Wall Street is back in the business of lending money at the Fed’s gifted rate of zero plus a modest 80 basis point spread - so that the fast money can buy CLO paper on 9 to 1 leverage. There is your triple shuffle. It didn’t work out last time, but that doesn’t matter because the game is obvious. After enough buying on Wall Street’s triple leverage, junk loan prices might temporarily rebound. Then the brokers will put out the call to retail: The junk loan asset class is rebounding - its time to come back. For the final shearing, that is!
6 Years After the Financial Crisis Hit, The Big Banks Are Still Committing Massive Crimes
- EU regulators unveil details of bank stress tests (FT)
- Just use NSAfari: U.S., UK advise avoiding Internet Explorer until bug fixed (Reuters)
- China’s Income Inequality Surpasses U.S., Posing Risk for Xi (BBG)
- US races to refuel infrastructure fund as revenue dries up (FT)
- New Era Dawns at Nokia as Company Appoints CEO, Plans $1.4 Billion Special Dividend, Share-Repurchase Program (WSJ)
- Obama reassures allies, but doubts over 'pivot' to Asia persist (Reuters)
- Dissent at SEC over bank waivers (FT)
- U.S. Banks to Help Authorities with Tax Evasion Probe (WSJ)
- U.S., Europe Impose New Sanctions on Russia (WSJ)
- Why the U.S. Is Targeting the Business Empire of a Putin Ally (BBG)
- Euro-Area April Economic Confidence Unexpectedly Declines (BBG)
- Bitcoin traders settle class actions over failed Mt. Gox exchange (Reut
This eruption of late cycle bubble finance hardly needs comment. Below are highlights from a Bloomberg Story detailing the recent surge of leveraged recaps by the big LBO operators. These maneuvers amount to piling more debt on already heavily leveraged companies, but not to fund Capex or new products, technology or process improvements that might give these debt mules an outside chance of survival over time. No, the freshly borrowed cash from a leveraged recap often does not even leave the closing conference room - it just gets recycled out as a dividend to the LBO sponsors who otherwise hold a tiny sliver of equity at the bottom of the capital structure. This is financial strip-mining pure and simple - and is a by-product of the Fed’s insane repression of interest rates.
Combining China's aggregate domestic production and apparent imports indicates that she has now over 3,514 tonnes. Assuming the U.S. still owns all the gold held by the Fed, this would make China the world's second largest national owner... but it remains unclear whether the Fed's published Gold holdings are actually the property of other nations. Clearly the recent price rise in gold owes something to inflation fears, repressed interest rates and to the Ukrainian situation. In the meantime, a growing awareness of a possible serious and increasing shortage of physical gold and a decline in the power of western central banks to suppress the price, point to a resumption of the fundamental bull market in gold, despite a possible increase in fears of recession.
There is much new info in the just released Bloomberg profile on the infamous ex-JPMorganite Blythe Masters, among which the disclosure that she had made it clear that she had wanted to go along with the disposable JPM physical commodities unit (which as was reported recently, was sold to Swiss commodities giant Mercuria) and "and continue as the group's chief", a plan which did not work out as she had planned since she has no plans to "join the unit’s purchaser" (although joining Glencore is another matter entirely, and one which looks increasingly plausible) but what we find most striking is the following revelation: "Masters is under investigation by federal prosecutors in Manhattan, according to two people with knowledge of the matter. That probe was opened following a settlement with regulators that alleged JPMorgan manipulated power markets in the Midwest and California."
The last year or two has seen a deluge of Fed speakers pay lip-service to watching/monitoring/keeping-an-eye-on potential bubbles... but as yet having found none... That is all except one - Jeremy Stein - who explicitly called out high yield bonds as in a 'frothy' bubble last year... it appears he has grown weary of smashing his head against that wall...
- *FED SAYS STEIN SUBMITTED RESIGNATION LETTER TO OBAMA
- *YELLEN SAYS STEIN WAS 'AN INTELLECTUAL LEADER' ON FED BOARD
Stein plans to return to teaching at Harvard but in his resignation letter noted that more work is needed on the job market and that the financial market needs strengthening.
Almost a month ago, we wrote "This Is The One Financial Product Now Targeted By The HFT Swarm", in which after briefly perusing the Virtu S-1 filing, we concluded that "one product stood out. It is highlighted on the chart below: FX."
We are happy to report that this time the mainstream media is following our reports much more closely then five years ago, because overnight none other than Bloomberg came out with "High-Frequency Traders Chase Currencies as Stock Volume Recedes" in which we read, guess what, "Forget the equity market. For high-frequency traders, the place to be is foreign exchange." But our readers already knew this of course...
The purpose of Quantitative Easing is to support the balance sheets of a few over-sized banks and to finance the federal budget deficit at an artificially low rate of interest. In other words, QE supports failed banks and federal fiscal irresponsibility. In order to successfully carry off this blatant misuse of public policy, the price of gold, a measure of the dollar’s value, must be suppressed. The Federal Reserve’s lack of integrity speaks volumes about the corruption of the US government.
Yesterday, we read with some amusement that Goldman has moved Guy Saidenberg, reportedly one of the greater profit centers at the firm - and how could he not be when he always traded against Tom Stolper's recommendations which led to tens of thousands of pips in losses to those who listened to him over the past five years - from head of global foreign-exchange trading to a new role, as co-head of commodities. Why did Goldman decide to scrap its once uber-profitable FX vertical and redo it from scratch? Simple - the ability to rig and manipulate FX markets, which are now under every global regulator's microscope after the "Cartel" members so foolishly let themselves be exposed to the entire world, is no longer there, as confirmed last night by news that a dozen large investors have filed a joint lawsuit against 12 banks for "allegedly conspiring to rig global foreign-exchange prices." Allegedly? Hasn't everyone read the Cartel chatroom transcripts yet?
Gold is a tangible commodity. It's a material good that can be held in the hand, bought and sold--and warehoused. You have to understand warehousing to understand the gold market.
The last time the FT penned an article on the topic of gold manipulation, titled "Gold price rigging fears put investors on alert" it was promptly taken down without much (any) of an explanation. Luckily, we recorded the article for posterity here. Earlier today, another article on the topic appears to have slipped through the cracks of the distinguished editors of the financial journal that enjoys the ad spend of the status quo, when it reported that "Gold pricing scrutiny widens", hardly an update that will take the world by storm, however it is notable that "even" the FT, where for years goldbugs claiming gold manipulation had been ridiculed, is finally start to admit the glaringly obvious.
My investigation into gold trading irregularities, including the time around the London fixes, initially began after reading the work of the late Adrian Douglas, along with Dmitri Speck.
With the Bank of England recently denying any collusion with dealers to manipulate FX rates and exclaiming "it was not our job to go hunting for the rigging of markets," the WSJ reports that none other than that bastion of trust The Federal Reserve examined key FX benchmarks months before global regulators sounded alarms over the manipulations... but took no action.
Bank Of England Restructures After FX Probe But Not Responsible "For Hunting For Rigging Of Markets"Submitted by Tyler Durden on 03/11/2014 12:39 -0400
"We can't come out of this with a shadow of doubt about the integrity of the Bank of England," Governor Mark Carney told MPs this morning on the heels of the report, as we noted here, that found no collusion by the bank to manipulate FX rates. A senior BoE employee was told of "attempts to move the market" but "did not convey to [Monetary Policy Committee member Paul Fisher] that markets were being rigged," and therefore was suspended. While many have called this "as bad as Libor" the BoE remains adamant of its lack of involvement but is still restructuring itself - adding that "it isn't our job to go out hunting for rigging of markets." Nope, just to ignore it, we presume. MPs were not impressed.