Tag: news

Thanks to the just released February diary of Fed chief Yellen, we now know exactly when she called Bank of England Governor (and former Goldman Sachs employee) Marc Carney and ECB President (and former Goldman Sachs employee) Mario Draghi.

Can you guess when?

The answer:

 

This marked the exact bottom in the market. As someone suddenly decide to panic-buy stocks right as Carney’s 40 minute conversation was over – and all amid spiking CDS, collapsing bank stock prices, a Deutsche Bank which even the “serious” media outlets said was near bankruptcy, surging Yuan vol, and “real” crashing earnings expectations:

 

And that is how, with just  two phone calls, Janet Yellen saved the world.

 

Unrigged, efficient markets for all:

 

Did we just get the closest glimpse of Keyser Soze the global Plunge Protection Team communication by phone call? Only the NSA knows…

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

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

What do Hillary Clinton, Bernie Sanders, and Donald Trump have in common? Well, they claim that weak currencies are a key that gives producers a competitive edge. This claim fuels their furor with China and its currency, the renminbi (RMB). According to the candidates, a manipulated, weak RMB allows China to push aside U.S. producers.

The idea that weak currencies work wonders is as old as the hills. Mercantilists of all stripes have drunk this Kool-Aid forever. For them, the advertised goal of a devaluation is an increase in the price of foreign produced goods and services and a decrease in the price of domestically produced goods and services. These changes in relative prices are supposed to switch domestic and foreign expenditures away from foreign produced goods and services towards those produced domestically. This is supposed to improve a devaluing country’s international trade balance and balance of payments at the expense of its trade partners, who haven’t devalued their currencies.

For the public, this argument has a certain intuitive appeal. It works on the campaign trail. After all, a devaluation is seen as nothing more than a price reduction for domestically produced exports, and price reductions are always seen as a means to increase the quantity of goods sold. When it comes to currency devaluation, the analysis is not that simple, however. Even if we use a narrow, Marshallian partial equilibrium model (one consistent with the common man’s economic intuition) to determine the effects of a devaluation, the analysis becomes quite complicated. Contrary to the common man’s conclusion, a devaluation will often result in a reduction of exports and a deterioration in a country’s trade balance and balance of payments. When the models become more general and inclusive, a light shines even more brightly on just how confusing and contradictory the arguments favoring devaluations are.

But, without entering the technical weeds of economic analysis, it is clear why a devaluation strategy is a loser’s game. In 1947, the famous Cambridge don Joan Robinson penned “Beggar-My-Neighbor Remedies for Unemployment.” She not only coined the phrase “beggar-my-neighbor,” but concluded that so-called competitive devaluations would be unsuccessful in achieving their advertised objectives. Among other things, Robinson wrote that a devaluation would prompt a retaliation in the form of a competitive devaluation. Thus, the initiator of a devaluation could, and would, always be neutralized.

But, what does a reality check looks like, when applied to China? Well, the evidence contradicts conventional wisdom. As the accompanying chart shows, the RMB, in real terms, has mildly appreciated against the greenback in the 1995 – 2014 period, contrary to the claims of the candidates. And, contrary to what the devaluationists would have you think, Chinese exports have soared. These data not only poke a hole in the mercantilists’ notions about the wonders of weak currencies, but also illustrate just how ignorant of the facts Clinton, Sanders, and Trump are. They literally don’t know what they’re talking about.

via Zero Hedge http://ift.tt/1Rul7WR Steve H. Hanke

Earlier today, we brought you the latest from 1MDB, the development bank-turned slush fund at the center of multiple international investigations.

For those who might still be unfamiliar with the story, Malaysian prime minister Najib Razak set up the fund more than five years ago with the help of Goldman and one of the firm’s rising stars named Tim Leissner.

Kuala Lumpur paid an exorbitant amount in underwriting fees to Goldman and as the years went by, it became readily apparent that 1MDB was nothing more than a checking account on which Najib came to depend when he needed money for a campaign – or for some Chanel bags Rosmah Mansour decided she just had to have (probably because Leissner’s wife Kimora Lee told her they were this season’s must haves).

Recall that back in December of 2014 we highlighted Najib’s “golf diplomacy” wherein the premier spent several days golfing with President Obama in Hawaii while back in Asia, more than 100,000 Malaysians were forced from their homes during a horrific flood. “How can you smile and happily play golf with Obama while the people at home are terrified and confused about what will happen to them and their property,” an opposition politician asked at the time.

That’s a good question and now we know that Najib wasn’t just golfing in Hawaii, he was also spending obscene amounts of money at Italian boutiques. As WSJ reports, Najib spent more than $130,000 at a Chanel store in Honolulu less than 48 hours before hitting the links with Obama. All told, Najib looks to have blown at least $15 million during the time period in question on “clothes, jewelry, and cars”

“Let me be very clear: I have never taken funds for personal gain as alleged by my political opponents—whether from 1MDB, SRC International or other entities, as these companies have confirmed,” Najib said last year.

Right. So the $56,000 he dropped at Signature Exotic Cars in 2011 and the €750,000 he spent at Swiss jeweler De Grisogono were just standard Prime Minister-type purchases. 

Of course any US taxpayers reading this shouldn’t get too angry with Najib. After all, Obama spent more than $8 million on the very same Hawaii trip mentioned above. At least he had the decency to sink a 40 foot chip shot a year later in the same locale. Where’s your highlight Mr. Najib?

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

We are one step closer to another full-blown return of the cold war.

Yesterday, during a briefing in Latvia’s capital Riga, NATO Gen. Philip Breedlove said that NATO and the United States are switching their defense doctrine from assurance to deterrence in Eastern Europe in response to a “resurgent and aggressive Russia.”

The comments by Breedlove come a day after the Pentagon said it would begin continuous rotations of an additional armored brigade of about 4,200 troops in Eastern Europe beginning in early 2017.

“We are prepared to fight and win if we have to … our focus will expand from assurance to deterrence, including measures that vastly improve our overall readiness,” Breedlove said following talks with Baltic region NATO commanders.

“To the east and north we face a resurgent and aggressive Russia, and as we have continued to witness these last two years, Russia continues to seek to extend its influence on its periphery and beyond.”

As Defensenews reports, Eastern NATO members including the formerly Soviet-ruled Baltic states and Poland have been lobbying the alliance to increase its presence in the region. And now NATO is obliging, and in the process assuring that Russia will once again escalate in kind.

We also know the timing of the next major geopolitical tension between NATO and Russia: “In the spring of 2017 what we will bring to Europe, and then again put into the three Baltic nations, is an armored brigade fully enabled with command and control and all of the supporting equipment required,” Breedlove said.

Asked by AFP whether he expected other NATO members to match the upped US troop commitment, Breedlove said: “We would hope (so).”

“What we have seen is that when we led by coming here with company-sized formations after (Russia’s actions in) Crimea and Donbas, other nations have shown up now with company-sized formations.”

Russia has repeatedly warned against the permanent positioning of substantial forces from NATO along its border. Recall the last time Russia reacted to what it deemed was a NATO provocation, it stationed tactical, nuclear-capable missiles along the Polish border.

Meanwhile, this is a map that roughly lays out the regional balance of power between Russia and NATO:

 

Some more rational NATO members, like Germany, have been skeptical about any substantial permanent deployment, saying it could breach a 1997 agreement between the military alliance and Russia.

But the new US deployment avoids the issue because it is not technically permanently stationed in Eastern Europe, with brigades rotating in and out, US officials say.

We doubt such verbal loopholes will hold much sway with Vladimir Putin, but we are certain that when Russia retaliates to this latest escalation by NATO, all accusatory media hell will break loose.

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

By EconMatters

Today`s Baker Hughes Rig Count data spells real trouble for U.S. Oil Production for the remainder of 2016. At this pace, we are going to start having massive declines in U.S. Domestic Oil Production.

 

via Zero Hedge http://ift.tt/1Y4mV9o EconMatters

In Q1 2007, the so-called “godfather” of technical analysis Ralph Acampora told a ‘Goldilocks’-prone Larry Kudlow on CNBC that “I’m bullish, but I don’t think I am bullish enough…there’s new leadership.” That call turned out to be very close to top-ticking the market before it’s collapse. Fast-forward nine years and Ralph is back, proclaiming that Yellen has “lit a fire under the stock market… and the correction is over.”

“Bear market” confirmed on the day of the lows… then 14.5% later “the correction is over” and “The trend is up.”

h/t @NorthmanTrader

 

Two words – “nailed it!”

 

Of course, Mr. Acampora is not alone. Jim Cramer recently “nailed it” too…

 

 

Trade accordingly…

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

It has been a crazy year so far.

After what was the worst January for the stock market in recent memory, and a volatile but still difficult month for risk in February, the month of March saw a the biggest rebound from its lows in Dow Jones history, and a substantial bounce for the vast majority of risk assets with positive momentum a feature right up until month end.

 

So what were the best, and worst, performers in the month of March, and the first quarter? Here is the summary from Deutsche Bank:

A notable standout during March was the big surge for Oil which saw WTI rally nearly +14% during the month from the low $30s to closer to $38/bbl, helped by those rising supply cut expectations. That’s helped both EM equities (+13%) and EM bonds (+8%) deliver strong gains during the month, however in local currency terms it’s the Brazilian Bovespa (+17%) which comes out on top with the domestic political situation there clearly playing a large part also. DM equity markets have also seen a marked rebound as a dovish Fed and also the easing measures announced by the ECB having proved supportive. The S&P 500 returned +7% on a total return basis last month while there was a recovery for the Stoxx 600 (+2%) and DAX (+5%).

At the other end of the scale it’s European Banks (-1%) which prop up the bottom of the league in local currency terms, not helped by a poor last day of the month. Gold (-1%) was also down modestly but as you’ll see below the performance YTD is still impressive. Away from that the only other negative total return performers last month came in the rates space with Bunds and Gilts down between 0% and 1% in local currency terms, the relative performance for Gilts seemingly showing that Brexit concerns aren’t having too much of an impact on that asset class. Treasuries, meanwhile, were little changed on the month. Returns for credit markets were generally in the low single digit range with the lower end of the quality spectrum relatively outperforming. It’s worth highlighting the relative weakness in the Dollar last month has resulted in USD-based gains generally being greater for most assets. The Bovespa still tops the list but with a notable +31% gain, while Greek (+17%), Portuguese (+12%) and Russian (+13%) equities all edge higher up the leader board. Gains for European credit markets also look greatly improved with EUR HY (+9%), EUR IG Non-Fin’s (+6%) and EUR Fin Sub (+7%) all rebounding strongly.

With regards to the quarter, despite being flat through the first two months of the year, the massive rally in March for the Bovespa sees it rank second on a local currency (+16%) basis, and top on a USD hedged (+27%) basis. Gold (+16%) tops the former the list still with Silver (+11%) not far behind. In USD terms its Bunds (+9%) and EU sovereign bonds (+8%) which also move steadily higher up the table and into the top seven on our list. US and EUR credit markets rank close to the middle with mid-single digit returns for the quarter. At the bottom end its DM equity markets which generally dominate. European Banks (-20% local and -16% in USD terms) have failed to recover from that huge selloff in January, while the Shanghai Comp (-15% and -15%), FTSE MIB (-15% and -11%), Nikkei (-11% and -5%) and DAX (-7% and -3%) also get honourable mentions. Last month’s gain has seen the S&P 500 (+1%) nudge back into positive territory YTD.

via Zero Hedge http://ift.tt/1Y4hqYi Tyler Durden