Every year, David Collum writes a detailed "Year in Review" synopsis full of keen perspective and plenty of wit. This year's is no exception. "I have not seen a year in which so many risks - some truly existential - piled up so quickly. Each risk has its own, often unknown, probability of morphing into a destructive force. It feels like we’re in the final throes of a geopolitical Game of Tetris as financial and political authorities race to place the pieces correctly. But the acceleration is palpable. The proximate trigger for pain and ultimately a collapse can be small, as anyone who’s ever stepped barefoot on a Lego knows..."
- Icahn, Paulson Suffer Large Losses as Energy-Related Bets Sour (WSJ)
- Oil Investors Keep Betting Wrong on When Market Will Bottom (BBG)
- U.S. to sell final $1.25 billion shares of Ally Financial from bailout (Reuters)
- Ally Financial Gets Subpoena Related to Subprime Automotive Finance (WSJ)
- Russia's parliament rushes through bill boosting banking capital (Reuters)
- How a Memo Cost Big Banks $37 Billion (WSJ)
- ECB considers making weaker euro zone states bear more quantitative easing risk (Reuters)
- How the U.S. Could Retaliate Against North Korea (BBG)
Frenzied Chinese Stock Buyers Soak Up So Much Liquidity, Central Bank Forced To Intervene, Prevent SeizureSubmitted by Tyler Durden on 12/18/2014 22:18 -0500
China's seven-day repurchase rate, a gauge of interbank funding availability in the banking system, surged 139 basis points, to a 10-month high of 5.28% in Shanghai, the biggest since Jan. 20. The reason for the sudden cash crunch, according to Bloomberg, is that subscriptions for the biggest new share sales of the year lock up funds. Twelve initial public offerings from today through Dec. 25 will draw orders of as much as 3 trillion yuan ($483 billion), Shenyin & Wanguo Securities Co. estimated. In other words, the scramble to allocate capital into China's surest way of making money, IPOs, has led to a drying out of general liquidity in the entire market. This in turn forced the PBOC to intervene and inject short-term money loans to commercial lenders in order to prevent the kind of interbank liquidity lock up that emerged in China in June 2013 in the aftermath of the first Taper Tantrum (and which before all is said and done, will likely take place again) and which sent global capital markets around the globe reeling before China resumed its massive liquidity injections which are at the heart of China's debt-fuelled bubble in the first place.
As we explained previously, quietly hidden within the humanitarian-sounding "The Ukraine Freedom Support Act of 2014", under the premise of enabling further sanctions on Russia, is the provision of "lethal aid" to Ukraine. Today, President Obama signed it into law...
*OBAMA SIGNED RUSSIAN SANCTIONS BILL TODAY, but SAYS HE DOESN'T PLAN TO IMPOSE SANCTIONS UNDER NEW LAW
Because he knows full well that is not the important part. The "lethal-aid" aspect is a direct provocation to Russia.. and he knows exactly how Putin will respond.
- Swiss National Bank Starts Negative Interest Rate of 0.25% to Stave Off Inflows (BBG)
- Putin Strikes Uncompromising Stance Over Crisis Gripping Russia (BBG)
- Sony cancels North Korea movie in apparent win for Pyongyang hackers (Reuters)
- U.S. Said Set to Blame North Korea for Sony Cyber Attack (BBG)
- China’s Short-Term Borrowing Costs Surge as Demand for Money Grows (WSJ)
- Russia Currency Market Bends But Doesn’t Break (BBG)
- Jeb Bush Puts Pressure on Chris Christie for 2016 (WSJ)
- From joy to outrage, Florida's Cuban-Americans greet new U.S. policy (Reuters)
- Russians Quit London Luxury Homes as Only Super-Rich Stay (BBG)
Forget about the Fed’s language and its FOMC meeting. The real story is the $100 trillion bond bubble (more like the $191 trillion interest rate bubble based on bonds). When it breaks, it doesn’t matter what the Fed says or does.
- Citigroup is pleased: Obama signs $1.1 trillion government spending bill (Reuters)
- Oil holds below $60 as OPEC, Russia keep pumping (Reuters)
- 5 Things to watch at the December Fed Meeting (WSJ)
- Russia Tries Emergency Steps for 2nd Day to Stem Ruble Rout (BBG)
- Ruble crisis could shake Putin's grip on power (Reuters)
- Apple Curbs Russia Sales as McDonald’s Lifts Prices (BBG)
- Traders Betting Russia’s Next Move Will Be to Sell Gold (BBG)
- China Warms to a More Flexible Yuan (WSJ)
Unfortunately for the bulls, various falling knife-catchers, and those who hope the Russian situation will stabilize imminently with or without capital controls, it appears things in Russia are about to get a whole lot worse because as the WSJ reports, the next driver of the Russian crisis is likely to come from within the banking system itself because "global banks are curtailing the flow of cash to Russian entities, a response to the ruble’s sharpest selloff since the 1998 financial crisis."
The rank economic cheerleading in the guise of “news” printed by the Wall Street Journal, Reuters and the rest of the financial press never ceases to amaze. But on the heels of Congress’ pathetic capitulation to Wall Street over the weekend you have to wonder if even the robo-writers who compose the headlines are on the take. How could anyone in the right mind label this weekend’s CRomnibus abomination “A Rare Bipartisan Success for Congress”? Apparently, that unaccountable plaudit was bestowed upon Washington by the WSJ solely because it avoided another government shutdown.
We recently noted the rise of counterparty risks in the financial system due to oil prices dropping (and leveraged derivative exposures) but as the Russia situation has deteriorated so dramatically this week, a renewed focus on bank exposures has sent stocks reeling (and credit risk soaring) among many European (and US) banks. As Bloomberg reports, Raiffeisen Bank International and Societe Generale, the European banks with most at stake in Russia, led European lenders lower. Raiffeisen fell as much as 10.3% to 11.40 euros in Vienna, the lowest level since it went public in 2005. Societe Generale dropped as much as 7.3% to 31.85 euros, hitting the lowest intraday level since August 2013. CDS markets for both also exploded with Raffeisen risk at 27 month highs. As one analyst noted, "There remains a huge amount of uncertainty at this juncture, but the key point is that there are no benign scenarios." While not on the same scale, US bank risk has also widened signicantly in recent weeks (despite equity strength).
- Ruble Sinks to 80 a Dollar Defying Surprise Russia Rate Increase (BBG)
- Oil slumps near $59 for first time since 2009 on oversupply (Reuters)
- Oil sinks, Russian moves fail to quell nerves (Reuters)
- Fed Seen Looking Past Low Inflation to Drop ‘Considerable Time (BBG)
- Students Among Dead as Pakistan Gunmen Kill 126 at Army School (BBG)
- Repsol to buy Talisman Energy for $13 billion (Reuters)
- Indonesia’s Rupiah Erases Decline After Central Bank Intervenes (BBG)
- Anti-Islam Rally Grows as Immigrant Backlash Hits Europe (BBG)
- Saudi Arabia is playing chicken with its oil (Reuters)
Not that all politicians are bad, but those who have genuinely good intentions get drowned out, within seconds, by the ones for whom the need to have power over others is more important than anything else. And, on the whole they’re not very smart. So they get advisors who they feel do know, and these advisors all come from the same small niche of society that steer everybody’s hard-earned cash towards that same small niche of society. 99% of economists are religious nuts who do even the Roman Catholic church one better because they chart graphs to ‘prove’ their beliefs are true - they adapt the world to their theories, not the other way around, as physicists do.