Duh. It was so obvious looking back. This is not a consequence-free environment... it’s time to find safety.
“I don’t think we’ve seen the last of this trend. When I trained as an economist, negative rates weren’t in the textbooks. But that’s the world we live in now, and it hasn’t stopped turning."
Why are the worlds’ most successful investors having so much trouble lately? The short answer is that the markets they used to understand have been replaced by something very different. In this new, post-market world, money managers can’t separate signal from noise and end up on the wrong end of wild swings in commodities, currencies and interest rates. And now their clients are figuring this out.
If we are forced to keep our money in the bank... and cash is outlawed... the Deep State will have total economic control over us all.
While the storm clouds continue to build above Trafigura, we now know the fate of Galena and why its CEO Letchford departed the company in a hurry last week: according to a follow up from Bloomberg, Trafigura has decided to close the flagship Galena Metals Fund, the latest hedge fund victim of the rout in raw materials markets from oil to copper.
With the ECB's December meeting just one week away, Mario Draghi and co. are still debating how best to package a new round of easing measures. As Reuters reports, the central bank is considering a tiered system for the application of negative rates in an effort to mitigate the effect on banks. Translation: the ECB may be preparing to "overwhelm" with an even larger cut to the already negative depo rate that analysts were expecting.
Having detailed the "perverted nonsense" that is the collapsing and negative US swap spreads (here, here, here, and here) and noted money manager's concerns that the big question remains whether there is "something bigger brewing under the surface that so far hasn’t been pinpointed yet," it appears Goldman Sachs feels the need to 'explain' the anomaly in what appears an effort to calm fears about the broken money markets. Of course, we don’t have to figure out what the “market” is saying about a negative spread because it isn’t saying anything other than “something” is wrong and even Goldman admits this signals funding and balance sheet strains are worsening since August.
Global Stocks Fall For 5th Day On Disturbing Chinese Inflation Data; Renewed Rate Hike Fears; Copper At 6 Year LowSubmitted by Tyler Durden on 11/10/2015 06:58 -0500
The ongoing failure of China to achieve any stabilization in its economy, after already cutting interest rates six times in the past year, and the prospect of a U.S. interest rate hike in December, had made markets increasingly jittery and worried which is not only why the S&P 500 Index had its biggest drop in a month, but thanks to the soaring dollar emerging market stocks are falling for a fourth day - led by China - bringing their decline in that period to almost 4 percent, and the global stock index down for a 5th consecutive day.
JS Kim Issues Critical Warning About Newly Introduced Global Banking "Gold Programs". Could Bankers Be Duping Us into Yet Another One of Their Reverse Alchemy Schemes?
- Dollar at three-month high as payrolls paralysis sets in (Reuters)
- 5 Things to Watch in the October Jobs Report (WSJ)
- China to Lift Ban on IPOs (WSJ)
- ArcelorMittal Is Latest Victim of China's Steel-Export Glut (BBG)
- 'Hope to see you again': China warship to U.S. destroyer after South China Sea patrol (Reuters)
- Giants Tighten Grip on Internet Economy (WSJ)
- Questions Surround Valeant CEO Pearson (WSJ)
Don't forget Forex is countertrend market (generally) - here's a strategy to play the Forex 'fix'
- Euro zone growth weak in October, China services rally (Reuters)
- Stocks Rise With European Bonds on Stimulus Outlook; Euro Falls (BBG)
- VW Sinks Deeper Into Crisis as Scandal Spreads to More Cars (BBG)
- Republicans ask IRS to audit Clinton charity's finances (Reuters)
- PBOC Inadvertently Boosts Stocks With Dated Zhou Comments (BBG)
- As China’s Economy Slows, Consumers Pick Up Some of the Slack (WSJ)
- Plane crashes in South Sudan, witnesses say dozens killed (Reuters)
At the height of the financial crisis, the unprecedented decline in swap rates below Treasury yields was seen as an anomaly. The phenomenon is now widespread, as Bloomberg notes, what Fabozzi's bible of swap-pricing calls a "perversion" is now the rule all the way from 30Y to 2Y maturities. As one analyst notes, historical interpretations of this have been destroyed and if the flip to negative spreads persists, it would signal that its roots are in a combination of regulators’ efforts to head off another financial crisis, massive corporate issuance (which we are seeing), China selling pressure (and its impact on repo markets) and "broken" wholesale money-markets.
If you thought we'd seen the depths of NIRP, think again because as Deutsche Bank notes, the ECB, Riksbank, SNB, and Nationalbank will likely dive further into the monetary Twilight Zone in the months ahead. Only when rates become negative enough to spark a depositor revolt will we have reached the "real" lower bound, but at that point, it will be far too late...
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