Baltic Dry Index. 826 Friday
LIR Gold Target by 2019: $30,000. Revised due to QE programs.
“
I know you think you understand what you thought I said but I'm not sure you
realize that what you heard is not what I meant”
Alan “Bubbles” Greenspan.
As if we didn’t have enough to worry about with
Spain, France, and Italy all looking like they are going the way of Greece and
Cyprus, now we have to worry that Japan has trumped them in the international
self-destruction, gambling stakes. After the Japanese stock market crash of
last Thursday, Monday brought no relief. Now the Bank of Japan itself and the
Japanese government financial advisory panel, both suggest that “Abeonomics” won’t
work, at least not as intended.
Not that the rest of the world’s exporting nations
have any intent on letting Japan get away with a massive beggar thy neighbour devaluation
to steal their export markets. Will Germany really let a Lexus sell for half
the price of a Benz? In this crazy new hot currency war, we have only just
passed Pearl Harbor. We all know how
Japan’s last gamble at Pearl Harbor paid off, and this new gamble will very
likely end the same way.
“All
the world is made of faith, and trust, and pixie dust.”
Haruhiko
Kuroda, with apologies to Peter Pan.
BOJ Split Highlighted as Slumping Stocks Jolt Abenomics: Economy
By Toru
Fujioka - May 27, 2013 12:34 PM GMT
Minutes released by the Bank of Japan
highlighted a split among policy makers over achieving 2 percent inflation and
mixed views on bond market turbulence after Governor Haruhiko Kuroda cited
signs the economy is picking up. “A few” policy makers said that it’s “highly uncertain whether changes in inflation expectations would lead to a rise in the actual rate of inflation,” according to a record of an April 26 meeting, released today in Tokyo. One member said the bond market may become unstable again, while another said rising rates may point to an economic upturn
Divisions in the board add to communication challenges for Kuroda, 68, as volatility in the stock and bond markets threatens to undermine business and consumer confidence. Kuroda said yesterday that the economy has clearly started picking up and there are no signs investors have “excessively bullish” expectations. He also cited a report indicating interest rates could rise by between one and three percentage points in an improving economy without causing financial instability.
“Kuroda should have explained why the market is volatile now and why he thinks it’s going to be okay, rather than just saying he doesn’t see any major problem,” said Kazuhiko Ogata, chief Japan economist at Credit Agricole SA. (ACA) in Tokyo. “Kuroda hasn’t yet learned how to communicate well with the market.
‘‘A few’’ BOJ board members said that swings in financial markets had been triggered by perceptions that the BOJ had conflicting goals -- trying to push down interest rates while pursuing inflation, the minutes showed. According to JPMorgan Chase & Co., the BOJ uses the term ‘‘a few’’ to mean two.
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Japan Risks Yield Jump Undermining BOJ Easing, Fiscal Panel Says
By Mayumi Otsuma - May 27, 2013 11:17 AM GMT
A Japanese government fiscal advisory panel warned that a failure to improve
the nation’s finances could trigger a spike in bond yields that makes central
bank easing less effective. Prime Minister Shinzo Abe needs to map out a plan to curb the world’s largest public debt and maintain confidence in the nation’s bonds, the panel, which includes academics and company executives, said in a report released in Tokyo today.
“If the government fails to show concrete success in fiscal reform, the large bond purchases by the Bank of Japan over the next two years could be seen as debt monetization, and this may cause a sharp spike in yields, weakening the effect of monetary easing,” the report said.
Abe and Bank of Japan Governor Haruhiko Kuroda are grappling with reviving the economy without blowing out the nation’s debt burden, projected by the International Monetary Fund to reach 245 percent of gross domestic product this year, the highest in the world. Volatility in stocks and bonds is underscoring the challenge, with the Topix Index falling 3.4 percent today after a one-day 6.9 percent decline last week.
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Funny Money Turns Serious
By Brady Willett May 27, 2013
By Brady Willett May 27, 2013
----The line between success and catastrophic
failure is exceptional thin in Japan. This is the case not only because
achieving an inflation rate of 2% without stoking financial bubbles/volatility
is a difficult proposition, but also because of Japan’s massive debt. As
Kyle Bass (see Mauldin’s excellent
recap)
notes, “if JGB interest rates rise 2% in Japan, then the government must pay
almost 80% of its revenues (as currently received) just to cover the interest
on its debt”. Suffice to say, given Japan’s debt albatross interest
rates can not be permitted to rise all that much, which makes every Kuroda’
intervention into the bond market so intense.
Put simply, given it’s debt load and inflexible policy options, there is the real risk that Japan’s financial markets and economy become so terminally reliant on money printing that confidence in the Yen collapses. And while last week’s volatility in Japanese markets may not inspire debt default and/or the end-game exodus from Yen, it did provide a budding contradiction to the good-time QE feelings permeating the financial landscape only a few short weeks ago.
Conclusions
Despite the Eurozone’s ongoing sovereign issues and Bernanke’s precarious print-fest, Japan is likely to be the first real nightmare for a world increasingly fixated on printing money to try and solve problems.
Put simply, given it’s debt load and inflexible policy options, there is the real risk that Japan’s financial markets and economy become so terminally reliant on money printing that confidence in the Yen collapses. And while last week’s volatility in Japanese markets may not inspire debt default and/or the end-game exodus from Yen, it did provide a budding contradiction to the good-time QE feelings permeating the financial landscape only a few short weeks ago.
Conclusions
Despite the Eurozone’s ongoing sovereign issues and Bernanke’s precarious print-fest, Japan is likely to be the first real nightmare for a world increasingly fixated on printing money to try and solve problems.
More
We end for today with central bank fuelled casino capitalism back in full swing.
And Canadian Mr. Carney hasn’t even taken over at the Bank of England yet. As
we wrote many times under fallen guru Greenspan’s serial bubble regime, what
could possible go wrong? QE forever, is to drive stocks to infinity and beyond.
“Moreover,
it was far from obvious that bubbles, even if identified early, could be
preempted short of the central bank inducing a substantial contraction in
economic activity – the very outcome we would be seeking to avoid.”
Alan “Bubbles”
Greenspan.
Hedge fund managers generate billions of returns in record start to year
Booming stock markets and global money-printing have allowed some of the world’s biggest hedge funds to generate billions of dollars of returns in a record start to the year.
Hedge fund managers including Chris Hohn, Crispin Odey and Dan Loeb have each generated double-digit returns since the beginning of 2013.Although most of the high-rolling sector is still struggling to live up to its reputation – the latest Goldman Sachs Hedge Fund Trend Monitor shows the average year-to-date returns are just 5pc – some of the stars have manage to notch up stellar returns.
The smart money has been placed on large bets that action by central banks will continue to fuel stock markets, despite underlying economic problems.
And managers have been richly rewarded as the FTSE 100 hit its highest level since 2000 last week; despite falls yesterday and late last week, Japan’s Nikkei has risen nearly 70pc since last November; and the Dow Jones has soared to a record high.
London-based Mr Hohn, who runs The Children’s Investment fund, generated 8.5pc in April alone, taking his returns over six months to 30pc. Mr’s Odey’s flagship €1.6bn (£1.37bn) European fund is up 16.8pc to the end of April, adding to the 30.7pc the fund generated last year.
Meanwhile in America, Third Point’s Mr Loeb has cemented his position as one of the most successful money managers in the world by generating 13.5pc in his $5.7bn (£3.7bn) offshore fund, and 34pc in his $2.2bn Ultra fund, to May.
Hugh Sloane of Sloane Robinson, has returned 26.7pc, albeit on a smaller scale in his $450m fund at Sloane Robinson, according to figures collected by HSBC.
At CQS, Michael Hintze’s $1.8bn Directional fund up is up 8.8pc. At the end of last year, Mr Hintze predicted that quantitative easing would continue to fuel a rise in global stock markets.
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There
is nothing that you could say to me now that I could ever believe.
Chancellor
Gordon Brown.
At the Comex silver depositories Friday final figures were: Registered 43.72 Moz,
Eligible 121.62 Moz, Total 165.34 Moz.
Crooks and
Scoundrels Corner
The bent, the seriously bent, and the totally
doubled over.
Where is Diogenes when you need him. Today, yet
another growing scandal in the world of the Great Vampire Squids. “God’s work,”
in the 21st century seems indistinguishable from Mammon’s.
“Capitalism
is based on self-interest and self-esteem; it holds integrity and
trustworthiness as cardinal virtues and makes them pay off in the marketplace,
thus demanding that men survive by means of virtue, not vices. It is this
superlatively moral system that the welfare statists propose to improve upon by
means of preventative law, snooping bureaucrats, and the chronic goad of fear.”
Alan “Bubbles”
Greenspan.
How Did Major Hedge Fund Earn 30% Returns for 20 Years Straight? Lots of Cheating
There are 8,000 hedge funds, and they are up to their
eyeballs in unethical behavior.
How would you like to invest $10,000 and watch it grow
over 20 years into $1,461,920? Well that's what happened at the giant hedge
fund, SAC Capital Advisors, which made a 30% return for 20 years in a row.
How is it possible to make such profitable investments again and again and again? The U.S. Attorney for Manhattan, Preet Bharara, believes he has the answer: SAC is cheating ... again and again and again. In fact, Bharara suggests that hedge funds that engage in insider trading may be rotten to the core:
"Given the scope of the allegations to date, we are not talking simply about the occasional corrupt individual; we are talking about something verging on a corrupt business model, for the defendants seem to have taken the concept of social networking and turned it into a criminal enterprise. " [refers to a 2011 hedge fund indictment, not the current case against SAC.]
To date, nine current and former SAC employees face insider trading criminal charges stemming from their work at the firm. Four have pled guilty and two are still fighting their indictments. Now the head of SAC, multi-billionaire Stephen A. Cohen (note the initials), will be subpoenaed to appear before a grand jury. The federal strategy may be to indict the entire hedge fund and shut it down, according to the New York Times.
We do not know as yet to what degree SAC relied on illegally obtained information (or other illicit activities) to amass its extraordinary profits. But we do know this: hedge funds don't like to gamble. Rather they want to make their billions by betting on sure things. In researching my book, How to Make a Million Dollars an Hour, it became clear that that the hedge fund industry as a whole is up to its eyeballs in a series of unethical maneuvers that sometimes are legal, sometimes are borderline and often are outright criminal.
But aren't there many (some?) honest and ethical people working in America's 8,000 hedge funds?
Maybe so, but the overwhelming culture within hedge funds makes cheating a way of life, according to Lynn Stout of UCLA Law School. In her article, " How Hedge Funds Create Criminals," Stout claims that hedge funds flash three critical signals that promote unethical behavior:
More
One of the queries Quakers are asked to consider, is: "Do
you maintain strict integrity in your business transactions and in your
relations with individuals and organizations? Are you personally scrupulous and
responsible in the use of money entrusted to you, and are you careful not to
defraud the public revenue?"
Probably why there a no Quakers on Wall Street.
The monthly Coppock Indicators finished April:
DJIA: +133 Up. NASDAQ: +139 Up. SP500: +170 Up. Another Fed bubble underway. But when to jump
off before it ends?
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