Banking didn’t start out as a reckless, parasitical plaything of a moneyed and politically-connected aristocracy.
One of the most intellectually disingenuous statements made by western policymakers is that inflation is tame… nonexistent. However the actions of the World Bank this beggars belief as 'poverty' is re-defined (just like GDP) to ensure the planners can conjure hundreds of billions of dollars out of thin air without any consequences whatsoever. Zero risk.
Ever seen Jamie Dimon, wearing his presidential cufflinks, stretch, bend and break the truth in front of Congress? The guy, and by implication JPMorgan, is unflappable: there is nothing in this world that could dent his cool. And yet, we may have just uncovered the weakest link in JPMorgan's armor. The one thing in the world that would make JPM "blink" is...
With relative front-runner Yulia Tymoshenko suggesting Ukraine hold a referendum on joing NATO in June - exactly the event that Putin has expressed grave concern about - this weekend's elections in the troubled nation are considerably more crucial to global geopolitical anxiety than the record low levels of implied volatility across FX, bond, and stock markets would suggest. AS Deutsche explains, Ukraine's new president will face challenges in almost all key spheres – in particular, de-escalating tensions within Ukraine, especially in the eastern provinces; conducting deep economic reforms in order to move Ukraine on the path of recovery along with dealing with the international lenders; finally, improving relations with Russia and the European Union. Below we outline the policy agendas of the candidates and assess the probable scenarios of further political development.
Monetary central planning at the zero bound embodies a destructive internal contradiction. It inherently generates rampant speculation in real estate and financial assets because ZIRP massively subsidizes the cost of carry. At the same time, its practitioners are institutionally disposed to bubble denial because they falsely believe that their policies are what is keeping the real economy advancing - even if currently it is at a sub-normal pace by historical standards. Without fail, therefore, monetary central planners keep their feet on the accelerator to the very end, boasting that the “in-coming data” shows the macro-economy approaching the nirvana of full-employment. What they are actually doing, however, is driving the financial system to unsustainable extremes of valuation and speculation - and eventually to a crash landing. We have had two of these processions of the lemmings - that is, Fed driven cycles of bubble inflation and bust - already in this century. Now we are at the asymptote of the third.
While US central bankers shudder at the idea of admitting their could be a bubble in real estate or stocks (unless its obvious in hindsight); and England's Bank of England explains 'if there is a bubble, it's not their fault, but there isn't so there'; it appears the Chinese are more comfortable with the truth. As Bloomberg BusinessWeek reports, China's central bank Governor Zhou Xiaochuan said, China may have a housing bubble only in “some cities,” - an issue that’s difficult to resolve with a single nationwide policy. As concerns mount of dramatic over-supply on the back of extrapolated urbanization dreams, Zhou notes, “The economy has slowed down a bit, but not very much," adding that "we should keep vigilance on whether it continues to slow down." Which is odd because US talking heads have made up their minds that China is fixed...
It seems that no market tops until the bag has been fully passed to retail muppets, and we appear to be in the process of that happening right now. The retail investor is getting back into the stock market and is seemingly focused on the riskiest types of shares; unlisted penny stocks. They aren’t just dipping their toes in either, the pace exceeds that of the tech boom of the late 1990?s and has just hit the highest amount on record.
A year ago it was the US which first "boosted" America's GDP by $500 billion - literally out of thin air - when it arbitrarily decided to include "intangibles" to the components that 'make up' GDP (in the process cutting over 5% from the US Debt/GDP ratio). Then Spain joined the fray. Then Greece. Then the UK. Then Nigeria, which showed those deveoped Keynesian basket cases how it is really done, when it doubled the size of its GDP overnight when it decided to change the base year of its GDP calculations. Now it is Italy's turn, and like everything else Italy does, this latest "revision" of the definition of GDP easily wins in the style points category. As Bloomberg reports, "Italy will include prostitution and illegal drug sales in the gross domestic product calculation this year." Yup: blow and hookers. And that, ladies and gents, how it's done.
Yes, U.S. capital markets have officially gone "Full Seinfeld"; As ConvergEX's Nick Colas notes, Tuesday’s selloff over “Nothing” reversed higher Wednesday throuygh Friday for similarly non-specific reasons. So, today we will go a little further afield and talk about words and what they tell us about shifting societal priorities and norms. Wonder what the most commonly searched word might be on the Merriam-Webster website? It is “Pragmatic”... which seems incredibly ironic given the total lack of pragmatism that appears to be shown in world markets.
It was almost inevitable: a week after we wrote "From Rothschild To Koch Industries: Meet The People Who "Fix" The Price Of Gold" and days after "Barclays' Head Of Gold Trading, And Gold "Fixer", Is Leaving The Bank", earlier today the UK Financial Conduct Authority finally formalized what most in the "tin-foil" hat community had known for years, when it announced that it fined Barclays £26 million for manipulating "the setting of the price of gold in order to avoid paying out on a client order." Furthermore, the FCA confirmed that those inexplicable gold raids which come as if out of nowhere, and slam gold with a vicious force so strong sometime they halt the entire market, had a very specific source: Barclays, whose trader Daniel James Plunkett, born 1976, "sent out a burst of orders aimed at moving the price of the yellow metal."
Vladimir Putin has concluded his lengthy interview having covered everything from "the end of the unipolar model of the world" - i.e. de-dollarization - to US and Europe's responsibility for Ukraine's "full-scale civil war." The Russian leader noted that he's "trying to help Ukraine" but following the loans from the IMF asks "where's our money?" and warned that US sanctions have had little effect on the Russian economy but will have a boomerang effect. The following distills his 120 minute discussion... Putin "expects common sense to prevail."
"Artificial, credit-stained activity will never be more than a fleeting substitute for fundamental demand. And when the artificiality inevitably subsides, what is left is far worse than not having entertained it at the start. That too is a testament against the illicit concept of neutrality. We may all be dead in the long run, but it used to be nice to enjoy the fruits of free economic expansion whilst awaiting the unavoidable."
As we noted in the pre-open this morning, with the weekend just around the corner, it was virtually assured that the S&P would close at an all time high today - after all the people need to be confident when they go shopping at malls with money they don't have (but delighted by paper profits they haven't booked) so they boost the US non-GAAP GDP (at least before the BEA too, like Italy, changes the definition of GDP to include cocaine and hookers). Finally, assuring a (likely record) low-volume levitation today is the early closure of the bond pit ahead of Memorial Day holiday which also means only a skeleton crew of algos will be frontrunning each other to push the S&P over 1,900. Summing it all up perfectly - VIX closed at 15-month lows, Russell 2000 had its best week in 3 months, and Treasury yields are 13bps lower than when the S&P was last here... un-rigged.
Below, for the third year running, we present the 50 most shorted (and most convex) Russell 2000 names, which are sufficiently small and illiquid, that even the tiniest rumor or upgrade by a contrarian research shop is able to send into a short covering frenzy. They are sorted by short interest as a % of the float in declining order, which means that the absolutely most hated stocks are at the top.
"Words speak louder than actions until words stop working then we promise some actions... or more talk about actions." That appears to be the communication method-of-choice for the world's central bankers and The Bank Of Japan's Kuroda stepped into the breach today with his own demands. As Citi's Steven Englander translates, Kuroda is telling investors not to buy JPY just because the BoJ is being very reticent on policy ease (do as we say, not as we do). However, there is an important second message which is intended to be delivered to the Japanese bureaucracy - "Mr. Kuroda also acknowledged limits to what the BOJ can do to generate long-term growth."