Greece is "nowhere close" to a deal with its creditors and will miss a May deadline to strike a compromise ahead of an IMF payment due on June 5. Meanwhile, the ECB tightens the screws on the country's banking sector by refusing to lift the ceiling on the emergency liquidity that until now has helped to offset deposit flight.
In a stunningly honest turn of events - though likely self-preserving - a number of senior financial services executives are reportedly urged authorities around the world to bolster their crisis-busting arsenals amid fears that ultra-low interest rates have increased the risks of financial instability. As The FT reports, the heads of companies including HSBC, UBS and BlackRock will on Monday release a joint statement demanding policy-makers "address emerging market inefficiencies in the financial system, such as over-exuberance within asset classes." Policy-makers must “lean against something that is making people feel good but is actually going to give them a hangover they will find difficult to cope with."
- Tsipras Endgame Nears as Greek Bank Collateral Evaporates (BBG)
- Shi'ite forces ordered to deploy after fall of Iraqi city (Reuters)
- Ratings agency Fitch to downgrade many European banks (Reuters)
- Bubble Blowing to Continue So Long as Yellen Isn’t Raising Rates (BBG)
- Greece's Debt Battle Exposes Deeper Eurozone Flaws (WSJ)
- Obama to set new limits on police use of military equipment (Reuters)
- China April home prices fuel hopes of bottoming out, but long road to recovery (Reuters)
- Hedge Funds Close Doors, Facing Low Returns and Investor Scrutiny (NYT)
- ASIC's Greg Medcraft 'quite worried' about Sydney, Melbourne house prices (Fin Review)
"Loans take time to season and go bad, and Wall Street loves to package and pass along risk. The music will stop — it always does — and this will not end well.”
The Economist is a quintessential establishment publication. Keynesian shibboleths about “market failure” and the need to prevent it, as well as the alleged need for governments to provide “public goods” and to steer the economy in directions desired by the ruling elite with a variety of taxation and spending schemes as well as monetary interventionism, are dripping from its pages in generous dollops. The magazine has one of the very best records as a contrary indicator whenever it comments on markets. While gold hasn’t yet made it to the front page, but the Economist has sacrificed some ink in order to declare it “dead” (or rather, “buried”).
In a remarkably unbalanced and lazy article on gold this month the Economist magazine attempts to dismantle the case for investors and others to own gold. Both from an investment point of view and also from an ethical point of view. The article is so laughably one sided that it resembles propaganda rather than journalism. Therefore, we take pleasure in dissecting the article misleading sentence by misleading sentence.
"From the BIS to BlackRock, and Jamie Dimon to Jose Vinals, everyone seems to be talking about market liquidity," Citi's Matt King writes, before taking an in-depth look at just how broken the 'markets' truly are. To summarize: no depth in the Treasury market, a duration mismatched powder keg in "long-term" mutual funds thanks to the fact that ZIRP has destroyed money market yields causing investors to find a new 'cash substitute,' and a magically shrinking repo market in the wake of new regulations ironically meant to promote stability.
A big part of the U.S. equation is U.S. executives are looking at yields and realizing that to not borrow at these unsustainable levels could be a missed opportunity they will sorely regret. If you run a viable business and “investors” are throwing free money at you for future growth, why not leverage up and buy back some stock. This is ultimately something the Fed needs to focus on and lean against.
"What is different this time? Central banks are driving all investment decisions, and what this implies is that they are in this trade so deeply that there is no obvious or practical exit.... This is a dangerous situation. The focus must return to the REAL economy; we cannot trade our way out of past mistakes."
While the reality is that nobody has a clue what China's actual gold holdings are, the good news is that the answer is coming. As noted above, Chinese Premier Li Keqiang has asked the head of the International Monetary Fund to include China's yuan currency in its special drawing rights (SDR) basket. If indeed China is serious about CNY inclusion in the SDR, it will finally have to reveal its cards, which would mean it finally will provide an update, with a 6 year delay, of just what its latest gold holdings are. As such, don't be surprised to wake up one morning to headlines blasting that Chinese gold holdings have gone up by 2x, 3x, 5x or (more x) since 2009, a long-overdue update which will catalyze the next major leg higher in the precious metal.
- The Fed Still Wants Easy Money (BBG) - you don't say
- ECB Is Studying Curbs on Greek Bank Support (BBG)
- Banks Paid to Borrow as Three-Month Euribor Drops Below Zero (BBG)
- Baoding Tianwei is first state-owned Chinese enterprise to default (Reuters)
- Major Chinese Developer Says It Can’t Pay Dollar Debts (BBG)
- Wall Street Has No Idea How Much Money Venezuela Has (BBG)
- Goldman Sachs, Morgan Stanley Find Different Paths to Profits (WSJ)
- Does the Collapse of a Chinese Developer Signal the Start of More Defaults? (BBG)
- Retail Traders Wield Social Media for Investing Fame (WSJ)
"We're Living In A Gambling Society" BlackRock's Larry Fink Urges CEOs To Stop "Short-Termist" ThinkingSubmitted by Tyler Durden on 04/14/2015 17:00 -0400
As the ongoing collapse in economic productivity continues in America, and Alan Greenspan's concerns grow, the call for an end to the diversion of corporate spending to instantly shareholder-friendly actions comes from an unusual source. Larry Fink - CEO of the largest asset manager in the world - has unleashed a letter to 500 CEOs around the world - telling them that "the effects of the short-termist phenomenon are troubling both to those seeking to save for long-term goals such as retirement and for our broader economy,” bucking the dividend/buyback trend that investors are demanding. As NYTimes notes, the shortsightedness that pervades corporate America is just a symptom of a larger issue. "This is not just a corporate problem," Fink explains, "It's a societal problem, we’re currently living in a "gambling society."
Is the BoJ's back against the wall? We certainly think so as the evidence increasingly supports the notion that the central bank is bumping up against the limits of accommodative monetary policy and may soon be headed — as we've variously predicted —for "failed nation" status.
- Israel, U.S. Lawmakers Press Case Against Iran Nuclear Deal (WSJ)
- Rand Paul tries to broaden libertarian appeal (Reuters)
- Fewer Oil Trains Ply America’s Rails (WSJ)
- Chicago voters go to polls in first ever mayoral runoff (Reuters)
- FedEx to buy TNT to expand Europe deliveries (Reuters)
- Mohamed El-Erian Has Most of His Money in Cash (BBG)
- In Surprise Move, Australia Holds Rates (WSJ)
- Oil falls as Iran, China discuss more supply (Reuters)
History is on the market’s side, says DoubleLine's Jeff Gundlach, noting the Fed’s forecast for how much benchmark rates will rise is still too high, even after central bankers lowered their estimates last month. BlackRock’s Jeffrey Rosenberg says the bond market’s too complacent and is poised for a correction, claiming The Fed has "a tremendous ability" to send bond yields higher. But as Bloomberg reports, "if the burden of proof is on anybody, it’s on the Fed," and for now, as Gundlach exclaims, The Fed has "been wrong for so long," that their forecasts have been literally of no value, "the market’s pricing has been closer."