by Market Shadows - July 2nd, 2015 2:35 am
Financial Markets and Economy
A Year of Lower Oil Prices: Crossing A Boundary? (Art Berman)
The oil price collapse of 2014-2015 began one year ago this month (Figure 1). The world crossed a boundary in which prices are not only lower now but will probably remain lower for some time. It represents a phase change like when water turns into ice: the composition is the same as before but the physical state and governing laws are different.
Before we focus on the Greek drama which this morning has soared to new highs, a quick look at China which after trading largely unchanged for most of the day, saw a bout of late day selling, which brought the Shanghai Composite 5.2% lower, wiping out all Tuesday rebound gains, and back to the Monday post-PBOC crash level.One thing that was clear: nobody cared about the Chinese PMI data, where both the official PMI and HSBC Mfg PMI missed expectations and printed at 50.2 (exp. 50.4) and 49.4 (Exp. 49.6), respectively.
Mortgage applications decreased 4.7 percent from one week earlier, according to data from the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending June 26, 2015. …
Chinese stocks tumbled in late trade, with the benchmark index almost erasing Tuesday’s rally, as margin traders unwound positions for a seventh straight day and data showed economic growth remaining sluggish.
It's a $28.3 billion insurance mega deal (Business Insider)
Insurance provider Ace Limited is buying Chubb in a $28.3 billion deal, it announced on Wednesday.
The boards of both companies have agreed to the deal that will see Chubb shareholders receive $62.93 per share in cash and 0.6019 in Ace shares.
by phil - July 1st, 2015 8:13 am
Wheeeeeeee – what a ride!
It's 7:39:11 am and Greece is "fixed" at the moment and we have to time-stamp it to the second or it may change again. European markets are LOVING IT with 1.5-2.5% gains across the board but, on the whole, the DAX (the only one we really care about) isn't even close to our weak bounce line at 11,250 yet – so we don't care. We do care about CHINA!!! (see yesterday's post), who dropped over $200Bn in stimulus this week and they fell another 5% this morning anyway. That's not good, folks…
5% would be a 900-point drop in the Dow in one day. I think I need to put that in perspective because we say "China fell 5% today" and people go "well, isn't that a shame" and that's the end of it. It's not a shame, folks, it's a TRAGEDY! To sum things up, the Shanghai has fallend from 5,200 to 4,000, which is 23%, which would be over 4,000 Dow points and it bounced back to 4,300, which was a weak 25% retrace of the drop that was IMMEDIATELY reversed DESPITE massive stimulus measures.
Of course the 3,900 line is bouncy – it represents a 25% drop from 5,200 so SOMEONE is going to speculate and buy that dip but the dip buyers ran straight into a new round of sellers and now 3,900 MUST HOLD on the Shanghai or Greece will be the last thing you're worried about next week!
We are nowhere near unwinding the 2 TRILLION Yuan ($339Bn) of margin debt that has built up in China, much of it financed at the 22% capped interest rates. When your market is gaining 100% a year, taking a 22% loan out to buy stocks seems to make sense – especially when all of your state-controlled media (not to mention the Corporate Propaganda you pick up in the US) tells you how AWESOME everything is.
There are now more registered stock traders in China (90M) than there are registered Communist Party Members (87.8M) – interesting news on the 94th anniversary of the party's founding. It’s safe to assume this is not…
by Market Shadows - July 1st, 2015 2:05 am
Financial Markets and Economy
It has been a bad day for deals and deadlines all around: first Greece is about to enter July without a bailout program and in default to the IMF with the ECB about to yank its ELA support or at least cut ELA haircuts; also the US failed to reach a nuclear deal with Iran in a can-kicking negotiation that has become so farcical there is no point in even covering it; and now moments ago a third June 30 "deal" failed to reach an acceptable conclusion when Russia and Ukraine were unable to reach an agreement on gas prices at talks in Vienna on Tuesday. As a result, Ukraine is suspending its purchase of Russian gas.
The United States stood on the sidelines while Brazil was a stud. Now America is the All-Star economy.
The tables have turned between the two nations' economies, and it's a much different story from just a few years ago.
Brazil's President, Dilma Rousseff, visited President Obama Tuesday at the White House as Brazil's economy continues to shrink. When Obama visited Rousseff in 2011, Brazil was coming off a stellar year of economic growth and the U.S. was making tepid progress in its recovery from the recession.
Euro burdened by Greece, uncertainty high (Business Insider)
The euro remained on the defensive in Asia on Wednesday as Greece became the first developed economy to default on a loan with the IMF, setting the scene for another day of uneasy action in markets.
Still, it surprised no one when the International Monetary Fund confirmed Greece had missed a payment on its debt, perhaps taking it a step closer to an exit from the euro.
The IMF said Greece had asked for a last-minute repayment extension earlier on Tuesday, which the Fund's board would
by ilene - July 1st, 2015 1:39 am
Courtesy of Jesse's Cafe Americain
"Empires communicate in two languages. One language is expressed in imperatives. It is the language of command and force. This militarized language disdains human life and celebrates harshness and brutality. It demands. It makes no attempt to justify the flagrant theft of natural resources and wealth or the use of indiscriminate violence.
The other language of empire is softer. It employs the vocabulary of ideals and lofty goals and insists that the power of empire is noble and benevolent. The language of beneficence is used to speak to those outside the centers of death and pillage, those who have not yet been totally broken, those who still must be seduced to hand over power to predators.
The road traveled to total disempowerment, however, ends at the same place. It is the language used to get there that is different."
by ilene - June 30th, 2015 9:16 pm
Well no one is having fun anymore. Here's Paul Price's take on the latest Greek drama.
By Paul Price
The popular press has made Germany into the villain of the current Greek drama (and popular bloggers point out the role of Goldman Sachs.) Why, they ask, should Berlin be dictating how the Greek government runs its own country?
Understanding the reasoning for that is quite simple if you think in terms of the Beach Boys’ old hit song, Fun, Fun, Fun.
Greece is the wayward “daughter.” Substitute average retirement at 57.8 years old and cushy government pensions with the “hamburger stand.” Think of Germany as the “dad” who recently wised up. Understand that Greece “shouldn’t have lied” all along about its financial status.
Dad was funding the sweet life for his partying daughter while supplying the goodies and footing the bills. She told him the cash was all going towards her betterment and growth when, really, the money was simply being used to have a great time.
No wonder her old man got pissed off.
What would you do in that situation?
You’d probably take away the keys, ground her and cancel her credit cards.
When your kids get jobs and become financially independent they’ll have every right to tell you to “f*ck off.” Until then, while they’re still on your dime, it is only natural to expect they will live under your house rules.
Greece’s proposed referendum expects to ask the kids whether they want to keep partying or if they’d prefer to stay home, study and hunker down.
Which way do you think the vote will go?
Is the responsible parent really the “bad guy” in this story?
Okay, okay. It's a little more complicated. There's enough blame to go around and many complicit players. (Like with the subprime mortgage crisis in the US.)
Germany and the rest of Europe would have been better off writing down Greece's debt in full, back in 2010-2011, rather than lending the country more money to keep up the facade that Greece could avoid default. In effect, the troika (the European commission, the European Central Bank and the IMF) paid off some bondholders and…
by ilene - June 30th, 2015 5:07 pm
By John Mauldin
(Originally published on June 27, 2015)
“If this were a marriage, the lawyers would be circling.”
The Economist, My Big Fat Greek Divorce, 6/20/2015
Greece is again all the buzz in the media and on the commentary circuit. If you’re like me, you are suffering terminal Greece fatigue. You just want Greece and its creditors to “do something already” rather than continually coming to the end of every week with no resolution, amid finger-pointing and dire warnings from all sides about the End of All Things Europe – maybe even the world.
That frustration is a common human emotion. Perhaps the best and funniest illustration (trust me, it is worth a few minutes’ digression) is the story about one of my first investment mentors, Gary North, who was working in his early days for Howard Ruff in Howard’s phone call center before Gary began writing his newsletters and books. (Yes, I know I am dating myself, as this was the late ’70s and early ’80s, just as I was getting introduced to the investment publishing business. And for the record, I knew almost everyone in the publishing business in the ’80s. It was a very small group, and we got together regularly.)
Howard set up a phone bank where his subscribers could call in and ask questions about their investments and personal lives. One little lady had the misfortune to get Dr. Gary North on the line. (Gary was the economist for Congressman Ron Paul and went on to write it some 61-odd books, 13,000 articles, and more – all typed with one finger. He is a human word-processing machine.)
This sweet lady lived way out in the country and was getting older. She asked Gary if he thought it would be a wise idea for her to move into the city (I believe it was San Francisco) to live with her daughter. Not knowing the answer, Gary helped her work out the pros and cons over the phone, and she decided to move. A few days later she called back and said that she couldn’t bring her dog with her because of…
by Market Shadows - June 30th, 2015 1:34 pm
Financial Markets and Economy
Ever since bond market liquidty became the topic du jour across Wall Street (just a few short years after it was first raised in these pages), analysts, pundits, and reporters alike have begun to question what might happen should investors who have piled into mutual funds and ETFs (especially fixed income products) suddenly decide to sell into illiquid secondary markets.
China stocks had another wild day on Tuesday, as volatile momentum swings kept investors guessing about the direction of a market that has lost trillions of dollars of value in recent weeks.
The Shanghai Composite dropped as much as 6% in morning trading, before bouncing back to close up 5.5%. The performance comes one day after China's benchmark index dipped into bear market territory — defined as a decline of 20% from recent highs.
Uber Technologies Inc. is telling prospective investors that it generates $470 million in operating losses on $415 million in revenue, according to a document provided to prospective investors.
The term sheet viewed by Bloomberg News, which is being used to sell $1 billion to $1.2 billion in convertible bonds, doesn’t make clear the time period for those results. The document also touts 300 percent year-over-year growth.
Equity markets are “broken,” a “complete mess,” or maybe even “rigged.” Luis Aguilar, a commissioner on the Securities and Exchange Commission, was quoting others when he used those words in remarks to the inaugural meeting of the SEC Equity Markets Structure Advisory Committee on May 13. But his warnings were no less emphatic. Almost five years to the day since the so-called flash crash, the SEC and key market players were finally gathered to discuss, and inevitably debate, the causes and responses to a significant decrease in investor and regulator confidence
by phil - June 30th, 2015 8:30 am
Down in the pleasure centre,
hell bent or heaven sent,
listen to the propaganda,
listen to the latest slander.Pump it up until you can feel it.
Pump it up when you don't really need it. – Elvis
China has set a new Global record by dumping almost $200Bn (over 1Tn Yuan) in stimulus into their overheated markets in just two days. Sunday night it was a rate cut AND lowering the reserve requirements for banks and yesterday afternoon they dropped another $50Bn in a "Reverse Repo" operation and, to cap it off this morning, the Finance and social Security Ministries published draft rules that would permit the state pension fund to invest up to 30% of its net asset value in securities, potentially allowing ANOTHER 600B yuan ($97B) to enter the market.
Take 30% of our retirement savings and buy stocks that already gained over 100% this year in an attempt to prevent a bear market from wiping out all of the gains – BRILLIANT!!!
Certainly Chinese speculators thought so as the Shanghai went from down 5.6% at the open to up 5.6% at the close! This allowed them to save a little face at the close of the Quarter and, more importantly, promises Fund Managers a whole new round of suckers to dump shares into in July.
10% happens to be a Strong Bounce off the 25% drop, per our 5% Rule™, so we're not going to be too impressed until we see some follow-through. Like us, Bloomberg is skeptical, saying: "China's Magic Tricks Can't Save Its Stock Market" warning us:
Only time will tell if Beijing's bag of tricks is empty. But if it is, the fallout on global markets could dwarf the impact of Greece's flirtation with default. The world, after all, has had a few years to contemplate a Greek exit from the euro. But if the world's biggest trading nation suddenly hit a wall, it would