Morgan Stanley

Successive rounds of government bond monetization have worked to destroy the Treasury, JGB, and EU core markets while the post-crisis regulatory regime has seen dealers back away from providing liquity in the secondary market for corporate credit just as the very same monetary policy that broke government bond markets has led to an explosion of new issuance from corporate borrowers, creating the potential for a self-feeding catastrophe in the event of selloff in corporate bonds.

The primary job of modern American regulators is to protect entrenched status quo interests. Protecting the public doesn’t even factor into the equation.

Nothing exposes the fallacies of the Fed’s policies of the last five years like its horror at the prospect of raising rates even a little bit. 

Janet Yellen at the Federal Reserve believes that the partying on Wall Street and in the financial institutions may “lead to trouble”.

• China’s Record Capital Outflows Spark Financial Stability Fears (FT)
• U.K. Inflation Falls Below Zero for First Time Since 1960 (BBG)
• Islamic State Solidifies Foothold in Libya to Expand Reach (WSJ)
• Judge sentences 11 Afghan police over lynching of woman in Kabul (Reuters)
• The $18 Trillion Global Economic Boost If Everything Went Right (BBG)
• Eurozone Prices Confirmed Flat Year-on-Year in April, Core Inflation Inches Higher (Reuters)
• Greek Finances to Stagger On Longer Than You Think (BBG)
• Athens sees EU deal soon, Greeks' approval of government stance dwindles (Reuters)

"Loans take time to season and go bad, and Wall Street loves to package and pass along risk. The music will stop — it always does — and this will not end well.”

Since the beginning of 2014, the 225 companies that have gone public in China have returned an average of 418% on their way to an average P/E of nearly 100X while growing earnings by an average of just 4%. Most absurd of all, software IPOs have returned 1,124%, have an average P/E of 311X on earnings growth of -5%.

"To critics who warn that pumping trillions of dollars into the economy in a short period is bound to drive up inflation, today's central bankers point to stagnant consumer prices and say, 'Look, Ma, no inflation.' But this ignores the fact that when money is nominally free, strange things happen, and today record-low rates are fueling an unprecedented bout of inflation across asset prices."

• Bonds Extend Global Rout as Europe Stocks Slide, Dollar Weakens (BBG)
• Verizon Communications to Buy AOL for $4.4 Billion (BBG)
• Fresh Nepal earthquake kills dozens, triggers panic (Reuters)
• Sen. Shelby to Unveil Legislation Heightening Fed Scrutiny (WSJ)
• Bill Gross: The Amount of Money I'll Give Away 'Is Staggering, Even to Me' (BBG)
• U.S. rejects notion that Gulf rulers snubbing Obama summit (Reuters)... what about AIIB?
• In Asia, Debt Market Gets Tougher (WSJ)
• Iran’s Mahan airline defies sanctions in shadowy aircraft deal (FT)

As the SHCOMP soars, the sellside reacts to China's latest round of easing and the message is clear: more policy rate cuts are in the cards as real lending rates remain elevated and deflation risk remains high. Meanwhile, the PBoC's statement was making the rounds on WeChat hours before its official release suggesting Janet Yellen isn't the only central banker that enjoys leaking information.

In the coming months, however many hours Clinton spends introducing herself to voters in small-town America, she will spend hundreds more raising money in four-star hotels and multimillion-dollar homes around the nation. The question is: "Can Clinton claim to stand for 'everyday Americans,' while hauling in huge sums of cash from the very wealthiest of us?" This much cannot be disputed: Clinton's connections to the financiers and bankers of this country - and this country's campaigns - run deep. As Nomi Prins questions, who counts more to such a candidate, the person you met over that chicken burrito bowl or the Citigroup partner you met over crudités and caviar?

Morgan Stanley breaks down the buyback-equity rally relationship while WSJ flags "big borrowing" by both corporations and investors. In short: corporate debt issuance is at record levels and so are buybacks, stock prices, and margin accounts. When the cycle finally turns, look out below. 

If the DOJ and CFTC is going to be consistent, then they have to indict the entire financial community from the CME, Exchanges, Brokers, Institutions, Investment Banks, Hedge Funds, Management Funds and High Frequency Trading Firms.