In 55BC, Cicero stood before the Senate of Rome (warning of its looming demise), spoke of the “arrogance of officialdom” and the more one studies going ons throughout history, the clearer it becomes – the story remains the same, only the actors change - history repeats because the passions of man never change. Those who may grudgingly support the ECB stimulus in the hope that it will buy time for governments to enact structural overhauls, keep praying that politicians will push aside their own personal self-interests for once and focus of the interests of the people. Such wishful thinking is foolish since history demonstrates that only takes place when the system collapses. People who do hold to this view are also worried that looser monetary policy may work against structural measures. The European Central Bank’s stimulus diminishes any incentive for governments to reform. The policy makers and specialists at Davos were divided over the effect of even that program; but where do these people get off assuming they have the ability and right to manipulate the world?
Someday, maybe, these central banks will find that secret formula that unlocks the commanded utopia from its monetary prison, but I think it more like what led to the end of the first Gulf War, where continued air raids upon Iraqi positions amounted to destroying rubble. As Colin Powell put it, “we were bouncing rubble with billion-dollar missiles.” That seems to be a fitting, paraphrased description of the European state of monetarism, bouncing economic rubble with trillion-euro debt missiles.
No matter what the politicians say about how great America is and how we, as a people, will always triumph, the fact is that the nation seems to be imploding. Despite the dire state of our nation, however, you can rest assured that none of the problems that continue to plague our lives and undermine our freedoms will be addressed by our so-called elected representatives in any credible, helpful way, and certainly not during a State of the Union address.
"No one believes the suicide hypothesis," one of Nisman's investigative team told Reuters, adding that, "he was very convinced of his ideas and prepared to see them through. He had received threats all his life and it never intimidated him." With the news of no gunpowder residue sinking in, and protests rising, even Argentina's President is now uncomfortably admitting it, saying on Thursday that she was "convinced" Nisman's death was not a suicide, explaining that people had led him astray in his investigation in order to smear her name and then "needed him dead." However, instead of vowing to shed light on the matter, Fernandez and her government have been on the defensive, trying to refute Nisman's claims against her. Neighboring Uruguay said it felt sorry for Argentina and that its justice system needs to clear up the case to maintain "the minimal confidence our societies need." Questions abound...
Euro Crash Continues Sending Stocks Higher, Yields To Record Lows; Crude Stabilizes On New King's CommentsSubmitted by Tyler Durden on 01/23/2015 07:03 -0500
Today's market action is largely a continuation of the QE relief rally, where - at least for the time being - the market bought the rumor for over 2 years and is desperate to show it can aslo buy the news. As a result, the European multiple-expansion based stock ramp has resumed with the Eurostoxx advancing for a 7th day to extend their highest level since Dec. 2007. As we showed yesterday, none of the equity action in Europe is based on fundamentals, but is the result of multiple expansion, with the PE on European equities now approaching 20x, a surge of nearly 70% in the past 2 years. But the real story is not in equities but in bonds where the perfectly expected frontrunning of some €800 billion in European debt issuance over the next year, taking more than 100% of European net supply, has hit new record level.
The Euro Crashes To 12 Year Lows And Now The US Commerce Secretary Starts To Grumble About A Strong DollarSubmitted by Tyler Durden on 01/22/2015 12:57 -0500
A crashing Yen failed to help Japan or fix its economy, but while Japan may now be a lost cause, the Keynesian masterminds of the world will give it another try, and following today's Draghi's announcement, the EURUSD has crashed to the lowest level since 2003, tumbling over 200 pips, and printing below 1.14 moments ago. However, in a clear indication that the party for the USD-bulls may be ending, none other than the US commerce secretary moments ago said the impact of a rising dollar on exports and economic growth bears monitoring.
If speeches like the State of The Union this week, and the reactions to it, make anything clear, it’s that the PR guys won the fight against critical thinking. All you need to do is get people to believe whatever it is you got for sale. And 99.9% of people are easily fooled. That’s how you define democracy in 2015: how many people can you fool? Which is the most convincing sleight of hand?
As we detailed previously, the first USD-denominated Chinese corporate bond default last week - of developer Kaisa Group - signals considerably deeper problems in China's economy as one manager noted, "everyone is rethinking risk right now." As Bloomberg reports, Chinese companies comprised 62% of all U.S. dollar bond sales in the Asia-Pacific region ex Japan last year, issuing $244.4 billion and that huge (and illiquid) market "has been too complacent," according to one credit strategist who warned, investors would be “rational to adopt a cautious approach in view of the fact that anything can happen, anywhere, anytime. It would be irrational to continue thinking that after Kaisa none of the companies will see a similar fate."
After 6+ years of deepening poverty and rising stock markets, of creative accounting, of QE and ultra-low interest rates, of extend and pretend and outright propaganda and of what have you, all of which have led us to where we are today, facing yet more rounds of stumbling from crisis into multiple crises, it would seem clear that the model, if not the mold, is broken. In order to fix it, let alone replace it altogether, we need to understand to what extent it is broken. And to do that, we first need to know what exactly the model is. However, the rich-and-powerful in Davos believe in one model only, the one of ever increasing centralization and globalization, because that’s the model that got them where they are.
The EU’s financial watchdog, the European Securities and Markets Authority, will look at whether automated trading adds fake, or ghost, liquidity to markets, said Steven Maijoor, the regulator’s chairman. “There has been a suggestion that the liquidity they are providing is not real liquidity because once you would like to go into the trade and accept an order the offer disappears,” Maijoor said in an interview in Hong Kong on Jan. 20. “We are looking now into the specific issue of what is called ghost liquidity.”
"...with the large downward revision to its core CPI outlook, the bank is more or less acknowledging a much lower possibility of achieving the 2% price stability target by around FY2015. Yet, at the press conference following the MPM, Governor Kuroda said he still held the view that 2% could be achieved by around FY2015. Domestic investors have been skeptical of the BOJ’s target from the outset, and now foreign investors are also beginning to question the BOJ’s logic and communication with the market. We believe the mixed signals the BOJ is sending may well serve to further undermine confidence in the bank." - Goldman
Market Wrap: Futures Lower After BOJ Disappoints, ECB's Nowotny Warns "Not To Get Overexcited"; China SoarsSubmitted by Tyler Durden on 01/21/2015 06:55 -0500
Three days after Chinese stocks suffered their biggest plunge in 7 years, the bubble euphoria is back and laying ruin to the banks' best laid plans that this selloff will finally be the start of an RRR-cut, after China's habitual gamblers promptly forget the market crash that happened just 48 hours ago and once again went all-in, sending the Shanghai Composite soaring most since October 9, 2009. It wasn't just China that appears confused: so is the BOJ whose minutes disappointed markets which had been expecting at least a little additional monetary goosing from the Japanese central bank involving at least a cut of the rate on overnight excess reserves, sending both the USDJPY and US equity futures lower. Finally, in the easter egg department, with the much-anticipated ECB announcement just 24 hours away, none other than the ECB's Ewald Nowotny threw a glass of cold water in the faces of algos everywhere when he said that tomorrow's meeting will be interesting but one "shouldn’t get overexcited about it."
The old joke is "In America, you correct newspaper, but in Soviet Union, newspaper corrects you.” Switzerland is now experiencing the bond market equivalent.
Global markets face three risks, according to Edwards: bearishness in the U.S. government bond market, a flawed confidence that the U.S. is in a self-sustaining recovery and undue faith in the relationship between quantitative easing (QE) and the equity markets. “It doesn’t matter how much QE is spewing out of the US,” he said. “The markets will lose confidence that the policymakers are in control of events, just as they did in 90's Japan. They lost faith that the policymakers were in control. This is the biggest risk out there.”
The fix for low oil prices is... low oil prices. Past some point high-priced producers will naturally stop producing, the excess inventory will get burned up, and the price will recover. Not only will it recover, but it will probably spike, because a country littered with the corpses of bankrupt oil companies is not one that is likely to jump right back into producing lots of oil while, on the other hand, beyond a few uses of fossil fuels that are discretionary, demand is quite inelastic. And an oil price spike will cause another round of demand destruction, because the consumers, devastated by the bankruptcies and the job losses from the collapse of the oil patch, will soon be bankrupted by the higher price. And that will cause the price of oil to collapse again. And so on until the last industrialist dies...