Topics discussed in the interview were - China and Russia’s gold hoarding - - Do not trust government ‘headline inflation’ - Importance of owning physical gold internationally - Likelihood of bank bail-ins in G20 countries - Cyprus bail-in did not hurt Russians; Hurt Cypriot savers - You have to be prepared ... Better to be a year early than a day late
- U.S. sets new import duties on Chinese solar products (Reuters)
- U.S.-China Solar-Products Dispute Heats Up (WSJ)
- China Mulls Offshore Yuan Gold Trade in Free Trade Zone (BBG)
- Insider-Trading Probe Could Snarl a Deal for Icahn (WSJ)
- KCG Holdings Suspects Its Trading Code Was Stolen (WSJ)
- ‘Period. Full Stop’ Is the New ‘At the End of the Day’ (BBG)
- Draghi not so goof for bonds: Investors Flag Risk of ECB Disappointing After Europe Bond Rally (BBG)
- But great for stocks: Equity Traders See Draghi Turning Throttle Up on Rally (BBG)
With Thomas Piketty's book on inequality topping the charts among the book-reading common-folk, ambitious ex-bankers are enjoying the high-life in ways not even Gordon Gecko could have dreamed up. If greed is good, then this is better as former Lehman execs sell the first ".luxury" website domain names and ex-Goldmanites pitch "curated environments that optimize health" for home living with 'Vitamin-C-infused showers'. Of course, as one banker opines philosophically, "it's all about balance...it's important that people who have the capital are making it as useful as possible."
With 97.5% of the S&P 500 having reported earnings, as of May 29, 2014, we can take a closer look at the results through the 1st quarter of the year. Despite the exuberance from the media over the "number of companies that beat estimates" during the most recent reported period, operating earnings FELL from $28.25 per share to $27.32 which translates into a quarterly decrease of 3.4%. The ongoing deterioration in earnings is something worth watching closely. The recent improvement in the economic reports is likely more ephemeral due to a very sluggish start of the year that has led to a "restocking" cycle. This puts overly optimistic earnings estimates in jeopardy of being lowered further in the coming months ahead as stock buybacks slow and corporate cost cutting becomes less effective.
Two weeks ago when news broke about the first confirmed instance of gold price manipulation (because despite all the "skeptics" claims to the contrary, namely that every other asset class may be routinely manipulated but not gold, never gold, it turned out that yes gold too was rigged) we said that this is merely the first of many comparable (as well as vastly different) instances of gold manipulation presented to the public. Today, via the FT, we get just a hint of what is coming down the pipeline with "Trading to influence gold price fix was ‘routine’." We approve of the editorial oversight to pick the word "influence" over "manipulate" - it sound so much more... clinical.
Proving once again that you can't print your way to general economic prosperity, Abenomics took another shot to the chest last night as Japan's base wages failed to rise month-over-month for the 24th month in a row (the longest streak in history). Even after all the promises and hope of the spring wage negotiations, Abe's 'plan' to guilt employers into raising wages is not working; which is especialy problematic given the surge in inflation (as the 'real' wage slumped 3.1% in April) As Goldman warns, we caution against excessive expectations for sustained wage growth.
- At least 74 dead in crashes similar to those GM linked to faulty switches (Reuters)
- Obama Calls for $1 Billion Europe Security Fund; Will Increase U.S. Military Presence in Eastern Europe (WSJ)
- Euro Inflation Slowing More Than Forecast Pressures ECB (BBG)
- China accelerates as euro zone stumbles (Reuters)
- Russia says Ukraine situation worsening, submits U.N. resolution (Reuters)
- Secondary Sales Squeeze Investors (WSJ)
- Barclays Said to Start Cutting Jobs in Investment Banking Unit (Bloomberg)
- Backlash Grows on Release of Sgt. Bowe Bergdahl in Taliban Prisoner Swap (WSJ)
- For fallen soldiers' families, Bergdahl release stirs resentment (Reuters)
- PIMCO's Gross stares at record outflow (Reuters)
This is a great example of how the game works. In a world in which every government on earth needs “liquidity” to survive, and the primary goal of every government is and always has been survival (the retention of arbitrary power at all costs), the provider of liquidity is king. So what is liquidity and who provides it? ...Ecuador agreed to transfer more than half its gold reserves to Goldman Sachs for three years as the government seeks to bolster liquidity...“Gold that was not generating any returns in vaults, causing storage costs, now becomes a productive asset that will generate profits,” the central bank said in the statement.
With Eric Holder suddenly playing hardball with the banks (most notably not US banks), it has not gone unnoticed among the largest European newspapers. The potential $10 billion penalty for BNP Paribas - France's largest bank - for alleged dealings with a sanctioned Iran has been called a "masterful slap," by Le Monde and Le Figaro said the U.S. was making an example of BNP to deflect criticism it had been "lenient with the American banks responsible for the financial crisis." This could make for an awkward week for Obama, not only facing Putin as he visits Europe to celebrate D-Day but as the allies themselves turn on him with France's Hollande likely to raise the matter and, as Bloomberg reports, newly elected National Front party called on the French government to "defend the national interest" in the case.
- Unstoppable $100 Trillion Bond Market Renders Models Useless (BBG)
- Afghan president fumes at prisoner deal made behind his back (Reuters)
- Spain to Unveil $8.6 Billion Stimulus Package (AP)
- How fracking helps America beat German industry (Reuters)
- Obama to Urge European Allies to Stay Tough on Russia (WSJ)
- Frenchman 'admits' Brussels shooting in video (AFP)
- Heloc Payment Jump to Take Bite Out of Consumer Spending (WSJ)
- Obama Said to Propose Deep Cuts to Power-Plant Emissions (BBG)
- Lehman Lesson Lost as Bank Lobby Gains Clout (BBG)
- WSJ reports that WSJ reporting on Icahn insider trading probe may have killed it (WSJ)
- KKR liquidates former Goldman Sachs traders-run hedge fund (Reuters)
At the beginning of the year, all - as in all - of the smart money expected a rising yield environment and a recovering economy. They were all wrong. Oddly enough, they still believe pretty much the same, using seasonal scapegoats to explain away their mistakes. As for what the most selective subset of the smart money believes, here is Goldman's David Kostin with the summary: "Almost all clients have the same outlook: 3% economic growth, rising earnings, rising bond yields, and a rising equity market." Goldman's own view doesn't stray much: "Our S&P 500 targets of 1900/2100/2200 for end-2014/2015/2016 are slightly more conservative but generally in line with consensus views." And of course, when everyone expects the same, the opposite happens... even if this is one of those financial cliches we wrote about yesterday.
Equity Blow Off Top Takes Brief Overnight Rest, Prepares For Another Session Of Low Volume LevitationSubmitted by Tyler Durden on 05/30/2014 07:03 -0400
Last night's docket of atrocious Japanese economic data inexplicably managed to push the Nikkei lower, not because the data was ugly but because the scorching inflation - the highest since 1991 - mostly driven by import costs, food and energy as a result of a weak yen, and certainly not in wages, has pushed back most banks' estimates of additional QE to late 2014 if not 2015 which is as we predicted would happen over a year ago. As a result the market, addicted to central bank liquidity, has had to make a modest reassessment of just how much disconnected from reality it is willing to push equities relative to expectations of central bank balance sheet growth. However, now that the night crew trading the USDJPY is replaced with the US session algo shift which does a great job of re-levitating the pair, and with it bringing the S&P 500 higher, we expect this brief flicker of red futures currently observable on trading terminals to be promptly replaced with the friendly, well-known and "confidence-boosting" green. The same goes for Treasurys which lately have been tracking every directional move in stocks not in yield but in price.
Despite all the doom and gloom in the market, we would have loved to have these employment numbers three years ago.
One supremely smart CNBC talking head summed it all up, "today's negative GDP number was excellent news," and sure enough, thanks to someone's multi-billion-dollar bid at the all-time-highs mid-afternoon, we went to the moon, Alice. Trannies are on target for their best month since October (+5.7%). The dash-for-trash has a new life as "most shorted" have now risen 6 days in a row - the biggest squeeze in over 3 months. This all happened as bonds rallied (though yields rose modestly on the day), VIX rose, USDJPY would not play along and aside from the spike in volume, on a total lack of liquidity. Gold and silver were monkey-hammered early on but limped back off their lows as WTI crude rallied from the GDP print on. The S&P 500 is now only 30 points short of Goldman Sachs June 2015 target.
China may be bad, but there are far worse places to be.