A Full Analysis and Step-by-Step Guide for EU Area Residents To Aid In Escaping the Upcoming Bank Bail-ins & Capital ControlsSubmitted by Reggie Middleton on 04/18/2015 12:21 -0400
This may take you the entire weekend to digest, but if you are an unsecured creditor/lender (have a checking, savings or demand deposit account) to a euro zone bank, I would consider it your fiduciary responsibility to yourself to sit down and parse this piece with care and aplomb!
Update: SCHAEUBLE: GREECE FREE TO SEEK RUSSIAN AID, MAY NOT GET MUCH
As Greeks take to the streets, Varoufakis calls predictions about Grexit reverberations delusional, and Bloomberg proposes a list of Greek default scenarios. Meanwhile, central banks move to ringfence Greek exposure and analysts scramble to outline the risk of bank runs, capital controls, and contagion.
“Based upon a review of your account, there has been no such qualifying activity and it is therefore subject to being classified as abandoned if you do not act quickly... If we fail to hear from you the account will be escheated to the state and closed.”
Sovereign Risk is the biggest risk out there. You cannot ever underestimate the desperate tactics and procedures of bankrupt governments.
Past: Scarily Prescient Analysis of @Grexit meets Present: Analysis of the Goldman Hedge meets Future: Goldman DisintermediationSubmitted by Reggie Middleton on 02/20/2015 16:12 -0400
A literal Tour de Force, likely the most indepth, practical analysis of the Grexit situation as you will ever read. This is why I like blogging... You can never find stuff like this in the mainstream media.
With reports of near mutiny in Syriza's ranks amid the back-bending they have done to try to meet Germany's demands - only to be abjectly denied by a non-ultimatum-setting Schaeuble - it is perhaps time to prepare (ahead of tomorrow's apparent "G" day) for the possibility that Greece creates a systemic event. As Goldman recently warned, there are aspects that leave us more worried than we have been since the start of the Euro area crisis with a tight schedule to avert a disorderly outcome. Risk markets so far have traded in a resilient (well managed) manner but risks of an accident remain and here is how Goldman suggests you hedge that exposure.
It will be politics rather than economics (or Q€) that drives the shorter-term outlook in Greece. Goldman Sachs warns that the new Greek government’s position is turning more Eurosceptic and confrontational than most (and the market) had anticipated ahead of last weekend’s election. This increases the risk of a political miscalculation leading to an economic and financial accident and, possibly, Greek exit from the Euro area (“Grexit”) and while many assume European authorities have the 'tools' to address market dislocations arising from this event risk, Goldman expects significant market volatility. Rather stunningly, against this background, and in spite of Q€, recommends closing tactical pro-cyclical exposures in peripheral EMU spreads (Italy, Spain and Portugal) and equities (overweight Italy and Spain).
- Global Debt Crisis II – Total Global Debt to GDP Ratio Over 300% - Risk of Bail-Ins in 2015 and Beyond - Currency and Gold Wars - $1 Quadrillion “Weapons of Mass Destruction” Derivatives - Cold War II and New World Order as China and Russia Flex Geopolitical Muscles - Enter The Dragon – Paradigm Shift of China Gold Demand - Forecast 2015: None. Forecast 2020: Gold $2,500/oz and Silver $150/oz
If you want to know where the global experiment in massive money printing is heading - just take a look at the monetary madhouse in Europe. And that particular phrase has full resonance once again as it becomes more apparent by the hour that Europe and the Euro were not fixed at all. Indeed, beneath the surface of Draghi’s “whatever it takes” time out, the crisis has been metastasizing into ever more virulent deformations.
"It appears possible that the Central Bank of Russia has started to sell off some of its gold reserves in December, with some sources reporting that official gold reserves dropped by $4.3 billion in the first week of the month."
Kuroda has fired the shot that looks likely to trigger the next phase of the crazy monetary experiment we’ve all been living in for the last five years. Unfortunately, the next phase is where things start to get nasty. Just because equity markets cheered the latest sugar rush he guaranteed them should not make smart investors lower their guard — quite the opposite, in fact. Colonel Kuroda has gone up-country into the Heart of Darkness, and all we can do is await the Apocalypse now.
"Japan is no Zimbabwe. Neither was Israel, yet from 1972 to 1987 its inflation averaged nearly 85%. As its CPI rose nearly 10,000 times, its stock market rose by a factor of 6,500 … Regular readers know that I don’t generally make forecasts, but that every now and then I do go out on a limb. This is one of those occasions. Mapping Israel’s experience onto Japan would take the Nikkei from its current 9,600 [as of October 2010] to 63,000,000. This is our 15-year price target." - Dylan Grice
When a tin-foil-hat-wearing blog full of digital dickweeds suggest the dollar's reserve currency status is at best diminishing, it is fobbed off as yet another conspiracy theory (yet to be proved conspiracy fact) too horrible to imagine for the status quo huggers. But when the VP of Research at the New York Fed asks "Could the dollar lose its status as the key international currency for international trade and international financial transactions," and further is unable to say why not, it is perhaps worth considering the principal contributing factors she warns of.
GDP-weighted average sovereign risk for European nations has risen 14% in the last 2 weeks - the most since Nov 2012. European peripheral bond spreads finally started to 'adjust' for real risk this week with a dramatic 30-40bps decompression from the early week's tights to the closing wides. Portugal was worst (+23bps on the week) followed by Italy and Spain. Stocks were hammered - EuroStoxx 600 2-week drop is the biggest since May 2012 and Germany's DAX 2-week drop is largest since Nov 2011.
One major factor to the slow growth/low inflation in the U.S. is the Wall Street Yield Trade. By incentivizing unproductive use of capital, low interest rate via monetary policy is actually deflationary.
Mario Draghi unleashed his ultimate "spend-it-all-now-or-you'll-lose-it" Keynesian demand-pull bazooka this week when he went full negative-rate-tard. While plenty of time has been spent discussing the "low-flation" and the total lack of credit creation (Keynes ultimate kryptonite), we thought the following three charts might bring home just how entirely broken (and dependent) Europe's economy/market has become...