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Less than six months after we pointed out that the BoJ owns 52% of the entire Japanese ETF market, Reuters reports that the Kuroda’s Peter Pan fairy tale, aka the Bank of Japan, is thinking about buying even more. The BoJ is said to be currently buying $30 billion of ETF’s a year under its current policy, however since the Nikkei is down over 10% this year, that figure is apparently not enough to keep the market propped up.

Here’s how the BoJ’s holdings in the Japanese ETF market looked visually in recent months:

 

“Increasing ETF buying in huge amounts, combined with a modest increase in bond buying and an interest rate cut, could be the only way left to surprise markets,” said a former BOJ executive who retains close contact with incumbent policymakers.

The reason for the BOJ’s desperation shift to monopolizing the equity market next is that as we have warned since 2014, it is running out of bonds to purchase: “the BOJ’s huge bond purchases are also drying up market liquidity, which further limits the scope for a large increase.”

“They are crossing off a list of things that aren’t possible, and the only thing that’s left is buying ETFs,” said Richard Jerram, economist at Bank of Singapore.

Japan’s ETF market is just 15.8 trillion yen, of which the BOJ already holds about half, but ETFs can be easily cobbled together by brokerages, so there is scope for plenty more, given Japan’s TOPIX stock market weighs in at 500 trillion yen.

Recall that the Bank of Japan’s purchasing of ETF’s does in fact lift the market, but questions remain around how much losses the bank will incur after the euphoria wares off, and how they can ever exit their position without collapsing prices.

“The BoJ will not easily be able to retract this liquidity in the future without destabilizing markets“, said Andrew Meredith, co-managing director at Tyton Capital Advisors

What “retraction”? The BOJ will never be able to “retract” as at this point this is the all in gamble; Kuroda knows very well that should the Nikkei drop a few more percent, he and Abe are out. Even the BOJ itself realizes this:

There are doubts raised within the BOJ, too, but those voices are in retreat as Kuroda stretches the limits of monetary policy, and dissenters to his radical money-printing policies are being replaced by supporters, the sources say.

 

“I don’t think worries about an exit are high on the list of the BOJ’s priorities,” said another source familiar with the BOJ’s thinking.

Worse, increasingly every BOJ proposal is being seen as a joke by even the “serious” members of the analyst community.

Jerram at Bank of Singapore said he was not convinced buying ETFs would help much with the BOJ’s principal goals, however, as there wasn’t a clear transmission into economic performance.

 

“They do something for the sake of doing something, and people see through that pretty quickly,” he said.

With the only tangible success of NIRP being that the BoJ has broken the money market, it will now embark on a journey to push on the string from the other direction, ultimately from the boardroom.

As we said back in October, “buying individual issues would allow the BoJ to effectively control corporate management teams on the way to dictating decisions about wage hikes and capex. In other words, when Abenomics fails, the BoJ will simply take over the boardroom and mandate higher pay in an effort to fix this.”

Which brings up another question: why is it that central banks have no qualms about reporting their purchases f ETFs but, with the exception of the SNB, are yet when it comes to purchases of single name stocks (or, gasp, crude oil) during key inflection points, it is still considered a taboo? After all, there are no markets left that are isolated from central bank intervention anymore.

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Janet – you have a problem. Following the all-clear from China, soaring stock prices, and ‘stability’ in oil, Chicago Fed business conditions just hit a 17-month high. In other words, The Fed is gonna need some bigger ‘turmoil’ excuses or defending “no rate hikes” is going to look a whole lot more political than their independence would suggest.

Everything is awesome in Chicago too…

 

As The Chicago Fed notes:

Business activity expanded for New York manufacturing firms for the first time in over a year, according to the April 2016 survey. After remaining in negative territory for seven months, the general business conditions index rose to a reading slightly above zero last month, and climbed nine more points to reach 9.6 in April. Thirty-one percent of respondents reported that conditions had improved over the month, while 22 percent reported that conditions had worsened. After a steep gain last month, the new orders index edged up two points to 11.1, pointing to an increase in orders. The shipments index edged lower but, at 10.2, still signaled a modest increase in shipments. The unfilled orders and delivery time indexes both came in close to zero. The inventories index was -4.8, indicating that inventory levels were slightly lower.

 

The prices paid index rose sixteen points to 19.2, suggesting that input prices increased at a significantly faster pace than last month. The prices received index, up nine points to 2.9, showed a small increase in selling prices. The index for number of employees edged up to 2.0, indicating that employment levels remained fairly steady, and the average workweek index was unchanged at 2.0, a sign that hours worked remained largely the same.

Sp surging prices, better jobs, no global turmoil – what are you waiting for Janet?

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Several weeks ago, a German comedian Jan Böhmermann, landed in hot water after releasing a satirical “video poem” about the Turkish president which aired in ZDF Neo Royale program on March 31, and accuses Erdogan of repressing Turkey’s national and religious minorities, as well as of being a pedophile.

The video, which incidentally was less funny than the author had intended, can be seen in the clip below.

 

Most were slighly amused by it, but not the target of the clip’s satire, and a few days ago the Turkish president submitted a criminal complaint against the 35 year old German comedian for libel.

While the video fell under the protective cloak of the right to artistic freedom, press freedom and freedom of opinion, Böhmermann dubbed his poem an act of “abusive criticism” Reuters reported.

Ironically, even former Greek Finance Minister Yanis Varoufakis, who has borne the brunt of Böhmermann’s jokes himself, spoke out in support of the comedian, tweeting that “Europe first lost its soul [agreement with Turkey on refugees], now it is losing its humor.”

Europe first lost its soul (agreement with Turkey on refugees), now it is losing its humour. Hands off @janboehm! https://t.co/w6bTJjp0QG

— Yanis Varoufakis (@yanisvaroufakis) April 11, 2016

 

And while some said that this could land the humorist, already under investigation over attacking foreign representatives, in more trouble free speech watchers said that the likelihood of Merkel succumbing to Turkish pressure was low.

However, they were wrong, and earlier today Angela Merkel authorised the Turkish demand for criminal proceedings against a German TV comedian over a crude satirical poem about President Recep Tayyip Erdogan in a bitter row over free speech.

“The government will give its authorisation in the case at hand,” Merkel told reporters, adding that it was up to the courts to decide on his guilt or innocence.

However, perhaps to soften criticism of folding to Erdogan demands, Merkel also announced that Germany would by 2018 scrap the rarely-enforced section 103 of the criminal code — insulting organs or representatives of foreign states — under which the comic, Jan Boehmermann, has been accused, as a result of the embarrassing affair.  A section 103 probe can only go forward with the approval of the federal government.

Ankara this month filed a formal request for a criminal inquiry to be launched in Germany against the popular Boehmermann, who accused Erdogan of having sex with goats and sheep while gleefully admitting he was flouting Germany’s legal limits on free expression.

Merkel – who had previously labelled the poem “deliberately insulting” — had pledged Turkey’s request would be “very carefully” examined, even as she underlined the German constitution’s guarantees of “freedom of expression, academia and of course the arts”.

As AFP reports, on Friday she said her government, after heated internal debate, had concluded that only the judiciary should decide whether Boehmermann had committed a criminal offence.

“In a state under the rule of law, it is not a matter for the government but rather for state prosecutors and courts to weigh personal rights issues and other concerns affecting press and artistic freedom,” she said.

Merkel stressed that Berlin’s decision did not amount to a “prejudgement” on his legal culpability and that “prosecutors and courts” would have the last word. In an ironic twist, German law also allows Erdogan to demand the court verdict be broadcast, if he wins.

And while we respect Merkel’s justification for what will be seen as another crushing blow to European free speech, we wonder how a comparable criminal complaint by Putin against a German comedian would have fared (and there are certainly more than enough media jokes for him to pick) with the chancellor. And then we remember that it is not Russia that is the critical threshold for millions of Syrian refugees which can be unleashed upon Europe at a moment’s notice, but Turkey, and promptly remember who has all the leverage.

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Authored by Donald Trump, Op-Ed via The Wall Street Journal,

On Saturday, April 9, Colorado had an “election” without voters. Delegates were chosen on behalf of a presidential nominee, yet the people of Colorado were not able to cast their ballots to say which nominee they preferred.

A planned vote had been canceled. And one million Republicans in Colorado were sidelined.

In recent days, something all too predictable has happened: Politicians furiously defended the system. “These are the rules,” we were told over and over again. If the “rules” can be used to block Coloradans from voting on whether they want better trade deals, or stronger borders, or an end to special-interest vote-buying in Congress—well, that’s just the system and we should embrace it.

Let me ask America a question: How has the “system” been working out for you and your family?

I, for one, am not interested in defending a system that for decades has served the interest of political parties at the expense of the people. Members of the club—the consultants, the pollsters, the politicians, the pundits and the special interests—grow rich and powerful while the American people grow poorer and more isolated.

No one forced anyone to cancel the vote in Colorado. Political insiders made a choice to cancel it. And it was the wrong choice.

Responsible leaders should be shocked by the idea that party officials can simply cancel elections in America if they don’t like what the voters may decide.

The only antidote to decades of ruinous rule by a small handful of elites is a bold infusion of popular will. On every major issue affecting this country, the people are right and the governing elite are wrong. The elites are wrong on taxes, on the size of government, on trade, on immigration, on foreign policy.

Why should we trust the people who have made every wrong decision to substitute their will for America’s will in this presidential election?

Here, I part ways with Sen. Ted Cruz.

Mr. Cruz has toured the country bragging about his voterless victory in Colorado. For a man who styles himself as a warrior against the establishment (you wouldn’t know it from his list of donors and endorsers), you’d think he would be demanding a vote for Coloradans. Instead, Mr. Cruz is celebrating their disenfranchisement.

Likewise, Mr. Cruz loudly boasts every time party insiders disenfranchise voters in a congressional district by appointing delegates who will vote the opposite of the expressed will of the people who live in that district.

That’s because Mr. Cruz has no democratic path to the nomination. He has been mathematically eliminated by the voters.

While I am self-funding, Mr. Cruz rakes in millions from special interests. Yet despite his financial advantage, Mr. Cruz has won only three primaries outside his home state and trails me by two million votes—a gap that will soon explode even wider. Mr. Cruz loses when people actually get to cast ballots. Voter disenfranchisement is not merely part of the Cruz strategy—it is the Cruz strategy.

The great irony of this campaign is that the “Washington cartel” that Mr. Cruz rails against is the very group he is relying upon in his voter-nullification scheme.

My campaign strategy is to win with the voters. Ted Cruz’s campaign strategy is to win despite them.

What we are seeing now is not a proper use of the rules, but a flagrant abuse of the rules. Delegates are supposed to reflect the decisions of voters, but the system is being rigged by party operatives with “double-agent” delegates who reject the decision of voters.

The American people can have no faith in such a system. It must be reformed.

Just as I have said that I will reform our unfair trade, immigration and economic policies that have also been rigged against Americans, so too will I work closely with the chairman of the Republican National Committee and top GOP officials to reform our election policies. Together, we will restore the faith—and the franchise—of the American people.

We must leave no doubt that voters, not donors, choose the nominee.

How have we gotten to the point where politicians defend a rigged delegate-selection process with more passion than they have ever defended America’s borders?

Perhaps it is because politicians care more about securing their private club than about securing their country.

My campaign will, of course, battle for every last delegate. We will work within the system that exists now, while fighting to have it reformed in the future. But we will do it the right way. My campaign will seek maximum transparency, maximum representation and maximum voter participation.

We will run a campaign based on empowering voters, not sidelining them.

Let us take inspiration from patriotic Colorado citizens who have banded together in protest. Let us make Colorado a rallying cry on behalf of all the forgotten people whose desperate pleas have for decades fallen on the deaf ears and closed eyes of our rulers in Washington, D.C.

The political insiders have had their way for a long time. Let 2016 be remembered as the year the American people finally got theirs.

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The energy bankruptcy wave has been officially unleashed.

After just yesterday Energy XXI became the latest shale company to seek bankruptcy protection, this morning another troubled energy producer, Goodrich Petroleum announced a prepackaged Chapter filing meant to implement a financial reorganization after struggling to restructure its debt amid declining energy prices.

In its press release, the company announced, that “through the Chapter 11 restructuring, the Company will eliminate approximately $400 million in debt from its balance sheet, substantially deleverage its capital structure and strategically position the Company for long-term performance in an anticipated improving commodity price environment. The RSA eliminates all of the Company’s prepetition funded indebtedness other than its first lien reserve based loan facility, which currently has approximately $40 million outstanding, resulting in a significantly deleveraged balance sheet upon the Company’s emergence from the Chapter 11 bankruptcy process. “

The filing, just like EXXI’s is not a surprise: Goodrich earlier this month reached an agreement with creditors to use its “best efforts” to file for Chapter 11 with a prepackaged plan to reorganize and emerge from court as an operating business. That agreement came after the company’s debt-for-equity exchange offer failed to gain enough traction among debt holders.

As Bloomberg reminds us, on March 16, Goodrich delayed releasing its annual report, citing a large loss that auditors have determined may affect the company’s ability to operate as a going concern. The loss comes “mainly as a result of substantial impaired asset writedowns,” Goodrich said in the filing.

But what is most notable, and goes back to what we have said for the past year, is that even in bankruptcy energy companies will continue operating, and perhaps pump even more than prepetition: as Goodrich adds, the prepack agreement “provides for the Company’s executive management team to remain with the Company, which will allow for the Company’s operations to continue as normal throughout the court-supervised financial restructuring process, including the payment of royalty and operating expenses.”

In other words, the pumping will go on.

Goodrich has properties in the Tuscaloosa Marine shale of eastern Louisiana and southwestern Mississippi, the Eagle Ford shale in south Texas and the Haynesville shale in northeast Texas and northwest Louisiana, according to its website. Low gas prices have led it to focus on leasing its existing acreage, according to the website.

As Bloomberg adds, since the start of 2015, about 50 oil and gas producers have gone bankrupt, owing more than $17 billion, according to law firm Haynes & Boone LLP. Goodrich joins shale-focused companies such as Magnum Hunter Resources Corp., which filed for creditor protection in December.

Furthermore, as we noted yesterday, April’s total junk bond defaults, over $14 billion as of yesterday, just added another several hundred million in restructured liabilities to the tally. This means that with just 15 days past in the month of April, total high yield bankruptcies are well on their way to surpassing the highest monthly total since 2014.

Finally, putting the default cycle in perspective, here is the monthly default total for Junk and investment grade since 2011.

We expect the April line to be a new multi-year high.

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• Global stocks, dollar and oil cool ahead of Doha meeting (Reuters)
• Oil Falls Before Doha as Global Markets Brace for Weekend Risk (BBG)
• China Growth Slows; Revival Policies Appear to Gain Traction (WSJ)
• White House hopefuls Clinton, Sanders joust in Brooklyn brawl (Reuters)
• Trump talks up ‘New York values’ as protesters demonstrate against him (Reuters)
• Sanders Can’t Clarify Wall Street Plan in Testy Clinton Debate (BBG)
• Goldman’s Blankfein Said to Push Deepest Cost Cuts in Years (BBG)
• Italy’s Atlas fund struggles to stop sky falling on banks (Reuters)
• Obama to Back Anti-Brexit Campaign on Trip to U.K. Next Week (BBG)
• Valeant calls in investment banks to weigh options (Reuters)
• Activist Hedge Funds Wounded by Former Shale-Boom Star (WSJ)
• Impeachment Sunday: Brazil Cooks Up Rowdy Made-for-TV Spectacle (BBG)
• Greek banks’ EFSF notes eligible for ECB purchasing (Reuters)
• Asia’s Richest Man Is Building Chicago’s Priciest Penthouse (BBG)
• U.S. defense secretary visits carrier in disputed South China Sea (Reuters)
• This Shipyard Is So Unprofitable It’s Becoming a Parking Lot (BBG)
• Spain’s Political Standoff Roiled by Panama as Minister Resigns (BBG)
• Iran’s General Soleimani in Moscow for talks: three sources (Reuters)
• North Korea’s failed missile launch prompts ‘saber-rattling’ jibe from China media (Reuters)
• Businessman in New York corruption probe linked to hedge fund investment (Reuters)

 

Overnight Media Digest

WSJ

– Microsoft Corp sued the Justice Department on Thursday, saying it’s unconstitutional for the government to bar tech companies from telling customers when federal agents have examined their data. (http://on.wsj.com/1SOT411)

– After a flubbed stock-market debut in 2012, Bats Global Market Inc’s initial public offering raised $252.7 million late Thursday after selling 13.3 million shares at $19 apiece, valuing the company at $1.82 billion. (http://on.wsj.com/20GrJ6Y)

– Private-equity firm Carlyle Group LP is in talks to buy a package of oilfield-services businesses from Halliburton Co and Baker Hughes Inc that could be valued at more than $7 billion, as the energy giants seek to overcome a Justice Department challenge to their planned merger. (http://on.wsj.com/1RXJ09s)

– On Thursday, Judge David Cowan of California Superior Court for the County of Los Angeles upheld his December ruling that Sumner Redstone, the 92-year-old controlling shareholder of Viacom Inc and CBS Corp, wouldn’t be deposed. (http://on.wsj.com/1Vtq9Gp)

– Wells Fargo & Co’s first-quarter profit fell 5.9 percent as the nation’s third-largest bank by assets said the slump in oil prices continued to punish energy companies and started to hurt some consumers. (http://on.wsj.com/23JyvL3)

 

FT

Deutsche Bank’s chief executive, John Cryan, warned that London will lose its position as the main hub for trading European sovereign debt and currencies if Britain votes to leave the European Union. (http://bit.ly/1T7meLh)

The British economy will be weaker and the European Union will be damaged if the UK votes to leave the EU, the White House said. (http://bit.ly/1SOBt9n)

Wells Fargo & Co, Bank of America Corp and JPMorgan Chase & Co have each taken $500 million hits on their energy portfolios, spelling out the damage inflicted by lower oil prices. (http://bit.ly/1SOBXfK)

 

NYT

– As Yahoo Inc prepares to accept first-round bids for its core Internet business on Monday, potential buyers have found themselves facing one big problem – How do you value a company with a declining business when the company appears reluctant to share vital financial details. (http://nyti.ms/1TUWiVH)

– China’s growth rate slowed as expected in the first three months of the year, but a notable pickup in debt-driven industrial activity last month probably cushioned the slowdown. (http://nyti.ms/1qtnxe7)

– Some 400,000 retirees who worked in the trucking, parcel delivery and grocery supply industries face drastic pension cuts on July 1 as a result of a little-noticed measure attached to a huge end-of-year spending bill passed in December 2014. (http://nyti.ms/1p2RPmV)

– Microsoft Corp is suing the Justice Department, challenging its frequent use of secrecy orders that prevent Microsoft from telling people when the government obtains a warrant to read their emails. (http://nyti.ms/1ScE0g8)

 

Canada

THE GLOBE AND MAIL

** British Columbia has declared a public health emergency after another surge in drug-related overdoses and deaths, making it the first province in Canada to take such a step as others, including Ontario and Alberta, work to combat the effects of fentanyl drug. (http://bit.ly/1MwCSon)

** Albertans will pay more to fill up their vehicles and heat their homes as the province ramps up an ambitious climate strategy intended to reduce greenhouse gas emissions and help Canada’s largest oil producer create jobs in areas such as renewable energy. (http://bit.ly/1V64lzX)

** Almost 200 clean technology companies from across Canada have written to the federal government, asking for a dramatic increase in government support for the industry, far beyond what was included in last month’s budget. (http://bit.ly/1Yx6ORX)

NATIONAL POST

** Toronto’s rental condominium market is starting to generate price increases that haven’t been seen in years, as tenants squeezed out of the housing market look to lease instead. (http://bit.ly/1SPl6JQ)

** Alberta will collect significantly less in carbon tax revenues than initially expected, according to the government’s budget released on Thursday, which also shows the province’s debt tripling over the next three years. (http://bit.ly/1qu5dkY)

 

Britain

The Times

* Shareholders in BP PLC voted overwhelmingly to reject a massive pay rise for its chief executive amid mounting anger over boardroom excess. In a vote representing the second-biggest rebellion of its kind at a British company, 59 percent of the oil giant’s shareholders opposed the 13.8 million pounds pay package for Bob Dudley. (http://bit.ly/23J6wLs)

* Councils and utility companies that cause misery for weekend motorists by leaving roadworks with no repairs taking place will be fined under a government crackdown. They face penalties of up to 5,000 pounds a day for abandoning roadworks amid warnings that unnecessary traffic restrictions place a huge burden on the economy. (http://bit.ly/22y2WRO)

The Guardian

* Senior military figures will be singled out for criticism alongside Tony Blair and other establishment figures in the long-awaited Chilcot report into the 2003 invasion of Iraq, which is due to be handed to Downing Street next week. (http://bit.ly/1RWG256)

* U.S. President Barack Obama will strike a delicate balance over Brexit during a visit to the UK next week, where he will host a town hall with youth and offer his view “as a friend” that Britain should remain in the EU. (http://bit.ly/1qWrKrm)

The Telegraph

* Foreign aid spending will outstrip the amount given to councils to collect bins, install street lights and run local services for the first time next year, official government estimates show. Forecasts buried in the Treasury’s budget book reveal that spending on international development will hit 9.3 billion pounds in 2017/18 – overtaking local government spending of 8.2 billion pounds that year. (http://bit.ly/1TUEH05)

* BP PLC has moved to appease disgruntled investors, promising that it will overhaul the way it pays its most senior directors after almost 60 percent of shareholders who voted did so against its highly criticised remuneration report. (http://bit.ly/1SdeYxs)

Sky News

* Jeremy Corbyn has rejected claims he has not put enough effort into the campaign to keep the UK in the European Union, declaring: “There is nothing half-hearted about anything I do.” The Labour leader said that while there were many “shortcomings” with the institution, he would make the case for “Remain and Reform” in Europe in the run-up to the vote on 23 June. (http://bit.ly/1XxabbC)

* Britain’s biggest banks have rushed to warn staff about their conduct during the European Union referendum campaign just hours before strict electoral rules come into effect. Sky News has learnt that John McFarlane, the chairman of Barclays, wrote to staff on Thursday to remind them that while the bank’s board “considers that it is in the interests of our customers and clients for the UK to remain in the EU,” employees must not undertake activities deemed to be campaigning for a specific outcome. (http://bit.ly/1T7IpBa)

The Independent

* Czechia will soon be synonymous with the Czech Republic. The country is set to use the name Czechia in English, Tschechien in German and Tchequie in French, translations of ‘Cesko’ in Czech. (http://ind.pn/1SEQyKp)

* The Bank of England has issued its starkest warning yet over the consequences of Brexit for the British economy, stating that the country would likely face a long period of uncertainty if it left the EU that would dampen demand and impact on UK assets. (http://ind.pn/264sGKd)

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