Tag: finance

For a market that is flirting with all time highs on a daily basis, the recent banker and trader suicide epidemic seems oddly out of place. And yet, it continues to claim even more victims, with the latest casuality being Edmund Reilly, 47, a trader at Midtown’s Vertical Group, who as the Post reported, jumped in front of an LIRR train station yesterday at 6 am near the Syosset train station and was pronounced dead at the scene.

More:

A Manhattan trader was killed Tuesday morning by a speeding Long Island Rail Road commuter train, marking at least the seventh suicide of a financial professional this year.

 

Edmund (Eddie) Reilly, 47, a trader at Midtown’s Vertical Group, jumped in front of an LIRR train at 6 a.m. near the Syosset train station. He was declared dead at the scene.

 

Reilly’s identity was confirmed by Salvatore Arena, an LIRR spokesperson, who said an investigation into the incident was continuing.

 

Passengers on the west-bound express train told MTA investigators they saw a man standing by the tracks before he jumped in front of the train, Arena said.

 

“Eddie was a great guy,” Rob Schaffer, a managing director at Vertical, told The Post in an email. “We are very upset and he will be deeply missed.”

 

The divorced father of three had rented a house around the corner from his ex-wife, Michelle Reilly, in East Norwich, NY.

 

One family friend, who said he spoke to the trader on Sunday, told The Post that Reilly “didn’t look good.”

This latest death brings the recent banker death tally to 10:

1 – William Broeksmit, 58-year-old former senior executive at Deutsche Bank AG, was found dead in his home after an apparent suicide in South Kensington in central London, on January 26th.

2 – Karl Slym, 51 year old Tata Motors managing director Karl Slym, was found dead on the fourth floor of the Shangri-La hotel in Bangkok on January 27th.

3 – Gabriel Magee, a 39-year-old JP Morgan employee, died after falling from the roof of the JP Morgan European headquarters in London on January 27th.

4 – Mike Dueker, 50-year-old chief economist of a US investment bank was found dead close to the Tacoma Narrows Bridge in Washington State.

5 – Richard Talley, the 57 year old founder of American Title Services in Centennial, Colorado, was found dead earlier this month after apparently shooting himself with a nail gun.

6 – Tim Dickenson, a U.K.-based communications director at Swiss Re AG, also died last month, however the circumstances surrounding his death are still unknown.

7 – Ryan Henry Crane, a 37 year old executive at JP Morgan died in an alleged suicide just a few weeks ago.  No details have been released about his death aside from this small obituary announcement at the Stamford Daily Voice.

8 – Li Junjie, 33-year-old banker in Hong Kong jumped from the JP Morgan HQ in Hong Kong this week.

9 – James Stuart Jr, Former National Bank of Commerce CEO, found dead in Scottsdale, Ariz., the morning of Feb. 19. A family spokesman did not say whatcaused the death

10 – Edmund (Eddie) Reilly, 47, a trader at Midtown’s Vertical Group, commited suicide by jumping in front of LIRR train

via Zero Hedge http://ift.tt/N9y4ag Tyler Durden

• China premier warns on economic slowdown as data fans stimulus talk (Reuters)
• Li says China defaults ‘unavoidable’ (FT)
• Russia Said to Ready for Iran-Style Sanctions in Worst Case (BBG)
• Rescue the tapes from the Bank of England’s dustbins  (FT)
• Obama Warns Putin of Cost to Russia for Annexing Ukraine (BBG)
• The TVIX is back: Credit Suisse VIX Note That Ran Amok in 2012 Back on Top (BBG)
• U.S. Risks National Blackout From Small-Scale Attack (WSJ)
• U.S. Investigators Suspect Missing Airplane Flew On for Hours (WSJ)
• Malaysia says no evidence missing plane flew hours after losing contact (Reuters)
• Missed Alarms and 40 Million Stolen Credit Card Numbers: How Target Blew It (BBG)
• Death Toll in NYC Building Blast Rises to Six; Search Continues (BBG)
• Big fine imposed on ex-Goldman trader Tourre in SEC case (Reuters)
• ETFs Get $41 Billion Erasing Stock Withdrawals on Economy (BBG)

 

Overnight Media Digest

WSJ

* General Motors Co said it may have known about problems with its ignition switches dating back to 2001 when it was developing but had not yet launched the Saturn Ion.

* U.S. investigators suspect that Malaysia Airlines Flight 370 stayed in the air for about four hours past the time it reached its last confirmed location, according to two people familiar with the details, raising the possibility that the plane could have flown on for hundreds of additional miles under conditions that remain murky.

* The U.S. launched a last-ditch effort Wednesday to avert a potentially costly diplomatic crisis with Moscow ahead of a vote Sunday in Crimea on whether the region should leave Ukraine and return to Russia.

* The Federal Reserve examined a key foreign-exchange benchmark months before global regulators sounded the alarm about potential manipulation, but officials took no public action.

* Game maker King Digital Entertainment Plc is planning to start trading this month on the New York Stock Exchange-valuing itself Wednesday at as much as $7.6 billion after it set a price range for its initial public offering.

* The U.S. could suffer a coast-to-coast blackout if saboteurs knocked out just nine of the country’s 55,000 electric-transmission substations on a scorching summer day, according to a previously unreported federal analysis.

* The Federal Trade Commission opened an investigation into Herbalife Ltd, the maker of nutritional supplements that has spent more than a year battling hedge fund manager William Ackman over allegations it is a pyramid scheme.

* Purdue Pharma LP says it plans to submit its extended-release hydrocodone drug to the Food and Drug Administration later this year. The company’s tablets are designed to prevent users from crushing them for snorting or injection. Shares of rival Zogenix Inc plunged more than 20 percent after the announcement, which appears to jeopardize sales of the company’s just-launched drug Zohydro.

* Energy XXI Ltd agreed to acquire EPL Oil & Gas Inc in a $1.53 billion cash-and-stock deal that will create the largest publicly traded oil-and-gas producer in the shallow waters of the U.S. Gulf of Mexico.

* A former Credit Suisse banker, Andreas Bachmann, pleaded guilty to helping Americans hide money in Switzerland and agreed to cooperate with the U.S. government.

 

FT

Two-thirds of this year’s income tax in Britain will be paid by one in 10 adults as George Osborne leans heavily on Britain’s highest earners, fuelling a debate over whether Wednesday’s Budget should extend some help to higher-rate taxpayers.

The United States has announced its first “test” sale of oil from its strategic petroleum reserve since Iraq invaded Kuwait in 1990, describing the planned release as intended “to appropriately assess the system’s capabilities in the event of a disruption”.

British security officials have been given special access by Google to YouTube video site to have content instantly screened if they think it threatens national security.

Multi-level marketing company Herbalife’s trading practises will be investigated by the U.S. Federal Trade Commission over claims that it is a “pyramid scheme”.

As the search for the missing Malaysia Airlines flight MH370 drags on, aviation experts, frustrated relatives of those aboard and China allege that communications over the search have been slow, information contradictory and co-ordination patchy.

 

NYT

* General Motors said on Wednesday that it had received reports as early as 2001 – three years earlier than previously disclosed – of a safety defect in its cars that the company has now linked to 12 deaths and at least 31 accidents over the past decade.

* A federal judge on Wednesday ordered Fabrice Tourre, the former Goldman Sachs Group Inc trader at the center of a troubled mortgage deal, to pay the Securities and Exchange Commission $825,000 in penalties and other costs. The sum fell just short of the roughly $1 million payout that the agency had requested.

* The U.S. Federal Trade Commission said on Wednesday that it had opened an official inquiry into Herbalife Ltd, the nutritional supplement company that has been the focus of a 15-month crusade by hedge fund billionaire William Ackman.

* King Digital Entertainment Plc, maker of hit mobile phone game “Candy Crush Saga”, said on Wednesday that it expected to price its shares from $21 to $24 each in its forthcoming offering, which would value the company at $7.6 billion.

* Citigroup Inc cut the pay of its chairman for Mexico, Manuel Medina-Mora, by about $1.1 million last year from 2012, citing “control issues” at its Banamex USA unit.

* Hedge fund Elliott Management is raising its bet on Juniper Networks Inc after the networking equipment company announced a series of new initiatives.

* Jefferies Group LLC, the investment bank and brokerage firm, agreed on Wednesday to pay $25 million to settle accusations by the Securities and Exchange Commission that it failed to supervise traders who lied to investors about the price of mortgage-backed securities.

* Atomico, the venture capital firm led by Niklas Zennstrom, the co-founder of Skype, is investing in Brazil again, a sign that entrepreneurship continues to grow in Brazil even amid a lagging economy.

* The Financial Conduct Authority of Britain has hired Julia Hoggett, a managing director for debt capital markets products at Bank of America Merrill, as head of investment banking in its supervision division.

* Credit Karma, a credit score service, announced on Wednesday that it raised $85 million in a third round of fund-raising, led by Google Inc through an investment arm that specializes in late-stage technology companies.

 

Canada

THE GLOBE AND MAIL

* The federal transport safety agency is scrapping a requirement for railways to report on smaller spills involving hazardous materials, raising questions about the quality of the accident data Ottawa collects.

* The Toronto District School Board has pledged to tighten its oversight of provincially funded programs for students outside the classroom, after an audit revealed lax procedures for overseeing spending.

Reports in the business section:

* After building one of Canada’s most successful independent whisky distilleries over the past two decades, John Hall has cashed in with the $186-million sale of his Forty Creek Distillery Ltd to Italian beverage giant Gruppo Campari.

NATIONAL POST

* A controversial social services provider that operates Canada’s only supervised drug injection centre and runs dozens more projects in Vancouver’s poverty-stricken Downtown Eastside appears headed for involuntary receivership and a possible court battle with the British Columbia government, because of concerns over its “spending practices” and financial “irregularities.”

FINANCIAL POST

* Herbalife Ltd said on Wednesday that the U.S. Federal Trade Commission had opened an inquiry into its operations. Billionaire investor William Ackman has for months called on regulators to investigate Herbalife’s distribution model, which he calls a “pyramid scheme.”

* AltaGas Ltd could step in to help salvage a proposed natural gas-export terminal planned for Canada’s West Coast as the project’s Texas-based owners seek to rescue the development from insolvency.

 

China

CHINA SECURITIES JOURNAL

– China will improve the development of agricultural product futures market this year, said Jiang Yang, vice-president of the China Securities Regulatory Commission.

SECURITIES TIMES

– China Minsheng Banking Corp Ltd will follow China CITIC Bank Corp in launching a virtual credit card with Alibaba Group Holding Ltd for use in online purchases, sources told the newspaper.

CHINA BUSINESS NEWS

– China is drafting a rule saying internet financial and online peer-to-peer lending will be under the supervision of the China Banking Regulatory Commission, several sources told the newspaper.

CHINA DAILY

– A private kindergarten in the western city of Xi’an, home of the famed Terracotta Warriors, is being investigated over allegations it gave children unauthorised prescription medicines. School officials were detained by police.

 

Britain

The Telegraph

SCRAPPING 40 PCT RATE COULD BE ‘ICONIC’ TORY PLEDGE, NO 10 POLICY ADVISER SAYS

The Conservatives should consider scrapping the 40 percent higher rate of income tax as an “iconic” pledge to help win voters, a Number 10 policy adviser has said.

UK PETROL PRICE FEARS AS OPEC RAISES OIL FORECAST

Opec has upgraded its forecast for world oil demand, raising the prospect of higher petrol prices ahead of next week’s Budget.

The Guardian

BANK OF ENGLAND CALLS IN LEADING QC TO INVESTIGATE FOREX-RIGGING CLAIMS

The Bank of England has called in one of the most respected figures in the legal world, Anthony Grabiner QC, to investigate allegations that some of its staff may have been involved in manipulating the 3 trillion pound-a-day foreign exchange markets for almost 10 years.

BRITISH R&D SPENDING DOWN DESPITE GOVERNMENT’S INNOVATION STRATEGY

Britain spent less as a proportion of national income on research and development than the rest of the European Union in 2012 despite the government’s apparent innovation push to boost growth.

The Times

INVESTORS DEMAND SCALP OF BARCLAYS BONUS-SETTING CHIEF

Investors who control hundreds of millions of pounds of Barclays shares are poised to vote to oust Sir John Sunderland, head of the board’s remuneration committee.

COPPER PRICE SLUMP PUTS CHINA ON ITS METTLE AFTER BOND DEFAULT

Global commodity prices were shaken in recent days after China’s first corporate bond default, with the red metal suffering the brunt of the selling spree. The scale of the sell-off reveals the depth of concerns over China’s shaky credit markets, analysts said.

The Independent

CANDY CRUSH BOSSES TO MAKE MILLIONS FROM NEW YORK FLOAT

UK executives at the games studio behind Candy Crush Saga are set to make millions more than initially thought from the company’s stock market listing, after the developer was valued at up to $7.56 billion (4.55 billion pound) on Wednesday.

G4S AGREES TO PAY 109 MILLION POUND OVER ELECTRONIC TAGGING SCANDAL

G4S has agreed to pay nearly 110 million pound back to the taxpayer following a scandal in which it charged for the monitoring of non-existent electronic tags, including some which had been assigned to dead offenders.

 

Fly On The Wall 7:00 AM Market Snapshot

ECONOMIC REPORTS

Domestic economic reports scheduled for today include:
Jobless claims for week of Mar. 8 at 8:30–consensus 330K
Retail sales for February at 8:30–consensus up 0.2%
Import price index for February at 8:30–consensus up 0.5%
Business inventories for January at 10:00–consensus up 0.4%

ANALYST RESEARCH

Upgrades

ATK (ATK) upgraded to Equal Weight from Underweight at Barclays
Activision Blizzard (ATVI) upgraded to Buy from Neutral at BofA/Merrill
Alon USA Energy (ALJ) upgraded to Outperform from Neutral at Macquarie
Cabela’s (CAB) upgraded to Outperform from Market Perform at William Blair
Dresser-Rand (DRC) upgraded to Outperform from Market Perform at William Blair
Qihoo 360 (QIHU) upgraded to Outperform from Neutral at Credit Suisse
Starz (STRZA) upgraded to Equal Weight from Underweight at Evercore

Downgrades

Consolidated Edison (ED) downgraded to Equal Weight from Overweight at Barclays
EPL Oil & Gas (EPL) downgraded to Hold from Buy at Stifel
EPL Oil & Gas (EPL) downgraded to Market Perform from Outperform at BMO Capital
Electronic Arts (EA) downgraded to Neutral from Buy at BofA/Merrill
Express (EXPR) downgraded to Market Perform from Outperform at FBR Capital
Midstates Petroleum (MPO) downgraded to Sector Perform from Outperform at RBC Capital
PVH Corp. (PVH) downgraded to Equal Weight from Overweight at Morgan Stanley
PVH Corp. (PVH) downgraded to Market Perform from Outperform at Wells Fargo
Steelcase (SCS) downgraded to Neutral from Buy at Longbow

Initiations

Approach Resources (AREX) initiated with a Buy at Mizuho
Beneficial Mutual (BNCL) initiated with a Buy at Compass Point
Clifton Savings (CSBK) initiated with a Buy at Compass Point
Concur (CNQR) initiated with a Neutral at B. Riley
Cornerstone OnDemand (CSOD) initiated with a Buy at B. Riley
Diamondback Energy (FANG) initiated with a Buy at Mizuho
Investors Bancorp (ISBC) initiated with a Buy at Compass Point
Jive Software (JIVE) initiated with a Buy at B. Riley
Kearny Financial (KRNY) initiated with a Buy at Compass Point
Knowles (KN) initiated with an Outperform at JMP Securities
Laredo Petroleum (LPI) initiated with a Buy at Mizuho
Perfect World (PWRD) initiated with an Outperform at Credit Suisse
Ultimate Software (ULTI) initiated with a Buy at B. Riley
Workday (WDAY) initiated with a Neutral at B. Riley
YY Inc. (YY) initiated with an Outperform at Credit Suisse

COMPANY NEWS

Liberty Global (LBTYA) joined Time Warner Cable (TWC), Comcast (CMCSA) in RDK joint venture
FDA advisory committee unanimously recommended Roche’s (RHHBY) cobas HPV test
Addus Homecare (ADUS) said it sees material weaknesses in internal reporting controls and that its Q1 revenues will be negatively impacted by severe winter weather
Herbalife said “surprised” by FTC investigation, CNBC says
Williams-Sonoma (WSM) raised its quarterly dividend to 33c per share from 31c per share
Krispy Kreme (KKD) raised its share repurchase authorization to $80M from $50M
JetBlue (JBLU) to sell LiveTV subsidiary to Thales Group for $400M

EARNINGS

Companies that beat consensus earnings expectations last night and today include:
PhotoMedex (PHMD), Kronos Worldwide (KRO), magicJack (CALL), CTPartners (CTP), Williams-Sonoma (WSM), Callon Petroleum (CPE), Depomed (DEPO), Addus HomeCare (ADUS)

Companies that missed consensus earnings expectations include:
Methode Electronics (MEI), Emerge Energy Services (EMES), Hawaiian Telcom (HCOM), Natural Gas Services (NGS), UCP, Inc. (UCP), Banc of California (BANC), Senomyx (SNMX), Vail Resorts (MTN), Miller Energy (MILL), Jones Energy (JONE), KCAP Financial (KCAP), Anthera Pharmaceuticals (ANTH), Scientific Games (SGMS), Ultrapetrol (ULTR), Home Inns (HMIN), Arc Logistics (ARCX), Supernus (SUPN), Keryx (KERX), Artesian Resources (ARTNA), Emerald Oil (EOX), Providence Service (PRSC), Krispy Kreme (KKD), Majesco (COOL), eMagin (EMAN), Orexigen (OREX), Vail Resorts (MTN)

NEWSPAPERS/WEBSITES

General Motors (GM) knew of faulty ignition switches as early as 2001, WSJ says
Wells Fargo (WFC) alleged to have process for faking foreclosure docs, NY Post says
Zell facing questions over CommonWealth (CWH) fight, FT reports
eBay (EBAY) CEO meets with investors as Icahn feud escalates, Bloomberg says
Deutsche Telekom (DTEGY) expects T-Mobile (TMUS) to struggle in spectrum auctions, WSJ says
Teva’s (TEVA) shares could rise 30%, Barron’s reports
Citigroup (C) mulls clawbacks, pay cuts over Banamex fraud, Bloomberg reports

SYNDICATE

Elbit Imaging (EMITF) files to sell 204.42M ordinary shares for holders
Fortress (FIG) files to sell 28.3M shares
Galmed (GLMD) Pharmaceuticals 2.83M share IPO priced at $13.50
InterMune (ITMN) files to sell 7.5M shares of common stock
Post Holdings (POST) 5M share Secondary priced at $55.00
Quintiles (Q) 15M share Secondary priced at $52.00
Regado Biosciences (RGDO) files to sell 4M shares of common stock for holders
Stock Building Supply (STCK) 5.6M share Secondary priced at $19.50
William Lyon Homes (WLH) files to sell 15.73M shares for holders

via Zero Hedge http://ift.tt/N9y1LD Tyler Durden

It was another day of ugly overnight macro data, all of it ouf of China, with industrial production (8.6%, Exp. 9.5%, Last 9.7%), retail sales (11.8%, Exp. 13.5%, Last 13.1%) and fixed asset investment (17.9% YTD vs 19.4% expected) all missing badly and confirming that in a world of deleveraging, the Chinese economy will continue to sputter. Which is precisely what the “bad news is good news” algos needs and why futures levitated overnight: only this time instead of latching on to the USDJPY correlation pair, it was the AUDJPY which surged after Australia – that Chinese economic derivative – posted its third best monthly full-time jobs surge in history! One can be certain that won’t last. But for now it has served its purpose and futures are once again green. How much longer will the disconnect between deteriorating global macro conditions and rising global markets continue, nobody knows, but sooner rather than later the central planner punch bowl will be pulled and the moment of price discovery truth will come. It will be a doozy.

In Europe, stocks traded mixed this morning, with the FTSE-100 index underperforming its peers following the release of less than impressive earnings by Morrisons, shares down around 10%. As a result, heading into the North American cross over, consumer services sector is among the worst performing, while the recovery by base metals also ensured that basic materials related stocks traded higher. Still, the move higher was led by financials, with Commerzbank trading with good gains following an upgrade by SocGen to buy rating.

Looking elsewhere, in spite of the bounce back by stocks this morning, USD/JPY traded lower, with Swiss rates also bid, as market participants remained vary of any future shocks stemming from China amid fears of more corporate defaults. On that note, Chinese Premier Li said that China is to take measures to regulate local financing vehicles and ensure no systemic financial risks arise from defaults. Of note, Ireland made a successful return to markets, selling its first 10y bond since entering the bailout in 2010.

Going forward, market participants will get to digest the release of the latest weekly jobs and retail sales reports from the US, while the US Treasury will auction off USD 13bln in 30y bonds.

Bulletin headline summary from Bloomberg and RanSquawk

• FTSE-100 index underperformed its peers following the release of less than impressive earnings by Morrisons, down 10% at the open.
• Chinese Premier Li said that China is to take measures to regulate local financing vehicles and ensure no systemic financial risks arise from defaults.
• Bundesbank’s Weidmann said that it is premature to declare euro zone debt crisis over, adding that ECB’s expansionary monetary policy stance is appropriate.
• Treasuries steady before week’s auctions conclude with $13b 30Y bonds, WI yield 3.675% vs 3.69% at February sale; retail sales due at 8:30am ET, est. +0.2%
• Yesterday’s $21b 10Y reopening was awarded at 2.729%, about 1.5bps below WI yield at 1pm according to Stone & McCarthy
• Other metrics strong, including highest bid-to-cover and lowest primary dealer award lowest since March 2013, as increase in direct award offset drop in indirects
• China’s industrial-output, investment and retail-sales growth cooled more than estimated in January and February, signaling an economic slowdown that makes the government’s 2014 expansion target harder to reach
• Chinese Premier Li Keqiang said there’s some flexibility around the nation’s target of 7.5% growth this year without specifying how much of a slowdown leaders would tolerate
• Russian government officials and businessmen are bracing for sanctions resembling those applied to Iran after what they see as the inevitable annexation of Ukraine’s Crimea region, according to four people with knowledge of the preparations
• Australia boosted payrolls in February by the most in more than 22 years, with the number of people employed full time rising by 80,500; overall employment climbed 47,300 vs 15k  median estimate
• New Zealand raised its key interest rate, the first developed nation to exit record-low borrowing costs this year, and said it plans to remove stimulus faster than previously forecast to contain inflation
• The missing Malaysian airliner kept flying after it dropped off controllers’ radar screens, raising new questions about whether foul play was involved, according to people familiar with data gathered in the inquiry
• Sovereign yields mostly lower. EU peripheral spreads little changed. Asian equities mixed; Nikkei and Topix lower, Shanghai +1%. European equity markets, U.S. stock-index futures gain. WTI crude and copper lower, gold gains

US Event Calendar

• 8:30am: Retail Sales Advance, Feb., est. 0.2% (prior -0.4%); Retail Sales Ex Auto, Feb., est. 0.1% (prior 0.0%); Retail Sales Ex Auto and Gas, Feb., est. 0.2% (prior -0.2%)
• Retail Sales Control Group, Feb., est. 0.2% (prior -0.3%)
• 8:30am: Initial Jobless Claims, March 8, est. 330k (prior 323k)
• Continuing Claims, March 1, est. 2.903m (prior 2.907m)
• 8:30am: Import Price Index, Feb., est. 0.5% (prior 0.1%)
• 9:45am: Bloomberg Consumer Comfort, March 9
• 10:00am: Business Inventories, Jan., est. 0.4% (prior 0.5%)
• 2:00pm: Monthly Budget Statement, Feb., est. -$195b (prior – $203.5b)
• 11:00am: Fed to purchase $3.25b-$4b in 2018 sector

Asian Headlines

Chinese Premier Li said that China is to take measures to regulate local financing vehicles and ensure no systemic financial risks arise from defaults. (BBG)

– At the same time, Moody’s said that non-financial companies in China will see little effect from the Chaori Solar default as their exposure to any follow-on tightening is limited.

– This follows the first corporate bond default in China’s history last Friday, with markets keenly focused on what could be the next domino to fall.

Of note, JGBs closed sharply lower and had a brief moment of extreme volatility as it spiked to the downside by 1 point but then immediately pared the large majority of the move, which was attributed to a rogue algorithmic trade and a sharp reaction to the Bank of Japan’s decision to buy JPY 170bln of long-term bonds vs. Exp. JPY 180bln. In terms of Chinese data released overnight:

– Chinese Industrial Production YTD (Feb) Y/Y 8.6% vs. Exp. 9.5% (Prev. 9.7%) – Retail Sales YTD (Feb) Y/Y 11.8% vs. Exp. 13.5% (Prev. 13.1%)

EU & UK Headlines

Bundesbank’s Weidmann said that it is premature to declare euro zone debt crisis over, adding that ECB’s expansionary monetary policy stance is appropriate. Also, even though Bundesbank’s Weidmann said that the risk of widespread deflation in the Eurozone is very limited, EU inflation indicators (ie swap rates) continued to point to growing fears of lower inflation for a prolonged period of time, with 2y inflation swap rate falling to its lowest since late 2008.

This morning, Italy sold EUR 7.75bln vs. Exp. EUR 7.75bln worth of BTPs, while the Irish debt agency successful returned to markets with its first 10yr auction since entering the bailout in 2010.

US Headlines

Congress will fail to approve an aid package to Ukraine before a Sunday referendum in Crimea, where voters will decide whether to break away from Kiev’s government to join Vladimir Putin’s Russia. (TheHill) While a Senate panel on Wednesday approved legislation in a bipartisan vote, aides said differences between the House and Senate will prevent Congress from completing its work before lawmakers leave Washington on Friday for a weeklong recess.

Equities

Consumer services sector underperformed since the open, following earnings by Morrison’s, which consequently weighed on other retailers such as Tesco and Sainsbury’s. At the same time, with stocks trading higher enabled credit spreads to reverse some of the recent widening, which when combined with a positive broker recommendation by SocGen meant that financials outperformed on the sector breakdown.

FX

Resumption of the downward trend by USD/CNY following the conclusion of the annual congress meeting in China, together with the pick up in sentiment saw the USD index fall to its lowest level since late October 2011. In turn, EUR/ USD advanced to its highest level since September 2011, in spite of the fact that there remains a growing risk of deflation in the joint currency bloc.

AUD benefited from a rebound by gold prices and also the release of better than expected jobs report which also saw the pair move above its 100DMA line. Also of note, RBNZ hiked their Official Cash Rate by 25bps to 2.75% as expected, adding that NZD remains a headwind and that the current exchange rate is not sustainable in the long-run.

Commodities

Credit Suisse says platinum selling at USD 1,550/oz is possible on continuation of strikes in South Africa. (BBG)

Peruvian silver mine Uchucchacua owned by Bueaventura has been hit by a miners strike. The Union leader said it was based on the dismissal of 10 employees and the need for better working conditions that has halted production.

Estimated output loss is 324,000 kilos of silver. (RTRS)

The decision to release 5mln bbls of crude from the US Special Petroleum Reserve is a ‘warning shot’ to Russia saying the decision has been engineered as a warning shot to Russia over the Ukrainian crisis, with the US excuse of ‘testing operations’ as too close to coincidence, according to analysts at SocGen. (BBG)

Arab countries will extend aid to Egypt in the form of petroleum products until at least September, according to Egyptian Finance Minister Dimian. (RTRS)

* * *

We conclude with the traditional overnight recap by DB’s Jim Reid

As we went to print this morning China printed its retail sales, industrial production and fixed asset investment data for February. Overall the data is disappointing, which doesn’t help the general nervousness over the Chinese growth story at the moment, but again we need to be wary of seasonal factors. For the record China’s February industrial production (8.6% YTD YoY vs 9.5% expected), retail sales (11.8% YTD YOY vs 13.5% expected) and fixed asset investment (17.9% YTD YoY vs 19.4% expected) were all below consensus. In reaction, S&P500 futures are down about 1pt as we type and the AUD is down 20 ticks. Earlier this morning we saw better sentiment return to Asian markets but volumes were generally on the low side. In China, Premier Li spoke to reporters to mark the end of the National People’s Congress. Li said that he was aware of the downside risks to the Chinese economy but assured that the government will take measures to ensure growth was within a reasonable range, to secure jobs and to prevent inflation. Amid all the concern about corporate and trust defaults, Li indicated that though he did not want to see defaults of financial products, some defaults cannot be avoided. He also stated that the government must ensure that there is no systemic financial risk arising from debt market problems. The words have helped the closely-watched Shanghai Composite (+1.2%) lead the rest of the region’s bourses higher overnight but it’s safe to say that sentiment remains pretty fragile. Adding to the jumpiness in Asia is a potential “fat finger” incident in the JGB futures market overnight, which saw the 10yr contract collapse by more than 1pt in a matter of seconds before swiftly recovering most of those losses.

Nevertheless, confidence there has been weakened today and 10yr JGB yields are up 1.5bp. In Australia, the AUDUSD (+0.9%) spiked higher following a significantly stronger than expected employment report (+47k vs 15k expected).

A surprising turnaround in sentiment during the NY session helped the S&P 500 (+0.03%) record a small gain yesterday and in the process avoid its first 3- day-consecutive fall in nearly two months. The catalyst for the NY morning rally was unclear but it might have been a combination of a rally in copper futures (both in London and Shanghai) and news that US Secretary of State John Kerry will be meeting with Russian Foreign Minister Sergey Lavrov in London on Friday to discuss the Ukraine crisis. Some dovish prepared remarks from the Fed nominees Fischer, Brainard and Powell ahead of their Senate nomination hearings today perhaps also helped.

Aside from the headlines on the Kerry-Lavrov London meet up, yesterday’s EM news flow was hardly confidence-inspiring. The MSCI EM equity index closed down -1.2% and the CDX EM credit index (-0.25points) notched up its fourth straight loss but those losses could have been larger were it not for the abrupt risk turnaround during the NY session. Reports of anti-government unrest in Turkey intensified yesterday and the BBC said that there were violent protests in at least 32 towns and cities across the country that were partly triggered by the funeral of a youth who had tragically passed away earlier in the week (BBC). Turkish bond yields spiked another 10bp, but still fared better than Russian 10yr USD bonds which sold off more than 20bp in yield terms yesterday. US and European lawmakers appeared to be inching slowly towards imposing sanctions against Russia, and the G7 issued a statement to the effect of condemning Russia’s actions in Crimea. The G7 also announced that the group has cancelled preparations for the next G8 summit in Sochi. Russian president Putin was said to have told his finance minister and central bank governor that he was dissatisfied with Russia’s economic growth rate (Reuters), but there was very little other detail provided on the discussions.

There were a few bright spots in EM, such as in India where there was better dataflow in the form of industrial production (January +0.1% vs -0.9% expected) and CPI (8.1% vs 8.3% consensus) but even that failed to inspire the INR (-0.44% against the USD).

Though we saw the S&P500 recover back to unchanged on the day and US treasuries close 4bp lower, there was surprisingly little macro data from the US to drive markets. Perhaps the biggest news was the release of prepared statements from the trio of Fed Board of Governor nominees. Of those, the most closely watched were the comments from the Fed vice-chair nominee Stanley Fischer who was on balance fairly dovish. He said that the Fed needed to remain very accommodative as “normalcy has not been restored”. He was referring to the unemployment rate which he thought was still too high and inflation which was below target. Interestingly, there was fair amount of commentary from Fischer on the Fed’s financial regulation role, saying that the financial crisis had driven home the lesson that the Fed also has to contribute its part to financial system stability. Staying on the Fed, the WSJ’s Hilsenrath wrote in a blog that the Fed’s rate guidance is likely to change, possibly at the next policy meeting on March 18th-19th with a shift away from unemployment-oriented guidance. He writes that Yellen’s next challenge is to rewrite guidance without unanchoring market expectations. Yesterday saw the front end of the UST curve underperform, with 2yr yields largely unchanged despite the rally in 10yr and 30yr.

Returning to the topic of Ukraine, our EM strategists write that the crisis there is still at a dangerous stage and the economic element to the crisis has yet to be resolved. Ukrainian FX reserves are now more or less exhausted and exchange controls have therefore been tightened to prevent a freefall in the currency. This has bought a little time but is not a sustainable solution in their view. They estimate that about US$35bn of external financial assistance is needed. Public debt is moderate at 40% of GDP but will inevitably increase significantly. This is partly because about 60% of government debt is denominated in foreign currencies. Against this backdrop, they consider whether there is a case for bailing in the private sector and suggest an alternative approach to private sector involvement which could involve the voluntary exchange of short-dated for longer-dated bonds. The nature of the situation in Ukraine (a relatively low debt stock, but considerable short-term uncertainty) make for ideal conditions for a “PSI-lite” approach such as this, which could be beneficial for Ukraine and for investors.

Turning to the day ahead, the focus will be on US retail sales and the Senate nomination hearing for Stanley Fischer (mainly the Q&A given that the prepared remarks have already been published). The Senate committee will also consider the nomination of Lael Brainard and renomination of Jerome Powell to a new term at the Fed. US weekly initial jobless claims, French and Italian CPI are the other major data points today.

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The ersatz common shares of Fannie Mae and Freddie Mac lost about half of their value this week after news reports indicated that the Senate had agreed on a bipartisan proposal to eliminate the housing GSEs. Senate Banking Committee Chairman Tim Johnson (D-SD), and the panel’s top Republican, Mike Crapo of Idaho, said they reached agreement on how to overhaul the complex housing system and reduce the role of the federal government in backing home loans.  

And there is good news: Matt Levine at Bloomberg View has finally come to the correct conclusion that the common of shares of Fannie and Freddie must have zero value until the preferred is first paid in full.  Somebody break the news to Ralph Nader and Bill Ackman. 

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First and foremost, the news reports about the likelihood of passage of this “bipartisan” legislation are overly optimistic.  The odds of the House adopting the Senate proposal are small to none.  But more important, the deteriorating situation in the housing sector makes it unlikely that Congress is going to mess with either GSE anytime soon.  

Even though Fannie and Freddie are mostly underwriting prime mortgages, while the FHA and Ginnie Mae are picking up the slack on below-prime loans, the falling volumes in the mortgage market generally are going to start seriously affecting effecting the debate over the GSEs.  Once home prices start to visibly fall in many parts of the nation later this year, any discussion of GSE reform will be put aside.  This is a shame because the only way to fix the mortgage market and stabilize home prices is via legislation.  But the Johnson-Crapo proposal still lacks some essential elements.

As we noted in a recent post on ZH, the roots of the subprime crisis and the subsequent boom and bust in the housing sector can be traced back to 1998, when the SEC under Arthur Levitt amended Rule 2a-7 and thereby handed the world of housing finance to the big banks and the GSEs on a silver platter.  See “Zombie Dance Party: It’s Only a Monopoly, But I Like It.”

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Under the current regulatory regime in the US, banks are not generally underwriting below-prime mortgages.  Non-banks want to do this business, but they cannot fund the warehouse or end investor component of the lending process efficiently because they cannot place paper with money market funds.  Under Basel III, keep in mind, a piece of non-agency mortgage debt has a risk weight above 100% vs. 20% for agency debt.  

As a result, the largest commercial banks have a monopoly on writing mortgages directly and indirectly providing funding to the non-bank mortgage sector.  This is just one reason why the housing sector is in big trouble.  See my comment in American Banker:

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What the SEC did with the changes to Rule 2a-7 was to give the big Wall Street banks an effective monopoly on creating paper for purchase by money market funds.  The change effectively cut non-bank issuers of mortgage paper and other long-duration securitizations out of the business of selling assets directly to money market funds and created an odious monopoly for the TBTF banks and GSEs.

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By handing the market for creating assets for money market funds to the commercial banks and broker dealers, the SEC unwittingly created the very circumstances that led to the near failure of The Reserve Primary Fund in 2008.  The monopoly also led to the eventual collapse of Lehman Brothers, Bear, Stearns & Co and even Citigroup later in the crisis.  All of these issuers of commercial paper and asset backed securities sponsored paper that was inferior in terms of credit characteristics to that originated by other banks and the GSEs.  Eventually they failed.  Remember, no private company can compete with a GSE.

If Congress wants to reduce the role of the government in the US mortgage sector, then we must do more than merely extinguish Fannie Mae and Freddie Mac.  Congress must allow non-banks to issue transparent, conservatively underwritten and really boring paper for sale directly to money market funds.  Congress should also revisit Basel III and allow banks to purchase such assets with less than 100% capital risk weights.  Such changes would include paper for residential mortgages, multi-family loans and other types of investment quality debt packaged in asset backed securities.  

But until we end the monopoly created by Rule 2a-7, the private sector cannot compete with the banks and GSEs.  Simply ending the corporate lives of Fannie and Freddie as the Johnson-Crapo proposal envisions is not sufficient because the TBTF banks will just go on to form a new monopoly with their successor.  

The other aspect of mortgage finance that we touched on in that earlier ZH post is the role of the Real Estate Mortgage Conduit or “REMIC” in supporting the Big Bank/GSE monopoly in mortgage finance.  By making the REMIC structure the only type of securitization vehicle that qualifies for pass-through status for tax purposes, the IRS and SEC have essentially handed the securitization market to the largest banks.  

More, since in a REMIC trust both sides of the balance sheet are considered “debt” for tax purposes, a REMIC cannot restructure itself in bankruptcy.  This is why the 10-15 million home mortgage loans that are owned by a REMIC trust and are currently underwater cannot be fixed.  Again, the exclusivity of the REMIC for tax purposes is a major reason why millions of underwater mortgages cannot be restructured.  This is a major problem for the US housing market. 

When home builders in the 1980s issued their own collateralized mortgage obligations (CMOs), the issuer was actually a “C” corporation and not a REMIC trust.  When a calamity hit Texas in the 1980s, the separately incorporated subsidiaries of these builders that issued mortgage bonds could file bankruptcy and restructure their underwater mortgages (which were fully taxable and thus defined as assets) so they could maximize the value of the restructured MBSs.  

As trusts, REMIC entities cannot be debtors in a bankruptcy because the mortgages they own are seen as “liabilities” for tax purposes.  REMIC’s exclusivity is not only a monopoly creator in terms of the advantage they have in terms of funding costs but also acts to inhibit a restructure restructuring of underwater mortgages.  You can bet Tim Johnson and Mike Crapo don’t have a clue about any of this.

The REMIC’s exclusivity for asset backed securities is both a facilitator of monopoly and a resolution problem.  The housing market overhang problem caused by the inability of REMICs (or anybody else) to restructure first lien mortgages on primary homes pulls home values down and also inhibits the attraction of capital to support a really robust private mortgage insurance market.  

Two points: 1) If Senators Johnson and Crapo really want to see private capital in the mortgage market, we must end the exclusivity of REMICs for tax purposes.  2)  The inability of non-banks to access funding via sales of short-term commercial paper secured by conduits to money market funds to support warehousing of loans before creating CMOs is an illegal restraint of trade and places non-bank seller/servicers or mortgages in a subordinate position to the TBTF banks.  

Until we see members of Congress talking about a repeal of the SEC’s amendments to Rule 2a-7, all of this talk about “housing reform” is just going to be a pretense.  Unless we allow non-bank issuers of mortgage paper to compete directly with the monopoly commercial banks and GSEs, there is no practical way to attract private capital back into the mortgage market – except as free-riders on a governmental guarantee, explicit or otherwise.

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Submitted by Mike Krieger of Liberty Blitzkrieg blog,

In some cases the NSA has masqueraded as a fake Facebook server, using the social media site as a launching pad to infect a target’s computer and exfiltrate files from a hard drive. In others, it has sent out spam emails laced with the malware, which can be tailored to covertly record audio from a computer’s microphone and take snapshots with its webcam. The hacking systems have also enabled the NSA to launch cyberattacks by corrupting and disrupting file downloads or denying access to websites.

 

The man-in-the-middle tactic can be used, for instance, to covertly change the content of a message as it is being sent between two people, without either knowing that any change has been made by a third party.

 

– From Glenn Greenwald’s latest article: How the NSA Plans to Infect Millions of Computers with Malware

 

According to the Snowden files, the technology has been used to seek out terror suspects as well as individuals regarded by the NSA as “extremist.” But the mandate of the NSA’s hackers is not limited to invading the systems of those who pose a threat to national security.

 

In one secret post on an internal message board, an operative from the NSA’s Signals Intelligence Directorate describes using malware attacks against systems administrators who work at foreign phone and Internet service providers. By hacking an administrator’s computer, the agency can gain covert access to communications that are processed by his company. “Sys admins are a means to an end,” the NSA operative writes.

But not all of the NSA’s implants are used to gather intelligence, the secret files show. Sometimes, the agency’s aim is disruption rather than surveillance. QUANTUMSKY, a piece of NSA malware developed in 2004, is used to block targets from accessing certain websites.

 

QUANTUMCOPPER, first tested in 2008, corrupts a target’s file downloads. These two “attack” techniques are revealed on a classified list that features nine NSA hacking tools, six of which are used for intelligence gathering. Just one is used for “defensive” purposes – to protect U.S. government networks against intrusions.

 

Before it can extract data from an implant or use it to attack a system, the NSA must first install the malware on a targeted computer or network.

 

According to one top-secret document from 2012, the agency can deploy malware by sending out spam emails that trick targets into clicking a malicious link. Once activated, a “back-door implant” infects their computers within eight seconds.

 

Consequently, the NSA has turned to new and more advanced hacking techniques. These include performing so-called “man-in-the-middle” and “man-on-the-side” attacks, which covertly force a user’s internet browser to route to NSA computer servers that try to infect them with an implant.

 

In one man-on-the-side technique, codenamed QUANTUMHAND, the agency disguises itself as a fake Facebook server. When a target attempts to log in to the social media site, the NSA transmits malicious data packets that trick the target’s computer into thinking they are being sent from the real Facebook. By concealing its malware within what looks like an ordinary Facebook page, the NSA is able to hack into the targeted computer and covertly siphon out data from its hard drive. A top-secret animation demonstrates the tactic in action.

 

The man-in-the-middle tactic can be used, for instance, to covertly change the content of a message as it is being sent between two people, without either knowing that any change has been made by a third party. The same technique is sometimes used by criminal hackers to defraud people.

 

“The thing that raises a red flag for me is the reference to ‘network choke points,’” he says. “That’s the last place that we should be allowing intelligence agencies to compromise the infrastructure – because that is by definition a mass surveillance technique.”

 

In many cases, firewalls and other security measures do not appear to pose much of an obstacle to the NSA. Indeed, the agency’s hackers appear confident in their ability to circumvent any security mechanism that stands between them and compromising a computer or network. “If we can get the target to visit us in some sort of web browser, we can probably own them,” an agency hacker boasts in one secret document. “The only limitation is the ‘how.’”

Full article here.

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"Europe faces 25 years of Japan-style stagnation," warns George Soros in this brief Bloomberg TV interview, adding that without deeper integration, "it’s an incomplete association of nations and it may not survive." While claiming that the financial crisis may be over they now "face a political crisis," with the voluntary association cracking due to the creditors (Germany) being in charge. However, he hopes "Ukraine is a wake-up call to Europe, because Russia has emerged as a rival to the European Union." Putin, Soros worries, "has a very different idea of what a society should be like… he has a blind spot – he believes people can be manipulated and cannot resist." That's not the case according to Soros, who exclaims "people do believe in freedom."

 

 

George Soros on what is facing Europe today:

"What is facing Europe, unless there is a more radical change is a long period of stagnation. Nations can survive in that way. Japan is just trying to break-out of 25 years of stagnation, where Europe is just entering. The European Union is not a nation. It’s an incomplete association of nations and it may not survive 25 years of stagnation.

 

"The financial crisis as such is over. But now we are facing a political crisis, because the Euro crisis has transformed what was meant to be a voluntary association of equal sovereign states that sacrificed part of their sovereignty for the common good into something radically different. It is now a relationship between creditors and debtors, where the debtors have difficulty in paying and servicing their debt and that puts the creditors in charge. And that divides the Eurozone into two classes – the creditors and debtors. The creditors are in charge and unfortunately the policy that Germany in particular is imposing on Europe is counter-productive and is making the condition of the debtor countries worse and worse. So, right now Europe is already growing a little bit, the Eurozone, but that’s only because Germany is forging ahead and more than let’s say Italy and Spain are falling behind. "

On Central Banks and whether he cares about the weakness we saw in the data and deflation:

"That’s going to be a very tough year for the banks. They are under pressure, because they have to meet the stress test. The banks have an interest in passing the stress test rather than reviving credit to the economy, so the banks have a transmission mechanism for the people’s savings channeling it into the real economy. They are not fulfilling their function."

On Ukraine's impact on Europe:

"Ukraine is a wake-up call to Europe, because Russia has emerged as a rival to the European Union. Putin has tried to reconstitute the Russian empire as a rival for the European Union and has been very successful politically. Not terribly unsuccessful financially and economically, because the Russian economy is not doing well at all, but Putin has outplayed, outmaneuvered the European Union, because Europe it [inaudible] to form, it demanded too much and offered too little. So, it wasn’t difficult for Putin to output it. But the Ukrainian people stood up and demonstrated by actually sacrificing their lives. Their commitment to be part of Europe, so this is a challenge for Europe and Europe needs to rediscover its own European identity instead of each country just pursuing its national interests and getting further and further into conflict with the others. There are certain core principles and this is a political thing – democracy, open society, freedom that Europe has believed in and ought to actually stand up and be united."

 

"Putin has a very different idea of what a society should be like. He believes that people can be manipulated. He actually has got a blind spot. It’s beyond his comprehension that people can spontaneously resist. He believes that if Ukraine resists that there is a conspiracy that people, that Americans, CIA, my foundation are conspiring to threaten him or to undermine is policies. And that’s not the case, people do believe in freedom. "

 

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With all eyes focused on China (which is quiet for now), Japanese bond futures just collapsed over a point on very heavy volume only to be instantly lifted back to a modest loss in what appears to be a flash-crash – rather than a fat-finger (jamming June JGBs down to 2-month low prices). Gold, meanwhile, is continuing its day-session rally and has topped $1370 – it’s highest since September 19th. US equities are holding gains for now as JPY is bid (i.e. JPY crosses are tumbling).

 

 

JGBs flash-crash…

 

The ticks make it look like algos and not a giant fat-finger trade (and we note it occurred during BoJ’s JOMO time too)…

 

We wonder if it’s related to the force-feeding that the government recently made:

Japan May Make JGB Bids Mandatory for Megabanks, Brokers

 

Japanese finance ministry plans to make mandatory from April that 20 brokerages and 3 megabanks bid for 3% of JGBs in enhanced liquidity auctions, Nikkei newspaper reports, without saying where it got the information.

 

Bidding is voluntary at present in the auctions which enables the ministry to offer additional popular issues of outstanding JGBs: Nikkei

 

Ministry will discuss plan with market participants next week: Nikkei

 

Plan aims at revitalizing JGB market liquidity and avoiding risk of interest rate spikes with BOJ buying 40-50% of all newly issued long-term bonds: Nikkei

For context…

 

And then there’s this!!

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Submitted by Nick Giambruno via Doug Casey's International Man blog,

Most readers are familiar with Peter Schiff. He is a financial commentator and author, CEO of Euro Pacific Capital, and is known for accurately predicting the 2008 financial crisis.

He also has a very keen understanding of internationalization. Peter shares with me his strategies in this must-read discussion below that I am happy to bring exclusively to International Man readers. (If you are not already a member, you can join for free here.)

Nick Giambruno: Peter, do you see the potential for another financial crisis in the US playing out in the not-so-distant future?

Peter Schiff: Unfortunately, yes. I mean, how soon is very difficult to tell. In fact, right now you’ve got a high level of complacency. The stock markets are rallying to new highs, nominal highs. People seem to be convinced that the worst is behind us, that the central banks of the world have solved their problems by papering them over. But, you know, I don’t think they’ve solved anything. I think they’ve compounded the underlying problems that caused the last crisis, and so now the next crisis will be that much worse because of what the central banks did, in particular the Federal Reserve.

The Fed is right now trying to prop the economy up, the housing market up with cheap money, and it is operating under the delusion that one day it can take that cheap money away and the economy and the housing market will just sustain on their own, but that’s not possible. The Fed is building an economy that is completely dependent on that cheap money. And so if you take it away, the economy implodes, but if you don’t take it away, then it’s worse.

Nick Giambruno: So what measures do you see coming into place—things such as capital controls?

Peter Schiff: Well, certainly as currencies depreciate, governments look to try to find ways to stop the bleeding. What’s really is going on with inflation is that you have a huge transfer of wealth from savers and lenders to debtors, and of course the US government is the world’s biggest debtor, but a lot of American voters are in debt too.

If you’re a saver and you don’t want to watch your assets confiscated through the printing press, then you’re going to try to protect yourself. You might do that by moving your dollars abroad, converting them to foreign currencies, trying to get out of harm’s way, and that’s when you have the government potentially coming in with capital controls.

Putting taxes on foreign currency transactions or maybe outright prohibiting them altogether, that will make it more difficult for you or more expensive to take protective measures. I think we’ve already got the beginnings of capital controls in the United States. The government is making it very difficult for Americans to do business abroad. Many foreign financial institutions, banks, and even bullion depositories are refusing to do business with American citizens for fear of retaliation by the IRS or other government agencies.

Nick Giambruno: So what can Americans and others living under a desperate government do to minimize this risk?

Peter Schiff: Well, the first thing that you could do is minimize your purchasing power risk. So you don’t have to get your money into a foreign bank or foreign brokerage account to get out of the dollar. I help Americans diversify globally within a US account, but their portfolio consists of foreign assets, whether it’s foreign bonds, government bonds, corporate bonds, foreign stocks, dividend-paying stocks, commodities, or precious metals. These are all things that will protect purchasing power in an inflationary time period, and things that the federal government—the Federal Reserve—can’t levy the inflation tax on.

If you’re more worried about political risk—about the US government seizing your assets—then you want to take the next step. This is not just getting out of the dollar, but getting your money out of the country. But again, the US government is making that more difficult right now.

I know personally. I set up a foreign brokerage firm as a subsidiary of my foreign bank, which I also set up, called Euro Pacific Bank. I did this predominantly for foreigners who were having trouble investing with my US brokerage firm. The securities rules and regulations are now so onerous that it almost caused me to view any foreigner as a terrorist. So if somebody in Australia wanted to open up an account with me, there was so much paperwork involved that oftentimes they would just give up halfway through the process. So what I did is I set up this foreign bank so that I wouldn’t have to operate under those confines, so I can be more competitive to a foreign investor, but I can’t offer these services to Americans.

My foreign bank is no different than many other foreign banks. In order to really protect the privacy of my foreign customers, I can’t accept American customers. And if I accepted American customers, my compliance cost would be so high that I would have to charge my foreign customers more for transactions to try to stay in business. So to mitigate all that regulation and the potential of having to share all the information on my foreign clients with the US government, I’m just not taking American customers with my foreign bank.

Nick Giambruno: So Euro Pacific Bank, where is it headquartered and why did you choose that jurisdiction?

Peter Schiff: It’s in St Vincent and the Grenadines (the Caribbean). I did it for a number of reasons: it’s close to me, but also because of the banking laws. You have secrecy, privacy, and you have no tax. They’re not going to impose any income tax on my company as an offshore bank, they’re also not going to impose any taxes, any withholding taxes on my bank’s customers’ interest income or their capital gains. And no one is going to pierce the wall of secrecy. You’re going to have to go in to a St. Vincent’s court and get a local court order to get any information from my bank.

The bank is regulated, but it’s not nearly as onerous as the type of regulations that I would face trying to do this business from the United States. In fact, some of the things we’re doing offshore might be completely impossible because they would no longer be economically viable if I tried to do them in America, but I can do them offshore because the government doesn’t impose these artificial barriers.

(Editor’s Note: You can find out more about Euro Pacific Bank here.)

Nick Giambruno: Generally speaking, which countries are you particularly bullish on?

Peter Schiff: It’s kind of like a monetary or economic triage; I’m always looking around the world to see which countries are in the least bad shape, which countries are the least reckless and the least irresponsible. You really can’t find any one country that’s doing it perfectly. You just have to find the ones that are making the fewest mistakes.

And I think high on that list are Singapore and Hong Kong. Those markets are relatively free of regulation, free of taxation. I mean, it’s not nonexistent, but on a relative basis you have a lot more freedom there, and so you have a lot more prosperity there. You have much better economic fundamentals. And not just in those two places, but in Southeast Asia in general, in a lot of the emerging economies, you’ll find a lot less government and a lot more freedom. People are working harder, they’re saving, they’re producing, and they’re exporting. You don’t have these trade deficits, budget deficits, and you don’t have armies of people looking to retire on government entitlements. In Europe, we still like Switzerland even though they are making mistakes tying their currency to the euro. I think eventually they will change that policy. Scandinavia, we have been investors in Norway, we’ve been investors in Sweden. Also Australia and New Zealand have been longtime favorites. We’ve been investing down there or even closer to home in Canada. We do have some investments in South America. We’re diversifying around the world trying to get into the right countries, the right currencies, the right asset classes.

Nick Giambruno: On a different note, we’ve seen the number of US citizens renouncing their citizenship sharply increase. We have also seen high-profile people like Tina Turner and Eduardo Saverin give up their US citizenship. Would Tina be eligible to use Euro Pacific Bank?

Peter Schiff: Yes, once you renounce your US citizenship. The only people who can’t bank with me are American citizens, or green card holders. So once you are no longer an American citizen, as long as you don’t reside in the United States, then you are welcome at the bank.

I think a lot of people are doing this obviously for tax reasons, although they can’t necessarily claim it’s for tax reasons. You have to fill out a form if you want to renounce your citizenship—which, by the way, you can only get from a foreign embassy or consulate. Those forms used to be free. Now they’re $500 apiece. So think about that. If they can charge you $500 for that form, they could charge $5,000, they could charge $5,000,000. They could basically make it impossible for you to leave. And they’re trying to make it more difficult ever since Eduardo Saverin from Facebook went to Singapore. Now the government is trying to come up with all sorts of ways to punish Americans who try to give up their citizenship, and this really is the sign of a nation in decay. Fifty years ago, nobody would want to give up American citizenship. They would cherish it. The fact that so many people are paying tremendous amounts of money to get this albatross off their neck shows you how much times have changed, that an American passport is not an asset to be cherished but a liability that people are willing to pay to get rid of.

Nick Giambruno: And what about yourself? Do you believe you are adequately diversified internationally?

Peter Schiff: I think my investments are; I own a lot of foreign stocks. I have a lot of precious metals, I have a lot of mining shares. But I still live in the United States, so I’m obviously still vulnerable here. My family is here, so I haven’t done anything about a physical exit strategy. Although I do think I have financial resources that would afford me the ability to relocate, but I haven’t actually taken any steps other than setting up a foreign business. I have the foreign bank in the Caribbean. I have a brokerage firm Euro Pacific Canada, and so I’ve got offices up there. I’m also thinking about opening up an office in Singapore and trying to move more of my business—particularly my asset management business—to move it from the US. Not only because of favorable tax treatment outside the US, but because of the regulatory environment. If you want to be globally competitive, you need to be in an area where you can minimize these costs because if I have those costs and my competitors don’t, then I am at a disadvantage. And also because I think that over time people are going to be more and more hesitant about sending their money to the United States. So if I’m going to manage money, I might have to manage it offshore, because I think people will be worried about sending it here. They might be worried that the US government might take it.

If it ever gets really, really bad that you feel that you have to leave, by then it might be illegal to take any gold or silver out of the country. Right now you can take more than $10,000 worth of cash or cash equivalents—which would include gold bullion—out of the country as long as you tell the government that you’re taking it. And if you don’t tell them and they catch you, there’s a big fine and jail penalty. But one day it might not be the case. It might be that you are prohibited from taking any significant amount of money out of the country, and who knows what the penalty might be if they catch you. But if it’s already out of the country, then you don’t have to worry, because you’re leaving with nothing and the money is on the other side of the border waiting for you.

Nick Giambruno: So the idea is to preempt capital controls?

Peter Schiff: Yeah, well, you get out the window before they slam it shut. That’s the whole idea, and right now those windows are shutting all around as more and more offshore institutions are saying “no thank you” to an American customer. But the other reason that you want to act sooner too is if they impose exchange controls or fees on purchasing precious metals. They don’t ban them, but they have a big tax on the transaction or a big tax on the foreign exchange. If you want to buy Swiss francs, they can have a transaction tax. You want to get your money out of the dollar before those taxes are imposed, because if you wait until they’re imposed, then you can’t get as much money out, because a lot of it is being lost to taxes. In getting out of the dollar, you’re trying to avoid the inflation tax, but they’re hitting you with some other kind of tax in the process because that’s really what they are trying to do. A lot of people are worrying about the income tax or the estate tax and they go through elaborate means to try to minimize those taxes, but then they leave themselves vulnerable to what might be the biggest tax of all: and that’s the inflation tax. So you have to act to protect yourself before so many people are trying to protect themselves that the government makes it almost impossible to do so.

Editor’s Note: Internationalization is your ultimate insurance policy. Whether it’s with a second passport, offshore physical gold storage, or other measures, it is critically important that you dilute the amount of control the bureaucrats in your home country wield over you by diversifying your political risk. You can find Casey Research’s A-Z guide on internationalization by clicking here.

via Zero Hedge http://ift.tt/1lY7sbw Tyler Durden

Australia just added the 3rd most full-time jobs ever in a month according to the Aussie Bureau of Statistics. That is 16-times the average monthly gain since 1978. Of course, rather than shrug it off as some idiotic aberration as the nation suffers under the crushing blow of a collapsing commodit market and shrinking China, “traders” bid AUDJPY to the moon (which sparked a mini-rally in US equity futures).

 

Today’s print is only bettered y Aug 1991 and Feb 2011…

 

and that managed to get traders to run through stops on AUDJPY at 93.00

 

We assume it didn’t snow in Australia

via Zero Hedge http://ift.tt/1lY7qjI Tyler Durden