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The Central Bank policies of the last five years have damaged the capital markets to the point that the single most important item is no longer developments in the real world, but how Central banks will respond to said developments. Let us take a moment to digest that. Before 2008, for the most part, when something happened in the world, an investor would think about how that issue would affect the markets. Today, that same investor will try to analyze how the Central Banks will react to that issue, not the impact of the issue itself. This is why, for various periods between 2008 and today
Alarmed at the anti-Russian hysteria sweeping Washington, and the specter of a new Cold War, U.S. intelligence veterans one of whom is none other than William Binney, the former senior NSA crypto-mathematician who back in March 2012 blew the whistle on the NSA's spying programs more than a year before Edward Snowden, took the unusual step of sending the following memo dated August 30 to German Chancellor Merkel challenging the reliability of Ukrainian and U.S. media claims about a Russian "invasion." Via AntiWar and ConsortiumNews, highlights ours MEMORANDUM FOR: Angela Merkel, Chanc
YESTERDAY
California Minimum-Wage Earners Work 19 Hours-A-Day, 7 Days-A-Week To Afford Rent
Thanks to The Fed-inspired fast-money flood driving up asset prices, owning or even renting a home has become unaffordable to most. Working a 40-hour-week, a single-earner in D.C. would need to be paid a $28.25 minimum wage for afford to rent a home... and if you live in California (and earn minimum wage), you will need to work 18.6 hours-a-day, 7 days-a-week to afford rent. Thank you Ben and Jane
China Services PMI Jumps Most On Record To 18-Month Highs
While Markit's Manufacturing PMI fell in August, the apparent demand for 'services' in China exploded. China Services PMI jumped from the worst on record 50.0 in July to 54.1 in August (18-month highs). This is the biggest MoM rise in the data on record... because they can. We have nothing to add because it's simply becoming too surreal and manipulated for rational explanation. HSBC is quick
Did US Macro Just Jump The Shark?
For the past five years there has been a very clear and significant cycle to US macro data - a slight rise to start the year, notable weakness into the middle of the year, a rapid recovery into the fall, then generally flat to year-end. A year ago, we explained this cycle appears to be created by government agencies need to spend, spend, spend their budgets out ahead of fiscal year-end (Sept).
IQ, IP and 8 Commandments of Corporate Governance
By: Chris Tell at: http://capitalistexploits.at/ Recent dealings with a company led me to think about the relationship between corporate governance, creativity, innovation and what it takes to create or indeed wreck a successful enterprise. A result of having been involved in well over 100 private equity transactions (I've long ago stopped counting), Mark no doubt a similar number, has been a lot
If You Like Your "Boots On The Ground", Here's Even More - Obama To Send 350 Troops To Iraq
Just hours after the beheading of a 2nd American journalist, The White House has issued a statement: *U.S. TO SEND ABOUT 350 MILITARY PERSONNEL TO IRAQ: WHITE HOUSE *WHITE HOUSE SAYS ADDITIONAL FORCES WON'T SERVE IN A COMBAT ROLE With American non-combat, humanitarian, advisers now being dispersed to the four corners of the world for non-combat, humanitarian, advisory roles; one wonders how long
Memo To Washington: Iraq Is Not A Nation And You Can’t Build One There With Bombs
Submitted by David Stockman via Contra Corner blog, Washington’s strategy in Iraq is in shambles, but not just because America’s spanker-in-chief is really a wimp at heart. The problem is far more generic. To wit, the geographic territory of Iraq is not a nation; it is an arbitrary series of lines on a map drawn 100 years ago by dandies in the foreign offices of two fading empires (the British and
The One Thing The Bank Of Japan Apparently Can't Print More Of
First it was socialist utopia Venezuela and now Keynesian-economics favorite playground Japan is concerned about a troubling problem - fear of a toilet-paper shortage. As WSJ reports, the Ministry of Economy, Trade and Industry is encouraging families to stockpile at least one month’s worth of toilet paper in the event of a major disaster, as they "fear there would be a serious shortage of to
The Eurozone Could Be A Problem For Stocks
Submitted by Lance Roberts of STA Wealth Management, A few weeks ago I asked a simple question: "Can The U.S. Economy Stand Alone?" "The following chart is food for thought. There are extremely high expectations that the U.S. economy will achieve “lift off” in terms of economic growth eventually achieving 3-4% annualized growth rates. The chart below shows the nominal GDP of the Eu
A Divided World
Yesterday we showed how 'isolated' Russia was (if you chose to look only at isolating parts of the world). Today, we glimpse at the world's views on China vs US... As The Global Post notes, we know that only 35 percent of Americans have a favorable view of China. But what about the rest of the world? Source: Global Post * * * Who's isolated now?
Guest Post: How Can You Tell Whether Russia Has Invaded Ukraine?
Submitted by Dmitry Orlov via ClubOrlov blog, Last Thursday the Ukrainian government, echoed by NATO spokesmen, declared that the the Russian military is now operating within Ukraine's borders. Well, maybe it is and maybe it isn't; what do you know? They said the same thing before, most recently on August 13, and then on August 17, each time with either no evidence or fake evidence. But let's give
China Will Revise Its GDP Definition Until Its Hits Government "Growth Targets", Goldman Explains
Previously we have commented that when all it takes for a country to "hit" its GDP target, is to adjust said definition by adding the benefit of estimated ancillary items as prostitution and drugs, GDP loses all relevancy and meaning in its transformation to an arbitrary, goalseeked policy measurement and validation tool straight out of China's Department of Truth. After all how else wou
The Scariest California Drought Map Yet
Across California, reservoirs are running dry as the drought continues to weigh dramatically on many parts of the economy. The following map, showing the dismally low levels of reservoirs in all their horrible glory could be the scariest drought map yet... Source: CDEC
3 Important Gold Charts - Transparent Holdings Fall As Bullion Goes East To Russia and China
3 Important Gold Charts - Transparent Holdings Fall As Bullion Goes East To Russia and China Chart 1: Changes in Holdings (millions of oz) vs Gold Price Nick Laird of www.ShareLynx.com has compiled some great new charts on the transparency of public gold holdings over time. The charts were emailed to us Monday night. Sharelynx.com is one of the internet’s most comprehensive sources for market re
Back To The Future
Submitted by Tim Price via Sovereign Man blog, “Sir, Arnaud Montebourg, the former French economy minister and the sourest note in the Hollande repertoire, dares to complain of “absurd” austerity policies ? (“Hollande purges cabinet following leftwing revolt”, August 26.) If those policies are absurd, it is because they were not accompanied by the structural reforms so badly needed to make the Fre
Volatile Day: Gold, Oil, & Bonds Dump As The Dollar Jumps
Today was a significant day for many markets. For the 7th time in the last 8 months, US Treasuries opened the month with weakness (30Y up 8.5bps, 2Y +3bps from Friday). Significant JPY and GBP weakness pushed the USD Index to fresh 14-month highs (+0.25% on the week). USD strength smacked gold (-$20 to $1265), silver, and crude oil significantly lower (WTI under $93 and Brent testing towards $100,
Angelo Mozilo Responds To Charges:: “No, No, No, We Didn’t Do Anything Wrong”
If Angelo Mozilo's lawyers are to be believed, the former orange head of Countrywide can not be sued by the government (for civil purposes obviously, no former banker in the US can ever be held criminally liable under the Obama administration) because he is, well, sick. However, the same disease apparently does not prevent the 75 year old from giving 30 minute telephonic interviews, such as this o
Summarizing Morgan Stanley's Entire "S&P At 3000 In 2020" Report In One Sentence
Do you believe in miracles? Morgan Stanley's Adam Parker does, having given up on his sane bearish case long ago, he now predicts S&P to 3,000 because "if we get EPS growth of 6% per year from 2015-2020, that would drive S&P500 earnings to near $170; a 17x multiple would translate into a peak level for the S&P500 near 3000 under this scenario." So, just some simple math, eh?
Your Wall Street Slumlord Arrives in Europe: Goldman Launches "Buy-To-Rent" In Spain
Submitted by Mike Krieger via Liberty Blitzkrieg blog, Liberty Blitzkrieg was early in reporting on the trend of financial firms entering the U.S. residential real estate market with “all-cash” bids for tens of thousands of homes with the intention of turning former homeowners into permanent sources of rental income. The first of many pieces I published on the topic was in January 2013, titled: Am
Trading Treasuries In 1 Simple Chart
While it is unclear if August's exuberant buy-it-all strategy will hold for September, the following chart from BofA should raise a few eyebrows. In August, practically all the gains for bonds (yield compression) occurred in the overnight session (from 8pmET to 6amET)... * * * Normal trading? Well it's better than no trades at all like in Japanese govvies... Chart: BofA
The Central Bank policies of the last five years have damaged the capital markets to the point that the single most important item is no longer developments in the real world, but how Central banks will respond to said developments.
Let us take a moment to digest that. Before 2008, for the most part, when something happened in the world, an investor would think about how that issue would affect the markets.
Today, that same investor will try to analyze how the Central Banks will react to that issue, not the impact of the issue itself. This is why, for various periods between 2008 and today, the markets would rally on terrible economic data and other economic negatives: traders believed that because the data was bad the Fed would be more inclined to engage in more easing.
After all, why do we invest? We invest because we want to make money. And when it comes to investing, we prefer easy money: gains that have a high probability of success. And thanks to Central Banks cutting interest rates over 500 times and printing over $10 trillion in money since 2008, what’s the easiest way to make money by investing today?
Front-run Central Banks policies.
Consider Europe. In 2012, ECB President Mario Draghi promised to do “whatever it takes” to keep the Euro in one piece. Since that time, nothing has really improved in Europe’s economy.
France is approaching a triple dip recession. Germany may re-enter recession before the year’s end. Spain remains an economic basket-case. Portugal just suffered another major bank failure. And on and on.
And yet, bond yields on European Sovereign debt have fallen to multi-century lows. Germany’s 10 year is now at 1%... an ALL TIME low. The reason for this? Investors, convinced that the ECB will buy sovereign bonds or, at a minimum, drive bond yields lower, have poured into European bonds.
As a result, European bonds are now stretched to levels that far exceed a bubble. Remember, the entire sovereign debt crisis in Europe was based on the fact that most European countries are insolvent. When you include unfunded liabilities, most European countries are running Debt to GDP ratios north of 400%.
The basic premise of investing is that you should be compensated for your risk exposure. The riskier an investment, the higher your expected returns should be.
However, thanks to Central Bank meddling, today this is no longer the case. In Europe, where lending money to sovereign nations is in fact a high risk proposition, you are given almost nothing in the way of yields.
This will not end well. In fact, the ending will likely be catastrophic as the fast money herd panics and tries to move out of the various assets it only bought based on the assumption that it could unload its position on someone willing to pay a higher price (likely a Central Bank) down the road.
We don’t know when this will happen, but it WILL happen. And unlike stocks, when bond bubbles implode things tend to get VERY serious VERY quickly.
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