In an oddly ironic twist, today Donald Trump announced that he has picked as chairman of his newly launched fundraising operation none other than a former employee of the bank he has repeatedly criticized in the past, and which he used as a foil to criticize Ted Cruz: Goldman Sachs. In addition to Goldman, Mnuchin also worked for Soros previously. Where it gets even more ironic is that Mnuchin has donated frequently to Democrats, including to Clinton and Barack Obama.
Calling himself 'the king of debt' in his business dealings, Donald Trump warned correctly this morning that the national debt would be troublesome if the cost of borrowing increases, asking rhetorically, "we're paying a very low interest rate. What happens if that interest rate goes up 2, 3, 4 points? ...We don't have a country." The U.S. should "renegotiate longer-term debt," he added rather shockingly to the CNBC anchors, and with the recent surge in US Treasury default risk (now at 3-month highs), it appears the market is growing more nervous also.
Coming ‘sharia gold standard’ or shariah compliant gold could lead to a very significant source of new demand for physical gold coins and bars in the Islamic world as some of the $2 trillion of assets held in Islamic financial institutions are allocated to the very small physical global gold market.
While markets remain relatively subdued ahead of tomorrow's nonfarm payrolls report, after several days of losses in US stocks which pushed the S&P500 to three week lows, overnight markets ignored the latest weak data out of China where the Caixin Services PMI was the latest indicator to disappoint (dropping from 52.2 to 51.8), and instead focused on crude, which rebounded from yesterday's post inventory-build lows and briefly printed above $45/bbl over uncertainty related to the impact of Canada wildfires on production and how long will last. The bounce in WTI has meant Brent briefly traded at parity with West Texas for the first time in 6 weeks.
Aeropostale Files Chapter 11: Latest Retail Bankruptcy After American Apparel, Cache, Wet Seal And QuiksilverSubmitted by Tyler Durden on 05/04/2016 07:58 -0400
Aeropostale's decline was swift. The brand was established in 1987, went public in 2002, and by 2010 it had a market cap of nearly $3 billion. However, by January 2015 the company of 21,000 employees had posted losses in its last three fiscal years, and with 2015 being the fourth consecutive year of losses, its market cap imploded to just $2.9 million.
We've now seen three consecutive quarters of net tightening of C&I lending standards in the US (Figure 1, left) and previously whenever this has happened it has ultimately led to a full blown default cycle – albeit with only three cycles of data to examine. The series does tend to exhibit sweeping cyclical tendencies with momentum and is not prone to random fluctuations. So it's a worry that we've entered the net tighten stage and have stayed there for three quarters now.
The ECB is effectively out of viable options. The global banking crisis is back.
Back in April 2013, during the height of the IPO scramble, the NYT gushed about Fairway's just concluded IPO: "Until recently, Fairway was not much more than a popular market on Manhattan’s Upper West Side, where residents went for goods like smoked salmon, medjool dates and cheeses. Today, it is a fast-growing 12-store grocery chain with ambitions of opening 300 outlets across the country." Just over three years later, the once successful IPO is now a distant memory and soon enough, so will the company behind it because overnight Fairway Group Holdings filed for Chapter 11 bankruptcy protection,
- Global stocks slide as yen, euro gains question policy potency (Reuters)
- U.S. Index Futures Signal Stock Losses as AIG Drops on Earnings (BBG)
- EU Sees Weaker Growth in Eurozone and Wider EU as China Slowdown Weighs (WSJ)
- Euro Set for Longest Run of Gains Since 2013 as Fed Focus Fades (BBG)
- German Bonds Advance as EU Cuts Euro-Area Inflation Outlook (BBG)
Central bankers have the unchaperoned power to create the greatest fortunes ever known to mankind at will and to invest that money wherever they want. With trillions of dollars at their disposal and trillions more whenever they want to conjure it into existence, what is to stop them from controlling the oil market just as they have stocks and bonds?
As of today, we now have three consecutive quarters of tightening lending standards. In fact, based on the latest survey, net lending standards tightened even more than during Q4 as shown in the chart below, and are now the tightest on net since the financial crisis. Needless to say, if a recession and a default cycle has always followed two quarters of tighter lending conditions, three quarters does not make it better.
If the world’s economies were really out of intensive care, why would ultra-radical monetary policies like helicopter money be increasingly debated at the highest level of governments? Also, how come 70% of Americans believe the US economy is on the wrong course? And why do almost half of US citizens admit they couldn’t come up with $400 to meet an unexpected need? Yes, I know why ask why? And it is what is, and a bunch of other clichés. But this isn’t normal, it isn’t healthy, and - at least in the opinion of this author—it isn’t going to end well.
Following this weekend's bankruptcies of Ultra Petroleum and Midstate Petroleum which added $3.1 billion to the mushrooming high-yield energy bond default volume tally, in addition to the $1.5 billion of credit facility defaults, the energy high-yield default has soared to a record 13% rate, surpassing the 9.7% mark set in 1999, according to Fitch Ratings.
Debt, if used for productive investments, can be a solution to stimulating economic growth in the short-term. However, in the U.S., debt has been squandered on increases in social welfare programs and debt service which has an effective negative return on investment. Therefore, the larger the balance of debt becomes, the more economically destructive it is by diverting an ever growing amount of dollars away from productive investments to service payments. The relevance of debt growth versus economic growth is all too evident as shown below...
2008 Deja Vu? Treasury Warns Congress - Bailout Puerto Rico Or Risk "Chaotic Unwinds... Cascading Defaults"Submitted by Tyler Durden on 05/02/2016 14:39 -0400
In a disappointingly similar tone to the warnings, threats, and promises sent to Congress in 2008 when demanding the banks get their bailout (or else), Treasury Secretary Jack lew has released a letter he sent to Congress warning that if Puerto Rico's situation is not "fixed" in an "orderly" manner "quickly" then the nation will face "cascading defaults."