The Rout In Spain
Submitted by Tyler Durden on 05/24/2013 - 08:13 Central Banks European Central Bank Federal Reserve Federal Reserve Bank Gross Domestic Product International Monetary Fund Reality Yen
Spain has already gone bankrupt. It is not spoken of in this fashion, no one mentions it in public but that is the truth of it. The money, some $172 billion, was funneled to the banks and not to the sovereign in one more European ruse to distract everyone but the results are the same. Now it is becoming apparent that even this amount of money was not enough so more will have to be given. The money will go to the Spanish banks, the debt will be guaranteed by Spain, the contingent liability will not be counted as part of Spain's debt to GDP ratio but we will know the truth of it. Whatever direct money from Spain that goes into their banks will be called an "investment" and put on the left side of their balance sheet as an asset and the mockery will continue but I can still read a ledger; thank you very much.
- Comments: 63
- Reads: 11,071
Why Italian Bonds Have A Long Way Down To Go
Submitted by Tyler Durden on 05/24/2013 - 07:47 Bond Carry Trade Japan non-performing loans Reality
As we hinted last night, and as the market is starting to realize, one of the bigger downstream casualties of the first rumblings that Abenomics is starting to crack, have been peripheral bond yields, with Spanish, Italian and Portuguese yields all wider by 10 bps and rising. However, that is only half the story. The other half is that, with its usual 6-8 week delay, the market is finally grasping the biggest danger in Europe - one which we have been pounding the table on week after week after week (most recently here): the soaring non-performing loans held by European banks. In fact, it took the FT to confirm what we have been warning about all along. And just so the market has a sense of how much downside may be imminent if indeed reality reasserts itself and frontrunning the Japanese carry trade both occur at the same time, here is a rather unpleasant chart courtesy of Diapason, of what expects all those who bought up Italian bonds in the recent dash-for-trash, oblivious of the collapsing fundamentals, and driven purely by FOMO. The downside could be big to quite big.
- Comments: 25
- Reads: 6,970
Frontrunning: May 24
Submitted by Tyler Durden on 05/24/2013 - 07:31 Activist Shareholder Apple Ben Bernanke Bloomberg News Bond CBOE China Cohen Corporate Finance Crack Cocaine Crude Goldman Sachs goldman sachs GOOG Google Housing Market Insider Trading Ireland John McCain Natural Gas News Corp Peter Chernin Private Equity recovery Reuters SAC Sears Time Warner United Kingdom Volatility Wall Street Journal World Trade Yuan- The deeper agenda behind "Abenomics" (Reuters)
- BoJ governor Haruhiko Kuroda promises to stabilise bond market (FT)
- Obama Sees Sunset on Sept. 11 War Powers in Drone Limits (BBG)
- Lower CPMs for everyone: FTC Begins Probe of Google's Display-Ad Business (WSJ)
- Apple’s Tax Magic Leaves Irish Bondholders Unmoved (BBG)
- Asia Goes on a Debt Binge as Much of World Sobers Up (WSJ)
- All hail Gazpromia: UK gas supply six hours from running out in March (FT)
- Spain’s banks face €10bn more provisions (FT) ... and then more, and more, and more
- Truck strike may have caused Washington state bridge collapse, officials says (Reuters)
- P&G Says A.G. Lafley Rejoins as Chairman, CEO (BBG)
- Five Key Things About the SAC Insider Case (BBG)
- Comments: 13
- Reads: 2,106
Bizarro Time As Better Data Sends Stocks Lower
Submitted by Tyler Durden on 05/24/2013 - 06:56 Bloomberg News BLS Bond Bureau of Labor Statistics Carry Trade Central Banks Continuing Claims European Central Bank Gross Domestic Product Initial Jobless Claims Japan Jim Reid LTRO Markit Monetary Policy Morgan Stanley New Home Sales Nikkei POMO POMO Recession recovery Unemployment United Kingdom Volatility"The last 36 hours have perhaps been evidence as to what might happen if stimulus is withdrawn before the global recovery has been cemented and what might happen if Japan makes mistakes along the way to their attempted new dawn. With the Chinese data still ambiguous, Europe still in recession, Japan in the very early stages of a growth experiment and with the US recovery still historically very weak one has to say that liquidity has been the main market fuel in recent months. So central banks have to tread carefully and the Fed tapering talk and the BoJ's seemingly benign neglect policy towards JGBs has had the market fretting." - Deutsche Bank
- Comments: 41
- Reads: 4,910
Despite 'Promises', Japanese Market Chaos Continues
Submitted by Tyler Durden on 05/24/2013 - 00:17 Bond Capital Markets Carry Trade Nikkei Volatility
UPDATE 1: Japanese stocks turned negative (NKY -600pts from highs, -1.5% on day; and TOPIX down over 4% from highs); Japanese banks -11% from yesterday highs; S&P futures down 10 points from after-hours highs...
UPDATE 2: *KURODA WANTS TO AVOID INCREASING VOLATILITY IN BOND MARKET (yeah thanks... as useful as saying "we all want to avoid syphilis")
UPDATE 3: Nikkei 225 Drops below 14,000 - TOPIX down 11% from highs
For the second day in a row, and in spite of comments from Abe and Kuroda on communicating with the market (as Kuroda says BoJ Monetary easing sufficient), Japanese capital markets are out of control.
- Comments: 181
- Reads: 20,490
Will It Be Inflation Or Deflation? The Answer May Surprise You
Submitted by Tyler Durden on 05/23/2013 - 22:33 Consumer Prices Federal Reserve Great Depression Gross Domestic Product Hyperinflation Recession Trade Deficit Warren Buffett
Is the coming financial collapse going to be inflationary or deflationary? Are we headed for rampant inflation or crippling deflation? This is a subject that is hotly debated by economists all over the country. Some insist that the wild money printing that the Federal Reserve is doing combined with out of control government spending will eventually result in hyperinflation. Others point to all of the deflationary factors in our economy and argue that we will experience tremendous deflation when the bubble economy that we are currently living in bursts. So what is the truth? Well, for the reasons listed below, we believe that we will see both.
- Comments: 294
- Reads: 42,139
Japan Has Officially Gone Insane
Submitted by Tyler Durden on 05/23/2013 - 22:05 Japan YenOn one hand:
- BOJ OFFERS TO BUY 300B YEN DEBT WITH MORE THAN 10YR MATURITY
- BOJ OFFERS TO BUY 600B YEN IN 5-10YR GOVT DEBT
and on the other
- ABE SAYS BOJ ISN’T DIRECTLY BUYING GOVERNMENT DEBT
We give up: raging schizophrenia and a sado-maso fetish is now a core prerequisite for anyone who wishes to follow the daily lies these central planning sociopaths spew with impunity.
- Comments: 181
- Reads: 19,946
As Of This Moment Ben Bernanke Own 30.5% Of The US Treasury Market... And Will Own All By 2018
Submitted by Tyler Durden on 05/23/2013 - 21:37 Ben Bernanke Ben Bernanke Bond Budget Deficit fixed POMO POMO
What may come as a surprise to most, is that as of this week's H.4.1 update, the amount of ten-year equivalents held by the Fed increased to $1.583 trillion from $1.576 trillion in the prior week, which reduces the amount available to the private sector to $3.637 trillion from $3.668 trillion in the prior week. And also, thanks to maturities, and purchase by the Fed from the secondary market, there were $5.219 trillion ten-year equivalents outstanding, down from $5.244 trillion in the prior week. What this means simply is that as of this moment, the Fed has, in its possession, a record 30.32% of all outstanding ten year equivalents, or said in plain English: duration-adjusted government bonds. It also means that the amount of bonds left in the hands of the private sector has dropped to a record low 69.68% from 69.95% in the prior week. Finally, the above means that with every passing week, the Fed's creeping takeover of the US bond market absorbs just under 0.3% of all TSY bonds outstanding: a pace which means the Fed will own 45% of all in 2014, 60% in 2015, 75% in 2016 and 90% or so by the end of 2017 (and ifthe US budget deficit is indeed contracting, these targets will be hit far sooner). By the end of 2018 there would be no privately held US treasury paper.
- Comments: 70
- Reads: 14,319
China's Bird Flu Goes Airborne
Submitted by Tyler Durden on 05/23/2013 - 21:12 China Hong Kong
As if China was not suffering enough from a slumping economy, the South China Morning Post now reports that the H7N9 'bird flu' virus that has infected 131 people (and killed 36) so far can be transmitted not only by close contact but by airborne exposure. Domestic reports suggest the virus appears to be brought under control largely through restrictions at bird markets but the team at the University of Hong Kong has also found that pigs can be infected (cue 'when pigs can fly' pun). The findings suggest that there may be many more cases that have been detected or reported since "people may be transmitting the virus before they know they've even got it."
- Comments: 110
- Reads: 10,728
All I Want For Christmas Is The S&P (The Las Vegas Period)
Submitted by Tyler Durden on 05/23/2013 - 20:41 Bank Failures BRICs Central Banks China Equity Markets International Monetary Fund Kondratieff Wave Las Vegas Lehman Market Conditions Purchasing Power recovery Reserve Currency Shadow Banking
We are approaching a critical point (again) in the “battle royal” between the forces of inflation and deflation. Deflationary forces are threatening to overwhelm the reflationary push-back of the world’s central banks - although this is not reflected in most equity markets (especially the US). Open-ended QE was only announced by the Fed last Autumn, but the impact on (market-based) inflation expectations plateaued within months and has started turning down. A decision to taper QE would obviously be negative for equities in the absence of a sufficiently strong offsetting improvement in economic fundamentals – which is difficult to envisage right now.
- Comments: 34
- Reads: 8,458
Japanese Stocks Open +1.5%; Bonds Half-Way To Limit Down
Submitted by Tyler Durden on 05/23/2013 - 20:04 Bond Japan Nikkei Quantitative Easing recovery
It seems the correlation to USDJPY has started to disintegrate and what is more worrisome for the BoJ is the linkage between JGBs and the Nikkei 225. Equities in Japan are about to open to a modest bounce around 1.5% but JGB prices are down around 0.50 (half the limit-down price moves). So, the problem for the BoJ is - do you let JGBs flop to maintain your equity market's appearance of normality? Or are Japanese stocks about to be as implicitly repressed as the bond market? It would appear TPTB are doping their best to ramp the JPY to keep this bounce alive (USDJPY opening just shy of 102.50).
*AMARI SAYS 'ABENOMICS' IS PROGRESSING STEADILY (this is progress?)
*AMARI SAYS BOJ IS COMMUNICATING CLOSELY WITH MARKETS (we suspect the market is communicating back even more)
"Central bankers dream of getting back to "normal" – normal interest rates, a normal balance sheet, and so on. But that point isn't going to come any time soon. They are stuck on a money printing treadmill, and there appears no way off.
- Comments: 53
- Reads: 7,272
Is America’s Economy Being Sovietized?
Submitted by Tyler Durden on 05/23/2013 - 19:29 Alan Greenspan Equity Markets Fail Federal Reserve Fisher Fractional Reserve Banking Monsanto New Normal Obama Administration Obamacare Reality Richard Fisher Transparency
The foundation of the Soviet model of trade and investment was centralization under the guise of "universal public ownership". The entire goal of communism in general was not to give more social and political power to the people, but to extinguish alternative options and focus power into the hands of a select few. The process used to reach this end result can vary, but the goal always remains the same. In most cases, such centralization begins with economic hegemony, and it is in our fiscal structure that we have the means to see the future. Sovietization in our financial life will inevitably lead to sovietization in our political life. Does the U.S. economy’s path resemble the Soviet template exactly? No. And we're sure the very suggestion will make the average unaware free market evangelical froth at the mouth. However, as we show, the parallels in our fundamentals are disturbing; the reality is that true free markets in America died a long time ago.
- Comments: 112
- Reads: 11,779
IRS' Lois Lerner Put On Involuntary Paid Vacation
Submitted by Tyler Durden on 05/23/2013 - 18:56 Barack Obama
The IRS' Lois Lerner may not be the most proficient when it comes to hiding years of alleged conservative group persecution, or subsequently pleading the fifth and avoiding self-incrimination in what she dubs is a perfectly legal misunderstanding even as she makes on the record statements defending her innocence, but when it comes to being put on "involuntary" paid leave, she shows private sector efficiency and results. According to Bloomberg, "Lerner is being replaced on an acting basis, the IRS said today. Lerner has been placed on paid administrative leave, said a Democratic aide who was informed of the decision. The move wasn’t voluntary, the aide said." So whereas taxes paid by conservatives were being used to fund her witchhunt of other conservatives, going forward the government worker, who oddly enough is being replaced "despite having done nothing wrong", will be paid to do nothing. Sound like a hole in one mission accomplished for this administration.
- Comments: 114
- Reads: 8,510
Are Covert Operations Underway In The Global Currency Wars?
Submitted by Tyler Durden on 05/23/2013 - 18:34 Japan New Zealand Price Action Quantitative Easing Switzerland
In an age of economic policy activism, including widespread quantitative easing and associated purchases of bonds and other assets, Amphora's John Butler reminds us that it is perhaps easy to forget that foreign exchange intervention has always been and remains an important economic policy tool. Recently, for example, Japan, Switzerland and New Zealand have openly intervened to weaken their currencies and several other countries have expressed a desire for some degree of currency weakness. In this report, Butler summarizes the goals and methods of foreign exchange intervention and places today’s policies in their historical context; but moreover he discusses the evidence of where covert intervention - quite common historically - might possibly be taking place: perhaps where you would least expect it... And if the currency wars continue to escalate as they have of late, it seems reasonable to expect that covert interventions will grow in size, scope and frequency.
- Comments: 42
- Reads: 11,103
Chart Of The "Keynesian Normal": America's Tragic Divergence
Submitted by Tyler Durden on 05/23/2013 - 17:56 Federal Reserve Gross Domestic Product
There is a saying that debt can't buy growth. When it comes to the US, that saying is absolutely correct: only lots and lots of debt can "buy growth."
As the chart below shows, since officially leaving the gold standard in 1971, annual GDP growth has outpaced the growth of federal debt on just 11 occasions, and of these half were during the dot com boom of the late 1990s. Obviously this chart would look far worse if instead of just federal debt - which is merely a portion of total we used total credit market debt (which is some three time greater). But for illustrative purposes, merely Federal debt will suffice, because the parabolic "endphase" divergence between the two indexed lines - one showing GDP growth, the other debt growth - says more about the final outcome of this tragic Keynesian experiment than 1000 meandering, meaningless, trolling essays written by Nobel-prize winning economists ever could.
- Comments: 51
- Reads: 10,014
