Speaking through its mouthpiece Global Times, China has published its first reaction to "unpredictable" Trump's position as presumptive Republican nominee and their expectations of a Trump vs Clinton fight for The White House... "This scenario is becoming increasingly serious..."
Let’s be honest, free money sounds great. And you might agree if you start daydreaming about what you’d buy with additional $1,000 or $5,000 in your bank account. The truth is, nothing is free...
"Money for free! Well not exactly. The Piper that has to be paid will likely be paid for in the form of higher inflation, but that of course is what the central banks claim they want. What they don’t want is to be messed with and to become a government agency by proxy, but that may just be the price they will pay for a civilized society that is quickly becoming less civilized due to robotization. There is a rude end to flying helicopters, but the alternative is an immediate visit to austerity rehab and an extended recession. I suspect politicians and central bankers will choose to fly, instead of die."
The central bank war on savers is rooted in a monumental case of the Big Lie. Here is what a retired worker who managed to save $5,000 per year over a 40 year’s lifetime of toil and sweat in a steel factory now earns in daily interest on a bank CD. To wit, a single cup of cappuccino. Yet the central bankers claim they have absolutely nothing to do with this flaming economic injustice.
While there was no unexpected overnight central bank announcement unlike yesterday's surprise by the RBA which unleashed volatility havoc in the FX market, which promptly spilled over into all asset classes, overnight stocks around the world saw another leg lower without a tangible catalyst, while EM currencies fell to a one-month low after two Fed presidents raised concern investors had become too complacent in their belief that U.S. interest rate raises will stay on hold. Or perhaps all that is happening is that after ignoring Trump, the market is starting to finally price in the possible reality of the Donald in the White House (although as Jeff Gundlach pointed out, Trump would be a far better president for the economy and the market than Hillary or Bernie).
Back in March, Japan's Global Pension Investment Fund appointed Norihiro Takahashi as its new president. Few paid much attention to it, but it may very well end up being one of the most significant events that occurred as we look back in twelve to eighteen months.
Just another central bank intervention in what is now a daily occurrence?
After three years of the dollar being pretty much the only strong currency in the world, US corporate profits are falling (because it’s hard to sell things abroad when you price them in an expensive currency) and growth is slowing (because an economy can’t expand if corporate profits are falling). Presumably the plunging dollar will offer some relief on those fronts. But our relief comes at a high, potentially-catastrophic price for Japan and Europe...
From our friends at Fasanara Capital we get their latest contrarian - and very bearish - Investment Outlook, which can be summarized as follows: "Reflation Phase To Be Temporary, More Downside Ahead", and which also contains four key conviction trade ideas over the next 12 months. "The narrative of reflation is today dominant and can continue to propel markets for a while longer. But as we know the narrative changes fast, and when it does we can expect a quick re-pricing. As we re-assess the validity of the underlying risks, we expect a shift in narrative in the few months ahead and a sizeable sell-off."
Crude oil time-spreads have completely dislocated from inventories. Historically, such dislocations have proved to be short lived. We expect that either spot prices will sell-off again or the back end of the curve will move sharply higher.We estimate that in order for time-spreads to move back in line with inventories, either front end prices have to sell off by USD10-15/bbl or the back end has to appreciate USD15-20/bbl. Given the parameters of our gold pricing model, the latter would imply roughly a USD100-150/oz rise in the gold price.
A Surprise From JPM: "Pundits Are Urging Investors To Chase Performance; We Believe This Would Be A Mistake"Submitted by Tyler Durden on 05/03/2016 11:14 -0400
"Equities had a meaningful rebound from the February lows, and we now find many who didn’t want to add at the time, are looking to enter the market at these levels. Indeed, pundits are urging investors to “chase performance”. We believe that this would be a mistake; complacency has crept into the market again, technicals appear overbought and the upturn in activity appears to be stalling."
“The zero interest [rate] policy is an attack on the assets of millions of Germans..."
Overnight Australia finally admitted it has succumbed to the global economic weakness plaguing the rest of the world when in a "surprise" move, Australia’s central bank cut its benchmark interest rate for the first time in a year to a record low and left the door open for further easing to counter a wave of disinflation that’s swept over the developed world. The move sent the local currency tumbling and local stocks climbing. Reserve Bank of Australia Governor Glenn Stevens and his board lowered the cash rate by 25 basis points to 1.75 percent Tuesday, a move predicted by just 12 of 27 economists surveyed by Bloomberg. The announcement has, not surprisingly unleashed havoc across FX markets and broadly pushed global mood into its latest "risk off" phase.
There are many who believe that the use of energy is critical to the growth of the economy. However, the thing that is not as apparent is that growth in energy consumption is dependent on the growth of debt. Both energy and debt have characteristics that are close to “magic,” with respect to the growth of the economy. Economic growth can only take place when growing debt (or a very close substitute, such as company stock) is available to enable the use of energy products. The situation we are facing today is one in which growing debt has been holding up oil prices and other commodity prices for a long time. We are now reaching limits on this process, as evidenced by growing wealth disparity, low commodity prices, and the frantic actions of governments leaders around the world regarding slow economic growth and the need for more stimulus.
Interestingly, the BoJ’s attempts to achieve its price inflation target continue to end in failure with unwavering regularity. While the central bank’s astonishing ineptness in this respect is a blessing for Japan’s citizens (at least for the moment, their cost of living doesn’t increase further), it harbors the danger that even crazier monetary experiments will eventually be tried.