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Will Greek “Hope” Offset “Limit Down” Contagion From The “Frozen” China Crash
Will Greek “Hope” Offset “Limit Down” Contagion From The “Frozen” China Crash
Today’s market battle will be between those (central banks) “hoping” that a Greek deal over the weekend is finallyimminent (which on one hand looks possible after a major backpeddling by Tsipras – who may never have wanted to win the Greferendum in the first place – yesterday in Brussels and today during his speech in the Euro Parliament, but on the other will be a nearly impossible sell to Greece as any deal terms will be far harsher than the deal offered by the Troika 2 weeks ago and will have no debt reduction), and those who finally noticed that the Chinese central planners have effectively lost control.
For those who may have missed the overnight fireworks, here are some more indicative Bloomberg headlines about China:
- China’s Stocks Plunge as State Intervention Fails to Stop Rout
- China Freezes Trading in 1,300 Companies as Stock Market Tumbles
- China’s State-Owned Firms Ordered Not to Cut Share Holdings
- China’s Market Rescue Makes Matters Worse as Prices Lose Meaning
- China Ramps Up Policy Response as Panic Grips Stock Market
While pundits have been eager to downplay what is now a historic rout in Chinese risk assets, one that is matched by the depression of 2008 and which has sent the SHCOMP from up 60% for the year 3 weeks ago to barely green losing some 15 Greeces in market cap since mid-June…
… the same pundits to whom neither the oil crash nor a Grexit nor the imminent collapse in Q2 corporate revenues and GAAP EPS, or anything else matters, the reality is that the Chinese stock rout is very clearly starting to have contagion effects on the rest of the economy, crashing commodities such as crude, gold, copper, iron and virtually everything else where China has been a marginal source of demand, but leading to forced selling of anything that is not nailed down.
…click on the above link to read the rest of the article…
“Bernanke & Greenspan Have Destroyed America” Schiff & Maloney Warn “People Don’t Realize What Is Coming”
“Bernanke & Greenspan Have Destroyed America” Schiff & Maloney Warn “People Don’t Realize What Is Coming”
Ali and Frazier, Laurel and Hardy, Mayweather and Pacquiao, Liesman and Santelli, and now Schiff and Maloney. Peter and Mike join clash of the titan-like to discuss their investment strategies and expose the charts the government doesn’t want you to seeas “people like Bernanke are taken seriously still and the people that did predict [the crisis] are dismissed as lunatics half the time.” The wide-reaching conversation covers everything from gold and stocks to The Fed and The Dollar – Bernanke “took the coward’s way out because all he did was exacerbate the problems to postpone the day of reckoning.” The air is coming out of the bubble, they warn, “Bernanke and Greenspan have absolutely destroyed America. People don’t realize what is coming…”
Full transcript below:
Mike: I was in Puerto Rico a little while back and Peter Schiff invited me over to his house and we were just amazed at how we are exactly on the same page when it comes to everything economically. And so he just made a trip out to California near my offices and we decided we’d get together and discuss some of this stuff. So on your travels Peter lately you were just at a show you were speaking. Where were you at?
Peter: I was in Las Vegas. It’s great to see you again Mike. I was speaking to a very main stream audience of hedge fund managers at an annual conference there. And what was very interesting is even though the audience was, as I said, very main stream, and I was on a panel with a lot of very high profile, main stream individuals, the only person that really got applause was me.
…click on the above link to read the rest of the article or view the interview…
Why the Bank of Japan Can’t Stop a Sudden Collapse of the Yen
Why the Bank of Japan Can’t Stop a Sudden Collapse of the Yen
On Friday morning in Tokyo, the Nikkei stock index was up again, at 20,600, highest in 15 years. Since “Abenomics” has become a common word in December 2012, the Nikkei has soared 128% on a crummy economy, terrible government deficits, and an insurmountable mountain of government debt. This 10-day run of straight gains, or 11-day run if Friday plays out, is the longest glory streak since February 1988 when Japan was in one of the craziest bubbles the world had ever seen.
The subsequent series of crashes had the net effect that the Bank of Japan became engaged in propping up the stock market not only by pushing interest rates to zero and dousing the market with money via waves of QE, but also by buying equity ETFs and J-REITs.
Prime Minister Shinzo Abe has made asset-price inflation his top priority. Under pressure from the BOJ and the government, state-controlled entities – such as the Government Pension Investment Fund with ¥137 trillion in assets – are dumping Japanese Government Bonds into the lap of the BOJ and are buying stocks with the proceeds.
Foreign hedge funds have jumped into the fray, which is the hot money that can evaporate overnight. But fear not, every time the Nikkei drops 100 points or so, the BOJ starts buying, or creates the perception that it’s buying, and within minutes, stocks shoot back up. It’s part of the BOJ’s relentlessly communicated policy to inflate asset prices come hell or high water.
And hell or high water may now be on the way.
Ultimately, monetary policies hit the currency. So the yen has sagged about 35% since Abe took over. On Thursday in Tokyo, it hit ¥124.3 to the dollar, the lowest since December 2002. Friday morning, after some jawboning by the government and the BOJ, it recovered a smidgen.
…click on the above link to read the rest of the article…
Why The Dollar Is Rising As The Global Monetary Bubble Craters
Why The Dollar Is Rising As The Global Monetary Bubble Craters
Contra Corner is not about investment advice, but its unstinting critique of the current malignant monetary regime does not merely imply that the Wall Street casino is a dangerous place for your money. No, it screams get out of harms’ way. Now!
Yet I am constantly braced with questions about the US dollar and its impending demise. The reasoning seems to be that if America is a debt addicted dystopia—-and it surely is—- won’t the US dollar sooner or later go down in flames as the day of reckoning materializes? Won’t you make money shorting the doomed dollar?
Heavens no! At least not any time soon. The reason is simply that the other three big economies of the world—Japan, China and Europe—are in even more disastrous condition. Worse still, their governments and central banks are actually more clueless than Washington, and are conducting policies that are flat out lunatic—–meaning that their faltering economies will be facing even more destructive punishment from policy makers in the days ahead.
Indeed, Draghi, Kuroda and the commissars of red capitalism in Beijing make Janet Yellen and Stanley Fischer (Fed Vice-Chairman) appear to be slightly sober. So as trite as it sounds, the US dollar is the cleanest dirty shirt in the laundry. And on a relative basis, its is going to look even cleaner as two decades of monetary madness around the world finally hit the shoals.
…click on the above link to read the rest of the article…
The Monetary Illusion Again in Trade
The Monetary Illusion Again in Trade
Just as a follow-up to further highlight and emphasize the “monetary illusion” of currency devaluation in this closed environment, the yen’s returned devaluation against the “dollar” more recently has renewed confusion (or intentional misdirection) about what Abenomics is supposedly accomplishing. Taken solely from the perspective of the Japanese internally, exports to the US are once more growing, and doing so rather sharply. December’s year-over-year gain, in yen, was almost 24% while January came in at an equally robust 16.5%.
Taken by themselves without context, it would seem great fortune and monetary capability to gain in exports at such huge growth rates. But, as I have shown time and again, what goes out of Japan is matched by what comes in to the US. For all that buzz over huge export growth, nothing much shows up on this end.
Both months were positive in “dollars” but barely and thus no actual growth took place. Economists and central bankers even concede the disparity, but don’t much care about it. They simply assume that Japanese exporters now flush with more yen will hire more workers and pay the ones they have even more, igniting that virtuous circle of “aggregate demand.” In reality, why would they do that?
…click on the above link to read the rest of the article…
Crashing Yen Leads To Record Number Of Japanese Bankruptcies | Zero Hedge
Crashing Yen Leads To Record Number Of Japanese Bankruptcies | Zero Hedge.
Last week, Zero Hedge first showed a chart so simple, even a Krugman could get it: at this point (and really ever since USDJPY 110 and higher), any incremental Yen devaluation is destructive for the Japanese economy, leading to an unprecedented surge in corporate bankruptcies and, ultimately, economic depression.
The obvious logic here led even the Keynesian studs at Goldman to declare that “Further yen depreciation could be a net burden.” Unfortunately for Abe and Kuroda, halting the Yen devaluation here would be suicide, as Japan now needs its currency to devalue every single day to mask the fact of the underlying economic devastation, or else the Japanese people may (and should) vote Abe out, which would lead to a prompt end to Abenomics, an epic collapse in the Nikkei, and put thousands of weak-Yen chasing Mrs. Watanabes in margin call purgatory.
Sadly, that will not happen. We say “sadly” because an end end to Abenomics, which is really Krugmanomics now, is the only thing that could save Japan now. And just to prove that, here is Japan Times confirming what we said, with a report that “Corporate bankruptcies linked to the yen’s slide hit a new record in November, highlighting the strains on small and midsize companies as Prime Minister Shinzo Abe campaigns for re-election on his deflation-busting economic strategy.“
…click on the above link to read the rest of the article…
Goldman Warns “Further Yen Depreciation Could Be A Net Burden” As Japanese Bankruptcies Soar | Zero Hedge
It is no secret that one of the primary drivers of relentless S&P 500 levitation over the past two years, ever since the start of Japan’s mammoth QE, has been the use of the Yen as the carry currency of choice (once again as during the credit bubble of the early-2000s), whose shorting has directly resulted in E-mini levitation. One look at the intraday chart of any JPY pair and the S&P500 is largely sufficient to confirm this. Those days, however, may be coming to an end, at least according to Goldman which overnight released a note saying that the Yen is “Almost at breakeven: Further yen depreciation could be a net burden.”
Here are the highlights:
The yen has depreciated quickly beyond ¥115/US$ from the ¥107/US$ level since the FOMC made the decision to terminate quantitative easing and the BOJ surprised with additional easing at the end of October. This has prompted concern over possible damage to Japan as a whole if the yen weakens further.
Using industry input/output tables to investigate the costs and benefits of a weak yen, we find that the manufacturing sector still reaps forex translation gains under Japan’s current economic structure. However, in materials and nonmanufacturing industries that have limited opportunity to pass on forex-driven cost growth to exports, the costs of a weak yen far outweigh the benefits. According to our calculations, a 25% decline in the yen’s valueresults in a ¥4.1 tn net cost increase for Japanese industry as a whole since 2012 and a ¥10.5 bn increase in household sector import inducement.
…click on the above link to read the rest of the article…
