Tag: news

One of the more troubling stories to hit the tape last week was that despite, or rather due to, roughly $100 billion in losses in the past 5 quarters, Japan’s gargantuan $1.4 trillion state pension fund, the GPIF, which has desperately been selling Japan’s best performing asset – Japanese Government Bonds – in order to buy local stocks and the Nikkei at its decade highs only to see its equity investment plunge, is now forced to buy even more stocks, i.e. double down, as part of a ridiculous rebalancing which will lead to even more losses.

Japan is not alone.

After China did everything to prop up its own stock market, including arresting hedge funders, sellers, “rumormongers”, halting short selling, eliminating futures trading, and ultimately culminating with the “Buttonwood SPV” in which the PBOC finally threw in the towel and admitted it was directly buying stocks,  we now learn that Chinese pensioners are about to become unwitting stock funds.

As Bloomberg reports, “China’s pension funds are about to become stock investors.”

The country’s local retirement savings managers, which have about 2 trillion yuan ($300 billion) for investment, are handing over some of their cash to the National Council for Social Security Fund, which will oversee their investments in securities including equities. The organization will start deploying the cash in the second half, according to China International Capital Corp. and CIMB Securities.

For the rhetorical answer to the rhetorical question of “what can possibly go wrong” here is the one-title answer, also from Bloomberg:

 

Why is China – for whom social stability is absolutely paramount and thus gambling with people’s retirement funds is truly a foolish initiative – doing this? Simple: whereas in the US legions of clueless investors buy any and every stock mentioned by such “legends” of crony capitalism as Warren Buffet, in China it is the pension fund. To wit:

For the nation’s equity markets – which are dominated by retail investors and among the world’s worst performers this year – the state fund’s presence is even more valuable than its cash, said Hao Hong, chief China strategist at Bocom International Holdings Co. The NCSSF has “such a good reputation in being a value investor that if they take the lead, the signaling effect is actually quite strong,” said Hong, who had predicted the start and peak of China’s equity boom last year. “It’s almost like Warren Buffett saying he is buying a stock.”

China’s “Warren Buffett” may be about to have a very rude awakening. According to Bloomberg, China’s NCSSF, which oversees 1.5 trillion yuan in reserves for China’s social security system, has returned an average 8.8% a year since 2000, the Securities Daily reported earlier this year, citing official data. Truly a remarkable number, and one which is alas just too good to be true when one considers that the larger pension system has been locally managed and made just 2.3% annually through 2014, the newspaper said. This also ignores China’s epic stock market wipe out in 2015.

Here is the official spin:

The organization’s entry will come as Shanghai stocks begin a gradual recovery that has pared their losses for the year to 16 percent from as much as 25 percent. While yuan depreciation concerns are pressuring Chinese assets lower, the economy is showing some signs of stabilizing. The nation’s foreign-exchange reserves unexpectedly climbed in June in a sign of slowing outflows, while a measure of services rose.

 

The entry “will be a positive event in terms of sentiment but the actual impact won’t be drastic,” said Ben Bei, an analyst at CIMB Securities in Hong Kong. “The fund will tend to be prudent and the progress may be very gradual — that is, it will enter the market over the next several years.”

The unofficial one is simpler: to boost confidence that China’s openly rigged and manipulated markets are once again safe:

Venturing into China’s volatile stock markets — where a crash erased $5 trillion of value last year — isn’t without its risks for funds traditionally focused on more stable assets. Japan’s government pension fund, the world’s largest, may have lost about $43 billion in the second quarter, Morgan Stanley MUFG Securities Co. estimated. This adds fuel to criticism over the Government Pension Investment Fund’s decision to boost equity allocations in 2014.

The problem, however, is that like in Japan and the rest of the world, pension funds simply have no choice than to swing for the fences when it comes to returns. Especially in China.

Low returns are a challenge for China’s pension system, which is already facing pressure from a rapidly aging population. The country’s old-age dependency ratio — a measure of those 65 or over per 100 people of working age — is set to triple to 39 by 2050. The NCSSF didn’t respond to an e-mail seeking comment. The pension funds are more likely to buy blue-chip firms, said CIMB’s Bei, while Bocom’s Hong said they’ll probably seek out shares of state-owned enterprises with low valuations. With the market down for the year, the timing is right for entry, said Hong.

The only silver lining on this latest foray into risk assets by a pension fund is that the exposure will be capped. Up to 30% of Chinese pension investments’ net value can be allocated to stocks, while the cap for bonds is 135 percent. While that means the funds can theoretically inject 600 billion yuan into shares – compared with the Shanghai market’s 25.9 trillion yuan size – CICC estimates that purchases this year will be limited to about 100 billion yuan. This means less than $20 billion in buying power: hardly impactful at all to push stocks much higher.

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But the real reason why this latest $300 billion in stock buying “dry powder” is being activated can be summarized in just two words: plunge protection. Bloomberg explains:

Giving the NCSSF more ammunition may serve one more purpose: helping stabilize markets during the next rout. During last year’s tumble, policy makers armed state-run investing company China Securities Finance Corp. with more than $480 billion to try and limit declines. “Their mandate is to make a return and make sure the fund doesn’t have a deficit,” said Hong. “But in times of crisis when they’re called upon by the state, I think it will be difficult to refuse the request.”

Too bad China does not know how to use HFTs like Citadel who, in collaboration with entities like the NY Fed, unleash massive upside momentum on very little capital to prevent market routs as has been the case in the US at every major inflection point during the past 7 years. That China has not yet gotten to the most modern method of market manipulation – with or without the Fed’s blessing – is troubling and suggests that at least one more major round of pain is in store for Chinese stocks.

via http://ift.tt/29wDLes Tyler Durden

Exactly how Micah Johnson came to be the man who murdered five police officers in Dallas remains unsolved. Johnson, a mid-twenties man (much like Bin Laden's son), apparently had taken his love for the ladies a little too far when he was serving in the Army Reserves. The killer who "stated that he wanted to kill white people, especially white officers", as we posted, had an apparent fetish for women's panties. 

As The Daily Beast reports, Johnson was kicked out of the Army for stealing panties, returned home as a soldier who fell from grace, was exposed to Eric Garner's July murder and Michael Brown's August murder, all while trying to negotiate a deal with his lawyer regarding his panty heist. 

Johnson’s military lawyer, Bradford Glendening, says that a female corporal mentioned Victoria’s Secret underthings when she filed a sexual harassment complaint against his client. The lawyer further reports that the corporal was worried enough to seek an order of protection against Johnson and to recommend that he receive mental health treatment.

And…

Down in Texas, Micah Johnson waited for his lawyer to work out some kind of deal with the Army. Family friend Myrtle Booker noted that along with becoming withdrawn, Johnson had developed an increased interest in firearms, as might befit a onetime panty stealer who found himself lacking.

Johnson's bad luck began shortly after the President visited Bagram Air Base in Afghanistan on a surprise visit to Johnson's group and others in 2014.

Imagine knowing that you are about to be discharged for stealing panties and now you have to help set up for a surprise pep-speech from the President.  Furthermore, imagine being in the group, with other proud soldiers surrounding you, and hearing the President say:

…I’m also here representing 300 million Americans who want to say thank you as well. (Applause.) I know sometimes when you're over here, away from home, away from family, you may not truly absorb how much the folks back home are thinking about you. So I just want you to know when it comes to supporting you and your families, the American people stand united. We support you. We are proud of you. We stand in awe of your service.

Johnson, likely very worried about what would come of his panty theft, learned in August of 2014 after arriving back in the US, that his Mesquite home, where he went to highschool and graduated in 2009, was broken into and two guns were stolen.

At this point it has become clear that the story-line being spun to the public is one focused on the details.  The people of Dallas and the rest of the world are to believe:

• an Army Reserve recruit stole panties,
• saw two high profile murders play out on American media,
• felt bad in the juxtaposition of Presidential praise in the midst of a possible discharge,
• had two guns stolen from him,
• then turned into a Dallas sniper much like Lee Harvey Oswald.

As we highlighted just hours ago, Johnson has links to Leftist Revolutionary Groups and the Nation of Islam. As we've shown, Johnson's ties have been consciously made and clearly part of a deeper slide into a world where unapologetic calls for the murder of fireman and cops are regular propaganda.  On the African American Defense League (AADL) Facebook back, founder Dr. Mauricelm-Lei Millere wrote:

The white­man wants your blood! How many of us has he killed and enslaved? Trillions!…We need the action that makes them pay atten­tion. An eye for an eye phi­los­o­phy! Arm your­self in Fer­gu­son, Mis­souri and across Amer­ica! A life for a life!" He con­tin­ued, "Also, we must go to their com­fort­able neigh­bor­hoods and raid those stores. It is time to LOOT & BURN those stores…

At this point we're beginning to wonder if "Johnson's Panties" will be the "Benghazi Youtube Video" or the "Syrian Chemical Attacks Video" of American constitutional repression efforts. Remember, for all the talk we've heard about gun control lately, there seems to be a lack of discussion surround Attorney General Eric Holder's gun smuggling operation with the Mexican drug cartels that killed a US border agent. Those are details we need though. 

Will the average American believe the narrative of a botched panty heist sparking a downfall that dragged Johnson through sensationalized US media coverage of murder, to a home invasion, all the while feeling ashamed about his own disgrace as the US President heaps praise upon his group?

* * *

Draw your own conclusions.

via http://ift.tt/29qnUCq Tyler Durden

From Russell Napier of ERI-C

 

Now only one question matters for global investors — Wo ist der Hubschrauber? (Where is the helicopter?).

The decline of European commercial bank share-prices before Brexit made it clear that a monetary reflation of Europe was failing. The collapse in these same share-prices post-Brexit means that even the politicians now realise that the ECB acting alone cannot stabilize the European economy. Indeed, given the evident political strains in the European Union, saving the economy from recession is now key to saving the European political union project itself.

So, will Mrs Merkel abolish fiscal austerity across Europe and permit each of the states of the European political union expand their debt mountains at the same time that the ECB is buying that debt? Are the keys to der Hubschrauber to be handed over? To save the European political union Germany must now confront its greatest fear and enfranchise the political union’s central bank to conduct outright monetary financing of all its constituent governments.

Investors need to remain very cautious indeed as it is in no way clear that Mrs Merkel will hand over the keys to der Hubschruaber. Should she do so, however, major changes in investment allocation are necessary as helicopter money will be raining from the skies in Japan, the Eurozone, the UK and even in the USA if President Clinton also wins the House and the Senate. This form of reflation will likely work and in due course work too much. Few things are binary in investment, but this huge decision to be taken in Berlin is the biggest binary event for investors this analyst has yet come across. The repercussions will reverberate throughout this century.

This analyst would like to present you with a firm forecast as to the possibility of ‘helicopter money’ coming to the European political union. However, it is too close to call. Even if that assertion is correct, this is truly dire news for financial markets.

Investors seem to have no doubt that Mrs Merkel will indeed endorse an end to fiscal austerity in the Eurozone and, in the process, further breach the constitution of the ECB and ignore the ghost of Herr Haverstein (Germany’s Weimar/hyperinflation central banker). These are truly existential decisions for any Chancellor of Germany to make and it is too dangerous to invest clients’ hard-earned savings on a bet that The Chancellor will sacrifice everything for the political union project.

Time is ticking away and a decision will have to be made within weeks if a European recession, which will raise severe questions about the survivability of the European political union, is to be averted. We will know soon enough just how large the ghost of Herr Haverstein still looms in Germany, as a failure to endorse helicopter money within a few weeks most likely means Germany is ultimately backing away from the European political union project. This is amongst the most important political decisions of the 21st century and one full of pain for global equity investors if Germany decides not to act. Early clues as to which way The Chancellor might swing are to be found in Italy.

The Solid Ground has been warning for well over a year that the introduction of the Bank Resolution and Recovery Directive (BRRD) would undermine the stability of European banks and, if actually implemented, would cause bank-runs across Europe. The collapse in European bank share-prices since January does suggest that bank stability has been undermined. Now we face the prospect of a BRRD implementation in Italy and the biggest public policy error since Hank Paulson allowed Lehman Brothers to fail.

At this stage the best bet must still be that Germany will back away from insisting upon implementation of the BRRD and the bail-in of Italian commercial bank-bond holders and, conceivably, large-scale deposit holders. However, the German response to the unilateral announcement by the Government of Italy that public funds would be used to recapitalize their banks, without any bail-ins, was uncompromising. While one might have expected a representative of the European political union to have insisted that laws be implemented, Mrs Merkel intervened directly, presumably representing the Union as a whole when she stated: “We wrote the rules for the credit system, we cannot change them every two years.”

If that is a true representation of what The Chancellor thinks then a financial crisis is just a few days away. Not only will it create runs on banks across Europe, it will also signal that the German commitment to the European political union cannot be taken for granted. In the opinion of this analyst this double-whammy from a BRRD implementation would create a shock as large as the bankruptcy of Lehman Brothers. Given the scale of the consequences from such a public policy error, this is not the time for risk-taking.

Should The German Chancellor hand over the keys to der Hubschrauber, then global equity markets will rise materially and very quickly. Investors can afford to miss this first move given the risks that the keys to the helicopter might remain hanging on the kitchen door at the Bundeskanzleramt. However, responding rapidly to the sound of whirring rotors is very important as the very positive impact on European equity and global equity prices will continue for months, quarters and conceivably even years. It is not a time to be a hero and second-guess The Chancellor, but instead be ready to move quickly to accept the Haverstein bonus for equity investors this Chancellor is prepared to endow on investors almost 100 years after Germany last sought this particular economic solution to a political problem. Equity investors know only too well where such bounty ends, but this will not stop them from enjoying the early reflationary spring.

Meanwhile, in a sideshow to the increasingly likely reversal of the European political union, the United Kingdom continues to flex. The constitution is flexing, the exchange rate is flexing, the political parties are flexing. This flexing is in marked contrast to the brittle constitutional and economic framework, in the form of a single currency, placed upon the sovereign states of Europe. Scotland’s place in the UK is guaranteed because who would vote for the creation of a border, joining the Euro and a European political union which will either be dissolving or rapidly centralizing; in addition there’s also the impact of the oil price to consider.

Most or even all the politicians who lied and condescended to their electorate in the referendum are gone or going. It is not that naïve to assume that the next bunch will be better, albeit that is a low hurdle to jump. Meanwhile, the grossly overvalued exchange rate that produced a huge current account deficit has gone. The cost of government borrowing, crucially, has declined and this has created the flexibility to launch a more expansionary fiscal policy. Ironically, the banking system is sound because it had to be bailed out by the government in 2008. A recession is very likely as business investment slows, but this is all part of a flexing and not a breaking.

In short, the so-called chaos represents a fairly smooth and rapid realignment in politics and finance. Brittle systems fracture under strain and those are not the systems in the United Kingdom.

The people of the United Kingdom voted not to delegate their sovereignty to a European political union. While the timing of that decision was a surprise, the fact that the UK would not become one of the Federal States of Europe has been clear for a very long time indeed. The pain associated with such a decision is lessened the sooner it is taken, so the fact that it has happened now should be seen as a relief.

The minority who voted Remain have convinced themselves that their economic prospects have been dented by uneducated xenophobes from places they have never heard of. The 17.4 million who voted Leave brace themselves to expect a painful economic adjustment they deemed a price worth paying to defend the sovereignty of the people in parliament. In due course there will be an election to that parliament and all citizens will get to have their say on the free movement of goods, the free movement of services and freedom of establishment, the free movement of persons (and citizenship), including free movement of workers and the free movement of capital. For the first time in some decades all their votes will count on these issues and, for any party securing the backing of the 48% of the population who voted Remain, true power awaits.

Throughout this flexible democratic process humus will continue to be widely available, café culture will continue to thrive and a cappucino will never revert to being called ‘a frothy coffee.’ Just how our four freedoms will be exercised, though, will ultimately depend upon our fellow Europeans and how committed they actually are to the extinction of the sovereign state in their pursuit of a European political union. There remain grounds for significant optimism that they too will revert to a desire to pool the interests of states without pooling the sovereignty of states.

If you don’t hear the rotors of der Hubschrauber very soon then what has begun is an economically painful but constitutionally necessary journey back to a common market and away from a political union. The United Kingdom would be at the centre of such a realignment of interests. While welcoming such a constitutional realignment, investors need to realise that the free movement of capital will be suspended in any such process. For years The Solid Ground has warned that this is by far the most important change that investors will face in ‘the new normal’. Meanwhile, still no sound of rotors!

via http://ift.tt/29tKR2N Tyler Durden

By Chris at http://ift.tt/12YmHT5

So when I came to you ragged, exhilarated, and a little bit richer two weeks ago, I referenced a buddy who I’m really grateful to know. Why?

Because he’s a better trader than I am and surrounding yourself with smarter people than you sure ain’t a bad strategy.

Today I bring you his thoughts on Brexit because, quite frankly, much of what is being written about the topic on the internet is wrong, just wrong. It’s primarily written by people opining on a topic from positions of academia or by bogus people who are managing neither their or anyone else’s money.

Kuppy’s thoughts on the topic are therefore well worth considering. I hope you’ll enjoy them.

—————-

By Harris Kupperman, Adventures in Capitalism

In all my global wanderings, I’ve only been to London twice — during one of those visits, I didn’t even leave Heathrow.

To say that I understand the inner psyche of the British is foolish, but I certainly would have voted in favor of Brexit. I would have voted this way, not because I’m uneducated, impoverished or racist. I certainly don’t feel disenfranchised. I would have voted for Brexit out of sheer personal self-interest.

As I watch both leading UK parties disintegrate into internecine chaos, I feel even more confident that having one less layer of politicians and bureaucrats is a net positive for everyone.

Over the past week, a lot has been incorrectly written on this Brexit vote and how it will destroy UK economy along with the British Pound (GBP). I find that much of this content comes from those who depend on the EU for their own livelihoods.

As I sift through endless studies, I have this continued head-scratching moment full of confusion and frustration. Why are all these studies coming from the same fools who have bound the EU into a straight-jacket of no growth and endless regulations? They know nothing about economics, so why are the big banks all quoting them.

Brexit, simply put, is an existential threat to the Eurozone intelligentsia and their ability to continue their vapid lives paid for by the citizens of Europe. Why aren’t people willing to call it what it is? Peddling fear is the only recourse for those who have already lost the debate. Investors are now running around terrified of nothing.

I tend to think that Brexit will be quite good for the UK economically.

As the dust settles and the fear-mongering abates a bit, rational logic will prevail and this view will become more universal.

Until then, fear, panic and forced sales will likely create one of the best opportunities this year to pick up bargains in well-positioned companies standing to benefit from the tail-wind caused by increased UK economic growth.

Let’s start with the obvious, less regulations makes your economy grow faster. Any time you reduce regulation, it’s a good thing. I don’t think anyone can dispute this. The UK is about to abandon a lot of silly rules. So what are the legitimate fears of Brexit?

Let’s start with trade.

Right now, the UK is party to numerous treaties with the EU. Does anyone think that the UK will be excluded from future trade with the EU? The EU will make a big stink and likely make things tough on the UK at first, but that won’t last long. The UK imports more from the EU than it sells to the EU. Who would want to stop trade with a net-importer? What does the UK sell a lot of? Oil. If the EU doesn’t want that oil, it will get onto a tanker and go somewhere else that it’s welcomed.

I can’t tell you how the new treaties will get re-drafted, but the UK will end up in a favored position in regards to trade. I’ve read a number of thoughtful articles that point to the UK’s rather large trade deficit— another legitimate concern — however, after a nearly 20% drop in the GBP against the euro in the past year, that will begin to self-correct.

The next fear is that the finance industry will leave London and seek out a new home.

Let’s be serious here — London is the capital of European finance because finance goes where there’s liquidity. There is no other city in Europe that has the density of bankers, traders, brokers, insurers, etc.

You cannot recreate London. Look at all of the Caribbean islands that have tried to become a finance hub for North America.

Capital will always go where there’s liquidity and it’s treated best. With low taxes and the same common first language of all international trade, London will remain the finance hub of Europe—the same special position that it’s had for centuries.

The final fear was that after Brexit, there would be a period of forced liquidation by various pension funds, endowments and sovereign wealth funds, leading to a short-term decline in wealth amongst the elites of Europe. The EU may even punish the UK and create a crisis in order to threaten other wayward nations from leaving.

This has now happened and it’s no longer a fear. The liquidations probably have yet to run their course, but the short-term self-interest of the 1% can’t dominate a country.

Besides, the more that the EU scares people senseless, the better the bargains will become for everyone else. At some point in the future, this will all be forgotten—much like the reason for all the selling in the first place.

With that out of the way, I want to throw my first (of many) ideas out there.

I want to be long GBP against the euro.

This spread has blown out by almost 20% in the past year — first on fears of Brexit and then the actual event. The panic in the GBP has overshot and the EUR has plenty of its own problems—from secession movements to plebiscites over EU membership, to the neutron bomb known as Deutsche Bank.

Brexit almost guarantees that the EU as we know it will fail. Once one leaves, they all will.

As the EUR continues its slow-motion implosion, capital will continue to go somewhere (often nearby) for safety.

Think of the tens of billions spent by the Danes and Swiss to stop their currencies from appreciating. Now think of the GBP which has a 3-month positive treasury carry of nearly 100 bps when compared to Germany and plenty of liquidity.

Where do you think capital flees to during the next Eurozone Crisis?

Disclosure: Long GBP/EUR

—————-

Nobody cares more about your money than you. And today the environment that you grew up in is no longer.

Individual investors for once have a MASSIVE advantage over institutional investors. They are not hamstrung by linear thinking, quantitative risk models built on a belief in efficient market hypothesis and theoretical economics.

Until next week, go break a leg.

– Chris

“The world we live in is vastly different than the world we think we live in.” – Nassim Nicholas Taleb

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via http://ift.tt/29tJqkM Capitalist Exploits

Presented with no comment…

 

 

Source: Tonwhall.com

via http://ift.tt/29NxBvt Tyler Durden

In recent months we have seen a dramatic spike in visualizations by sellside analysts, who appear to have finally grasped the reflexive nature of markets first noted so many years ago by none other than George Soros, which – with the Fed involved in all of them – show just why Janet Yellen is trapped.

First, it was Bank of America who in early may sketched the not-so-merry-go-round framing the relationship between the Fed and the market as follows (for our commentary read here):

 

 

Then just a few weeks later, when Goldman soured on China and the Yuan, the vampire squid revealed the Fed-China “doom loop” showing the Catch 22 relationship between the USD and the Yuan and how the S&P500 works as an intermediate buffer between the two.

 

 

Now it is Citi’s turn to unveil its own charting artistry with the following chart summarizing what it sees as the 3 big feedback loop risks as the world enters the “volatile” phase of the centrally-planned market and global economy. Presented without commentary.

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