Monthly Archives: May 2012
CH Daily | China to lower reserve requirement ratio
The discount rate cut doesn’t actually do anything for the economy- growth or inflation- but does show their concern.
And the relatively low Q1 state lending is showing the actual continuing policy constraint.
As previously discussed, China has what they consider an inflation problem, and there are precious few, if any, examples of inflation fights that didn’t cause hard landings.
Ch Headlines:
China to lower reserve requirement ratio
Q1 GDP slows in 29 provinces, regions
China 2012 Growth Forecast Cut to 8.1%, Citigroup Says
China 2012 Growth Outlook Revised to 8% From 8.2%, JPMorgan Says
China Growth Seen at 13-Year Low by Pimco as Banks Cut Forecast
JPMorgan Sought Loophole on Risky Trading
I made the point years ago to my partners that as a point of logic the large dealers are severely restricted in their ability to manage themselves.
The reasoning is as follows:
Any one of the many top traders working full time in their specific area of responsibility necessarily know a lot more about it than any manager possibly can.
In other words, any manager will have his hands full keeping up with what any one of the traders is up to, making it impossible, for all practical purposes, to keep up with all of them.
So shareholders should expect things to periodically malfunction from lack of sufficient oversight and supervision as a point of logic.
JPMorgan Sought Loophole on Risky Trading
By Edward Wyatt
May 1 (NYT) — Soon after lawmakers finished work on the nation’s new financial regulatory law, a team of JPMorgan Chase lobbyists descended on Washington. Their goal was to obtain special breaks that would allow banks to make big bets in their portfolios, including some of the types of trading that led to the $2 billion loss now rocking the bank.
Initial JPM thoughts
First, while this loss is a one time adjustment to capital, the use of this type of ‘trading’ as a profit center is probably a thing of the past.
Additionally, my guess is the whale has been liquidating a long oil position (and maybe paying on long bma ratios) for the last several weeks.
That is, this announcement probably came after their liquidations were pretty much over to minimize losses.
This means the market effects are probably behind us.
Japan Will Follow Europe With a Debt Crisis: Kyle Bass
Yet another legacy bites the dust:
Japan Will Follow Europe With a Debt Crisis: Kyle Bass
By Jeff Cox
May 10 (CNBC) — Japan is about to join Europe in the debt crisis ranks, with the two regions offering the best opportunities for investors to bet against, hedge fund manager Kyle Bass said.
While the world’s attention has been focused on sovereign debt issues in Greece and elsewhere, Japan will emerge as a problem area as well as the European developments accelerate, Bass told attendees at the Skybridge Alternatives, or SALT, conference.
“Greece will circle the drain and be ungovernable in the next 30 to 60 days,” said Bass, founder of Heyman Capital and famous for presciently shorting subprime mortgage bonds before the industry collapsed. “Japan is in the crosshairs of the market…I’ve never seen more mispriced optionality in my entire life.”
The Bank of Japan, the nation’s equivalent of the U.S. Federal Reserve, is effectively monetizing the national debt by buying up 50 trillion yen-worth of Japanese Government Bonds, commonly referred to as JGBs in the marketplace, Bass said.
There are a number of perils commonly associated with the strategy of a central bank trying to print its way out of a debt crisis, not the least of which is inflation and lack of confidence in stability of debt, though Bass did not mention specific threats.
However, he said it’s easy to see a crisis coming.
“The fact of the matter is this is no longer an exercise in quantitative analysis,” he said. “It’s a question of when, not if.”
An aging Japanese population and entitlement culture are primary factors contributing to the national debt problem. Bass used disgraced money manager Bernie Madoff to make a point.
“Madoff taught us something,” Bass said. “You can make promises for a long time as long as you don’t have to live up to them.”
Greece’s Tsipras: We Want Euro, but Not Austerity
As previously discussed, for all practical purposes there is no political support for leaving the euro. The various populations simply do not trust their own governments with their currency:
Greece’s Tsipras: We Want Euro, but Not Austerity
By Michelle Caruso-Cabrera and Jennifer Leigh Parker
May 10 (CNBC) — The head of Greece’s Radical Left Coalition, Alexis Tsipras, told CNBC Thursday that he will “go as far as I can” to keep Greece in the euro zone, despite declaring earlier this week that the Greek bailout agreement is “null and void” and should be abandoned.
Tsipras (pronounced SEE-Pras), who was unable to form a coalition government this week after his party came second in Sunday’s election, said a Greek exit from the euro zone would be “disastrous.”
Tsipras said he is willing to negotiate with the so-called troika — the International Monetary Fund , the European Union, and theEuropean Central Bank — to keep Greece in the euro zone.
Fed Worries ‘Fiscal Cliff’ Is as Big a Threat as Europe
Does this mean the Fed staffers think fiscal policy works?
How about the Fed Chairman?
;)
Fed Worries ‘Fiscal Cliff’ Is as Big a Threat as EuropeBy Steve Liesman
May 10 (CNBC) — Officials at the Fed are increasingly concerned about the coming “fiscal cliff,” putting it on par with the European crisis and the housing market as among the US economy’s biggest threats.
MMT generates a newspaper in Lithuania
Marshall – CTV National Affairs
One of Marshall’s regular TV appearances.
Darn, he’s getting good at this!
CTV National Affairs
European Central Bank Leveraged Like Lehman: Author
Obviously neither the author nor CNBC understands the fundamental difference between the issuer of the euro and the users of euro.
In fact, the ECB as per the treaty has no capital requirement, nor does it have any particular use for capital.
However, a general belief has been expressed by various higher ups to the effect that negative ECB capital would somehow be inflationary, and therefore the current imperative for the ECB to have sufficient capital, whatever that means.
So the presumption is any losses the ECB realizes will be ‘matched’ by capital calls to the member nations. Hence the reluctance by the ECB to give Greece, for example, any discounts on the Greek bonds in the ECB’s porfolio.
European Central Bank Leveraged Like Lehman: Author
By Patrick Allen
May 10 (CNBC) — The European Central Bank is indebted to the hilt and is beginning to look like one of the banks it has done so much to save, according to author Satyajit Das.
Having subsidized the European banking industry with its 1 trillion euro ($1.29 trillion) long-term refinancing operation (LTRO), funds that were distributed at well below market prices, the central bank is leveraged to levels Bear Stearns and Lehman Brothers might have felt comfortable with in early 2007.
“If the European Financial Stability Fund was a collateralized debt obligation, the ECB increasingly resembles a highly leveraged bank. The ECB balance sheet is now around euro 3 trillion, an increase of about 30 percent just since Mario Draghi took office in November 2012,” said Das in notes sent to CNBC before an interview on “Squawk Box Europe” on Thursday.