Ireland

In his latest note Albert brings up in his latest note titled '?Basket trade?' suggests "Sell everything and run for your lives” (which has nothing to do with Edwards being a correct permabear in a world in which the house of cards is kept standing day after day only thanks to over $10 trillion and rising in central bank liquidity, and everythning to do with this). The point is whether increasing volatility across all major asset classes (notably FX and increasingly so in equities) will finally spill over into bonds, but in an inverted way - one where unlike stocks where vol surges when prices crash, would see bond volatility soar as a result of matched surge in bond prices, something which as we showed earlier today is becoming an increasing concern as bond yields around most places in the world have tumbled to record lows.

• Five U.S. airports to screen for fever (Reuters)
• Danger, central banks trading with each other: Bipolar U.S. Stocks See Biggest Mood Swing in Three Years  (BBG)
• Draghi Policies Blunted in Berlin as German Protests Grow (BBG)
• White policeman kills black teen in St Louis, triggering fresh protests (Reuters)
• Au Revoir to France’s Welfare Model as Socialists Cut Spending (BBG)
• Here comes Roberto Cavalski (Reuters)
• There are 49 U.S. venture-capital-backed companies with a valuation of $1 billion or more—the highest number on record (WSJ)
• Pressure mounts on Hong Kong leader over payout amid crisis (Reuters)

• IRELAND SELLS 10-YEAR BONDS AT RECORD-LOW YIELD OF 1.63%
• GERMAN 10-YEAR BUNDS RISE; YIELD FALLS 2 BASIS POINTS TO 0.88%
• DUTCH 10-YEAR GOVERNMENT BOND YIELD DROPS TO RECORD-LOW 1.021%
• PORTUGUESE 10-YEAR BOND YIELD DROPS TO RECORD-LOW 2.942%
• FRENCH 10-YEAR GOVERNMENT BOND YIELDS DROP TO RECORD-LOW 1.214%
• U.S. 10-YEAR NOTE YIELD DROPS TO 2.296%, LOWEST SINCE JUNE 2013
• SPANISH 10-YEAR BOND YIELD DROPS TO RECORD-LOW 2.038%
• FINNISH 10-YEAR YIELD DROPS TO 1% FOR FIRST TIME ON RECORD

And it all started off so promisingly, when after the biggest selloff in US stocks in two months, the BOJ and its preferred banks once again sold 6J (i.e., bought USDJPY) in the morning Japan session (while collecting CME liquidity rebates of course), sending the pair from below 108 to half the way to 109, and naturally taking global futures higher while pushing yields lower when as ITC says a "large TY seller knocked USTs to lows during the session" - hmmm, wonder who the large seller was. And then... the "rebound euphoria" fizzled a la Sodastream, sending the Nikkei sliding 1.2%, and US equity futures back to unchanged with the bond surge returning and sending German Bunds to new all time highs once again, while the Dax briefly broke below under 9000 before stabilizing at the key support level. It is unclear what caused the failure in central bank euphoria, although some suggest that the latest bevy of disappointing economic news wasn't quite bad enough.

• Ebola Patient Fights for Life as Contacts are Monitored (BBG)
• GPIF Unlikely To Announce New Portfolio Until November: Delay Could Rattle Investors Hoping Fund Will Invest More in Stocks (WSJ)
• High risk Ebola could reach France and UK by end-October, scientists calculate (Reuters)
• Neves to Face Rousseff in Brazil in Surprise Comeback (BBG)
• Hong Kong democracy protests fade, face test of stamina (Reuters); A Hong Kong Protest Run on Fumes and Instant Noodles (WSJ)
• Putin Clans Said Gridlocked Over Arrest as Sanctions Bite (BBG)
• Surging dollar may be triple whammy for U.S. earnings (Reuters)
• Lloyds Said to Cut Thousands of Jobs as CEO Cuts Costs (BBG)

I think this is a time where people will look back on us and see it as a period of practically central bank worship. The central bankers – Draghi, Yellen, Bernanke – have become almost celebrities in America. People have invested unreasonable hopes in what these central banks can know, and what they can do. I think that, sooner or later, the investing public will become disillusioned of these ideas.... I dare say that stock prices will not continue to rise uninterrupted at the same pace. That’s not a very interesting prediction, but the stock market is certainly a cyclical thing. I think it’s fair to observe that today’s ultra-low interest rates flatter stock market valuations. Stock prices are partly valued based on a discounted flow of dividend income. To the extent that the discount rate you use to value that stream of dividend income, which depends on interest rates, is artificially low, stock prices are artificially high. I think that the burden of proof is on anyone who would assert that we are in a new age of persistently and steadily rising stock prices.

Low interest rates are a direct cause of credit bubbles, and this is what is happening in Singapore

About 36 months ago Ireland’s two-year notes were yielding 14% and its government and the Brussels apparatchiks were scrambling with tin cup in hand to stave off disaster. Now their yield is negative 0.01%.

• European Bond Yields Go Negative (WSJ)
• Traveler from Liberia is first Ebola patient diagnosed in U.S. (Reuters)
• Hong Kong Protesters Step up Pressure on Leung to Quit (BBG)
• JPMorgan to face U.S. class action in $10 billion MBS case (Reuters)
• Turkey mulls military action against Islamic State (Reuters)
• Singapore Home Prices Fall for Fourth Straight Quarter on Curbs (BBG)
• Italy's Economic Woes Highlight Dilemma for European Central Bank (WSJ)
• Advanced iOS virus targeting Hong Kong protestors (Reuters)
• Fed Scrutiny of Leveraged Loans Grows Along With Bubble Concern (BBG)
•  Mosquito Virus That Walloped Caribbean Spreads in U.S. (BBG)

• Hong Kong protesters stockpile supplies, fear fresh police advance (Reuters)
• Protesters stay out on Hong Kong streets, defying Beijing (Reuters)
• Traders Turn Up Grilling Sausages at Hong Kong Protests (BBG)
• Ukraine Army Sees Worst Day Since Truce as Battles Flare (BBG)
• Islamic State uses grain to tighten grip in Iraq (Reuters)
• For Putin Ally, U.S. Sanctions Only Add to Anti-Russia Conspiracy Theory (WSJ)
• Coinbase Leads Move to Bring Bitcoin to Masses (BBG) - good luck
• Austria Cracks Down on Spies -- and Jihadis (BBG)
• EU Believes Apple, Fiat Tax Deals Broke Rules (WSJ); Apple’s Irish Tax Deal ‘Engineered’ to Boost Employment, EU Says (BBG)

A “poisonous combination” of record debt and slowing growth suggest the global economy could be heading for another crisis, a hard-hitting report will warn on Monday. It warns of a “poisonous combination of high and rising global debt and slowing nominal GDP [gross domestic product], driven by both slowing real growth and falling inflation”. The total burden of world debt, private and public, has risen from 160 per cent of national income in 2001 to almost 200 per cent after the crisis struck in 2009 and 215 per cent in 2013. “Contrary to widely held beliefs, the world has not yet begun to delever and the global debt to GDP ratio is still growing, breaking new highs,” the report said. Luigi Buttiglione, one of the report’s authors and head of global strategy at hedge fund Brevan Howard, said: “Over my career I have seen many so-called miracle economies – Italy in the 1960s, Japan, the Asian tigers, Ireland, Spain and now perhaps China – and they all ended after a build-up of debt.”

• This is why the locals are furious at the US: U.S-led raids hit grain silos in Syria, kill workers (Reuters) explaining this
• Billions Fly Out the Door at Pimco: About $10 Billion Is Withdrawn After Departure of Gross (WSJ)
• Pimco’s Ivascyn Takes on Gross With Unconstrained Fund (BBG)
• Revealed - the Troika threats to bankrupt Ireland (The Independent)
• Private Bad Debt Build-Up Casts Shadow on Greek Rebound (BBG)
• Fed Questions Bank Maneuver to Reduce Hedge Funds' Dividend Taxes (WSJ)
• Yuan-Euro Direct Trading Begins Tomorrow as China Promotes Usage (BBG)
• Geneva Report warns record debt and slow growth point to crisis (FT)
• Greenberg Team to Grill Bernanke, Geithner on AIG Bailout (BBG)... sadly only metaphorically

Straight forward discussion of the key events next week.   Weak on bluster.  Strong on analysis.   You've been warned.  

Can market forces prevail in the Eurozone? With another round of central bank intervention coming four plus years after the start of the Eurozone debt crisis, this is a question worth considering, at a time when the Southern Eurozone members - Italy, Spain, Greece and Portugal, which collectively account for over 30% of the GDP of the early adopters of the Euro as a whole – continue to struggle. This is a complex topic for sure, but a simple economic indicator can be used to help frame the situation.

"Today, Treasury is taking action to reduce the tax benefits of — and when possible, stop — corporate tax inversions. This action will significantly diminish the ability of inverted companies to escape U.S. taxation.  For some companies considering mergers, today’s action will mean that inversions no longer make economic sense." And yet, to think: the US government would have spared itself so much jawboning effort and fake work if all the Treasury did was promise that the 10 largest shareholders of the "unpatriotic inversion offender" would get the "tea party" treatment by the IRS. Then watch as inversions end with a thud, never to be heard of again...