Tag: finance

In line with what we discussed last night, once cajillionaire Eike Batista’s net wealth has now collapsed to less than -$746.5 Million according to Bloomberg as Veja notes, his “take over the world” company OGX has declared bankruptcy following the breakdown of restructuring talks with bondholders:

• *OGX FILES FOR BANKRUPTCY PROTECTION IN RIO, BATISTA LAWYER SAYS
• *BATISTA’S OGX EXTENDS DECLINE TO 30% AFTER BANKRUPTCY FILING
• *BATISTA LAWYER BERMUDES COMMENTS ON FILING BY PHONE FROM RIO

The filing puts $3.6 billion of bonds into default – the largest corporate debt debacle on record for Latin America.

As of this morning his net worth was already -$745 million..

via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/FLvX80D7roI/story01.htm Tyler Durden

In line with what we discussed last night, once cajillionaire Eike Batista’s net wealth has now collapsed to less than -$746.5 Million according to Bloomberg as Veja notes, his “take over the world” company OGX has declared bankruptcy following the breakdown of restructuring talks with bondholders:

• *OGX FILES FOR BANKRUPTCY PROTECTION IN RIO, BATISTA LAWYER SAYS
• *BATISTA’S OGX EXTENDS DECLINE TO 30% AFTER BANKRUPTCY FILING
• *BATISTA LAWYER BERMUDES COMMENTS ON FILING BY PHONE FROM RIO

The filing puts $3.6 billion of bonds into default – the largest corporate debt debacle on record for Latin America.

As of this morning his net worth was already -$745 million..

via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/FLvX80D7roI/story01.htm Tyler Durden

We’ve been saying for months and even years that markets can go higher. An important driver has been, and will be, investors’ negative views on the financial markets. Indeed, the higher they creep, the stronger the pessimism gets. Remarkable. In the past investors would swing from a neutral to a positive outlook and eventually reach the euphoria phase, as the markets climbed higher. Today, however, it’s criticism and complaining galore.

The same goes for the last fiscal quarter. While investors discarded equities, some sectors posted results unseen in years. Traditional indices rose by 2.5 percent (Dow Jones) to 5 percent (S&P 500), but growth sectors – technology booked quarterly profits of no less than 11 percent (!) – put up some amazing numbers on the board. We keep stressing technology as a compelling investment, because the masses are tough to convince it seems. There are many psychological scars from the past, which makes it hard for people to trust the markets. It is another sign, however, that stocks still have a long way to go before we reach the top.

Although we tend to say that we are right about our positive outlook on equities time and time again, investors are waiting for a wave of inflation. We have put this on the radar for a while now and investors are curious, and rightly so. “Whatever happened to the inflation you keep talking about?” A justified question we will try to answer in the following paragraphs, although the answer is not straightforward.

Monetary phenomenon

Inflation is often mixed up with rising prices, but those are only the consequence of inflation. Essentially, inflation is a monetary phenomenon. It reflects the amount of money in circulation: if that increases, inflation goes up. The ultimate effect of increasing prices is logical, as more units of a variable asset (money) are around in comparison to a fixed asset (e.g. commodities). This results in the need for more units of the former, to get the latter. Those who want to know how much money circulates may want to ask the central banks, as their balance sheet is largely representative. And because America is the supplier of the world reserve currency, the balance sheet of the Federal Reserve is the ultimate measure of inflation.

_{Balance sheet of the Fed; Source: St. Louis Fed}

Looking at the chart of the Fed’s balance sheet above, one immediately notices an inflation explosion. This is monetary inflation, of course, but the effect of this has not really trickled down to our daily lives and there is a good reason for that: the velocity of money collapsed at the same time (see the chart below). And that is because of the fact that the money created by the Fed is still stuck in bonds and other debt securities. Moreover, a major part of the money reserves is parked in banks. Consequently the ratio – the velocity of money – has plummeted in recent years. Not because there is less money in circulation, but because more of the money is tied up.

_{Velocity of the money reserves of the Fed; Source: St. Louis Fed}

The spectre of inflation is looming

This cannot go on forever. This monetary experiment will come to an end one day, forced by the market. You can probably guess what the outcome will be: an enormous increase in prices. It is a guessing game, naturally, to figure out when and how this will happen. It could be years before anything happens at all, but anything could happen anytime. This is called hyperinflation. No matter how this will pan out, higher price levels are unavoidable in the long term. It would be smart to not wait until the hurricane hits shore, but look for possible escape routes beforehand.

This wave of inflation will have a big impact on our standard of living, but most importantly on the buying power of your capital. Investors who have parked their wealth in assets such as bonds or savings accounts will have to face the music and deal with this devaluation. Investors with a big chunk of their capital invested in fixed income assets are protected against the destructive effect of inflation on their purchasing power. Take your precautions. Invest in quality companies in sectors that will support our future, invest some in gold and some in commodities. The clock is ticking!

Want to know more? Download Sprout Money’s Free Guide to Gold

 

Sprout Money offers a fresh look at investing. We analyze long lasting cycles, coupled with a collection of strategic investments and concrete tips for different types of assets. The methods and strategies from Sprout Money are transformed into the Gold & Silver Report and the Technology Report.

via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/rvmn9VyRuRU/story01.htm Sprout Money

The USD surged and Treasury bond prices and precious metals tumbled instantly on the FOMC’s statement but stocks decide it was time to ramp to VWAP (and VIX was hammered lower). After the initial knee-jerk, stocks caught back down to the reality of the other markets as it appears the investing public chooses to “sell the news” on the basis that the Fed removed the ‘tightening conditions’ language. The only question now is just how much of November, December, and January’s bull market run has been pulled forward into the last few days.

 

 

via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/xUfkq-UAP0E/story01.htm Tyler Durden

The USD surged and Treasury bond prices and precious metals tumbled instantly on the FOMC’s statement but stocks decide it was time to ramp to VWAP (and VIX was hammered lower). After the initial knee-jerk, stocks caught back down to the reality of the other markets as it appears the investing public chooses to “sell the news” on the basis that the Fed removed the ‘tightening conditions’ language. The only question now is just how much of November, December, and January’s bull market run has been pulled forward into the last few days.

 

 

via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/xUfkq-UAP0E/story01.htm Tyler Durden

Nobody could ever accuse the WSJ’s Jon Hilsenrath of breaching the FOMC embargo, which is why we were delighted to see that he waited a whole 7 minutes before releasing his 601 word summary of what the Fed really said.

Note the timestamp:

The turbo fast written piece, which incidentally says nothing new and once again merely parrots convention wisdom, is below:

The Federal Reserve on Wednesday held steady on its signature $85 billion-a-month bond-buying program and gave few new signals on when officials expect to pull back on the program or how they see the economic outlook changing.

 

The Fed’s policy-making committee showed itself to be effectively in a wait-and-see mode on the bond program, leaving investors in a continued guessing game about the path of a Fed policy that has been an important driver of asset prices and interest rates.

 

In June, Fed Chairman Ben Bernanke said he expected the Fed to start pulling back this year, but with only one more Fed policy meeting in December before year-end, that now looks less certain.

 

“[T]he Committee decided to await more evidence that progress will be sustained before adjusting the pace of its purchases,” the Fed said in its statement Wednesday, repeating language it used in September.

 

The Fed made very few changes to its description of current economic conditions. It said that the economy “continued to expand at a moderate pace,” and labor markets “have shown some further improvement.” The Fed acknowledged that the “recovery in the housing sector slowed somewhat in recent months,” one of the most notables change it made in its statement.

 

In September, the Fed had said that labor markets had shown “further improvement” and the housing sector was “strengthening.”

 

The Fed also removed references from the September statement to higher mortgage rates and tighter financial conditions.

 

Fed officials surprised markets at their September meeting when they decided not to cut their bond purchases after months of talk that they could start scaling back by year-end. The program is aimed at pushing down long-term interest rates to spur hiring, investment and spending.

 

With mortgage rates rising and a potential government shutdown and fight over raising the nation’s borrowing limit on the horizon, Fed officials said at the September meeting that they wanted to see more evidence that the economy can sustain its progress before cutting the bond-buying program.

 

A standoff over the federal budget led to a 16-day government shutdown that ended Oct. 17, injecting new uncertainty into the economy and damaging consumer confidence. The shutdown is expected to muddy some economic data through the end of the year. The Fed says its decisions are “data-dependent,” meaning it is basing them on how the economy develops. The most recent jobs report showed disappointing employment growth in September.

 

Nine out of 10 Fed officials voted to keep the bond-buying program steady on Wednesday. Kansas City Fed President Esther George continued her streak of dissenting by voting against the committee’s action because she thought the Fed’s easy-money policies could create financial instability and excessive inflation. Ms. George has dissented at all seven policy meetings this year.

 

The Fed also voted to keep short-term interest rates pinned near zero, where they’ve been since late 2008. Officials didn’t make any changes to so-called forward guidance, which are the statements made about the likely path of interest-rate policy.

 

All seven Fed governors vote at every policy meeting, as does the president of the Federal Reserve Bank of New York, William Dudley. Only five Fed governors attended this meeting. Governor Sarah Bloom Raskin is not participating in policy meetings in light of her pending nomination to be the next deputy Treasury secretary. The seat left empty by Elizabeth Duke in August has not been filled.

 

The presidents of the 11 other regional Fed banks vote on a rotating basis. This year, in addition to Ms. George, Chicago Fed President Charles Evans, Boston Fed President Eric Rosengren and Fed President James Bullard can vote.

And because just one super fast summary was not enough, here is another one, 15 minutes later, from the same Fed mouthpiece:

 

Three Takeaways on the Fed’s Policy Statement

 

Here are a few key takeaways:

 

–LITTLE CHANGE IN THE ASSESSMENT OF THE ECONOMY: The housing sector has “slowed somewhat,” the Fed said. That’s a downgrade from September when officials said it had been strengthening. The labor market had shown “some further improvement,” the Fed said, an ever-so-slight downgrade from the “further improvement” the Fed noted in September. On net, very little change in how officials see the economy performing.

 

–FINANCIAL CONDITIONS IMPROVING: The Fed dropped its reference to financial conditions having tightened in recent months, as it noted in September. That’s a nod of approval to rising stock prices and the recent drop in long-term interest rates. The Fed also removed a reference to its concern about higher mortgage rates, which have dropped since the last meeting.

 

–STILL AN EYE ON TAPERING: The Fed retained language it used in September which suggested officials had an eye on pulling back from their bond buying program if the economy improved. It noted “underlying strength” in the broader economy and said it chose to “await more evidence” on the economy’s performance before adjusting the bond-buying program. 

 

Taken together, the Fed isn’t taking a December adjustment to the bond-buying program off the table. But that comes with the strong caveat that it depends on whether the economy is living up to its expectations. As part of that assessment, Fed officials will be updating their economic forecasts in December and will need to make a judgment about whether their projection of accelerating economic growth in 2014 is likely to be met.

via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/fLQh2v3TaSI/story01.htm Tyler Durden

Nobody could ever accuse the WSJ’s Jon Hilsenrath of breaching the FOMC embargo, which is why we were delighted to see that he waited a whole 7 minutes before releasing his 601 word summary of what the Fed really said.

Note the timestamp:

The turbo fast written piece, which incidentally says nothing new and once again merely parrots convention wisdom, is below:

The Federal Reserve on Wednesday held steady on its signature $85 billion-a-month bond-buying program and gave few new signals on when officials expect to pull back on the program or how they see the economic outlook changing.

 

The Fed’s policy-making committee showed itself to be effectively in a wait-and-see mode on the bond program, leaving investors in a continued guessing game about the path of a Fed policy that has been an important driver of asset prices and interest rates.

 

In June, Fed Chairman Ben Bernanke said he expected the Fed to start pulling back this year, but with only one more Fed policy meeting in December before year-end, that now looks less certain.

 

“[T]he Committee decided to await more evidence that progress will be sustained before adjusting the pace of its purchases,” the Fed said in its statement Wednesday, repeating language it used in September.

 

The Fed made very few changes to its description of current economic conditions. It said that the economy “continued to expand at a moderate pace,” and labor markets “have shown some further improvement.” The Fed acknowledged that the “recovery in the housing sector slowed somewhat in recent months,” one of the most notables change it made in its statement.

 

In September, the Fed had said that labor markets had shown “further improvement” and the housing sector was “strengthening.”

 

The Fed also removed references from the September statement to higher mortgage rates and tighter financial conditions.

 

Fed officials surprised markets at their September meeting when they decided not to cut their bond purchases after months of talk that they could start scaling back by year-end. The program is aimed at pushing down long-term interest rates to spur hiring, investment and spending.

 

With mortgage rates rising and a potential government shutdown and fight over raising the nation’s borrowing limit on the horizon, Fed officials said at the September meeting that they wanted to see more evidence that the economy can sustain its progress before cutting the bond-buying program.

 

A standoff over the federal budget led to a 16-day government shutdown that ended Oct. 17, injecting new uncertainty into the economy and damaging consumer confidence. The shutdown is expected to muddy some economic data through the end of the year. The Fed says its decisions are “data-dependent,” meaning it is basing them on how the economy develops. The most recent jobs report showed disappointing employment growth in September.

 

Nine out of 10 Fed officials voted to keep the bond-buying program steady on Wednesday. Kansas City Fed President Esther George continued her streak of dissenting by voting against the committee’s action because she thought the Fed’s easy-money policies could create financial instability and excessive inflation. Ms. George has dissented at all seven policy meetings this year.

 

The Fed also voted to keep short-term interest rates pinned near zero, where they’ve been since late 2008. Officials didn’t make any changes to so-called forward guidance, which are the statements made about the likely path of interest-rate policy.

 

All seven Fed governors vote at every policy meeting, as does the president of the Federal Reserve Bank of New York, William Dudley. Only five Fed governors attended this meeting. Governor Sarah Bloom Raskin is not participating in policy meetings in light of her pending nomination to be the next deputy Treasury secretary. The seat left empty by Elizabeth Duke in August has not been filled.

 

The presidents of the 11 other regional Fed banks vote on a rotating basis. This year, in addition to Ms. George, Chicago Fed President Charles Evans, Boston Fed President Eric Rosengren and Fed President James Bullard can vote.

And because just one super fast summary was not enough, here is another one, 15 minutes later, from the same Fed mouthpiece:

 

Three Takeaways on the Fed’s Policy Statement

 

Here are a few key takeaways:

 

–LITTLE CHANGE IN THE ASSESSMENT OF THE ECONOMY: The housing sector has “slowed somewhat,” the Fed said. That’s a downgrade from September when officials said it had been strengthening. The labor market had shown “some further improvement,” the Fed said, an ever-so-slight downgrade from the “further improvement” the Fed noted in September. On net, very little change in how officials see the economy performing.

 

–FINANCIAL CONDITIONS IMPROVING: The Fed dropped its reference to financial conditions having tightened in recent months, as it noted in September. That’s a nod of approval to rising stock prices and the recent drop in long-term interest rates. The Fed also removed a reference to its concern about higher mortgage rates, which have dropped since the last meeting.

 

–STILL AN EYE ON TAPERING: The Fed retained language it used in September which suggested officials had an eye on pulling back from their bond buying program if the economy improved. It noted “underlying strength” in the broader economy and said it chose to “await more evidence” on the economy’s performance before adjusting the bond-buying program. 

 

Taken together, the Fed isn’t taking a December adjustment to the bond-buying program off the table. But that comes with the strong caveat that it depends on whether the economy is living up to its expectations. As part of that assessment, Fed officials will be updating their economic forecasts in December and will need to make a judgment about whether their projection of accelerating economic growth in 2014 is likely to be met.

via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/fLQh2v3TaSI/story01.htm Tyler Durden

Just as everyone expected, the Fed (absent its Press Conference) statement confirms they are data-driven, data is not good ‘enough’, therefore, no-taper:

• *FED SAYS IT WILL AWAIT `MORE EVIDENCE’ BEFORE QE TAPER
• *FED SAYS ECONOMY `CONTINUED TO EXPAND AT A MODERATE PACE’
• *FED SEES IMPROVEMENT IN ECONOMY EVEN WITH `FISCAL RETRENCHMENT

There were no clear comments that markets are growing a little too comfortable with the Fed’s free-money. Full Redline below…

Pre-FOMC: S&P Futs 1761, VIX 13.98%, 10Y 2.48%, Gold $1353, USD 79.46

Just before the statement hit, the market broke again! Gold started to rise, USD fell (led by EUR strength), VIX was smashed lower…

• *NASDAQ HAS DECLARED SELF HELP AGAINST NASDAQ-BX

By way of interest, in the next 5 days, we will see an overload of Fed Speakers: Tracy, Bullard, Kocherlakota, Lacker, Powell, and Lacker again… It seems they have no need for a press conference.

 

Full Redline below:

via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/0P1nFA5u-ok/story01.htm Tyler Durden

Despite what the talking heads continue to spew to justify all-time high stock market valuations, the 'fact' is that year-to-date, US Macro data has now performed the worst of all global macro indices. Furthermore, the pace of collapse in the last 4-weeks is the fastest in 8 months. What is perhaps most ironic is that US Macro peaked at the last FOMC meeting (when the Fed decided that data was not supportive enough to Taper) so any surprise today simply supports the fact that the Fed's decision is anything but fundamentally driven (and instead perhaps driven by the four 'bad' reasons for a tapering.)

 

US Macro has fallen to the worst performer year-to-date… (andnote when the un-Taper decision was made – at 'peak' macro)…

 

Collapsing at its fastest in 8 months (and note that each successive peak since the recession has seen lower highs – as the wealth effect or stimulus effects have become less and less)…

 

So any surprise decision or wording change today can only be driven by one (or more) of the following four ;bad' reasons:

1. Deficits are shrinking and the Fed has less and less room for its buying  

 

2. Under the surface, various non-mainstream technicalities are breaking in the markets due to the size of the Fed's position (repo markets, bond specialness, and fail-to-delivers among them).  

 

3. Sentiment is critical; if the public starts to believe (as Kyle Bass warned) that the central bank is monetizing the government's debt (which it clearly is), then the game accelerates away from them very quickly – and we suspect they fear we are close to that tipping point  

 

4. The rest of the world is not happy. As Canada just noted, the US monetary policy will be discussed at the G-20

Simply put, they are cornered and need to Taper; no matter how bad the macro data and we are sure 'trends' and longer-term horizons will come to their rescue in defending the prime dealers' clear agreement that it is time… 

via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/L1ez3xsFj0g/story01.htm Tyler Durden

Despite what the talking heads continue to spew to justify all-time high stock market valuations, the 'fact' is that year-to-date, US Macro data has now performed the worst of all global macro indices. Furthermore, the pace of collapse in the last 4-weeks is the fastest in 8 months. What is perhaps most ironic is that US Macro peaked at the last FOMC meeting (when the Fed decided that data was not supportive enough to Taper) so any surprise today simply supports the fact that the Fed's decision is anything but fundamentally driven (and instead perhaps driven by the four 'bad' reasons for a tapering.)

 

US Macro has fallen to the worst performer year-to-date… (andnote when the un-Taper decision was made – at 'peak' macro)…

 

Collapsing at its fastest in 8 months (and note that each successive peak since the recession has seen lower highs – as the wealth effect or stimulus effects have become less and less)…

 

So any surprise decision or wording change today can only be driven by one (or more) of the following four ;bad' reasons:

1. Deficits are shrinking and the Fed has less and less room for its buying  

 

2. Under the surface, various non-mainstream technicalities are breaking in the markets due to the size of the Fed's position (repo markets, bond specialness, and fail-to-delivers among them).  

 

3. Sentiment is critical; if the public starts to believe (as Kyle Bass warned) that the central bank is monetizing the government's debt (which it clearly is), then the game accelerates away from them very quickly – and we suspect they fear we are close to that tipping point  

 

4. The rest of the world is not happy. As Canada just noted, the US monetary policy will be discussed at the G-20

Simply put, they are cornered and need to Taper; no matter how bad the macro data and we are sure 'trends' and longer-term horizons will come to their rescue in defending the prime dealers' clear agreement that it is time… 

via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/L1ez3xsFj0g/story01.htm Tyler Durden