- In Hong Kong, ex-CIA man may not escape U.S. reach (Reuters)
- Backlash over US snooping intensifies (FT)
- Apple to Revamp IPhone Software, Ending Product Funk (BBG)
- Nothing like revising history: Japan revises up Q1 growth to annual 4.1% (FT), just don't look at the trade deficit
- Coffee Exports From Indonesia Seen Slumping to Two-Year Low (BBG)
- Euro bailout Troika nears end of road with patchy record (Reuters)
- Treasuries Little Changed Before Bullard Speaks Amid QE Debate (BBG)
- Schwab Topping Goldman Sachs Presages Return to Stocks (BBG)
- Hedge funds take over another city: London’s Forced Renters Fuel Apartment Investing Boom (BBG)
"I realised that I was part of something that was doing far more harm than good... The NSA routinely lies in response to Congressional inquiries about scope of surveillance in America. The NSA is intent on making every conversation and every form of behaviour in the world known to them.... What they're doing" poses "an existential threat to democracy."
- Edward Snowden, 29, PRISM Whistleblower
House prices - with respect to both levels and changes - differ widely across OECD countries. As a simple measure of relative rich or cheapness, the OECD calculates if the price-to-rent ratio (a measure of the profitability of owning a house) and the price-to-income ratio (a measure of affordability) are above their long-term averages, house prices are said to be overvalued, and vice-versa. There are clearly some nations that are extremely over-valued and others that are cheap but as SocGen's Albert Edwards notes, it is the UK that stands out as authorities have gone out of their way to prop up house prices - still extremely over-valued (20-30%) - despite being at the epicenter of the global credit bust. Summing up the central bankers anthem, Edwards exclaims: "what makes me genuinely really angry is that burdening our children with more debt to buy ridiculously expensive houses is seen as a solution to the problem of excessively expensive housing." It's not different this time.
And Other Stunning Facts I Learned Last Night ...
Jim Rogers was recently interviewed by GoldMoney and had plenty to say (as usual):
On Bernanke: "He doesn’t want to be around for the consequences of what he’s doing."
On Fiat: "Paper money doesn’t have a very glorious history, but again, nothing imposed by the government has a very long and glorious history."
On Europe's Crisis: "You can postpone it all you want, but the problems just mount."
On Capitalism: "You are not supposed to take money away from the competent people and give it to the incompetent so that the incompetent can compete with the competent people with their own money. That’s not the way capitalism is supposed to work."
- Apple Bonds Stick Buyers With $280.6 Million Loss as Rates Climb (BBG)
- Iceland Freezes EU Plans as New Government Shuns Euro Crisis (BBG)
- "Transparent Fed" - Ben Bernanke meets privately with Darrell Issa (Politico)
- Bank of Japan vows market steps to curb bond turbulence (Reuters) holds policy (FT)
- Stockholm riots spread in third night of unrest (FT)
- Dudley Says Decision on Taper Will Require 3-4 Months (BBG)
- Senate panel passes immigration bill; Obama praises move (Reuters)
- Italy to outline youth jobs plan as government struggles (Reuters)
- Apple CEO Tim Cook, Lawmakers Square Off Over Taxes (WSJ)
- Google Joins Apple Avoiding Taxes With Stateless Income (BBG)
- Sony Board Discussing Loeb’s Entertainment IPO Proposal (BBG)
- Vote Strengthens Dimon's Grip (WSJ), Dimon performance well choreographed (FT)
If Cyrpus blew up with bank assets/GDP leverage of 700% & Iceland blew up with leverage of 880%, what should we expect from Scotland @ 1,250%? Of course, this leverage number likely excludes those top secret charges I found last month...
Niall Ferguson recently remarked, "[Europe] is a politicial experiment gone wrong. The experiment was to see if Europeans could be forced into an even closer union - despite their wishes - by economic means, because the political means failed." In this brief clip, Lars Seier Christensen, co-CEO and co-founder of Saxo Bank, tells an audience at the Saxo #FXDebates in London that the eurozone will eventually break up as Brussels claims even more power from nation states. He warns investors that Cyprus was indeed a template for bail ins and that outright confiscatory wealth taxes, disguised as solidarity payments, could be used to raise funds. "The governments of Europe need money, and the private sector has it. It is as simple as that. Be very paranoid," he said, warning investors that the mattress may be a safer place to deposit money over the weekend than their bank accounts. "Frankly, it is a complete mess. And it is a mess that gets worse and worse every day," is how the outspoken truthiness begins, adding, "anyone with a rational view of the world now sees the currency collaboration as a historic failure that can lead to even further fatal consequences for Europe and the continent’s competitiveness vis-à-vis the rest of the world."
During the crisis Iceland was held up as one of the best examples of what was so wrong with the bubble that was created and sold to any and all. The party in power during this debacle was summarily dismissed by the people. However, a mere few years later, and given the apparent abhorrence with all things European, the Icelandic people have just ousted the incumbent pro-Europe party in favor of the Independence and Progressive parties that governed during the crisis. As the WSJ reports, the Social Democratic Alliance, which had overseen economic recovery and pushed for European Union membership, saw support tumble as the electorate's concern about personal finances overshadowed the ruling coalition's ability to stabilize the economy. Couple this with the promises of the two parties to cut taxes and the sweell of nationalist sentiment and the Social Democrats were summarily crushed. The leader of the Progressive party perhaps summed up the poeple's views best: "deeper integration with a Europe in "historic decline" isn't necessarily the best for Iceland," and that "economic crisis in Iceland and Europe has taught us the importance of being able to control your own destiny." Of course, as with any election, lots of promises are made; "they have really been promising the moon, people might get dissatisfied when they see that not everything can be realized."
There have been five developments over the weekend. Which is noise and which the signal ?
Now that the absolutely irrelevant debate over the applicability of the 90% debt/GDP Reinhart and Rogoff hard cutoff for sovereign growth is supposedly over due to an excel mistake of the type that JPMorgan did at least once to misrepresent its VaR both internally and to public shareholders (which to a large group of supposedly people is equivalent to supporting the notion that a record debt global conflagration can only be resolved with even more debt), perhaps the debate can shift to another question: why despite all the bickering and complaints, Europe never actually engaged in austerity, in spending or debt cuts, and that the primary reason the people's plight in the periphery worsened in the past three years is nothing more or less than gross political and governing incompetence?
The crypto-currency Bitcoin is still merely a speck on the global monetary landscape. It is young, experimental, and for all we know, it may ultimately fail to break into the monetary mainstream. However, on a conceptual level some are willing to call it a work of genius and arguably the most exciting development in the field of money for more than 130 years. The outcome is probably binary: Either Bitcoin ultimately fails and the individual Bitcoins end up worthless. Or Bitcoin takes off and Bitcoins are worth hundreds of thousands of paper dollars, paper yen, paper euros, or paper pounds. Maybe more. Those who buy Bitcoin as a speculative investment should consider it an option on the future success of the crypto-currency. We still consider gold to be the essential self-defense asset in the ongoing paper money crisis. The brand-new crypto-currency Bitcoin has to first earn its stripes as a monetary asset by proving itself as a ‘common’ medium of exchange. That is why we view Bitcoin very differently from gold, although the attraction of both has its origin in the demise of entirely elastic, politicized state fiat money. In the meantime, the debasement of paper money continues.
When the final "bailout" structure of the Cypriot deposit-confiscatory bail-in was revealed in late March, the implied victory for the Troika (which has since notched up its demands for the insolvent country to now sell its 14 tons of gold) was that instead of the deposit haircut passing as a tax, and thus needing a parliament ratification, it would come in the form of a bank resolution, with Laiki bank liquidating and being subsumed by the remaining Bank of Cyprus, and with uninsured depositors in both banks ending up crushed. However, as previously reported, in the interim period deposit outflows have continued and accelerated despite the assorted ineffective "capital controls" which has led to additional underfunding for the local banks, and to a second bailout of Cyprus, this one rising to €23 billion or a 35% increase from the original, as part of which the Troika has demanded that Cyprus sell their gold in the open market. Now, a month later, it appears that the Troika's initial victory may have been a Pyrrhic one, as yesterday the Cypriot attorney general announced, and today the government's spokesman confirmed, that the parliament will have to ratify the €23 billion bailout of the tiny island nation after all, thereby refocusing the popular anger from some ephemeral technocrat in Europe to the country's own elected representatives, thereby changing the calculus of the Cypriot decision by 180 degrees.
Now is the time to think about how you would live your life if your real value was appreciated and fairly compensated.
QE "is not a Buzz Lightyear policy," Dallas Fed's Fisher explains to Bloomberg TV's Stephanie Ruhle, "this will not go on forever." He admits there are limits to their (and implicitly the ECB or BoJ) policies - "we just have to figure out what they are." The always outspoken fed head goes on to explain why he believes the Fed's policy should be "dialed back... Not go from wild turkey, the liquor by the way, to cold turkey; but certainly slowing it down now." The too-big-to-fail banks are absolutely gaining from a substantial cost-of-funding advantage (over smaller banks) with their implicit government guarantee and Fisher expresses disappointment in the reams of pages that constitute new regulation adding that he would prefer "a simple statement saying they understand there is no government guarantee... It could be written by a sixth grader," as Dodd-Frank "needs repair." His fears are exacerbated by Cyprus as he notes, "[in Cyprus] you have an economy that is held hostage by bank failure and institutions that are too big to fail. We cannot let that happen in the U.S. ever again and the American people will not tolerate it."