http://www.zerohedge.com/fullrss2.xml en Is the Dollar's Momentum Easing? Is Deeper Pullback in the Stock Market Likely? http://www.zerohedge.com/news/2015-01-31/dollars-momentum-easing-deeper-pullback-stock-market-likely <p>The US dollar turned in a mixed performance in the last week of January. &nbsp;It slipped against the euro, yen, sterling and the Swedish krona, while rising against the other G10 currencies. The Swiss franc was the weakest of the majors, losing about 4.5% of its value against the dollar, encouraged by signs the Swiss National Bank may have intervened. &nbsp;</p> <p>&nbsp;</p> <p>The dollar also rose against most of emerging market currencies, except for a handful of eastern and central European currencies. &nbsp;The Russia ruble depreciated by nearly 10% following the S&amp;P's removal of its investment grade status, and a compromise struck with Greece to discuss further sanctions given the increase in hostilities in east Ukraine. &nbsp;</p> <p>&nbsp;</p> <p>In addition to technical factors, which we pointed out last week, an important consideration that has stalled the dollar's upside momentum are the doubts about a mid-year rate hike. &nbsp;The FOMC statement had upgraded its economic assessment, but did recognize the important of international developments. &nbsp;Whereas we regarded that as a prudent addition, many others viewed it as an escape clause of sorts. &nbsp;</p> <p>&nbsp;</p> <p>The implied yield of the December Fed funds futures contract fell 3.5 bp on the week to 41 bp. It finished 2014 at 71 bp. &nbsp;The same general pattern was evident in the December 2015 Eurodollar futures. &nbsp;The implied yields fell 5 bp on the week to 66.5 bp. &nbsp;It finished last year at 91.5 bp. &nbsp;</p> <p>&nbsp;</p> <p>Our fundamental views have not changed. &nbsp;We continue to think that a Fed hike in June is the most likely scenario. &nbsp;We would not place much emphasis on the sub-3% Q4 14 preliminary print on Fed policy for the middle of 2015. &nbsp;The preliminary estimate for GDP is subject to statistically significant revisions, especially as a third of the trade (December trade balance will be released next week) and inventory data is not yet available. &nbsp;Moreover, the 2.6% pace of expansion is probably closer to what the Fed views as trend growth in the US than the 4.8% growth in April-September period. &nbsp;</p> <p>&nbsp;</p> <p>In addition, the FOMC statement drew attention to the divergence between market-based measures of inflation expectations and surveys. &nbsp;The survey have shown much greater stability than the market-based measures, like the break-evens (comparing the TIPS yield to conventional bond yields). &nbsp;This was underscored ahead of the weekend as the University of Michigan's survey found the long-term (5-10 year) inflation expectation unchanged at 2.8%. &nbsp;</p> <p>&nbsp;</p> <p>Our dollar bullish outlook also remains intact, though the consolidation phase against the euro, yen and sterling may continue for a few more days. &nbsp;The euro has spent that last three sessions within the roughly $1.1225-$1.1435 trading range established on January 27. &nbsp;Last week we suggested potential toward $1.1460. &nbsp;</p> <p>&nbsp;</p> <p>The dollar has traded in a JPY117.20-JPY118.80 trading range for nearly two weeks. &nbsp;It has not closed above its 20-day moving average (~JPY118.20), which has capped upticks over this period. The decline in US Treasury yields and the heavier tone in equities (S&amp;P 500 -2.0% on the week) can see the dollar move lower against the yen. &nbsp;The key support of the broader range is JPY115.50. &nbsp;</p> <p>&nbsp;</p> <p>Sterling is interesting from a technical perspective. &nbsp;It has slipped below $1.50 four times over the past seven sessions. &nbsp; The RSI is neutral, but the MACDs are gentle trending higher since bottoming in the early January. &nbsp; &nbsp;The top end of the range comes is in the $1.5225-50 area. &nbsp;No inspiration is likely to come from the BOE meeting, which is most unlikely to change policy at this juncture. &nbsp;More incentives will come from the three PMI reports. &nbsp;The service and manufacturing PMIs are expected show modest improvement.&nbsp;</p> <p>&nbsp;</p> <p>The dollar-bloc currencies remain under pressure. &nbsp;After the Swiss franc, the New Zealand dollar (-2.4%), the Canadian dollar (-2.1%) and the Australian dollar (-1.7%) were the weakest of the major currencies. &nbsp; They have been crushed January. &nbsp;Encouraged by soft data and the surprise Bank of Canada rate cut, the Canadian dollar fell 8.4% against the US dollar in January. &nbsp;</p> <p>&nbsp;</p> <p>The New Zealand dollar, weighed down by the end of the RBNZ mini-tightening cycle, stepped up rhetoric about the over-valued currency, and falling commodity (including milk prices), lost 6.8% against the greenback. &nbsp;The Australian dollar fell almost 5% in January. &nbsp;Expectations have increased that the RBA will cut rates as early as next week. &nbsp;</p> <p>&nbsp;</p> <p>That said, the US dollar's advance to almost CAD1.28 before the weekend may have exhausted the near-term move. &nbsp;A consolidative phase would not be surprising. &nbsp;If such a phase does unfold, we see initial support for the US dollar in the CAD1.2540-80 area. &nbsp;</p> <p>&nbsp;</p> <p>The Australian dollar shed nearly three cents in the second half of last week. &nbsp; If the RBA does cut interest rates and suggest room for additional easing, the Australian dollar could spike lower, toward around $0.7640. &nbsp;However, the failure to cut and provide dovish guidance could see the Aussie back toward $0.7900. &nbsp;</p> <p>&nbsp;</p> <p>Before the weekend NYMEX's March crude oil futures contract briefly traded above its 20-day moving average (~$47.60) for the first time since the end of last September. &nbsp;It did not manage to close above it, though the June contract did. &nbsp;The day before prices set a new contract low. &nbsp;While the downside momentum has stalled, we would not want exaggerate the pre-weekend price action. &nbsp; Given the price action, it is surprising to see how much the RSI and MACD has have corrected. There is not compelling technical evidence that an important low is in place.</p> <p>&nbsp;</p> <p>The US 10-year US Treasury yield finished at new lows for the move near 1.66%. &nbsp;The next technical support is seen in the 1.57%-1.61% area from 2013. &nbsp;However, given the likely decline in CPI and some disappointing data (durable goods, GDP), the political storm in Europe, and the low international yields, investors should be prepared for the 10-year Treasury yield to fall to new record low. &nbsp;That means below the 2012 low near 1.38% recorded the same month that the euro zone's existential crisis had appeared to peak. &nbsp;</p> <p>&nbsp;</p> <p>The S&amp;P 500 lost about 2.7% in the last week of January, which is nearly the year-to-date loss. Support in the 1988 area has been tested. &nbsp;A break convincing break signal a move toward 1972 on the way to 1957. A break of that lower level would open the door to a move to &nbsp;1924 and the old gap from mid-October 2014 found roughly between 1905-1909. &nbsp;The technical tone is poor and the pre-weekend close on its lows warns of the risk of a gap lower opening on Monday. &nbsp;</p> <p>&nbsp;</p> <p>Observations from the speculative positioning in the futures market:</p> <p>&nbsp;</p> <p>1. &nbsp;The increased volatility in the foreign exchange market has not encouraged increased position taking in the currency futures. &nbsp;In the Commitment of Traders report for the week ending January 7, there was only one gross position adjustment more than 10k contracts, and it was to reduce risk. &nbsp;The gross short yen position was pared by 13.2k contracts to stand at 91.2k, the smallest in since the summer. &nbsp;Since early December when the dollar peaked against the yen in the spot market, the gross short yen position has been cut by 62k contracts.&nbsp;</p> <p>&nbsp;</p> <p>2. &nbsp;Of the remaining 13 gross currency positions we track, nine were adjusted by less than 5k contracts. &nbsp;The four that were adjusted by more than 5k contracts were accounted for by two currencies the Australian dollar and Mexican peso. &nbsp;The speculative gross long and short Australian dollar positions increased by 6.3k (to 16.1k contracts) and 8.6k (to 65k contracts) respectively. &nbsp;The speculative gross long peso position increased by 7.7k contracts to 26.7k. &nbsp;The gross short position rose by 6k contracts to 71.3k.&nbsp;</p> <p>&nbsp;</p> <p>3. &nbsp;Overall, bottom picking in the currency futures was evident. &nbsp; Only the euro saw a cut in the gross long position. &nbsp;It fell by 1.6k to 50.5k contracts. &nbsp;It remains the largest speculative gross long position. &nbsp;The increase in gross long positions, given the downtrend and net short position reflects anticipation of a pullback in the US dollar. &nbsp;</p> <p>&nbsp;</p> <p>4. &nbsp;US Treasury bears have been punished by the continued rally. &nbsp;The net short position fell to 108k contracts from 146k. &nbsp;It is the smallest net short position since early December. &nbsp;The gross short position was chopped by 67.3k contracts to 454.6k. &nbsp;The bulls took profits, trimming their longs by 29.6k contracts to 346.7k. &nbsp;</p> http://www.zerohedge.com/news/2015-01-31/dollars-momentum-easing-deeper-pullback-stock-market-likely#comments Aussie Australian Dollar BOE Bond Canadian Dollar Commitment of Traders CPI Crude Crude Oil EuroDollar Futures market Greece Investment Grade MACD New Zealand Price Action Swiss Franc Swiss National Bank Trade Balance Ukraine Volatility Yen Sat, 31 Jan 2015 15:13:19 +0000 Marc To Market 501242 at http://www.zerohedge.com ECB Threatens Athens With Bank Funding Cutoff If No Deal In One Month: February 28 Is Now D-Day For Greece http://www.zerohedge.com/news/2015-01-31/ecb-threatens-athens-bank-funding-cutoff-if-no-deal-one-month-february-28-now-d-day- <p>As Deutsche Bank's George Saravelos politely puts it, "Developments since the Greek election on Sunday have moved very fast." And indeed, so far the new Tsipras cabinet, and here we focus on the words and deeds of the new finance minister Yanis Varoufakis, has shown that the market's greatest hope - that the status quo in Greece will continue - has been crushed into a pulp (and so have Greek stock and bond prices) especially following yesterday's most <a href="http://www.zerohedge.com/news/2015-01-30/greece-slams-eu-bailout-ers-we-dont-want-7-billion-we-want-rethink-whole-program">recent comments by the finmin </a>in which he said that Greece "<strong>does not want the $7 billion</strong>" from the Troika agreement and that it wants to "rethink the whole program", culminating with an epic exchange with Eurogroup chief Jeroen Dijsselbloem in which Greece made it clear that the "constructive talks" are over. </p> <p>And suddenly the Eurozone is stunned, because what had until now been its greatest carrot when it comes to dealing with Greece, has become completely useless when the impoverished, insolvent nation itself says it no longer needs a bailout, seemingly blissfully unaware of the consequences. </p> <p>So earlier today the ECB's Erikki Liikanen, tired of pleasantries and dealing with what to Europe is a completely incomprehensible and illogical stance, one which is essentially a <em>massive defection </em>by Greece in the European "prisoner's dilemma", and which while leading to a Greek financial collapse and Grexit - <strong>both prerequisites to a subsequent Greek economic recovery unburdened by the shackles of the Euro - </strong>would also unleash a European depression, came out and directly threatened Greece that it now has 1 month until the end of February to reach a deal with the Troika, <strong>or else the ECB would cut off lending to Greek banks, in the process destroying the otherwise insolvent Greek banking sector. </strong></p> <p>And since only the ECB backstop has prevented a banking sector panic, the ECB is essentially betting the house, and the sanctity of the Eurozone (because after a Grexit all bets are off which peripheral leaves next) that the threat, and soon reality, of a bank run (at last check Greece had about €145 billion in deposits still left in its bank after JPM's latest estimate of €15 billion in outflows in January) will finally force Varoufakis and Tsipras to sit at the negotiating table with the understanding that not they but the Troika has all the leverage.</p> <p><a href="http://www.reuters.com/article/2015/01/31/ecb-liikanen-greece-idUSL6N0VA05620150131">Reuters explains</a>:</p> <blockquote><div class="quote_start"> <div></div> </div> <div class="quote_end"> <div></div> </div> <p><strong>A deal on extending Greece's bailout deal must be found by the end of February or the European Central Bank will not be able to continue lending to its banks, ECB council member Erkki Liikanen said on Saturday. </strong>Europe's bailout programme for Greece, part of a 240-billion-euro ($270 billion) rescue package along with the International Monetary Fund, expires on Feb. 28 and a failure to renew it could leave Athens unable to meet its financing needs and cut its banks off from ECB liquidity support. </p> <p>&nbsp;</p> <p>Greece's new leftist government, which aims to ease the strict terms of the bailout that have imposed harsh austerity, opened talks with European partners on Friday by flatly refusing to extend the current programme or to cooperate with the international inspectors overseeing it. </p> <p>&nbsp;</p> <p><strong>"We (ECB) have our own legislation and we will act according to that... Now, Greece's programme extension will expire in the end of February so some kind of solution must be found, otherwise we can't continue lending," </strong>Liikanen, also the governor of Finland's central bank, told public broadcaster YLE. </p> <p>&nbsp;</p> <p>"I don't believe that one can hide from the realities in the economy," he said in an interview. </p> </blockquote> <p>The question arose why when Greece already has undergone a Private Sector Involvement restructuring, i.e. a bankruptcy that however only impacted private entities and not official ones, such as the ECB, can't Greece have another debt haircut to which Liikanen responded that: "A significant debt restructuring has been carried out with private investors. The ECB cannot fund a state directly, which is what it would mean in this case."</p> <p>Odd: because that is precisely what the ECB is doing with QE, when it monetizes any of a number of Eurozone deficits. To this Liikanen also had a quick response:</p> <ul> <li><strong>LIIKANEN SAYS ECB ISN'T FINANCING EURO GOVERNMENTS' DEFICITS</strong></li> </ul> <p>Well, it is, but we'll let that slide for the time being. The bigger issue is that since the ECB directly holds tens of billions of Greek debt, any impairment on this debt would crush what the ECB has been saying from day one: that it can <em><strong>not </strong></em>suffer losses on the debt it has monetized or otherwise transferred over to its balance sheet. Such an impairment would immediately destroy Draghi's credibility, and promptly lead to furious screams from around the Eurozone as taxpayers suddenly realize all too well they are on the hook for funding the Eurozone's most insolvent members, first Greece and then everyone else who has already entered a toxic deflationary spiral. And since the ECB would finally be exposed for being Europe's "bad bank", the scramble to dump as much toxic exposure on Draghi would begin in earnest in the process launching the beginning of the end of the Eurozone. </p> <p>One can almost see why Greece does think it has all the leverage.</p> <p>That said, Greece now also has a countdown in which it can and will have to make a decision what to do with its leverage, and precisely 28 days until its very own D-Day which is now February 28, 2015 as per today's ECB threat. </p> <p>So with February now shaping up to be an even more volatile month for Europe, and thus the world, than January and December (both of which closed red) here is the full schedule of events and what the "known unknowns are" in the next 4 weeks, courtesy of Deutsche Bank.</p> <p><em>From George Saravelos' Update on Greece</em></p> <p>It is worth bearing in mind that the timing, scope and commitment to the policy changes announced by Greek ministers is highly uncertain, not least because the legislative agenda is likely to be directed by the leadership team of the new government rather than individual line ministries. This still leaves plenty of uncertainty on the new government’s intentions. On the more negative side, the breadth of statements was so wide and the speed with which they were made so quick, that we now consider an extension of the February 28th program expiry date as<em><strong> a key date </strong></em>within the negotiation process: <strong>Europe and the Troika are very likely to request an explicit commitment from the Greek government to close the current mission review and not reverse previous policy</strong>. The precise form such a commitment would take is unclear at this stage, but our underlying assumption is that uncertainty around the new government’s policy intentions is so high, that Europeans will request assurances before proceeding with more in-depth negotiations over the program in Q2.</p> <p>In turn, the above developments will likely have important implications for Greek bank financing at the ECB. Termination of the program on February 28th renders GGB-based collateral ineligible at Eurosystem refinancing operations, but still allows Greek banks to shift funding to Emerency Liquidity Assistance. <strong>However, ELA usage is under bi-weekly ECB review and is very likely to be on a rising trend over the next few weeks<span style="text-decoration: underline;">: to accommodate potential deposit flight</span>; to absorb foreigners’ refusal to roll-over t-bills that are maturing; and to absorb fresh government t-bill issuance to finance upcoming debt repayments to the IMF and other obligations</strong>. These large needs make it likely that the availability of ELA usage is itself linked to program extension above. </p> <p>All of the above then leaves three things that need to be clarified over the next few weeks. </p> <p><em><span style="text-decoration: underline;"><strong>First,</strong></span></em> under what conditions would the Troika be willing to extend the program and what form would this extension take? Our initial expectation was that a technical extension would have been offered to July followed by a successor ECCL program. Recent market developments and poor budget execution leave Greece’s ECCL eligibility an open question however, and it is possible that the Troika now only accepts program extension by a full year to coincide with the conclusion of the IMF program in March 2016. Such a large extension would be more difficult for the Greek government to manage domestically. </p> <p><em><span style="text-decoration: underline;"><strong>Second,</strong></span></em> does the ECB link Greek bank ELA provision to program extension as well? Given rising usage over the next few months, we would consider this an increasing possibility. </p> <p><em><span style="text-decoration: underline;"><strong>Third,</strong></span></em> what will the Greek government’s response to these conditions be? Public statements over the last 48-hours make it particularly difficult to envisage the government’s reaction function. On the one hand an offer of a one year extension and a written commitment to close the review would be particularly difficult for the government to manage domestically. On the other hand, the suspension of ECB financing of Greek banks would be exceptionally damaging to the economy. </p> <p>Here is an indicative timeline of key events that will likely provide answers to these questions: </p> <ul> <li><strong>Friday January </strong>30th – Eurogroup President Dijsselbloem meets with the Greek finance minister Varoufakis and Deputy PM Dragasakis in Athens. A press conference will follow, with the meeting likely setting the tone of negotiations to follow. </li> <li><strong>Sunday February 1st </strong>- Greek finance minister Varoufakis meets UK finance minister Osborne in London </li> <li><strong>Monday February 2nd</strong> – Greek finance minister Varoufakis meets French finance minister Sapin in Paris Tuesday </li> <li><strong>February 2nd </strong>- Greek finance minister Varoufakis meets Italian finance minister Padoan in Rome </li> <li><strong>Wednesday February 4th-5th</strong> – Bi-weekly ECB review of ELA </li> <li><strong>Wednesday February 4th</strong> – Likely t-bill auction to cover 1bn redemption on 6th </li> <li><strong>Thursday February 5th </strong>- Greek parliament opens, elects new speaker of the House </li> <li><strong>Saturday February 7-9th </strong>Government presents legislative agenda to parliament, vote of confidence midnight Monday 9th </li> <li><strong>Wednesday February 11th </strong>– Likely tbill auction to cover 1.4bn maturity on 13th </li> <li><strong>Thursday February 12th </strong>– European Council of EU Leaders, Tsipras likely to meet Merkel on sidelines </li> <li><strong>Friday February 13th </strong>– Voting for new Greek President begins, EC Commissioner Avramopoulos most likely candidate as per various media reports, originating from New Democracy. Likely completed by second round on the following day requiring 151 MP majority </li> <li><strong>Monday February 16th </strong>– Eurogroup where Greece likely to be top of agenda, conditions for extension of program to be made explicit by now </li> <li><strong>Wednesday February 18th-19th- - Bi-weekly ELA review </strong></li> <li><strong>Saturday February 28th </strong>– Current EFSF program expires</li> </ul> <p>In sum, developments and pressure on Greece have accelerated over the last few days, with a very large degree of uncertainty around both the Greek government’s and Troika’s position on how negotiations will proceed. We expect this to be ultimately resolved by a Troika request from the Greek side to commit to program completion and the broad contours of previously committed policy, particularly with regard to structural reform. In turn, program extension may itself be linked to ongoing ECB/ELA financing of Greek banks. The precise form this request takes and the Greek government’s reaction will ultimately determine the path Greece takes in coming weeks and months.</p> <div class="field field-type-filefield field-field-image-teaser"> <div class="field-items"> <div class="field-item odd"> <img class="imagefield imagefield-field_image_teaser" width="1200" height="833" alt="" src="http://www.zerohedge.com/sites/default/files/images/user5/imageroot/Draghi%20Satan_9.jpg?1422715238" /> </div> </div> </div> http://www.zerohedge.com/news/2015-01-31/ecb-threatens-athens-bank-funding-cutoff-if-no-deal-one-month-february-28-now-d-day-#comments Bad Bank Bank Run Bond Deutsche Bank European Central Bank Eurozone Greece International Monetary Fund Reality recovery Reuters Sat, 31 Jan 2015 14:40:54 +0000 Tyler Durden 501241 at http://www.zerohedge.com Greeks Turn to Gold on Bank Bail-in and Drachma Risks http://www.zerohedge.com/news/2015-01-31/greeks-turn-gold-bank-bail-and-drachma-risks <p>The Greek stock market is down over 36% year to date; the risk of global contagion in the event of a Greek exit is very real. Ordinarily such a crisis would require a massive coordinated effort from global stakeholders, perhaps directed by the IMF or some other pan-national financial body. But not in this case; the rhetoric is nationally-based and biased without unity of purpose across finance ministries. Recent official soundings from the UK and German governments saying that exposure to Greece is limited only underscores the depth of denial, ignorance and lack of consensus that exists within the euro area. A Greek exit from the euro would profoundly weaken the euro experiment and create a dangerous precedent for all future crises in the region.</p> <p>The European economy is the largest middle class economy in the world. With over 400 million relatively affluent consumers it represents a massive portion of the net global economy and as such a breakup of part of it would be felt across the world in credit spreads and capital decisions for years to come. This would not have been because of Greek exit, but rather because of the inability of the authorities to manage the crisis as risks initially built up, then as bail outs were designed and implemented and then as these efforts surely failed.</p> <p>We are witnesses to an epic failure of planning, statecraft and social justice. Regardless of where your politics lie, these elements are critical for a modern globally connected economy to function.</p> <p>Sadly, the geopolitical backdrop is one of suspicion and hostility in the form of a festering proxy war between western and Russian interests in Ukraine and regional crisis and humanitarian catastrophe in the middle east as Syria and Iraq descend into stateless anarchy. These factors reduce the odds of a successful solution in Greece being found in time.</p> <p>The share value of Greek banks cratered up to 30% Wednesday alone, before pulling back on Thursday as fears grew that the new government may not intend to soften their stance now that they are in office.</p> <p>In what is probably the worst performance for the sector on record, the four major banks – Bank of Piraeus, Alpha Bank, National Bank of Greece and Eurobank – all closed more than 25% lower. Athens stock exchange closed 6.4% lower.</p> <p>It marks an acceleration of the losses incurred over Monday and Tuesday in the immediate aftermath of the Syriza victory. From London’s Telegraph.</p> <blockquote><div class="quote_start"> <div></div> </div> <div class="quote_end"> <div></div> </div> <p><em>Greece’s banks have lost almost 40pc of their value in the three days since Syriza ascended to power in Sunday’s election as the dual threats of a bank run and the loss of support from the European Central Bank threaten a liquidity squeeze.</em></p> </blockquote> <p><em>Forbes list five main causes for the collapse:</em></p> <ol> <li>Deposit flight has accelerated.</li> <li>ECB liquidity could be cut off.</li> <li>Potential public and private debt restructuring.</li> <li>Low profitability.</li> <li>Reliance on deferred tax assets – Forbes explains it as an over-reliance by Greek banks on liquidity from the state.</li> </ol> <p>Greek banks are hemorrhaging deposits. The telegraph reports, “Banks also risk a repeat of the deposit flight seen in 2012. Up to €8bn of private sector deposits has been pulled out of Greek banks since November, according to Moody’s”, adding that bank deposits have fallen 5% in the last two months.</p> <p>The Financial Times paints an even more dramatic picture of bank runs and capital flight.</p> <blockquote><div class="quote_start"> <div></div> </div> <div class="quote_end"> <div></div> </div> <p><em>The real danger is that the Greeks themselves lose confidence. There are tentative signs that money is again being sent abroad, as it was in mid-2012. Nikolaos Panigirtzoglou at JPMorgan points out that €350m was sent from Greece to Luxembourg money funds since the start of last week. Extrapolating to all cash flight, he estimates as much as a 10th of Greek deposits may have left already this year. If a Greek bank panic develops it will strengthen the German hand, and make negotiations that much harder.</em></p> </blockquote> <p>In the event of any or all of these possibilities,&nbsp;<a href="http://www.goldcore.com/">gold and silver bullion</a>&nbsp;will perform well as a currency of last resort.</p> <p>Greek coin and bullion dealers with whom GoldCore spoke, confirmed an increase in demand for gold coins and bars in recent weeks and since the election.</p> <p>GoldCore have Greek clients both in Greece and living in the UK and throughout the world. We have seen a definite upsurge in interest, inquiries and demand since the election last Sunday.</p> <p>Concerns about bank holidays and also a return to the drachma have returned and Greeks are looking for ways to prevent further destruction of their wealth.</p> <p>For Greeks, Storage in Switzerland remains a favoured way of owning gold.</p> <p>The comprehensive guide to bail-ins:&nbsp;<a href="http://info.goldcore.com/what-savers-and-depositors-need-to-do-to-protect-their-savings-and-deposits-from-bank-bail-ins">Protecting Your Savings in the Coming Bail-in Era</a></p> <p>PRICE UPDATE</p> <p>Today’s AM fix was USD 1,263.50, EUR 1,114.98 and GBP 837.42 per ounce.<br />Yesterday’s AM fix was USD 1.275.50, EUR 1,129.36 and GBP 842.25 per ounce.</p> <p>Gold and silver both fell yesterday. Gold dropped 2.13% or $27.30, closing at $1,257.60/oz. Silver fell 5.78% or $1.04 and closed at $16.95/oz.</p> http://www.zerohedge.com/news/2015-01-31/greeks-turn-gold-bank-bail-and-drachma-risks#comments Bank Run European Central Bank Global Economy Greece Iraq Middle East Switzerland Ukraine Sat, 31 Jan 2015 10:00:56 +0000 GoldCore 501240 at http://www.zerohedge.com In Denmark You Are Now Paid To Take Out A Mortgage http://www.zerohedge.com/news/2015-01-30/denmark-you-are-now-paid-take-out-mortgage <p>With NIRP raging in the Eurozone and <a href="http://www.zerohedge.com/news/2015-01-24/how-mario-draghi-unleashed-14-trillion-negative-interest-rate-tsunami">over €1.5 trillion </a>in European government bonds trading with negative yields, many were wondering when any of this perverted bond generosity will spill over to other debtors, not just Europe's insolvent governments (who can only print negative interest debt because of the ECB's backstop that it will buy any piece of garbage for sale in the doomed monetary union). In fact just earlier today we, rhetorically, asked a logical - in as much as nothing is logical in the new normal - question:&nbsp; </p> <blockquote class="twitter-tweet" lang="en"><p>Who will offer the first negative rate mortgage</p> <p>— zerohedge (@zerohedge) <a href="https://twitter.com/zerohedge/status/561203824262905856">January 30, 2015</a></p></blockquote> <script src="//platform.twitter.com/widgets.js"></script><p>Little did we know that just minutes after our tweet, we would learn that at least one place is already paying homeowners to take out a mortgage. That's right - <strong>the negative rate mortgage is now a reality</strong>.</p> <p>Thanks of Mario Draghi's generosity with "other generations' slavery", and following 3 consecutive rate cuts by the Danish Central Bank, <strong>a local bank - Nordea Credit - is now offering a mortgage with a negative interest rate! </strong>This means, <a href="http://www.dr.dk/Nyheder/Penge/2015/01/30/0130122132.htm">according to DR.dk</a>, that Nordea have had to pay instead of charging interest to to a handful of customers, says housing economist at Nordea Kredit, Lise Nytoft Bergmann for Finance.</p> <p>From DR, <a href="https://translate.google.com/translate?sl=auto&amp;tl=en&amp;js=y&amp;prev=_t&amp;hl=en&amp;ie=UTF-8&amp;u=http%3A%2F%2Fwww.dr.dk%2FNyheder%2FPenge%2F2015%2F01%2F30%2F0130122132.htm&amp;edit-text=">google-translated</a>:</p> <blockquote><div class="quote_start"> <div></div> </div> <div class="quote_end"> <div></div> </div> <p>The interest rate has balanced around 0 in a level between minus 0.03 percent plus 0.03 percent. Most have paid a modest positive interest rate, <strong>but there are so few who have had a negative rate. It is quite an unusual situation, says Lise Nytoft Bergmann</strong>. </p> <p>&nbsp;</p> <p>It is residential customers who have chosen to stick with F1-loan that now benefit from the negative interest rate. F1 loan form has otherwise been strong returns in recent years in favor of fixed interest loan. </p> <p>&nbsp;</p> <p>Although interest rates are negative, it is not something that can be felt by customers as contributions and other costs continue to be paid. In turn, interest will be deducted from the contribution. </p> <p>&nbsp;</p> <p>Precisely because it is an unusual situation, Nordea Kredit's IT systems are not geared to the situation when the computers are only used to collect interest. </p> <p>&nbsp;</p> <p>Lise Nytoft Bergmann says that there is no cause for concern, and that the new situation can be handled, "but sometimes we have to use duct tape and paste."</p> </blockquote> <p>This is just the beginning: according the Danish media outlet, as a result of variable-refinancing, as recently as a week from now "a greater share of customers could have a negative rate."</p> <blockquote><div class="quote_start"> <div></div> </div> <div class="quote_end"> <div></div> </div> <p>Mortgage Denmark is one of the mortgage banks, where F1 rate also is close to zero, and here you are very excited about the upcoming negotiations, says Christian Hilligsøe Heinig, chief economist of the Mortgage Denmark. </p> <p>&nbsp;</p> <p>We have an auction just around the corner and it is very exciting to see how interest rates are going. We can go and get negative interest rates, says Christian Hilligsøe Heinig to JP Financial.</p> </blockquote> <p>And just like that, first in Denmark, and soon everywhere else in Europe, a situation has now emerged where savers who pay the bank to hold their cash courtesy of negative deposit rates, <strong>are directly funding the <em><span style="text-decoration: underline;">negative interest</span></em> rate paid to those who wish to take out debt. </strong>In fact, the more debt the greater the saver-subsidized windfall.</p> <p>That all this will end in blood and a lot of tears is clear to anyone but the most tenured economists, however in the meantime, we can't wait to take advantage of the humorous opportunities that Europe (and soon Japan and the US) will provide in the coming months, as spending profligacy will be directly subsidized and funded by the insolvent monetary system, while responsible behavior and well-paid labor will be punished, first with negative rates and soon thereafter: with threats, both theoretical and practical, of bodily harm. </p> <p><em>h/t @<a href="https://twitter.com/AndreasBay/status/561207378239299586">AndreasBay</a></em><a href="https://twitter.com/AndreasBay/status/561207378239299586"></a></p> <div class="field field-type-filefield field-field-image-teaser"> <div class="field-items"> <div class="field-item odd"> <img class="imagefield imagefield-field_image_teaser" width="620" height="349" alt="" src="http://www.zerohedge.com/sites/default/files/images/user5/imageroot/7450c909b3ba4b5f8a6dea13986c8ead_bolig.jpg?1422650613" /> </div> </div> </div> http://www.zerohedge.com/news/2015-01-30/denmark-you-are-now-paid-take-out-mortgage#comments Bond Duct Tape Eurozone fixed Japan New Normal Reality Sat, 31 Jan 2015 04:44:09 +0000 Tyler Durden 501226 at http://www.zerohedge.com Meet Loretta Lynch – Obama’s Attorney General Nominee Who Might Be Even Worse than Eric Holder http://www.zerohedge.com/news/2015-01-30/meet-loretta-lynch-%E2%80%93-obama%E2%80%99s-attorney-general-nominee-who-might-be-even-worse-eric-h <p><a href="http://libertyblitzkrieg.com/2015/01/29/meet-loretta-lynch-obamas-attorney-general-nominee-who-might-be-even-worse-than-eric-holder/"><em>Submitted by Mike Krieger via Liberty Blitzkrieg blog</em></a>,</p> <blockquote><div class="quote_start"><div></div></div><div class="quote_end"><div></div></div><p><strong><em>On matters of policy, Ms. Lynch called capital punishment &ldquo;an effective penalty&rdquo; and said she disagreed with Mr. Obama&rsquo;s statements that marijuana was no more harmful than alcohol. She called the National Security Agency&rsquo;s collection of American phone records &ldquo;certainly constitutional, and effective.&rdquo;</em></strong></p> <p>&nbsp;</p> <p>&ndash; From the New York Times article:&nbsp;<a href="http://www.nytimes.com/2015/01/29/us/politics/lynch-attorney-general-congress-confirmation-hearing.html?hp&amp;action=click&amp;pgtype=Homepage&amp;module=first-column-region&amp;region=top-news&amp;WT.nav=top-news&amp;_r=0">Criticism of Holder Dominates Hearing on Loretta Lynch, Attorney General&rsquo;s Possible Successor</a></p> </blockquote> <p>Eric Holder made a career out of protecting and coddling financial oligarchs (his <a href="http://www.huffingtonpost.com/2013/06/04/eric-holder-1999-memo_n_3384980.html">1999 memo essentially invented &ldquo;Too Big to Jail&rdquo;</a>). This was such a lucrative decision for Mr. Holder, that it&nbsp;allowed him to climb all the way to the top of his profession. The dividends that supporting this man ultimately paid to Wall Street criminals were&nbsp;priceless. Not only were they bailed out despite wrecking the U.S. economy, they have since funneled&nbsp;<strong><a href="http://libertyblitzkrieg.com/2015/01/26/as-the-middle-class-continues-to-die-global-oligarchs-plan-their-escape-from-the-impoverished-pleb-masses/">all of the wealth gains since 2008</a></strong>&nbsp;to themselves, while remaining above the law. This truly remarkable heist is&nbsp;what both Barack Obama and Eric Holder will be remembered for by history. Congratulations guys.</p> <p>When Eric Holder announced his resignation, many of us breathed a sigh of relief thinking it can&rsquo;t get much worse, but not so fast. The authoritarian streak and rampant cronyism of the Obama administration is a well oiled machine. You didn&rsquo;t think you&rsquo;d get off that easily did you? Enter Loretta Lynch.</p> <p>I&rsquo;ve touched upon&nbsp;Mrs. Lynch&rsquo;s record previously, in the post,&nbsp;<strong><a href="http://libertyblitzkrieg.com/2014/11/11/wall-street-journal-reports-obamas-attorney-general-nominee-has-been-involved-in-904-million-in-asset-forfeitures/">Wall Street Journal Reports Obama&rsquo;s Attorney General Nominee Has Been Involved in $904 Million in Asset Forfeitures</a></strong>. Here&rsquo;s an excerpt:</p> <blockquote><div class="quote_start"><div></div></div><div class="quote_end"><div></div></div><p><strong><em>As a prosecutor Ms. Lynch has also been aggressive in pursuing civil asset forfeiture, which has become a form of policing for profit. She recently announced that her office had collected more than $904 million in criminal and civil actions in fiscal 2013, according to the Brooklyn Daily Eagle.&nbsp;Liberals and conservatives have begun to question forfeiture as an abuse of due process that can punish the innocent.</em></strong></p> </blockquote> <p>Naturally, that was just the tip of the iceberg. What we have learned from her ongoing confirmation hearing is that she&rsquo;s a lover of NSA spying and the death penalty, while disagreeing with the statement that&nbsp;&ldquo;marijuana is&nbsp;no more harmful than alcohol.&rdquo;</p> <p>I wonder if she has much personal experience to base this opinion on, or if it&rsquo;s just more of the same we &ldquo;know what&rsquo;s best for you plebs, despite the fact that we have no idea what we are talking about.&rdquo;</p> <p>Meet the new Attorney General, same as the old. From <a href="http://www.nytimes.com/2015/01/29/us/politics/lynch-attorney-general-congress-confirmation-hearing.html?hp&amp;action=click&amp;pgtype=Homepage&amp;module=first-column-region&amp;region=top-news&amp;WT.nav=top-news&amp;_r=0">the <em>New York Times</em></a>:</p> <blockquote><div class="quote_start"><div></div></div><div class="quote_end"><div></div></div><p><em><strong>Ms. Lynch had steeled herself for tough questioning from a new Republican-controlled Judiciary Committee, particularly on her views of President Obama&rsquo;s immigration policy. But the questioning was mostly cordial,</strong> and, most important, the Republicans on the committee who hold the key to Ms. Lynch&rsquo;s confirmation &mdash; she needs three of their votes to proceed to a vote by the full Senate &mdash; showed little opposition.</em></p> </blockquote> <p>Of course it was cordial. Other than perhaps immigration, she&nbsp;basically espouses complete and total neo-con principals.</p> <blockquote><div class="quote_start"><div></div></div><div class="quote_end"><div></div></div><p><em>On the issue of immigration, Ms. Lynch said she found it &ldquo;reasonable&rdquo; that the Justice Department had concluded it was lawful for Mr. Obama to unilaterally ease the threat of deportation for millions of unauthorized immigrants. Mr. Holder similarly endorsed that view.</em></p> <p>&nbsp;</p> <p><em>Democrats see some Republicans, such as Senators Lindsey Graham of South Carolina, Orrin G. Hatch of Utah and Jeff Flake of Arizona, as possible confirmation votes. Mr. Flake said he had made no decision on Ms. Lynch but had come away with a favorable impression and expected that she would be confirmed.</em></p> <p>&nbsp;</p> <p><strong><em>On matters of policy, Ms. Lynch called capital punishment &ldquo;an effective penalty&rdquo; and said she disagreed with Mr. Obama&rsquo;s statements that marijuana was no more harmful than alcohol. She called the National Security Agency&rsquo;s collection of American phone records &ldquo;certainly constitutional, and effective.&rdquo;</em></strong></p> <p>&nbsp;</p> <p><em>Senator Sheldon Whitehouse, a Rhode Island Democrat on the panel, said she had given &ldquo;a flawless performance.&rdquo; Senator Richard Blumenthal, Democrat of Connecticut, called her testimony &ldquo;among the most accomplished and impressive that I&rsquo;ve seen as a member of this committee.&rdquo;</em></p> </blockquote> <p>Oh, but there&rsquo;s more. As if you needed proof that Ms. Lynch shares Eric Holder&rsquo;s financial oligarch coddling tendencies, the<a href="http://www.ibtimes.com/attorney-general-nominee-loretta-lynch-omitted-hsbc-interview-senate-questionnaire-1796924"><em> International Business Times</em> reports</a> that:</p> <blockquote><div class="quote_start"><div></div></div><div class="quote_end"><div></div></div><p dir="ltr"><em>WASHINGTON &mdash; In advance of her nomination hearing, Loretta Lynch did what every cabinet nominee is required to do: fill out a questionnaire listing all her media interviews so lawmakers can evaluate her candor. But the questionnaire U.S. attorney general nominee Lynch submitted to the Senate Judiciary Committee has a notable omission. <strong>Lynch failed to include an interview in which she defended the controversial settlement she orchestrated with the bank HSBC.</strong></em></p> <p dir="ltr">&nbsp;</p> <p dir="ltr"><em>The bank was accused of knowingly allowing Mexican drug cartels to launder money and of allowing violations of economic sanctions against countries including Iran, Libya, Sudan and Cuba. Lynch, then the U.S. Attorney for the Eastern District of New York, <strong>allowed the bank to avoid prosecution in 2012 by paying a $1.9 billion fine and submitting to a monitor for five years to oversee compliance. Critics slammed the deal as an example of the Obama administration&rsquo;s pattern of going easy on the financial industry.</strong>&nbsp;In the&nbsp;<a href="http://www.cbsnews.com/news/drug-cartels-bank-hsbc-to-see-no-arrests/" rel="nofollow" target="_blank">Dec. 11, 2012, interview she did with CBS News</a>, Lynch endorsed the settlement and dismissed criticism of the deal as &ldquo;shortsighted.&rdquo;</em></p> <p dir="ltr">&nbsp;</p> <p dir="ltr"><em>Lynch&rsquo;s boss at the time of the HSBC deal,<a href="http://money.cnn.com/2012/12/12/news/companies/hsbc-money-laundering/" rel="nofollow" target="_blank">&nbsp;Assistant Attorney General Lanny Breuer</a>, who was then head of the Department of Justice&rsquo;s criminal prosecution division, resigned after&nbsp;<a href="http://www.pbs.org/wgbh/pages/frontline/business-economy-financial-crisis/untouchables/lanny-breuer-financial-fraud-has-not-gone-unpunished/" rel="nofollow" target="_blank">a scathing Frontline piece</a>&nbsp;that highlighted Justice&rsquo;s failure to try any of the banks tied to the recession and the risky trades that led to it.&nbsp;It was during a discussion of HSBC before the Senate Judiciary Committee that Attorney General Holder famously said some banks &mdash; although not HSBC specifically &mdash;&nbsp;<a href="http://www.americanbanker.com/issues/178_45/transcript-attorney-general-eric-holder-on-too-big-to-jail-1057295-1.html" rel="nofollow" target="_blank">were too big to prosecute</a>.&nbsp;</em></p> </blockquote> <p><strong>Well there you have it. This woman, like Eric Holder, will be an unmitigated disaster for freedom in America.</strong></p> <p><strong>That&rsquo;s what &ldquo;liberal&rdquo; looks like in today&rsquo;s America.</strong></p> <div class="field field-type-filefield field-field-image-teaser"> <div class="field-items"> <div class="field-item odd"> <img class="imagefield imagefield-field_image_teaser" width="300" height="165" alt="" src="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/20150130_loretta.jpg?1422655675" /> </div> </div> </div> http://www.zerohedge.com/news/2015-01-30/meet-loretta-lynch-%E2%80%93-obama%E2%80%99s-attorney-general-nominee-who-might-be-even-worse-eric-h#comments Barack Obama Cronyism Department of Justice Iran national security New York Times Nomination Obama Administration President Obama Recession Richard Blumenthal Sheldon Whitehouse South Carolina Testimony Wall Street Journal Sat, 31 Jan 2015 03:20:17 +0000 Tyler Durden 501235 at http://www.zerohedge.com One Of These Things Is Not Like The Other http://www.zerohedge.com/news/2015-01-30/one-these-things-not-other <p>"Reality" is not "perception"</p> <p>&nbsp;</p> <p><a href="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2015/01-overflow/20150129_odd.jpg"><img src="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2015/01-overflow/20150129_odd_0.jpg" width="600" height="314" /></a></p> <p>&nbsp;</p> <p><em>Charts: Bloomberg</em></p> <div class="field field-type-filefield field-field-image-teaser"> <div class="field-items"> <div class="field-item odd"> <img class="imagefield imagefield-field_image_teaser" width="962" height="504" alt="" src="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/20150129_odd.jpg?1422633151" /> </div> </div> </div> http://www.zerohedge.com/news/2015-01-30/one-these-things-not-other#comments Reality Sat, 31 Jan 2015 02:40:57 +0000 Tyler Durden 501234 at http://www.zerohedge.com Thanks Obamacare: This Is What Americans Spent The Most Money On In Q4 http://www.zerohedge.com/news/2015-01-30/thanks-obamacare-what-americans-spent-most-money-q4 <p>If readers need clarification on what was the primary source of spending-based "<em>growth</em>" for the US economy in the fourth quarter, the same source that <a href="http://www.zerohedge.com/news/2014-12-23/here-reason-surge-q3-gdp">bumped up final Q3 GDP from 3.9% to 5.0%, </a>please ping us: we will gladly explain the chart below.&nbsp; <strong>And just in case it is still unclear what Americans are <a href="http://www.zerohedge.com/news/2014-12-10/what-americans-will-spend-their-whopping-380-low-gas-price-savings">spending their "gas sasvings" on</a>, here it is one more time.</strong></p> <p><a href="http://www.zerohedge.com/sites/default/files/images/user5/imageroot/2015/01-overflow/Q4%20spending%20GDP.jpg"><img src="http://www.zerohedge.com/sites/default/files/images/user5/imageroot/2015/01-overflow/Q4%20spending%20GDP_0.jpg" width="600" height="380" /></a></p> <p>And just in case the fading impact of Obamacare is not already priced in, here is what Q4 inventories did: <strong>rising by $113.1 billion in Q4, this was the second highest quarterly increase in the 21st century, second only to September 2010</strong>. It's all GDP-crushing liquidations from here.</p> <p><a href="http://www.zerohedge.com/sites/default/files/images/user5/imageroot/2015/01-overflow/Change%20in%20Inventories.jpg"><img src="http://www.zerohedge.com/sites/default/files/images/user5/imageroot/2015/01-overflow/Change%20in%20Inventories_0.jpg" width="600" height="406" /></a></p> <p>So big in fact that even the most upbeat permabull has no choice but to admit the truth:</p> <blockquote class="twitter-tweet"><p>A $113B inventory build in Q42014 means we could see less production and hence <a href="https://twitter.com/hashtag/GDP?src=hash">#GDP</a> in the current quarter.</p> <p>— Joseph A. LaVorgna (@Lavorgnanomics) <a href="https://twitter.com/Lavorgnanomics/status/561159955433398272">January 30, 2015</a></p></blockquote> <script src="//platform.twitter.com/widgets.js"></script> <div class="field field-type-filefield field-field-image-teaser"> <div class="field-items"> <div class="field-item odd"> <img class="imagefield imagefield-field_image_teaser" width="902" height="571" alt="" src="http://www.zerohedge.com/sites/default/files/images/user5/imageroot/Q4%20spending%20GDP.jpg?1422628520" /> </div> </div> </div> http://www.zerohedge.com/news/2015-01-30/thanks-obamacare-what-americans-spent-most-money-q4#comments Obamacare Sat, 31 Jan 2015 02:37:46 +0000 Tyler Durden 501205 at http://www.zerohedge.com "We Can't Do This Forever," Fed Admits "Market Will Overwhelm Us" http://www.zerohedge.com/news/2015-01-30/what-happens-when-markets-realize <p>In a somewhat stunning admission of the truth in central planning <em>(that the Swiss just experienced first hand - and perhaps Venezuela has been experiencing for years)</em>, The Philly Fed's Charles Plosser explains the following...</p> <blockquote><div class="quote_start"> <div></div> </div> <div class="quote_end"> <div></div> </div> <p>"<strong>It may work out just fine, but there’s a risk to that strategy, and the risk is that we wait until the point where markets force us to raise rates and then we have to react quickly and aggressively.</strong> I believe that if we wait too long, then we run the risk of falling very far behind the curve or disrupting the economy by rapid rate increases.</p> <p>&nbsp;</p> <p>...</p> <p>&nbsp;</p> <p><strong>The history is that monetary policy is not ultimately a very effective tool at solving real economic structural problems.</strong> It can try for a while but the problem then is that it’s only temporarily effective, and when you can’t do it anymore you get the explosion yesterday in the Swiss market.</p> <p>&nbsp;</p> <p><span style="text-decoration: underline;"><strong>One of the things I’ve tried to argue is look, if we believe that monetary policy is doing what we say it’s doing and depressing real interest rates and goosing the economy and we’re in some sense distorting what might be the normal market outcomes at some point, we’re going to have to stop doing it. At some point the pressure is going to be too great. The market forces are going to overwhelm us. We’re not going to be able to hold the line anymore. And then you get that rapid snapback in premiums as the market realizes that central banks can’t do this forever. And that’s going to cause volatility and disruption.</strong></span></p> <p>&nbsp;</p> <p>...<strong>I think the jury is still out on the costs. Because the cost I was worried about was the longer-term cost of unraveling all of this.</strong> So maybe I was right, maybe I was wrong. That remains to be seen.</p> <p>&nbsp;</p> <p><strong>I do worry about the longer-term implications for the institution.</strong> Part of my criticism has been that we have pushed the boundaries into fiscal rather than monetary policy. That has brought us praise and opprobrium. Perhaps justifiably on both counts. I do wonder as I look down the road five or 10 years, how will that shape the institution? What happens to our independence? What happens to our ability to do things effectively? Given all that we’ve done — maybe it was all for the best, but even if it was — <strong>are there going to be longer-term ramifications that we may end up regretting later?"</strong></p> </blockquote> <p>*&nbsp; *&nbsp; *</p> <p><span style="text-decoration: underline;"><strong>So - what happens when the markets realize this?</strong></span></p> <p>&nbsp;</p> <p><a href="http://www.nytimes.com/2015/01/30/upshot/q-and-a-with-charles-plosser-of-the-fed-raise-rates-sooner-rather-than-later.html?abt=0002&amp;abg=0&amp;_r=1"><em>Source: The Washington Post</em></a></p> <div class="field field-type-filefield field-field-image-teaser"> <div class="field-items"> <div class="field-item odd"> <img class="imagefield imagefield-field_image_teaser" width="338" height="346" alt="" src="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/20150130_plosser.jpg?1422642348" /> </div> </div> </div> http://www.zerohedge.com/news/2015-01-30/what-happens-when-markets-realize#comments Central Banks Monetary Policy Real Interest Rates Volatility Sat, 31 Jan 2015 02:05:17 +0000 Tyler Durden 501223 at http://www.zerohedge.com The Bond Market Has Reached Tulip Bubble Proportions http://www.zerohedge.com/news/2015-01-30/bond-market-has-reached-tulip-bubble-proportions <p style="margin: 0px; font-family: 'Times New Roman'; font-size: medium; line-height: normal;">By&nbsp;<a href="http://www.econmatters.com/search/label/EconMatters">EconMatters</a></p> <p style="margin: 0px; font-family: 'Times New Roman'; font-size: medium; line-height: normal;">&nbsp;</p> <p style="margin: 0px; font-family: 'Times New Roman'; font-size: medium; line-height: normal;"><img src="http://1.bp.blogspot.com/-F1hH4mKVeWc/VMwfgLuS8UI/AAAAAAAAEls/Wb8KfGn8PLE/s1600/tulipprint.JPG" width="320" height="484" style="display: block; margin-left: auto; margin-right: auto;" /></p> <p style="margin: 0px; font-family: 'Times New Roman'; font-size: medium; line-height: normal;">&nbsp;</p> <div class="MsoNormal" style="font-family: 'Times New Roman'; font-size: medium; line-height: normal;"> <p style="margin: 0px;"><strong><span style="font-size: 12pt; line-height: 17.1200008392334px;">Fed Officials Trying to Send Signals to the Bond Market</span></strong></p> </div> <div class="MsoNormal" style="font-family: 'Times New Roman'; font-size: medium; line-height: normal;"> <p style="margin: 0px;">&nbsp;</p> </div> <div class="MsoNormal" style="font-family: 'Times New Roman'; font-size: medium; line-height: normal;"> <p style="margin: 0px;">James Bullard on Friday noted that the Bond Market was far too dovish in relation&nbsp;to where the Fed is in regard to&nbsp;<a href="http://www.econmatters.com/2014/12/fed-interest-rate-decision-learn-from.html">raising rates</a>&nbsp;in June, and this might be the understatement of the year so far. For example the U.S. 2-Year Bond Yield is 0.45 or 45 basis points, think about this for a moment. Even if the Fed fund`s rate finishes the year at 50 basis points which is well below the Fed`s most conservative forecasts, and we use a conservative annual inflation rate of 1% (I know oil has dropped but there are more inflation categories than just the energy component). Moreover, the overall annual inflation rate is well above 1% right now, and you factor in that this bond is paying a 2-year risk premium for tying up one`s capital with all kinds of inflation risks over that 2-year time frame, this has to be the stupidest investment of all time. &nbsp;</p> </div> <p style="margin: 0px; font-family: 'Times New Roman'; font-size: medium; line-height: normal;"><strong><span style="font-size: 12pt; line-height: 17.1200008392334px;">2-Year U.S. Bond Yield is 45 Basis Points</span></strong></p> <div class="MsoNormal" style="font-family: 'Times New Roman'; font-size: medium; line-height: normal;"> <p style="margin: 0px;">&nbsp;</p> </div> <div class="MsoNormal" style="font-family: 'Times New Roman'; font-size: medium; line-height: normal;"> <p style="margin: 0px;">To buy the 2-Year Bond when the Fed has practically stated that after two FOMC meeting`s they are liable to raise rates at least 25 basis points at the earliest (think April) and June at the latest so that is 25 basis points right there added to the Fed Fund`s rate, and needs to be added to the 2-Year Bond calculation so the current Fed target rate is 0.00 - 0.25 with the daily rate on 1/29 of 0.11 or 11 basis points, so add the June 25 basis rate hike to the current daily rate of 11 basis points and you get a 36 basis point starting point for borrowing money, add an annual inflation rate of 1%, and we are at 136 basis points for evaluating the 2-Year Bond given this rather charitable and conservative analysis.</p> <p style="margin: 0px;">&nbsp;</p> <div style="text-align: center;"> <p style="margin: 0px;"><em><strong>Read More:&nbsp;<a href="http://www.econmatters.com/2014/08/european-bond-market-bubble-of-all.html">European Bond Market: Bubble of all Bubbles!</a></strong></em></p> </div> </div> <div class="MsoNormal" style="font-family: 'Times New Roman'; font-size: medium; line-height: normal;"> <p style="margin: 0px;">&nbsp;</p> </div> <p class="separator" style="margin: 0px; font-family: 'Times New Roman'; font-size: medium; line-height: normal; clear: both; text-align: center;"><a href="http://4.bp.blogspot.com/-XBJYqO4j4XU/VMwfs68HwgI/AAAAAAAAEl0/DZWrCPhO1c4/s1600/U.S.%2B2-Year%2BBond%2BYield(5%2BMinutes)20150130180726.png" style="margin-left: 1em; margin-right: 1em;"><img src="https://images-blogger-opensocial.googleusercontent.com/gadgets/proxy?url=http%3A%2F%2F4.bp.blogspot.com%2F-XBJYqO4j4XU%2FVMwfs68HwgI%2FAAAAAAAAEl0%2FDZWrCPhO1c4%2Fs1600%2FU.S.%252B2-Year%252BBond%252BYield(5%252BMinutes)20150130180726.png&amp;container=blogger&amp;gadget=a&amp;rewriteMime=image%2F*" width="625" height="640" border="0" style="cursor: move;" /></a></p> <div class="MsoNormal" style="font-family: 'Times New Roman'; font-size: medium; line-height: normal;"> <p style="margin: 0px;"><strong><span style="font-size: 12pt; line-height: 17.1200008392334px;"><br /></span></strong><strong><span style="font-size: 12pt; line-height: 17.1200008392334px;">June Rate Hike Telegraphed to Markets</span></strong></p> </div> <div class="MsoNormal" style="font-family: 'Times New Roman'; font-size: medium; line-height: normal;"> <p style="margin: 0px;">&nbsp;</p> </div> <div class="MsoNormal" style="font-family: 'Times New Roman'; font-size: medium; line-height: normal;"> <p style="margin: 0px;">Remember this June rate hike by the Fed has been pretty well telegraphed to market participants, and nothing changed in the latest Fed Statement in fact it became even more hawkish with language changes in the statement released this week. Therefore whether one completely takes out the inflation component leaving a 36 basis point starting point, a 45 basis point yield on the 2-Year is beyond absurd. It is an example of just how much risk taking and froth there is currently in the bond markets due to so much cheap money sloshing around the financial system right now. The only way an investor can make money with a negative real rate of return if you factor in the inflation rate is by using an insane amount of leverage on these very low borrowing costs. Low borrowing costs aren`t enough to make this trade work, it takes huge scale to make this a ‘worthwhile trade’ in a negative real rate scenario that this trade offers up to the risk taker.&nbsp;</p> </div> <div class="MsoNormal" style="font-family: 'Times New Roman'; font-size: medium; line-height: normal;"> <p style="margin: 0px;">&nbsp;</p> <div style="text-align: center;"> <p style="margin: 0px;"><strong><em>Read More:&nbsp;<a href="http://www.econmatters.com/2014/10/low-rates-and-qe-are-deflationary-at.html">Low Rates and QE are Deflationary at the Zero Bound</a></em></strong></p> </div> </div> <div class="MsoNormal" style="font-family: 'Times New Roman'; font-size: medium; line-height: normal;"> <p style="margin: 0px;"><strong><span style="font-size: 12pt; line-height: 17.1200008392334px;"><br /></span></strong><strong><span style="font-size: 12pt; line-height: 17.1200008392334px;">Leverage &amp; Bond Market Instability in Overcrowded Trade</span></strong></p> </div> <div class="MsoNormal" style="font-family: 'Times New Roman'; font-size: medium; line-height: normal;"> <p style="margin: 0px;">&nbsp;</p> </div> <div class="MsoNormal" style="font-family: 'Times New Roman'; font-size: medium; line-height: normal;"> <p style="margin: 0px;">Therein lies the problem for the Federal Reserve and Central Banks around the world, they have enticed investors to chase yield at negative real rate scenarios with huge leverage to make such a low yield vehicle trade profitable and worth doing. This is going to cause massive instability to the financial system when this trade ends like we all know it will because the numbers involved are nonsensical to say the least.&nbsp;</p> </div> <div class="MsoNormal" style="font-family: 'Times New Roman'; font-size: medium; line-height: normal;"> <p style="margin: 0px;">&nbsp;</p> </div> <div class="MsoNormal" style="font-family: 'Times New Roman'; font-size: medium; line-height: normal;"> <p style="margin: 0px;"><strong><span style="font-size: 12pt; line-height: 17.1200008392334px;">Unemployment Rate 5% in 2015</span></strong></p> </div> <div class="MsoNormal" style="font-family: 'Times New Roman'; font-size: medium; line-height: normal;"> <p style="margin: 0px;">&nbsp;</p> </div> <div class="MsoNormal" style="font-family: 'Times New Roman'; font-size: medium; line-height: normal;"> <p style="margin: 0px;">Just on Friday one of the most dovish members of the Federal Reserve,&nbsp;<span>&nbsp;</span>San Francisco Federal Reserve Bank President John Williams said the U.S. will see real GDP growth around 3 percent in 2015, and that the unemployment rate will touch 5 percent by the end of the year. Where do traders think that leaves the Fed Funds Rate? The U.S. 2-Year Bond is currently pricing in no rate hike for all of 2015 and 2016, and no inflation whatsoever, in fact a negative rate of inflation over the next two years.&nbsp;</p> </div> <div class="MsoNormal" style="font-family: 'Times New Roman'; font-size: medium; line-height: normal;"> <p style="margin: 0px;">&nbsp;</p> <div style="text-align: center;"> <p style="margin: 0px;"><em><strong>Read More:&nbsp;<a href="http://www.econmatters.com/2014/08/even-mainstream-academia-worried-about.html">Even Mainstream Academia Worried about Massive Bubbles in Markets</a></strong></em></p> </div> <p style="margin: 0px;">&nbsp;</p> </div> <div class="MsoNormal" style="font-family: 'Times New Roman'; font-size: medium; line-height: normal;"> <p style="margin: 0px;">The Tulip Lunacy in the Bond market is just off the charts stupidity at its finest, go ahead and buy the 2-Year Bond this upcoming week, I am sure this Bond will be good in four months when the Fed hikes rates 25 basis points, maybe if you are lucky there is a greater fool than you, but from the stampede that is sure to follow on the exit of this trade at these prices in the bond markets, you better be first!</p> </div> <p style="margin: 0px; font-family: 'Times New Roman'; font-size: medium; line-height: normal;">&nbsp;</p> <p style="margin: 0px; font-family: 'Times New Roman'; font-size: medium; line-height: normal;">©&nbsp;<a href="http://www.econmatters.com/">EconMatters</a>&nbsp;All Rights Reserved |&nbsp;<a href="http://www.facebook.com/EconMatters">Facebook</a>&nbsp;|&nbsp;<a href="http://twitter.com/#!/EconMatters">Twitter</a>&nbsp;|&nbsp;<a href="http://feedburner.google.com/fb/a/mailverify?uri=EconForecast">Email Subscribe</a>&nbsp;|&nbsp;<a href="http://astore.amazon.com/econforecast-20?_encoding=UTF8&amp;node=80">Kindle</a></p> http://www.zerohedge.com/news/2015-01-30/bond-market-has-reached-tulip-bubble-proportions#comments Bond Borrowing Costs Central Banks Federal Reserve Federal Reserve Bank John Williams Risk Premium Twitter Twitter Unemployment Sat, 31 Jan 2015 01:25:38 +0000 EconMatters 501239 at http://www.zerohedge.com Another Step Down The Long, Slow Road To IRA Nationalization http://www.zerohedge.com/news/2015-01-30/another-step-down-long-slow-road-ira-nationalization <p><a href="http://www.sovereignman.com/trends/another-step-down-the-long-slow-road-to-ira-nationalization-16041/"><em>Submitted by Simon Black via Sovereign Man blog</em></a>,</p> <p><strong>Let&rsquo;s take a brief walk into financial reality for a moment.</strong></p> <p><strong>At the time of this writing, the United States government&rsquo;s official debt is nearly $18.1 trillion.</strong></p> <p>Now, let&rsquo;s look at who the biggest owners of that debt are:</p> <blockquote><div class="quote_start"><div></div></div><div class="quote_end"><div></div></div><p><strong>1) Taxpayers of the United States.</strong></p> <p>&nbsp;</p> <p>If you&rsquo;ve held a job in the Land of the Free, 15.3% of your salary has gone to fund Social Security and Medicare.</p> <p>&nbsp;</p> <p>Each of these programs holds massive trust funds that are supposed to pay out beneficiaries, both present and future.</p> <p>&nbsp;</p> <p>Conveniently, the trust funds are required by law to buy US government debt.</p> <p>&nbsp;</p> <p>And given that every single US taxpayer is an ultimate beneficiary of these trust funds, that ranks the people of the United States as among the biggest holders of US debt.</p> <p>&nbsp;</p> <p>How sustainable is this? Not very.</p> <p>&nbsp;</p> <p>The 2014 trustee reports for both Medicare and Social Security indicate that nearly ALL of the trust funds are sliding towards insolvency.</p> <p>&nbsp;</p> <p>This isn&rsquo;t some wild conjecture. The people in government who manage these trust funds are flat out telling us that they&rsquo;re about to go bankrupt.</p> <p>&nbsp;</p> <p>Let that sink in for a bit&hellip; then ask yourself: how long can two insolvent programs continue to be among the largest owners of US government debt?</p> <p>&nbsp;</p> <p><strong>2) The Federal Reserve</strong></p> <p>&nbsp;</p> <p>Now that we know Social Security and Medicare cannot continue to buy Treasuries indefinitely, we turn our attention to the Fed, which as of today, holds over $2.4 trillion in US government debt.</p> <p>&nbsp;</p> <p>The Fed is essentially the lender of first resort to the US government and has singlehandedly managed to mop up the vast majority of government debt over the last several years.</p> <p>&nbsp;</p> <p>Problem is, the Fed has to print money to do this. And the Fed has created so much money over the last few years that it&rsquo;s now borderline insolvent.</p> <p>&nbsp;</p> <p>The Fed&rsquo;s capital now stands at just 1.27% of its total assets. To be clear, this is a razor thin margin of safety.</p> <p>&nbsp;</p> <p>No other central bank in the world (except Canada, curiously) would be able to post such a pitiful number and still pretend to be credible.</p> <p>&nbsp;</p> <p>But make no mistake, there is a level of monetary expansion that&rsquo;s too far. And the Fed is already getting close to this danger zone.</p> </blockquote> <p><strong>Bottom line, the Fed is not going to be in a position to write blank checks to the US government indefinitely without becoming insolvent and causing an epic currency crisis.</strong></p> <p><strong>And when that happens, where else can Uncle Sam go? Who else will buy his debt?</strong></p> <p><strong>Simple. You.</strong></p> <p><strong>More specifically, your retirement account.</strong></p> <p>According to Internal Revenue Service estimates, there&rsquo;s close to $5 trillion in individual retirement accounts in the Land of the Free.</p> <p>This is money that taxpayers prudently set aside for retirement, hopefully cognizant that Social Security isn&rsquo;t going to be there for them.</p> <p><strong>Devoid of any other easy lender, $5 trillion is far too irresistible for such a heavily indebted government to ignore.</strong></p> <p>I&rsquo;ve long warned that the government could easily nationalize a portion of all IRAs.</p> <p>It would be so simple for them to do&ndash; just a single executive order and a couple of phone calls.</p> <p>They&rsquo;ll probably wait for some market crash, and then sell it to Americans like this:</p> <blockquote><div class="quote_start"><div></div></div><div class="quote_end"><div></div></div><p><u><strong>&quot;For your own protection, we will henceforth require banks to invest your retirement savings in the safety and the security of US government bonds.&rdquo;</strong></u></p> </blockquote> <p>These bonds, of course, are so safe that they fail to pay an interest rate that even keeps up with inflation, effectively guaranteeing that you&rsquo;re going to lose money.</p> <p><u><strong>It started happening last year.</strong></u></p> <p>In his 2014 State of the Union address, President Obama announced his MyRA program.</p> <p>MyRA is basically an IRA that invests directly in&hellip; you guessed it&hellip; government bonds.</p> <p>He pitched it as an easy for Americans to save for retirement &ldquo;with no risk of losing what you put in&rdquo;.</p> <p>Step two came when both the President and Treasury Secretary embarked on a blitzkrieg-style marketing campaign to pump the program, pledging that they would aggressively push businesses to sign up their employees.</p> <p><strong>Now comes step three.</strong></p> <p>Find out more in today&rsquo;s podcast where we talk about the obvious, looming threats to your retirement security, and the structures you can build to do something about it.</p> <p><em>(click image for link to pdetailed podcast</em>)</p> <p><a href="http://www.sovereignman.com/podcast/031-another-step-down-the-long-slow-road-to-ira-nationalization-audio-16042/" target="_blank"><img alt="" src="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2015/01-overflow/20150130_ira.jpg" style="width: 579px; height: 293px;" /></a></p> <p>&nbsp;</p> <p><strong>If you have an IRA, you need to know this.</strong></p> <p><strong>I&rsquo;ve also put together a free report about safeguarding your IRA; it&rsquo;s a scaled down version of a premium report that I sent to our Sovereign Man: Confidential members recently, but it contains a lot of valuable information.</strong></p> <p>You can download it here:</p> <p>&nbsp;</p> <p style=" margin: 12px auto 6px auto; font-family: Helvetica,Arial,Sans-serif; font-style: normal; font-variant: normal; font-weight: normal; font-size: 14px; line-height: normal; font-size-adjust: none; font-stretch: normal; -x-system-font: none; display: block;"><a href="https://www.scribd.com/doc/254206509/IRA-Report" style="text-decoration: underline;" title="View IRA Report on Scribd">IRA Report</a></p> <p><iframe class="scribd_iframe_embed" data-aspect-ratio="undefined" data-auto-height="false" frameborder="0" height="600" id="doc_46215" scrolling="no" src="https://www.scribd.com/embeds/254206509/content?start_page=1&amp;view_mode=scroll&amp;show_recommendations=true" width="100%"></iframe></p> <p>&nbsp;</p> <p>*&nbsp; *&nbsp; *</p> <p class="postbottom_title">Our goal is simple: To help you achieve <strong>personal liberty</strong> and <strong>financial prosperity</strong> <em>no matter what happens</em>.</p> <div class="field field-type-filefield field-field-image-teaser"> <div class="field-items"> <div class="field-item odd"> <img class="imagefield imagefield-field_image_teaser" width="919" height="1006" alt="" src="http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/20150130_ira1.jpg?1422638093" /> </div> </div> </div> http://www.zerohedge.com/news/2015-01-30/another-step-down-long-slow-road-ira-nationalization#comments Fail Federal Reserve Market Crash Medicare Nationalization President Obama Reality Sat, 31 Jan 2015 01:20:57 +0000 Tyler Durden 501233 at http://www.zerohedge.com