Month: May 2016

Days before last week’s BOJ “stunner” in which the Japanese central bank ended up doing precisely nothing and smashing market expectations of further “bazooka” easing, we presented Goldman’s expectations why the Yen is set to “collapse” in the next 12 months, with Goldman’s FX strategist explaining why he believes the USDJPY will surge to 130 in the coming year. For those who missed it, the forecast was based on the assumption of much more aggressive easing including even more balance sheet expansion, something which clearly did not pan out (as we also warned) and the only “crushing” that took place was to the P&L of any Goldman clients who listened to the bank.

Then moments ago Robin Brooks came out with his much anticipated mea culpa in which he admits he misjudged the BOJ which has reverted to a “patient” narrative, saying “this is a fateful miscalculation in our view” but admitting that while “we hold to our structural view that $/JPY ultimately will go a lot higher… in the short term, it will fall.“

Seen in isolation, last week’s decision by the Bank of Japan (BoJ) to stay on hold is understandable. After all, the January move into negative rates produced a massive flattening in the JGB yield curve, exceeding anything seen in Apr. 2013 or Oct. 2014. We therefore have some sympathy for Governor Kuroda who said in the press conference that “we decided to watch the effect of QQE with negative rates this time.” But this meeting did not happen in isolation. The market interpreted the January shift to negative rates as validating fears that JGB scarcity limits QQE. $/JPY crashed from 120 – its equilibrium level following the QQE augmentation in 2014 – to below 110 in the run-up to last week, pushing inflation break-evens in Japan sharply lower. Our view going into last week was that the BoJ needed to grab the bull by the horns and dispel the notion that it is running “out of bullets.” We thought it could do this by shifting the emphasis back to balance sheet expansion by, for example, taking concrete steps to lift housing loans off banks’ balance sheets, something Governor Kuroda floated in a recent speech. Instead, the BoJ seemed intent on teaching the markets to be “patient,” downgrading the inflation forecast yet again while taking no action. This is a fateful miscalculation in our view. Unconventional easing is above all an expectations game, where it is necessary to shock markets again and again, until they have no reason to question a central bank’s commitment to its inflation target. Preaching “patience” is the opposite, telling markets they expect too much. There is little doubt in our minds that $/JPY will keep falling in the near term, until Governor Kuroda is forced to respond with overwhelming force. We therefore hold to our structural view that $/JPY ultimately will go a lot higher. But in the short term, it will fall.

Goldman then adds what Kuroda should be doing:

There remains the question what the BoJ can and should do. As we argued in the run-up to last week’s meeting, the BoJ needs to shift the emphasis of easing back to balance sheet expansion and QQE. While we do not believe that fears over JGB scarcity are well founded – there is plenty of scope for the BoJ to lift JGBs from non-banks (Exhibit 5) where the allocation to JGBs is high compared to government bond allocations elsewhere (Exhibit 6) – we think the BoJ needs to signal that it is not afraid to expand QQE beyond JGBs if needed by, for example, taking concrete steps to lift housing loans off banks’ balance sheets. We think such a step would cause $/JPY to rapidly move back above 120, as market fears over limits to QQE abate. Unfortunately, Governor Kuroda last week only floated additional rate cuts as the possible next easing step, something the market at this point disdains and, rightly, sees as incremental easing.

 

 

Until Governor Kuroda is willing to grab the bulls by the horns and confront market fears over the BoJ’s balance sheet, the path of least resistance for $/JPY is down. Our biggest anxiety is over intervention. In our opinion, this would throw out the rule book from recent years – that monetary policy is domestically focused – and the market could respond by pushing $/JPY down to an even greater degree. Of course, a lot rides on the price action in comings days. An emergency BoJ meeting may become necessary if Yen appreciation gets out of control.

It will be hardly encouraging for Goldman clients to hear that only an emergency central bank meeting will be the catalyst that delivers the long awaited move higher in the USDJPY, even as Goldman actively fails to note that according to the recent G-20 statements and last Friday’s Treasury warning an aggressive devaluation by the BOJ will henceforth be actively frowned upon.

But more importantly, Goldman’s admission that “the path of least resistance for $/JPY is down” may be just the “all clear” signal the market has been waiting for to go long the USDJPY, and judging by this morning’s reaction which has seen the currency pair spike higher, it is doing just that.

via http://ift.tt/26KBYeA Tyler Durden

Submitted by Judith Bergman via The Gatestone Institute,

Pope Francis, on his recent visit to the Greek island of Lesbos, said that Europe must respond to the migrant crisis with solutions that are "worthy of humanity." He also decried "that dense pall of indifference that clouds hearts and minds." The Pope then proceeded to demonstrate what he believes is a response "worthy of humanity" by bringing 12 Syrian Muslims with him on his plane to Italy. "It's a drop of water in the sea. But after this drop, the sea will never be the same," the Pope mused.

The Pope's speech did not contain a single reference to the harsh consequences of Muslim migration into the European continent for Europeans. Instead, the speech was laced with reflections such as "…barriers create divisions instead of promoting the true progress of peoples, and divisions sooner or later lead to confrontations" and "…our willingness to continue to cooperate so that the challenges we face today will not lead to conflict, but rather to the growth of the civilization of love."

The Pope went back to his practically migrant-free Vatican City — those 12 Syrian Muslims will be hosted by Italy, not the Vatican, although the Holy See will be supporting them — leaving it to ordinary Europeans to cope with the consequences of "the growth of the civilization of love."

There is nothing quite as free in this world as not practicing what you preach, and what the Pope is preaching is the acceptance of more migration into Europe, and more migration — much more — is indeed what is in the cards for Europe.

At the UN's Geneva conference on Syrian refugees on March 30, Italy's Minister of Foreign Affairs, Paolo Gentiloni, put the total number of asylum seekers into Italy in the first three months of 2016 at 18,234. This is already 80% higher than in the same period in 2015.

According to Paolo Serra, military adviser to Martin Kobler, the UN's Libya envoy, migrants currently in Libya will head for Italy in large numbers if the country is not stabilized. "If we do not intervene, there could be 250,000 arrivals [in Italy] by the end of 2016," he said. According to France's Defense Minister, Jean-Yves Le Drian, the number is much higher: 800,000 migrants are currently in Libyan territory waiting to cross the Mediterranean.

Already in November 2015, the European Union estimated — in its Autumn 2015 European Economic Forecast, authored by the European Commission — that by the end of 2016, another three million migrants will have made it into the European Union.

Nevertheless, the European Commission optimistically noted that, "while unevenly distributed among countries, the estimated additional public expenditure related to the arrival of asylum seekers is limited for most EU member states." It even concluded that the migrant crisis could have a small, positive impact on European economies within a few years citing that "Research indicates that non-EU migrants typically receive less in individual benefits than they contribute in taxes and social contribution."

This is the classic, politically correct denial of facts on the ground. The multitude of very costly social problems that Muslim migration into Europe has caused thus far do not exist in this whitewashed report, where the "research" indicates that migrants are always a boon. Similarly, any mention of the very real security costs necessitated by the Islamization that is occurring in Europe and the consequent need for monitoring of potential jihadists, simply goes unmentioned. One wonders whether the EU bureaucrats, who authored this report, ever descend from their ivory towers and move about in the real Europe.

Several European states have a less optimistic picture of the prospect of another three million migrants arriving on Europe's borders than either the Pope or the European Commission do. In February, Austria announced that it would introduce border controls at border crossings along frontiers with Italy, Slovenia and Hungary. On April 12, Austria began preparations for introducing border controls on its side of the Brenner Pass, the main Alpine crossing into Italy, by starting work on a wall between the two countries.

The Austrian decision to close the Brenner pass has received harsh criticism from the EU. European Commission spokeswoman Natasha Bertaud criticized the measure as unwarranted, claiming that "there is indeed no evidence that flows of irregular migrants are shifting from Greece to Italy". Is Bertaud deliberately misrepresenting the issue? The issue is not whether the migrants are shifting from Greece to Italy after the EU's unsavory deal with Turkey (they probably will) but the up to 800,000 migrants are already waiting to cross into Italy from Libya.

EU Migration Commissioner Dimitris Avramopoulos joined in the criticism of Austria, saying, "What is happening at the border between Italy and Austria is not the right solution." He had criticized Austria already in February, when Vienna announced that it would cap asylum claims at 80 per day. At the time, Avramopoulos said,

"It is true that Austria is under huge pressure… It is true they are overwhelmed. But, on the other hand, there are some principles and laws that all countries must respect and apply… The Austrians are obliged to accept asylum applications without putting a cap."

In response, Austria's Chancellor Werner Faymann told the EU that Austria could not just let the influx of migrants continue unchecked — nearly 100,000 have applied for asylum in Austria — and he called for the EU to act. The EU has not yet acted.

The EU should hardly be surprised that a sovereign state decides to take matters into its own hands in the face of the EU's failure to heed that call, and as it anticipates a repeat of last year's migration chaos — which, given the predicted estimates, is bound to occur this year with even greater force.

Predictably, Italy has also criticized the decision, with Italian Interior Minister Angelino Alfano saying that Austria's decision to erect the barrier is "unexplainable and unjustifiable." Italy, however, only has itself to blame for Austria's restrictions at the Brenner Pass. In 2014 and the first half of 2015, around 300,000 migrants arrived in Italy, mainly from Libya. Despite EU rules that require Italy to register those migrants, Italy simply let most of them pass through the country and continue into Austria. From there, most went further into Germany and Northern Europe. Clearly, Austria does not expect the Italians to change their practices.

Austrian police prepare to hold the line at the Brenner Pass border crossing with Italy, as a crowd tries to break through during a violent protest on April 3, 2016, against Austria's introduction of border controls to stem the flow of migrants. (Image source: RT video screenshot)

While the bureaucrats of the EU bicker with their member states over those states' unwillingness to follow EU regulations — evidently not made to cope with a migration crisis of these huge proportions — Turkey's President, Recep Tayyip Erdogan is threatening to drop his obligations under a recent EU-Turkey migration deal. Those obligations include taking back all new "irregular migrants" crossing from Turkey into Greek islands, as well as taking any necessary measures to prevent the opening of new sea or land routes for migration from Turkey to the EU. "There are precise conditions. If the European Union does not take the necessary steps, then Turkey will not implement the agreement," Erdogan warned recently in a speech in Ankara.

Erdogan knows that in the current European reality, his words have the effect he intends: When he threatens to flood Europe with migrants unless it does what he wants — in other words, blackmail — EU leaders will do what he says. German Chancellor Angela Merkel, one of the driving forces behind the EU-Turkey deal, also recently bowed to Erdogan's demands that Germany prosecute the satirist Jan Böhmermann, after he mocked and insulted the Turkish president in a poem. The German criminal code prohibits insults against foreign leaders, but leaves it to the government to decide whether to authorize prosecutors to pursue such cases. Angela Merkel gave her authorization, a decision widely criticized. Her own ministers — Foreign Minister Frank-Walter Steinmeier, and Justice Minister Heiko Maas — said they did not believe that the authorization should have been granted.

Another indication that Erdogan has no reason to fear any misbehavior on the part of the European Union regarding the EU-Turkey deal is that the European Parliament just voted in favor of making Turkish an official European Union language. Ostensibly, the vote came about in order to back an initiative by the president of Cyprus, Nicos Anastasiades, who asked the Dutch EU Presidency to add Turkish to the bloc's 24 official languages in order to boost attempts to reach a reunification agreement for Cyprus.

In his letter to the EU presidency, Anastasiades noted that Cyprus had already filed a similar request during its EU entry talks in 2002, but, at that time, it "was advised by the [EU] institutions not to insist, taking into account the limited practical purpose of such a development … as well as the considerable cost". Turkey's occupation of northern Cyprus, which Turkey invaded in 1974, is one of the issues blocking Turkey's accession negotiations with the EU.

Making Turkish an official language is seen by Turkey, according to a senior Turkish official, as "a very important, very positive gesture" for the Cyprus peace talks and for EU-Turkish ties more broadly. "If the blockage is lifted because of Cyprus being solved, then we can proceed very quickly," the Turkish official said.

All of the other official and working languages of the European Union are tied to states which are full members of the EU. Although the vote has to be approved by the European Commission before the decision can come into effect, it speaks volumes about the EU's deference to Erdogan.

In light of these developments, the granting of visa-free travel to European Union states for 80 million Turks looks as if it is a done deal, despite the 72 conditions, which Turkey, at least on paper, is expected to live up to. These include increasing the use of biometric passports and other technical requirements. So far, Turkey has only met half of these conditions. Perhaps that is why European Commission President Jean-Claude Juncker recently felt the need to mention that, "Turkey must fulfill all remaining conditions so that the Commission can adopt its proposal in the coming months. The criteria will not be watered down." The question is whether Juncker himself even believes his own words.

With the provisions on visa-free travel for 80 million Turks, the EU may just have gone from the frying pan into the fire. The visa-free admission of Turks into Europe would give Erdogan completely free rein to control the influx of migrants into Europe. Moreover, anyone believing that Erdogan would not take great advantage of this opportunity would have to be dangerously naïve. The European Union may yet conclude that the migrant crisis, in all its enormity, is the far lesser evil.

via http://ift.tt/1SIoSVS Tyler Durden

Are Central Bankers delusional?

 

Over the weekend, Benoît Cœuré, Member of the Executive Board of the ECB, penned a piece defending the ECB’s policies from the criticism that NIRP hurts savers.

 

The first paragraph reveals, quite clearly, just how lost the ECB is regarding the efficacy of its policies.

 

Is the ECB stubborn because we are adhering to our monetary policy despite strong criticism? No. We are complying with a precise task that was conferred on us. The EU treaties gave the ECB a narrow price stability mandate. In 2003 the ECB’s Governing Council clarified that euro area inflation should be below, but close to, 2% over the medium term.

 

If this is the alleged mandate for the ECB, they might want to reconsider their current policies. As we noted over the weekend, four rounds of NIRP as well as over €600 billion in QE has yet to even achieve 0% inflation.

 

 

NIRP and QE began post-2013 after the EU banking crisis hit full force in 2012. Looking at the above chart, where can you see any significant uptick in inflation from the EBC’s policies?

 

The single largest move, trough to peak, occurred from January 2015 to May 2015 when inflation rose from -0.6% to 0.3%, or a move of 0.9%. This occurred when the ECB announced its first QE program in history.

 

 

So… implementing a €1 trillion QE program, which for years was considered the “nuclear” option for the EU, produced a 0.9% increase in inflation that lasted a total of five months.

 

This is the greatest success the EU has managed to achieve despite implementing some of the most extraordinary monetary policies in history… a less than 1% increase in inflation that lasted less than half of a year.

 

Meanwhile, the ECB has implemented four rounds of NIRP, which does in fact hurt savers a great deal. In simple terms, while the ECB pursues its monetary pipe dream based on hypotheticals (economic models imply inflation should rise based on NIRP), it ignores economic realities.

 

What are those realities?

 

NIRP is not inflationary. On the contrary it is highly DE-flationary.

 

As Mr. Couere himself notes in his op-ed piece “people are not only savers.” The problem with this statement, is that while emphasizing people are more than economic units, he fails to see how actual people react psychologically to the ECB’s policies.

 

NIRP is both a tax on future interest income as well as a tax on current capital. It is a terrifying prospect for anyone as it indicates that you are very likely going to lose money.

 

Basic human psychology reveals that people are more afraid of losing what they already have, that they are of gaining something they don’t have. NIRP guarantees the former.

 

The likelihood of anyone experiencing NIRP and believing that the solution is to pile into risk assets (where the possibility of even greater losses of capital are plentiful) is less than 1%.

 

This is particularly true when most EU stocks peaked in 2014 around the time the EBC first introduced NIRP.

 

 

EU stocks are not a safe bet post-NIRP. And why would any saver buy EU sovereign bonds when most have negative yields? If your deposits are already going to be charged based on NIRP, buying an EU sovereign bond which also charges your interest accomplishes nothing but increasing your volatility.

 

Who would want that?

 

At the end of the day, the ECB, like all Central Banks, is concerned with one thing: the bond bubble.

 

And with the EU sporting a Debt to GDP ration of over 90% as a whole, the EU itself is bankrupt. Four rounds of NIRP and €1 trillion in QE can’t fix this.

 

 

Eventually this will trigger another 2008 type event. When, no one can say, but given that the ECB has failed to generate significant inflation, and that most EU nations have seen their Debt to GDP ratios increase since 2012, it’s not far off.

 

The next Crisis is just around the corner. And it will make 2012 look like a joke.

 

If you’ve yet to take action to prepare for the second round of the financial crisis, we offer a FREE investment report Financial Crisis "Round Two" Survival Guide that outlines easy, simple to follow strategies you can use to not only protect your portfolio from a market downturn, but actually produce profits.

 

You can pick up a FREE copy at:

http://ift.tt/1rPiWR3

 

Best Regards

Phoenix Capital Research

 

 

 

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In the aftermath of the recent Valeant and Allergan stock price fiascoes, one month ago we showed that when it comes to 2016 hedge fund performance, it has been an abysmal year for the “smartest money” – something even Warren Buffett touched upon during the weekend – primarily due to the residual clustering effect as over the years hundreds of hedge funds ended up being long the same handful of stocks following numerous self-reinforcing “idea dinners” and quasi-collusive attempts to push up stock prices with coordinate buying. While that generated generous returns on the way up, on the way down it turned out into a bloody massacre. The recent plunge in AAPL stock, held by roughly 160 hedge funds as of Dec. 31 (or rather, make that one less after Icahn dumped his shares) only made things worse.

Adding insult to injury has been another widely documented – if ironic – outcome, namely that it has been the stocks which have the lowest hedge fund concentration that have been among the best performers of the year.

This is understandable: by definition the least held stocks are also the most shorted, and since a massive short squeeze has been the chief driver of the market rebound from the February lows, it stands to reason that the most hated names would also be the best performing.

But what is a hedge fund, concerned about FOMO and piling up redemption requests, expected to do in this kind of environment where the general market has once again stormed higher and is returning more than the majority of hedge funds.

As it turns out according to the latest Goldman Sachs data, while the “low hedge fund concentration” stock basket remains the best performing, an unexpected strategy has popped up in the secon post: stock that have a “high hedge fund concentration.”

 

To be sure, in what may be the most glaring bimodal distribution seen in years, the hedge fund world is now so schizophrenic that only the most and least held stocks are notably outperforming the market.

And what may be the biggest surprise, is the following chart showing just how rapidly the “most concentrated” stocks have caught up to the “least concentrated” ones:

 

What the red shaded area demonstrates is just how furiously hedge funds have scrambled to double down on the most popular stocks within the HF community in hopes of recovering from losses driven mostly by the short book and the outperformance of the low concentration stocks.

Judging by the most recent HSBC reports, while this strategy of further doubling down on the most concentrated names has helped P&L in recent weeks, the reality is that just like China’s recent massive credit injection, it has merely delayed the risk of a disorderly unwind. If and when this latest batch of super concentrated names goes though another period of price distress and forced selling, it will lead to even more acute pain for those hedge funds who no longer have any clue what to do in this “market” but to buy whatever everyone else is buying, and pray.

via http://ift.tt/26KsWOM Tyler Durden

Submitted by Rakesh Upadhyay via OilPrice.com,

Ship tracking data from Bloomberg shows that 83 supertankers carrying around 166 million barrels of oil are headed to China, which has stockpiled an impressive 787,000 barrels a day in the first quarter of 2016 – the highest stockpiling rate since 2014.

While the world was speculating about oil prices plunging to $20 and $10 per barrel, China was busy stockpiling its reserves.

The chart below shows an increase in imports as crude prices collapsed. Since the beginning of this year, China has imported a record quantity of oil.

(Click to enlarge)

Back in January 2015, Reuters had reported that China planned to increase its strategic petroleum reserves (SPR) from 30 days to 90 days. In January 2016, it was revealed that China was building underground storage to complement its above-ground storage tanks.

The Chinese urgency points to two things. China believes that crude oil prices will not remain at the current levels for long, and that a disruption is possible due to geopolitical reasons, which can propel oil prices higher.

As a net importer of crude, it is protecting itself against a black swan event and using the current low prices to fill its tanks. The filled up tanks will ensure a steady supply of crude for at least three months in case of a disruption.

Does the record buying spree by the Chinese indicate a bottom in crude oil prices?

That is difficult to conclude, but it does put a floor beneath the current lows, because in all likelihood, China will resume its record buying and top up its SPR if prices tank.

The total Chinese imports in March via the very large crude carriers was 7.7 million barrels a day. Other than the supertankers, China also imports oil through pipelines and small tankers.

The Chinese demand doesn’t show a huge uptick corresponding to the rise in imports. JP Morgan estimates that in March, the total demand for oil in China was 10.3 million b/d, down 2.5 percent over the previous year and down 2.3 percent month on month, whereas the chart shows that imports are higher compared to the same period last year.

Crude oil prices have been on an upswing this month. The import data coming out of China for April will give a clue as to whether the Chinese demand remains intact at higher crude prices or the imports drop when prices rise.

If the demand drops following a rise in prices, we can assume that China doesn’t believe that the price rally will be sustained. At lower levels, Chinese buying might become a factor in deciding the bottom, as their increased imports will reduce the glut.

Similar to Saudi Arabia, which is a swing producer, China is acting like a swing consumer. However, as China doesn’t report its storage data, it is difficult to estimate how long this trend will continue.

Though other factors were involved in encouraging the bulls to buy at lower levels, the increased demand from China also helped in lapping up the excess production. If their imports drop, the world will return to the supply glut and oil prices will retrace back to the lower $30s per barrel.

via http://ift.tt/1TfsGgu Tyler Durden

A lack of intervention in the Yen and strength in EUR have combined to weigh on the US dollar. Bloomberg's USD Index is back at one-year lows as, while overnight chaos sent stocks higher, it has driven investors into the safety of bonds (Treasury yields down 2-3bps) and precious metals. Gold topped $1300 and Silver $18 as EURUSD pushes above 1.1500…

 

USD Index getting clubbed..

 

On the back of EUR strength…Topping 1.15 for the first time since August

 

Gold tops $1300…

 

And Silver hovers at $18…

 

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Following what was one of the most volatile Q1’s on record, Q2 kick started the second quarter on a positive note in April. According to DB (whose stock has failed to meaningfully rebound from recent lows) while performance didn’t quite match those lofty gains made in March, in the face of a number of key central bank meetings and also the commencement of earnings season in the US and Europe – for which expectations were low – risk assets in particular have shown a reasonable degree of resilience on the whole.

According to DB’s Jim Reid, traders would be hard pressed to find many assets which had a negative total return month. Looking across the asset  sample, its sovereign bond markets which were the standout underperformers with Treasuries, Bunds, Gilts, BTP’s and Spanish Bonds sitting in the 0% to -1% range. At the other end of the scale there is a clear theme and that’s the performance for commodity markets.

Indeed despite the Kuwait Oil producers meeting ending in a blank, it was another strong month for both WTI (+20%) and Brent (+16%) which resulted in both marching to the highest level this year. Silver (+16%) and Corn (+11%) were the other big performers in the commodity complex this month. In fact, the commodity market index rounds off the top 5 with an +8% return during the month. Brazilian equities (+8%) get another honourable mention this month with markets reacting positively to the latest political developments there, while it won’t be much of a surprise to see the Yen (+6%) also creep into the top ten following the BoJ disappointment at the end of the month.

In terms of equity markets, European banks (+6%) were the standout performer despite a weak last day of the month, although the sector is still well down on a YTD basis. European equities (+2%) had a reasonably solid performance on the whole, with Spanish (+4%) and Italian (+3%) markets leading the charge. Across the pond the S&P 500 (+0.4%) just stayed in positive territory, although the post-BoJ reaction saw the Nikkei (-1%) underperform. Credit market performance was decent especially given the moves in rates markets. Higher beta credit indices were the outperformers with EUR and US HY in particular finishing +2% and +3% respectively – the latter clearly benefiting from the move in Oil. EUR IG indices were also in positive territory with the announcement of the details around corporate bond purchases giving the asset class a positive boost.

If we look at returns on a USD basis only, the standout mover is the Nikkei which, when stripping out the rally in the Yen, jumps into the top ten with a +5% return.

 

Finally, on a YTD basis for USD-denominated assets, here are the best and worst performers.

Source: DB

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Authored by Steve H. Hanke of The Johns Hopkins University. Follow him on Twitter @Steve_Hanke.

Venezuela has been burdened by government corruption and incompetence for years. For an excellent primer, which documents these endemic problems in the pre-Chavez era, I recommend Moises Naim’s book, Paper Tigers & Minotaurs: The Politics of Venezuela’s Reforms. Washington, D.C.: The Carnegie Endowment for Peace, 1993.

Ever since Hugo Chavez injected his brand of socialism into Venezuela’s arteries in 1999, corruption and incompetence has been on steroids.

Two charts tell the tale of Venezuela’s woes. First, take a look at Venezuela’s oil production post-Chavez: it’s been sagging, and not because of dwindling resources.

 

Second, while oil production has slumped, Venezuela’s implied annual inflation rate has soared, according to my calculations at the Cato Institute’s Troubled Currencies Project. At present, Venezuela’s annual inflation rate is 304 percent, the world’s highest.

 

Venezuela’s elevated inflation rates have been mirrored by a collapsing bolivar and plummeting foreign reserves. With the cupboard nearly bare, businesses can’t obtain greenbacks from the central bank, which they need for imports. In consequence, shops and factories are being shuttered with each passing day. On April 29th, Empresas Polar SA, the producer of 80 percent of Venezuela’s beer, shut down. This could be the straw that breaks the camel’s back. A country in misery, without booze, is a country on the brink of revolt.

via http://ift.tt/1W31hW8 Steve H. Hanke

• Puerto Rico Development Bank Won’t Make Most of a Debt Payment Monday (WSJ)
• Why the jump in futures? Tokyo slide keeps mood downbeat (Reuters)
• Indiana to test Donald Trump’s staying power with evangelicals (Reuters)
• Gold Rallies Above $1,300 for First Time Since January 2015 (BBG)
• This Tech Bubble Is Bursting (WSJ)
• Valeant’s CEO Was Key Force on Pricing (WSJ)
• US banks sound caution on commercial property loans (FT)
• As oil plows through $45 a barrel, U.S. producers rush to lock in prices (Reuters)
• Why So Many Chinese Students Come to the U.S. (WSJ)
• Big bargains entice Warren Buffett fans on Berkshire weekend (Reuters)
• Halliburton, Baker Hughes Calls Off $28 Billion Deal (BBG)
• Goldman targets ‘mass affluent’ borrowers with unusual lending plan (Reuters)
• In Ukraine’s ‘Klondike,’ a Rush for Stolen Gems (BBG)
• China April official factory activity expands but at slower pace (Reuters)
• Buffett Hits Hedge Funds While They’re Down, Faulting Fees (BBG)
• Japan final April manufacturing PMI hits lowest since Jan 2013 after Kumamoto earthquake (Reuters)
• Mobius Adds Cash to Brazil Saying Rousseff Removal Not Priced In (BBG)
• Spanish Politics Enters Uncharted Waters as Election Looms (BBG)

 

Overnight Media Digest

WSJ

– Halliburton and Baker Hughes called off their merger, once valued at nearly $35 billion, which encountered opposition on several continents from regulators who claimed that it would hurt competition in the oilfield services business. (http://on.wsj.com/1Z1Avep)

– Hulu is developing a subscription service that would stream feeds of popular broadcast and cable TV channels, a move that would make the company a competitor to traditional pay-TV providers and other new digital entrants. (http://on.wsj.com/1Z1Aw1W)

– A group including private equity firm Apollo Global Management LLC boosted its bid for Apollo Education Group Inc in an effort to salvage the takeover of the University of Phoenix owner amid shareholder resistance. (http://on.wsj.com/1Z1AA1A)

– Republican front runner Donald Trump holds a 15-point lead over his rivals in Indiana’s Republican presidential primary, while Democratic frontrunner Hillary Clinton has a four-point edge ahead of Bernie Sanders, a new Wall Street Journal/NBC News/Marist Poll finds. (http://on.wsj.com/1VGzZV8)

 

FT

* Halliburton Co and Baker Hughes Inc are expected to announce the termination of their merger agreement on Monday following opposition from U.S. and European antitrust regulators.

* Air France-KLM’s board appointed Jean-Marc Janaillac as the Franco-Dutch airline’s new chief executive on Sunday, following the resignation earlier of Alexandre de Juniac.

* British lawmakers have asked Philip Green and his wife Tina to “respond promptly” to its request for help with inquiries into the failure of department store chain BHS and its pension liabilities.

* Deutsche Bank has “serious” and “systemic” failings in its controls against money laundering, terrorist financing and sanctions, according to a confidential letter by the UK’s financial regulatory agency.

 

NYT

– A lawsuit seeking to be certified as a class action has been filed on behalf of consumers in New York and California against the owner of Quaker Oats after testing found traces of the pesticide glyphosate in some oatmeal. (http://nyti.ms/26Jb7jg)

– Puerto Rico’s $422-million missed payment is the biggest yet in a continuing series of defaults by the struggling United States territory, and a warning that it will probably default on even larger and more consequential payments due on July 1, unless Congress enacts rescue legislation before then. (http://nyti.ms/1X3ljPe)

– China is pouring hundreds of billions of dollars into its economy in a new effort to support growth, and some of it is going into real estate sector, stocks and even egg futures. (http://nyti.ms/1TeKecS)

 

Britain

The Times

* Only way is up for oil price

(http://bit.ly/1raDJB3)

The oil price may have reached its floor after touching decade-low levels this year because of fears about a supply glut and a stand-off between the big producing nations, according to the world’s leading energy official.

* Blackstone races to top of private equity mountain

(http://bit.ly/26IFQwK)(http://bit.ly/26IFQwK)

Blackstone Group has raised a bumper $60 billion from private equity investors over the past five years, claiming the title of the world’s biggest private equity group and leaving its rivals far behind.

The Guardian

* Leaked TTIP documents cast doubt on EU-US trade deal

(http://bit.ly/23gYuYe)

Talks for a free trade deal between Europe and the U.S. face a serious impasse with “irreconcilable” differences in some areas, according to leaked negotiating texts.

* Europe’s liberal illusions shatter as Greek tragedy plays on (http://bit.ly/26IGpXy)

Greece is running out of money. The government in Athens is raiding the budgets of the health service and public utilities to pay salaries and pensions. Without fresh financial support it will struggle to make a debt payment due in July.

The Telegraph

* Lord Grabiner to be quizzed by MPs over BHS collapse

(http://bit.ly/1SWIP0y)

Lord Grabiner, the chairman of Arcadia, is due to be called to help MPs to understand why BHS was sold for 1 pound ($1.46) to Retail Acquisitions 13 months before its dramatic collapse.

* BT to let rival use its ducts and poles in bid to boost competition (http://bit.ly/23hrfnD)

BT Group is in talks to open up its infrastructure to a rival in a landmark test of Ofcom’s plan to introduce more competition for its much criticised Openreach network monopoly.

Sky News

* Butterkist owner to pass on the popcorn

(http://bit.ly/23esjsm)

The private equity group which owns stakes in corporate giants such as Hilton Worldwide and Versace is to take advantage of soaring UK consumer demand for popcorn by putting the Butterkist brand up for sale.

 

via http://ift.tt/24ifh2E Tyler Durden