Friday, December 19, 2014

Some Friday humor...

...about the "real" motivation with respect to Russia...

Thursday, December 18, 2014

What lower bound?

Rates during the Great Rate Compression can't go below zero...can they?  Speaking of "risk free assets", gold has crept up, but U.S. equities continue their phase transformation from risk asset to "safe haven".  What a transmogrification.

The Swiss National Bank on Thursday said it would introduce a negative exchange rate of -0.25 percent on sight deposit account balances at the central bank as it seeks to deter safe-haven buying.


The most important price for a sovereign nation is the price of its currency with respect to other competitor currencies.  Some amazing cascades and spumescent reactions from volatile changes in that price.

Google is now more valuable than the entire Russian stock market. Russia’s stock market is now worth $325 billion while Google is valued at more than $340 billion, according to Bloomberg.

Wednesday, December 10, 2014

The great rate compression continues

The entire world is gripped in a low or zero interest rate environment, and I have written about this on multiple instances here years ago.  Quality collateral has also been purchased by CBs, creating a shortage of "risk free" financial assets.

This is untenable...and the first fissures in this arrangement will be seen in U.S. equities, which have incredibly transmogrified into the "risk free" asset for the world.

The winter months will be telling.

Monday, December 08, 2014

Ding ding!

All aboard the express train!

Chinese brokerages’ valuations have surged to their highest level in more than four years as Shanghai’s surging stock market improves the prospects for trading revenue.

Thursday, December 04, 2014


The Saudis are the monopoly provider of oil.  Every once in awhile we all need to be reminded of this simple fact.  And while coordination is possible with the Saudis and the U.S. with respect to the Russian problem, it is more likley that the Saudis have finally decided to demonstrate to shale producers and other would be competitors who is boss.  They lured out their competitors and are crushing them once they went all-in.

The junk world is shuddering with the prospect of $60 oil.

Tuesday, December 02, 2014


Interesting article outlining the powerful emotional effect and "stickyness" that predictions have on experts.  It is incredibly difficult to admit your prediction is false when your your entire ego balances upon the precipice of mediocrity.

On a more substantive note, Readers here are not surprised about the lack of inflation as most interpretations of how economies work amongst "experts" relied on hopelessly outdated economic models.

A snippet:

Six years later, official consumer price index inflation sits at just 2 percent annually from July 2013 to July 2014, the latest period for which figures are available. This is identical to the rate for the previous year.
We asked four economists and market analysts to revisit what they originally predicted would happen after quantitative easing and assess whether (and why) they were right. Analyst Peter Schiff sticks to his guns, saying that any "claims of victory over inflation are premature and inaccurate. Inflation is easy to see in our current economy, if you make a genuine attempt to measure it." Economist Robert Murphy believes we are in a "calm before the storm" and is "confident that a day of price inflation reckoning looms." Contributing Editor David R. Henderson writes that the "financial crisis has brought such major changes in central banking that uncontrolled inflation from discretionary monetary policy is not as great a danger as it once was," though he remains critical of the Fed's growing powers. And economist Scott Sumner claims victory for the "market monetarists," noting that both Austrians and Keynesians have been proven wrong by events, and urging both sides to "take markets seriously."

Monday, December 01, 2014

Interesting timing...

...for China's announcement of a deposit protection"scheme".  Yes, the conditions ostensibly protect despositors from bank liquidation, but the exemption of foreign bank branches from the condition is telling.  The effects here would shift Chinese deposits from smaller banks and foreign branches to larger Chinese banks.  They also offer additional protection against runs on a bank in times of financial crisis.

Now why would the PBOC be concerned with that?

From the article:

The mainland had 49.9 trillion yuan of personal deposits and 53.7 trillion yuan of corporate time and demand deposits in October, according to the PBOC.
"To establish and regulate a deposit insurance scheme so that depositors are protected and financial risks can be reduced and financial stability maintained, the PBOC has drafted the rules for consultation," the official statement said.
Opinions can be submitted until December 30.
The establishment of a deposit insurance scheme is seen as a precursor to further financial reforms, including the scrapping of remaining controls on interest rates and increasing the role of market forces in the financial sector's operation so that lenders are allowed to fail if they are not well-run or if they take on too much risk.