REITs

REITs
Tim Knight from Slope of Hope's picture

It’s painfully clear for all to see that the majestic United States is now firmly caught in the rapacious stranglehold of financial elites which have completely captured it in a grotesque gamed monetary process.  Our country’s once idealistic and industrious free market economy has been hijacked and is undeniably being fraudulently and overtly financialized by the craven clutches and maniacal machinations of a contemptible self-seeking banking class. They have become nothing more than avaricious parasites disgustingly feeding from the grand trough of our treasured human ingenuity and self-respecting industry.

Why Policy Has Failed

Put down the Sunday newspaper; grab a pot of coffee; and call 'mom' and tell her she has to read this. Doug Rudisch has written a far-reaching summary of the true state of the world and 'why policy has failed'. Simply put, there is no faith in the system; real underlying faith and trust in the system, as opposed to the confidence born from economic steroid injections or entitlements. There also is a subtle but important distinction between faith and trust versus confidence. Faith and trust are longer term and more powerful concepts.There is more going on than a temporary lull in animal spirits that current fiscal and monetary policy will cure. If that was the case, it would be working already... We have ended up with a system where the worst of the risk takers have the ability to take the most risk and are currently taking it at extreme levels. We wish we could be more prescriptive and offer more solutions for the problems. But in order to solve a problem, you must first realize you have one. With respect to the Fed, we don’t think the U.S. realizes it has a problem.

Guest Post: From Shirakawa To Kuroda: The Regime Change Explained

The main take away from events in Japan is that the BOJ shifted from a tactic of interventions (under former Governor Masaaki Shirakawa) to one of monetary policy (under current Governor Haruhiko Kuroda) . What strikes us is that the monetary policy is precisely to... well, destroy their money and in the process any chance of having a monetary policy. In our view, it was exactly because the Fed’s (undisclosed) intention was to engage in never ending Quantitative Easing, that Japan was forced to implement the policy undertaken by Kuroda. Coordination with the Fed was impossible. With Mr. Kuroda’s policy, we now have the BOJ with a balance sheet objective, the Fed with a labour market objective (or so they want us to believe), the European Central Bank with a financial system stability objective (or a Target 2 balance objective) and the People’s Bank of China (and the Bank of Canada) with soft-landing objective. It is clear that any global coordination in monetary policy is completely unfeasible. The only thing central banks are left to coordinate is the suppression of gold.

Frontrunning: April 19

  • Police Searching for 19-Year-Old Boston Bombing Suspect (BBG)
  • Mayhem Erupts in Boston After MIT Campus Officer Slain (BBG)
  • Elvis Impersonator Accused of Ricin Letters Sowing Fear (BBG)
  • Blackstone Pulls Out of Dell Bid on Rapidly Falling PC Sales (BBG)
  • Before Texas plant exploded: What did regulators know? (Reuters)
  • Aso Says Japan Policy Unopposed at G-20 Meeting as Yen Falls (BBG)
  • Bipartisan pair target $2.5tn US savings (FT)
  • Plan for new Cyprus vote casts uncertainty on bailout (Cyprus Mail)
  • Ireland picks through debtors’ lifestyles (FT)

BoJ Unveils 'Shock-And-Awe' Quantitative-Qualitative Easing

As Citi's Todd Elmer notes, today's BoJ outcome looks far closer to 'shock and awe' than disappointment. It appears the BoJ's actions may speak as loud as their words for now - JPY is weakening and the Nikkei is rallying after Kuroda's last shot at a first impression appeared to beat expectations (covering for disappointing macro data - despite six months of jawboning and a 20% devaluation). Expectations, though tough to extract given the range of possible actions, appeared centered on extending maturities of bond purchases, increasing the size (median expectations of around JPY5.2tn per month or 50% higher than in Q1), bringing forward the open-ended nature of the program, and increasing scope to foreign bonds and REITs. In his effort to do "whatever it takes", the BoJ is upping asset purchases, extending the maturity of purchases and merging its asset purchase program; increasing the size to JPY7tn and buy securities out to 40 years. Though no mention of foreign bond-buying was made, and increase in ETFs and REITs is included. They have given themselves a two-year window to achieve the 2% inflation goal - paging Kyle Bass - and ironically, as the news broke Tokyo was hit by a significant earthquake.

Bank Of Japan May Buy Derivatives Next

Because having legal authority to buy corporate bonds, ETFs and REITs, in addition to everything else the Fed now buys, is apparently not enough to crush, mangle and suicide its currency, the BOJ is now considering adding yet another "asset" to its cocktail of eligible securities for purchase: those which Buffett once declared weapons of mass financial destruction - derivatives.

Will Japan's "Attempted" Reflation Succeed And Will It Spill Over Into Full-Fledged Currency War?

Yesterday we presented a simplistic analysis of why for Japan "This Time Won't Be Different", a preliminary observation so far validated by the just announced Japanese December current account deficit which was not only nearly double the expected 144.2 billion yen, printing at some 264.1 billion yen, but was only the first back-to-back monthly current account deficit since 1985. But perhaps we are wrong and this time Abe will succeed where he, and so many others, have failed before. And, as is now widely understood, perhaps Japan will succeed in finally launching the necessary and sufficient currency war that would be part and parcel of Japans great reflation, as even various G-8 members have recently acknowledged. The question is will it, and when?  One attempt at an answer comes from the fine folks at Bienville Capital who have compiled the definitive pros and cons presentation on what Japan must do, and how it will play out, at least if all goes according to plan.

Guest Post: The Next Secular Bull Market Is Still A Few Years Away

There have been several articles as of late discussing that the next great secular bull market has arrived. However, the reality is that this cycle is currently unlike anything that we have potentially witnessed in the past.  With massive central bank interventions, artificially suppressed interest rates, sub-par economic growth, high unemployment and elevated stock market prices it is likely that the current secular bear market may be longer than the historical average. No matter how you slice the data - the simple fact is that we are still years away from the end of the current secular bear market. The mistake that analysts, economists and the media continue to make is that the current ebbs and flows of the economy are part of a natural, and organic, economic cycle. If this was the case then there would be no need for continued injections of liquidity into the system in an ongoing attempt to artificially suppress interest rates, boost housing or inflate asset markets. From market-to-GDP ratios, cyclical P/Es, misconstrued earnings yields, and the analogs to previous Fed-blow bubbles, we appear near levels more consistent with cyclical bull market peaks rather than where secular bear markets have ended.