Feed aggregator

The one TBTF "bank" which unabashedly admits it is just a taxpayer backstopped hedge fund printing money for its owners (while supervising the NY Fed and all other central banks with various former employees in charge) with no actual lending or depository operations, Goldman Sachs, just hit it out of the park, when moments ago it reported Q1 earnings that smashed both top and bottom-line expectations, with revenues of $10.62 billion, up 13.8% from last year, and EPS of $6.00 printing far above the expected $9.31bn and $4.26. This was the best revenue generating quarter for Goldman since Q1 2011, or in four years. 

The breakdown by product line was impressive, with ever single revenue vertical posting Y/Y increases, with FICC's 10% increase resulting in the best quarter for the all important (and most profitable for the quarter) group since Q1 2013. Investment banking also rose 7% courtesy of an M&A and bond underwriting spree which usually see Goldman at the top (like today's Virtu IPO for example; the same Virtu Goldman bashed indirectly via Michael Lewis' book).

The full breakdown is below.


And since this is Goldman, if you generate money for the firm, you make money:

The accrual for compensation and benefits expenses (including salaries, estimated year-end discretionary compensation, amortization of equity awards and other items such as benefits) was $4.46 billion for the first quarter of 2015, 11% higher than the first quarter of 2014. This increase reflected an increase in net revenues, partially offset by a decline in the ratio of compensation and benefits to net revenues from 43.0% for the first quarter of 2014 to 42.0% for the first quarter of 2015. 

Most notably, Goldman remains the only TBTF to hire employees quarter after quarter: "Total staff increased 1% during the first quarter of 2015." Total employees at the end of Q1 rose to 34,400 from 34,000 a quarter ago and 32,600 a year ago.

Finally, those wondering how much the average Goldman employee is getting paid all-in, the answer as of Q1, was $381,948.

  • Euro zone bond yields sink to historic lows (Reuters)
  • Clinton Foundation to Keep Foreign Donors (WSJ)
  • Russia says U.S. forced it to act on Ukraine (Reuters)
  • Bankers to China's Rescue (BBG)
  • Saudi Arabia Adds Half a Bakken to Global Oil Market in a Month (BBG)
  • Valuations of Hong Kong's stock market operator go interstellar (Reuters)
  • Switzerland Attracts Fewer Firms as Politics Hurt Business Image (BBG)
  • NY settles suit against Ernst & Young over Lehman audit (AP)
  • Judge Rules GM Can Keep Its Bankruptcy Shield (WSJ)
  • The Oil Industry’s ‘Man Camps’ Are Dying (BBG)
  • 3 Big I.P.O.s Could End Slow Start for ’15 Debuts (NYT)
  • Double Mystery of BOJ Stock Rally Boosting Japan’s Megabanks (BBG)
  • Coffee Farmers Are Hurt by Single-Serving Pods Revolution in U.S. (BBG)
  • America’s Most-Wanted Swiss Bankers Aren’t Hard to Find (BBG)


Overnight Media Digest


* The European Commission took direct aim at Google Inc , charging the Internet-search giant with skewing results to favor its comparison-shopping service. But the formal complaint may only be the opening salvo in a broader assault that prompts big changes at Google. (http://on.wsj.com/1IKEk2N)

* A federal judge ruled General Motors Co can keep its bankruptcy shield, which allows it to block potentially billions of dollars in legal claims by hundreds of customers seeking damages over a defective ignition switch. (http://on.wsj.com/1H8ZpSl)

* The initial public offering of Virtu Financial Inc will gauge how investors view a firm that has been at the center of controversy around computerized trading. Virtu is set to start trading Thursday, after pricing its shares at $19 each. (http://on.wsj.com/1yxaQCd)

* The Clinton Foundation board has decided to continue accepting donations from foreign governments, primarily from six countries, even though Hillary Clinton is running for president, a summary of the new policy to be released Thursday shows.(http://on.wsj.com/1aXhu9F)

* Relationship Science LLC hired a new chief executive and raised a new funding round as it retools in search of faster growth. Jon Robson, a veteran of NYSE Euronext and Thomson Reuters Corp, has joined the company as CEO. (http://on.wsj.com/1ayzsPf)



After filing formal antitrust charges against search giant Google Inc, the European Union is upping the ante against companies it suspects of indulging in anti-competitive behaviour. EU officials said the charge sheet is ready against Russian gas exporter Gazprom.

Adultery website AshleyMadison.com plans to list itself on the London stock market to generate about $200 million that it says will help fuel its expansion into "the international market of adultery". The company values itself at $1 billion.

Guy Hands owned European private equity firm Terra Firma has launched a bid for struggling gym operator LA Fitness, countering rival offers from Pure Gym and Fitness First. Last year, LA Fitness sold 33 gyms to Mike Ashley's Sports Direct while the remainder of its 43 gyms, which are located in London and the southeast, are up for sale.

Accounting firm Ernst & Young will pay $10 million to settle a New York lawsuit that accused it of helping Lehman Brothers hide its precarious financial situation in the run-up to the 2008 global financial meltdown.



* The European Union is accusing Google Inc of abusing its dominance, and Microsoft Corp has links with the three initial complainants that sparked the antitrust investigation. (http://nyti.ms/1GMEhCZ)

* For political activists anticipating the 2016 U.S. presidential race, the minimum wage fight - and the challenge it poses to system they view as favoring the wealthy - is occurring at a potentially pivotal time. (http://nyti.ms/1E487lV)

* A federal bankruptcy judge ruled that General Motors , which emerged from bankruptcy in 2009, is not liable for accidents tied to the defect that occurred before that time. (http://nyti.ms/1GMFomd)

* As increases in oil stockpiles slowed in the United States, the price of West Texas Intermediate crude jumped 5 percent. But analysts remain unsure where oil pricing is headed. (http://nyti.ms/1FVnoDb)

* President Obama's removal of Cuba from the list of state sponsors of terrorism goes only a short way to reconnecting American businesses with Cuba, experts said. (http://nyti.ms/1H9OrfD)

* Investors flocked to initial public offerings by Etsy Inc , Party City Holdco Inc and Virtu Financial Inc , reflecting what analysts and deal makers say is a continuing appetite despite a lull in early 2015. (http://nyti.ms/1DlfNNj)




** Indian Prime Minister Narendra Modi used a speech in front of nearly 10,000 Indo-Canadians in Toronto on Wednesday night to tout his achievements since becoming India's leader and promise that his country would overcome corruption and poverty. (http://bit.ly/1CR5qNA)

** Toyota Motor Corp will invest hundreds of millions of dollars to replace Corolla production that is being shifted to Mexico and to upgrade its Canadian factories for a new system to assemble vehicles, the president of the company's Canadian manufacturing arm says. (http://bit.ly/1INY9X3)


** The Bank of Canada acknowledged Wednesday the country's output was flat-lining for most - if not all - of the first quarter, given that the fallout from the crash in crude appears to have been more "front loaded" than predicted just a few months.

For the central bank's policymakers, this will mean staying the course for now at current ultra-low interest rates and assessing the impact of still-low oil costs along the way. (http://bit.ly/1yv65sM)

** The numbers certainly aren't mind-blowing on Cameco Corp's five-year agreement to provide 7.1 million pounds of uranium to India through 2020. The deal is only estimated to be worth $350 million and it's small when you consider that the Saskatchewan-based miner sells about 33 million pounds of uranium annually. (http://bit.ly/1FWkXQT)

** Planned fee hikes at Canada's "quasi-monopoly" securities clearing and settlement system could drive the Ontario Financing Authority, a Crown agency that handles debt issues and risk management for the province, to take business outside the country. (http://bit.ly/1IhpoG0)




- China's regulators will encourage internet companies to expand into capital markets by loosening restrictions that regulate admission into the market and helping companies raise funds, said Zhang Yujun, assistant chairman at China's Securities Regulatory Commission.


- Wanda Group Chairman Wang Jianling said the group's internet finance products, including funds and insurance, will be released next month.


- Nuclear power projects such as "Hualong 1," a home-grown "third generation" reactor that China approved on Wednesday, are a part of China's plan to stabilise the economy, said Premier Li Keqiang, according to the newspaper.


- Land prices rose slightly in 105 Chinese cities between 2014 and the first quarter of 2015, data from the Ministry of Land and Resources indicated. Land prices rose 0.55 percent in the first quarter of 2015, down 0.39 percent from the previous quarter.


- The Asian Infrastructure Investment Bank (AIIB) will complement existing international financial institutions since the Asian Development Bank and World Bank do not focus on infrastructure construction, an editorial in the newspaper said.


- China's economy is expected to stabilise in the second half around July, said Fan Jianping, chief economist at the State Information Center.



The Times


UKIP published an independent audit of their policy costs alongside their manifesto yesterday morning in a bid to project an image of fiscal responsibility. Nigel Farage promised an 18 billion pounds ($26.77 billion) tax giveaway as he said UKIP was "leading the charge for a low tax revolution."(http://thetim.es/1DkohEr)


Brussels has signalled that it is ready for a protracted fight with Google Inc after levelling its first formal charges against the internet giant and indicating that there would be more to come. The European Commission accused Google yesterday of cheating consumers and abusing its dominance of internet searches by displaying its own shopping comparison service, Google Shopping, more prominently in search results than rival services.(http://thetim.es/1PPLh4L)

The Guardian


Britain's next government will face a tougher time than expected reducing Whitehall's annual spending deficit, according to the International Monetary Fund, which said lower tax receipts and uncertainty surrounding the election would undermine growth forecasts.(http://bit.ly/1PPPZ2p)


Tesco Plc is close to ridding itself of a fleet of corporate jets that came to symbolise the strategic missteps at Britain's biggest retailer, with the final aircraft set to be handed back next month. The supermarket group has sold or returned four of the five planes it had last autumn, including the Gulfstream jet used by Philip Clarke, the former chief executive who was ousted in July.(http://bit.ly/1PPT0jc)

The Telegraph


Ed Miliband's most senior adviser, David Axelrod, pays no tax on his reported 300,000 pounds ($446,100) earnings in Britain, The Telegraph has learned. Axelrod, a former adviser to Barack Obama, admitted that he is not resident for tax purposes in the UK.(http://bit.ly/1PPUie3)


J Sainsbury is planning to convert shop space equivalent to almost 40 supermarkets from selling food into non-food as it tries to fight back against a fall in grocery sales. Sainsbury's intends to use half of this space to sell its collection of own-brand non-food products, such as kitchenware and homeware.(http://bit.ly/1Dkxnkg)

Sky News


The World Health Organisation is urging survivors of the virus to practise safe sex "until further notice" after traces of Ebola were found in the semen of a man who had been given the all-clear six months earlier.(http://bit.ly/1PPVzBV)


The president of the European Central Bank was interrupted at a news conference by a protester shouting "end ECB dictatorship". Mario Draghi was outlining the bank's latest monetary policy thinking when a lone woman jumped onto the desk above Draghi and showered him with items including what looked like confetti and sheets of paper.(http://bit.ly/1PPVUEv)

The Independent


Nick Clegg could give David Cameron the go-ahead to hold an in/out EU referendum in post-election talks on another coalition, but in return would demand the Conservatives scrap their planned 12 billion pounds ($17.84 billion) of welfare cuts.(http://ind.pn/1PPWWAz)


Just as the S&P appeared set to blast off to a forward GAAP PE > 21.0x, here comes Greece and drags it back down to a far more somber 20.0x. The catalyst this time is an FT article according to which officials of now openly insolvent Greece have made an informal approach to the International Monetary Fund to delay repayments of loans to the international lender, but were told that no rescheduling was possible.  The result if a drop in not only US equity futures which are down 8 points at last check, but also yields across the board with the German 10Y Bund now just single basis points above 0.00% (the German 9Y is now < 0), on its way to -0.20% at which point it will lead to a very awkward "crossing the streams" moment for the ECB.

Oil is lower as well because also overnight we learned that the recent surge in crude prices is precisely what Saudi Arabia wanted to boost production to a new record high. with March production up another 659k b/d to 10.29m b/d (a fresh all time high) amid slower growth forecast for non-OPEC supply and better global demand outlook, OPEC says in its monthly Oil Market Report. "Higher global refinery runs, driven by increased seasonal demand, along with the improvement in refinery margins, are likely to increase demand for crude over the coming months." And the Saudis will do everything in their power power to paint the streets black... and slick.

As a result, European equities entered negative territory with the DAX earlier breaking below yesterday's low as ECB positions are unwound and concerns surrounding Greece continue to linger with discussions between Greece and the IMF set to begin today. The ongoing uncertainty has resulted in the short end of the Greek yield curve to climb, with 3y and 5yr yields both surging over 100bps. Furthermore, S&P downgraded Greece’s credit ratings to CCC+ from B-; outlook negative, while German Finance Minister Schaeuble downplayed expectations for a breakthrough in Greek/Eurogroup negotiations by saying ‘nobody expects that there will be a solution.

Shortly after the Eurex open flows were seen into fixed income and Bund futures caught a mild bid which led to the German 10y and 30y yield fell below 0.1% and 0.5% respectively for the first time in history, meanwhile UST’s trade slightly higher tracking its German counterpart.

Asian investors had no Greek headlines, or fundamentals to worry about, and as a result Asian stocks mostly rose led by energy stocks following yesterday’s rally across the energy complex. Shanghai Comp (+2.7%) outperformed after peaking near its 7yr highs, as yesterday’s declines and continued easing speculation triggered a round of fresh buying. Hang Seng (+0.4%) also rose after erasing earlier losses bolstered by a rally across railway stocks. Nikkei 225 (+0.1%) was the session’s laggard weighed on by a strong JPY, strengthening the most this month against the greenback.

In FX markets, the USD-index has begun to retrace some of yesterdays’ US Empire & Industrial Production inspired losses which has weighed on the EUR, with EUR/GBP breaking back below the low printed yesterday at 0.7167. Elsewhere, GBP/USD trades steady with attention turning to tonight’s UK Election debate which will be close watched as the market looks to observe any impact on the latest election polls. AUD strengthened the most in 3-weeks and outperforms its major pairs in the wake of a stellar Australian employment report, which prompted participants to pare May RBA rate cut calls. Unemployment rate fell to a 3-month low as the participation rate rose to an 8-month high, with the headline reading more than double expectations (37.7k vs. Exp. 15.0k (Prev. 15.6k, Rev. 42.0k). As such, markets are now pricing in a 56% chance of a 25bps May RBA rate cut vs. 74% prior to the report.

In the energy complex, WTI and Brent crude futures are unable to hold onto the gains seen after the DoE and API crude inventories data with overnight comments from the Iraqi oil minister Mehdi stating that oil exports should reach a record 3.1mln bpd in April as output from the country's southern fields stays strong and weather conditions improve. In precious metal markets, spot gold trade firmer above the USD 1200/oz level as yesterdays’ lacklustre US data continues to add to the risk off sentiment observed in the market.

In summary: European shares fall, though are off intraday lows, with the media and chemicals sectors underperforming and autos, resources outperforming. European car sales rose 11% in March. The Spanish and German markets are the worst-performing larger bourses, the Dutch the best. The euro is weaker against the dollar. German 10yr bond yields fall; Greek yields increase. Commodities decline, with natural gas, Brent crude underperforming and copper outperforming. U.S. jobless claims, continuing claims, Bloomberg consumer comfort, Bloomberg economic expectations, Philadelphia Fed index, housing starts, building permits due later.

Market Wrap

  • S&P 500 futures little changed at 2099
  • Stoxx 600 down 0.2% to 413.2
  • US 10Yr yield up 0bps to 1.89%
  • German 10Yr yield down 2bps to 0.09%
  • MSCI Asia Pacific up 1.1% to 154.3
  • Gold spot up 0.2% to $1205.6/oz
  • Eurostoxx 50 -0.6%, FTSE 100 -0.1%, CAC 40 -0.2%, DAX -0.7%, IBEX -0.8%, FTSEMIB -0.3%, SMI +0%
  • Asian stocks rise with the Shanghai Composite outperforming and the Sensex underperforming.
  • MSCI Asia Pacific up 1.1% to 154.3; Nikkei 225 up 0.1%, Hang Seng up 0.4%, Kospi up 0.9%, Shanghai Composite up 2.7%, ASX up 0.7%, Sensex down 0.7%
  • Euro down 0.43% to $1.0638
  • Dollar Index up 0.3% to 98.62
  • Italian 10Yr yield up 4bps to 1.3%
  • Spanish 10Yr yield up 3bps to 1.3%
  • French 10Yr yield down 2bps to 0.34%
    S&P GSCI Index down 0.2% to 429.8
  • Brent Futures down 1% to $62.7/bbl, WTI Futures down 0.7% to $56/bbl
  • LME 3m Copper up 1.2% to $6029/MT
  • LME 3m Nickel up 0.9% to $12790/MT
  • Wheat futures up 0.1% to 489.3 USd/bu

Bulletin Headline Summary from Bloomberg and RanSquawk

  • European equities reside in negative territory and German 10yr and 30yr yields print fresh record lows as the 10y yield falls below 0.1%
  • Looking ahead, sees the release of US Initial Jobless Claims, Housing Starts, Building Permits, Philadelphia Fed Business Outlook, EIA NatGas storage change, UK party elections debate as well as a loaded speaker slate featuring the likes of Fed’s Lacker, Lockhart, Mester, Rosengren and Fisher
  • Treasuries steady overnight as 10Y yields of Germany, France, Belgium, Netherlands, Austria, Finland and Ireland declined to record lows yday and French 30Y yield fell below 1% for first time.
  • The average yield on German government debt dropped below zero for the first time, an indicator of how the ECB’s bond-buying program has made the previously unthinkable a reality
  • For Norway’s $890 billion sovereign-wealth fund, the investment risks stemming from monetary policy have never been greater
  • U.K. bond investors have bigger concerns than who wins the election on May 7, with the past five years showing that central bankers, not politicians, hold power for financial markets
  • Ben Bernanke will become a senior adviser to the Citadel Investment Group, he will offer his analysis of global economic and financial issues and meet with investors
  • Fed will only know demand for its O/N RRP facility once it starts to move away from the zero bound; usage could stay steady or be “much greater than what we’ve seen at higher levels of interest rates,” Simon Potter, executive vice president at the New York Fed, said in speech
  • Sovereign bond yields mixed with Greek 10Y yields rising 77bps. Asian stocks rise, European equities drop, U.S. equity-index futures fall. Crude oil drops, copper and gold higher

US Event Calendar

  • 8:30am: Housing Starts, March, est. 1.040m (prior 897k)
  • Housing Starts m/m, March, est. 15.9% (prior -17%)
  • Building Permits, March, est. 1.081m (prior 1.092m, revised 1.102m)
  • Building Permits m/m, March, est. -1.9% (prior 3%, revised 4%)
  • 8:30am: Initial Jobless Claims, April 11, est. 280k (prior 281k)
  • Continuing Claims, April 4, est. 2.323m (prior 2.304m)
  • 10:00am: Philadelphia Fed Business Outlook, April, est. 6.0 (prior 5)

Central Banks

  • G-20 Finance Ministers, Central Bankers meet in Washington
  • 1:00pm: Fed’s Lockhart speaks in West Palm Beach, Fla.
  • 1:10pm: Fed’s Mester speaks in New York
  • 1:30pm: Fed’s Rosengren speaks in London
  • 3:00pm: Fed’s Fisher speaks in Washington

DB's Jim Reid concludes the overnight recap

In our 2013 long-term study "A Nominal Problem" we highlighted how one of the biggest concerns facing the global economy was how low Nominal GDP was relative to the past. Well this problem has intensified across most of the world over the last couple of quarters and China is a prime example. In the pdf today we show that Chinese NGDP is back down (5.7%) to within 0.1% of where it was at the lows in Q1 2009. While QE and ZIRP around the world is clearly keeping the 'plates spinning' successfully in terms of financial markets, policy is being less successful in promoting growth (real or nominal). This is important as the longer NGDP stays low the longer extremely high debt burdens will remain and even increase and the more vulnerable the economy stays to an outside shock. China's low NGDP also must have an impact on their external demand which in turn impacts the rest of the globe. So difficult times still for growth but perhaps allowing more financial market stimulus ahead.

Our Chinese economist Zhiwei Zhang also highlights how outside of the main releases, other non-mainstream numbers such as electricity production growth dropped to -0.1% yoy (Jan-Feb: 1.9%, 2014: 3.2%). Elsewhere cement output growth dropped to -20.5% (Jan-Feb: 11.2%, 2014: 1.8%) and the number of migrant workers dropped 3.6% yoy in Jan-Feb. Zhiwei maintains his view that China faces the risks of a mini-hardlanding, and the government will have to loosen policies significantly in Q2 to stabilize growth. He now expects three more RRR cuts in the rest of this year, with two in Q2 and one in Q3. They also continue to expect one interest rate cut in Q2, but see the possibility of more cuts in H2 should the economic growth continue to disappoint.

The Shanghai Comp and CSI 300 are rebounding +1.95% and +2.33% this morning respectively, no doubt helped by stimulus hopes after the poor data. Elsewhere, the Nikkei (-0.19%) is lower and the Hang Seng (+0.20%) is a touch higher. The ASX (+0.55%) is higher after Australia reported better than expected employment data.

Staying with stimulus the ECB reiterated that they see no imminent problems in sourcing bonds in their QE program and continue to expect it to be ongoing until inflation shows clear signs of meeting their objectives. In response the 10 year bund countdown to zero hit a new landmark as it dropped another 3bps to trade at 0.105% yesterday. Other Euro Govt bond yields dropped broadly similar amounts with the peripheral generally slightly out-performing as 10y yields in Spain (-2.9ps), Italy (-4.7bps) and Portugal (-5.2bps) dropped to 1.257%, 1.256% and 1.686% respectively.

Draghi’s comments certainly helped the better tone in markets yesterday, however it was a rally in oil markets which again provided much of the direction for risk assets and helped offset more soft data out of the US and more negative comments out of Greece, which we’ll come to shortly. Indeed, the S&P 500 (+0.51%) and Dow (+0.42%) both rose for the second consecutive day as energy stocks (+2.30%) rallied in line with a rise for WTI (+5.82%) and Brent (+5.87%). The rally in WTI in fact to $56.39/bbl marked the highs for 2015 so far, with the price now over $10 off the 6-year lows we saw roughly a month ago. The latest bounce appears to be as a result of the latest EIA data showing crude supplies increasing last week at the slowest pace since January.

Greece was the other notable headliner yesterday as comments from German Finance Minister Schaeuble in particular attracted attention. Having downplayed earlier reports in German press Die Zeit that the German government was working on a plan to keep Greece in the Euro-area if the country defaulted, Schaeuble went on to say that ‘no one’ expects a solution for Greece at the Eurogroup meeting next Friday and that the current government in place has ‘destroyed’ previous progress. Data released yesterday also showed that Greece missed its +1.5% budget surplus target for 2014 after posting +0.4%. S&P became the latest credit agency to act, downgrading Greece one notch to CCC+ (negative outlook).

Back to markets, Treasuries were fairly unmoved for the most part yesterday as the benchmark 10y yield in particular traded in a tight range before eventually closing a basis point tighter at 1.889%. The Dollar was weaker meanwhile as the DXY closed 0.40% lower. Yesterday’s data did little to help. In particular, the April print for the NY Fed empire manufacturing (-1.19 vs. +7.17 expected) was a significant miss - dragged down by new orders in particular – and more or less in line with the 18 month low seen back in December. Industrial production (-0.6% mom vs. -0.3% expected) was also soft having fallen more than expected for the biggest fall since August 2012. Manufacturing production makes for modestly better reading however with the +0.1% mom reading in line and up from (-0.2%) last month. Elsewhere, the NAHB housing market index rose 3pts to 56 and capacity utilization was more or less in line (78.4% vs. 78.6% expected)

There was little to surprise markets following the release of the Fed’s Beige book yesterday. The release showed that the economy grew at a ‘modest’ or ‘moderate’ pace in eight of the twelve regions from Mid February to end March. References to a harsh winter was unsurprisingly a theme, which, combined with a stronger Dollar and falling oil prices was blamed as the cause for weakening activity. Labour markets were said to be ‘stable or continued to improve modestly’ however the Districts reported only ‘modest’ upward wage pressure. On the subject of the Fed, St Louis Fed President Bullard (non-voter) was vocal again yesterday, this time highlighting the risk of asset price bubbles should rates be left near zero for too long.

Before we move on, a WSJ article out late last night caught our eye. In it, former Fed Chair Bernanke was quoted as saying that the control of monetary policy ‘might be more, rather than less effective’ should the Fed move away from the target Fed Funds rate and instead focus on the repo rate in a bid to maintain a larger balance sheet than before the crisis. Bernanke highlighted that the fed funds market is ‘small and idiosyncratic’ and noted that regulatory action should help ease wariness around reverse repo programs.

Moving on, as well as the strength in bond yields in Europe yesterday, equities also maintained their strong run as the Stoxx 600 (+0.57%) recorded a fresh record high while the DAX (+0.03%,) CAC (+0.70%), IBEX (+0.63%) and FTSE MIB (+1.17%) all finished higher. Despite a brief hold up from the invasion of a protestor, Draghi’s comments that there is ‘clear evidence that the monetary policy measures that we’ve put in place are effective’ and that ‘we expect the economic recovery to broaden and strengthen gradually’ certainly helped support confidence in markets. Elsewhere, the final March inflation reading out of Germany was unchanged at +0.3% yoy, while France stayed in deflation mode after its -0.1% yoy reading came in a touch below expectations of 0.0%.

The IMF’s Global Financial Stability Report was also released yesterday. In it, IMF Director Vinals warned of a ‘super taper tantrum’ and rising bond yields in the face of a first rate rise from the Fed. The report suggested that a 100bps rise in 10y Treasuries was ‘quite conceivable’ upon a move by the Fed, while ‘shifts of this magnitude can generate negative shocks globally, especially in emerging market economies’.

Looking at today’s calendar, it’s quiet in the European timezone this morning with no significant releases due out. Focus will again be on the US data where we get housing starts, building permits, initial jobless claims and the Philadelphia Fed business outlook. It’s a busy day for Fed commentary also where we have Lacker, Lockhart, Mester and Fischer all due to speak. Earnings season will of course remain a focus as well with Goldman Sachs, Citigroup and Schlumbeger due to report – an interesting contrast between the financial and energy space

Several years ago, Zero Hedge first, and to our knowledge only, reported that when it comes to unofficially executing trades in the equity market the NY Fed - through a slightly more than arms-length arrangement - does so using Chicago HFT powerhouse Citadel. In other words, while Citadel was instrumental in preserving the smooth, diagonal ramp in stocks since 2009 and igniting upward momentum just as everyone else stared to sell when the Markets Group of the NY Fed called, it was also paid handsomely: after all, nobody checks the Fed's broker commission statement. In fact according to some, indirect Fed compensation to what is the world's most leveraged hedge fund has been in the billions over the past decade.

Well, now it's payback time, and as the NYT reported overnight, the Brookings Institution's favorite blogger, former Fed Chairman Ben Bernanke, has joined none other than Citadel as an advisor.

According to the NYT, "while Mr. Bernanke will remain a full-time fellow at the Brookings Institution, the new role represents his first somewhat regular job in the private sector since stepping down as Fed chairman in January 2014.  His role at Citadel was negotiated by Robert Barnett, the Washington superlawyer who also negotiated a deal for his book, “The Courage to Act,” which Mr. Bernanke recently submitted to his editor and will be published in October."

From the NYT:

Mr. Bernanke will become a senior adviser to the Citadel Investment Group, the $25 billion hedge fund founded by the billionaire Kenneth C. Griffin. He will offer his analysis of global economic and financial issues to Citadel’s investment committees. He will also meet with Citadel’s investors around the globe.


It is the latest and most prominent move by a Washington insider through the revolving door into the financial industry. Investors are increasingly looking for guidance on how to navigate an uncertain economic environment in the aftermath of the financial crisis and are willing to pay top dollar to former officials like Mr. Bernanke.


Mr. Bernanke joins a long parade of colleagues and peers to Wall Street and investment firms. After stepping down, Mr. Bernanke’s predecessor, Alan Greenspan, was recruited as a consultant for Deutsche Bank, the bond investment firm Pacific Investment Management Company and the hedge fund Paulson & Company.

There is one difference: while Greenspan was brought on to share his wrong macro opinions with entities that at least had macro exposure on paper, all Citadel does is HFT after repeated, failed attempts to engage in various other investment banking verticals. That, and of course massively frontrunning retail orderflow. As such, with Bernanke's move one can finally see the unholy nexus of central banks and HFT algos in precisely the light we have described it since 2009: central banks manipulating markets from the top, HFTs manipulating markets from the bottom.

Oh, and did we mention Citadel is the world's most levered hedge fund on a regulatory basis? That's because it is.

In any event, it's payday for Ben, who must have quickly realized there isn't much money to be made in blogging.

While Mr. Bernanke declined to disclose his compensation, he said he would be paid an annual fee but would not own a stake in the firm or receive a bonus based on its performance. His arrangement with Citadel is not exclusive, so he could take on other consulting roles. Mr. Bernanke said that he could not determine exactly how much time he expected to devote to Citadel.


He added that he did not consider himself an investor; he plans to offer Citadel his perspective on monetary issues and other matters of public policy that Citadel will use as “inputs” into its investment decisions.


“I was looking for an opportunity to use my skills and knowledge,” he said. “This is an interesting firm.”


In a statement, Mr. Griffin said: “We are honored to welcome Dr. Bernanke to Citadel. He has extraordinary knowledge of the global economy and his insights on monetary policy and the capital markets will be extremely valuable to our team and to our investors.”

To summarize: a day after the NY Fed itself revealed it is opening a "back-up" trading floor in Chicago ("in case of a disaster or other eventuality") to be closer to the HFTs, Ben Bernanke himself is joining the most prominent HFT there is (also in Chicago). Just in case there was still any doubt who runs the "markets."

Citigroup Inc (NYSE: C) is estimated to report its Q1 earnings ...

Full story available on Benzinga.com


................Written independantly by Jeff Nielson (click for original)





April 15, 2015

Having written for several years about precious metals, the massive threat to our financial security (from our own financial institutions), and why gold and silver represent our best protection from that threat; it’s easy to forget that there are readers who are new to this sector. For those readers; it is necessary to review the fundamentals of supply and demand.



However, even regular readers and knowledgeable investors in this sector could likely benefit from such a review, although for entirely different reasons. After nearly four, solid years of extreme, unremitting downward manipulation of prices for gold and silver; it is easy for such readers/investors to forget (or simply lose confidence in the fact) that the dramatic, upward revision of gold and silver prices is both a necessary and imminent event.



Why is such a discussion necessary for newer readers? Because explaining to these readers how gold and silver are our financial shields against the systemic financial crimes directed against us is less-than-effective if those same readers don’t also know why precious metals currently fulfill such a function (and have always done so). It all starts with supply and demand.



For new readers previously only exposed to the pseudo-analysis of the mainstream media; supply/demand analysis will be totally alien. They are used to an exclusive diet of price analysis from the drones of the Corporate media. In the real world, however, that price analysis is utterly devoid of any validity or significance whatsoever, while only supply/demand analysis yields objective and unequivocal conclusions.



It is beyond the scope of this commentary to explain to new readers why price analysis is absolutely flawed, and thus totally devoid of all legitimacy. That is a separate subject on its own, and readers seeking understanding on this point will have to refer to a previous commentary specifically on that topic. This piece will explain why supply/demand analysis is irrefutable, at least with respect to the markets for all hard assets.



The Law of Supply and Demand is best illustrated by applying this conceptual framework to a specific (hypothetical) example, in this case the market for chocolate bars. As with any market, and any industry engaged in manufacturing; there are basic fundamentals which apply to the production of all goods.



The goods producer requires “inputs”, generally broken down into three categories: infrastructure, raw materials, and labour. These inputs all represent necessary and unavoidable costs, thus to produce a chocolate bar (or any other good) requires that purchasers meet (or exceed) a minimum price for that good. That minimum price must not only cover the full cost of production, but also generate at least some modest level of profit.



Why is “profit” necessary (in our capitalist economies)? Because that profit attracts the capital which is necessary to fund the reinvestment which is required to sustain any industry. Equipment wears out, over time, and must be replaced. Improvements in technology (intended to increase efficiency) require further investments – generally substantial ones.



In the case of non-renewable resources like gold and silver; massive reinvestment (of profits) is required to find new bodies of ore to mine, to replace the ore-bodies (and mines) which have been depleted through previous operations. Any long-term price for these metals which is below the full cost of production (plus necessary margin of profit) is not sustainable, and thus below the “minimum price”.



What happens when any good is priced below that minimum price? To answer that question; we merely refer back to our hypothetical example. Suppose that (one way or another) the “global price” for chocolate bars was manipulated down to 10 cents apiece, the normal price for a chocolate bar roughly 40 years ago.



The Law of Supply and Demand tells us exactly what would happen. With chocolate bars priced at this tremendous discount; there would be an explosion in demand, as buyers could obtain ten chocolate bars with the same dollar which used to only have sufficient purchasing-power to buy one. Meanwhile, as demand for chocolate bars exploded; the supply of chocolate bars would collapse. Today, no company could come close to covering their production costs at such an enormous discount (let alone make the necessary profit), and chocolate bar manufacturers would be forced to suspend production.



Very quickly; all of the store shelves (i.e. the global inventory) would be cleaned-out of all chocolate bars. That would leave only the remaining stockpile of chocolate bars — i.e. those chocolate bars still owned by various entities, but not yet eaten. The first and most obvious point is that none of these chocolate bar-holders would be willing to sell from their own stockpile at the heavily-discounted price of 10 cents apiece.



Irrespective of any previous price-manipulation; the real-world price for chocolate bars would rise (and rise dramatically), to whatever price was necessary to get a holder to part with a good which was currently not available for sale, and thus could not be replaced once sold. That (real-world) price for chocolate bars would continue to rise until…?

The price would rise until it was high enough to justify producers returning to this industry, and resuming production. Equally important; this “new price” for chocolate bars would not only have to be equal to the “old price” (the original, minimum price), it would have to be higher than that – at least over some shorter term.



There are two reasons for this. First of all; there would be a certain amount of lag-time between the time that the price of chocolate bars reached its (new) “minimum price” and actual, new production could reach store shelves. In the interim; anyone wanting to buy a chocolate bar would have to pay a significantly higher price than the Old (minimum) Price.



The second reason why the New (minimum) Price would have to be higher is risk and loss. Having already been driven out of business once; the producers returning to this market would only resume production once the New Price for chocolate bars had significantly exceeded the Old Price, to compensate for past losses and future risk.



To begin with; these returning businesses would have suffered financial losses from being previously forced to suspend production, and would seek to recover those losses through a higher New Price, their new “minimum price”. The New Price would also have to be higher to compensate these producers for perceived risk: the risk of being driven out of business again through price-manipulation (“once burned, twice shy”).



The important point to make here to newer readers is that this hypothetical example involving chocolate bars mirrors the fundamentals (and price-manipulation) currently taking place in the precious metals sector, in the real world. The prices for gold and silver have been manipulated below their minimum price. Producers have been driven out of business.



Demand does (greatly) exceed supply. The complete collapse of inventories of gold and silver is imminent. Thus a dramatic, upward revision of gold and silver prices is inevitable, and that new minimum price for gold and silver will be higher than the old minimum price. Naturally, the question on the minds of readers (old and new, alike) is “how high”?



Complicating the answer to this question, tremendously, is the medium of exchange which we still use (temporarily) to price all of our goods: the debauched and fraudulent paper currencies of the Western world. How rapidly is this debauched paper losing even its perceived value? A decade ago; the world’s largest gold miners were generating large profit-margins with the price of gold at $500/oz (USD). Today, even the Corporate media acknowledges that:


“$1,300 is not a sustainable gold price.”


Pricing gold at even $1,300/oz (USD) more than 2 ½ times the price of a mere decade ago is now below the “minimum price”, which is why these same gold miners are now suffering ugly losses on their bottom-line, with the price of gold bobbing above/below $1,200 (USD).



With the price of gold below its minimum price, ipso facto the price of gold must rise, to whatever new minimum price is necessary to restore supply/demand equilibrium. This is with respect to the long-term minimum price. As previously explained; over the shorter term, the price must go even higher than that long-term minimum price. That is the Law of Supply and Demand, and it is immutable.



The Law of Supply and Demand dictates that the price of gold must rise to a price somewhere above $1,300/oz (USD), and to an even higher price than that over the shorter term. So; why have “experts” like Nouriel Roubini and Dennis Gartman, and (supposedly) prestigious financial institutions like Goldman Sachs asserted that the price of gold was going to $1,000/oz, “expert opinions” which have been echoed hundreds of times by the drones of the Corporate media in their Chicken Little reporting?



Logically, there are only two possibilities. Either none of these so-called experts is familiar with the Law of Supply and Demand (and one of them was awarded a Nobel Prize in economics), or; they were/are lying to us when they insisted the price of gold should fall far below its minimum price.



Based upon supply/demand fundamentals for precious metals, and the accelerating collapse in value in the West’s dying currencies (most-notably the U.S. dollar); what is a reasonable, new “minimum price” for gold and silver? The answer to that more-challenging question will be the subject for Part II.




................Written independantly by Jeff Nielson (click for original)

Some of the stocks that may grab investor focus today are:

Wall Street ...

Full story available on Benzinga.com

On March 19th, the NTMA issued EUR500 million worth of 6mo notes with a yield of -0.01%. With a few strokes of the 'buy' keys, the markets welcomed Ireland to the ever-expanding club of nations that enjoy the privilege of being paid to borrow from private investors.

The biggest star of today's ECB's press conference was not Mario Draghi but 21-year-old German feminist, Josephine Witt, an ex-Femen activist who jumped on Draghi's desk wearing an "ECB Dick-tatorship", a slogan she repeatedly screamed as she was led away by security guards. She threw paper copies of her demands at Mr Draghi, while showering him with confetti that were created from her finely chopped up manifesto.


As Nordea analyst Heidi Schauman wryly observed after the conference: "All those expecting an uneventful ECB press conference were so wrong."

Who is Josephine Witt and what is her message?

According to the Telegraph, "to gain access to the press conference, the ECB said Ms Witt "registered as a journalist for a news organisation she does not represent”. Ms Witt told The Telegraph that she ha d pretended to be working for Vice Media, knowing that they hire many young reporters. The central bank said that it is investigating the incident."

Ms Witt said she would continue to engage in "hardcore activism" in response to what she believed was an "undemocratic" ECB. She added that recent protests in Frankfurt during the opening of the ECB's new offices were a reaction to Mr Draghi's leadership. "[He] never got a mandate, never got voted for or elected," she said.


"He imposes policies on these societies that are completely undemocratic," she added. A friend of Ms Witt said she opposes what she describes as “European neo-liberalism”, and argued that the ECB cannot act “without a state of surveillance, of police and violence”.


The friend stated that Ms Witt wants “peace and happiness for our lives, for Greece, and for all countries around the Mediterranean sea.” Her aim is to introduce a new political order to replace the European Union, with “democracy, civil rights, solidarity, and no borders”, the friend said.

She criticized the ECB for believing itself to be “master of the universe”, warning that “you will hear our outcries louder, brighter, inside and outside your halls, everywhere, and you shall deserve no rest”. She nicknamed the letters "papillons", in reference to the messages distributed by French resistance fighters during the Second World War. Papillon is French for butterfly.

As can be read in her manifesto (below) she said: “I do not expect this illegitimate institution to hear my voice, neither to understand my message.” Making reference to her "butterflies" she continued: “Today I’m just a butterfly sending you a sentence, but be afraid more are coming.” The activist was dragged from the ECB’s press room and taken to a police station in Frankfurt. She claims she was held for around two-and-a-half hours before being released without charge.

She extensively documented her 15 minutes of fame on Twitter, which as of this moment had a total of only 33 tweets, the first of which is from February 25. The majority detail her intrusion into the Frankfurt bank's inner sanctum as follows:

I would say, the #ecb 's security service is just as good as putins... :) finally outside police station!

— Josephine Witt (@josephine_witt) April 15, 2015

The #confetti-attack was not a #femen protest, I'm sorry ladies. I consider myself a freelance-activist. #exfemen #ecb Free Riot!

— Josephine Witt (@josephine_witt) April 15, 2015

Take a look at this face! #confettigate #ecb We own our own lives! pic.twitter.com/VyIcM0FaLe

— Josephine Witt (@josephine_witt) April 15, 2015

the leaflet i printed out yesterday, just if anybody asks what i was throwing at #draghi at #ecb #confettigate today! pic.twitter.com/w3VrnWfKZR

— Josephine Witt (@josephine_witt) April 15, 2015

"Staff from ecb are investigating the incident." these sweet guys did not even have the key to the emergency exit... #ecb #confettigate

— Josephine Witt (@josephine_witt) April 15, 2015

they call him "the frog" #ecb-leaks #confettigate https://t.co/ahw7d1ApdG

— Josephine Witt (@josephine_witt) April 15, 2015

Thank you, for appreciation! Let's take back democracy! https://t.co/2xp6FcxYLQ

— Josephine Witt (@josephine_witt) April 15, 2015

That's one raise they did not expect. Fair enough, confetti is some scary shit... pic.twitter.com/nybp4X9u7j

— Josephine Witt (@josephine_witt) April 15, 2015

"we will find our radical answers
and act with no violence"
#ecb #butterfly #freeriot pic.twitter.com/fbSQ2zAS9h

— Josephine Witt (@josephine_witt) April 15, 2015

bring the action! https://t.co/mI2ArLCL4g

— Josephine Witt (@josephine_witt) April 15, 2015

And one more time: End the #ECB Dick-tatorship!
Good night, M.#Draghi pic.twitter.com/fVifJ10rXk

— Josephine Witt (@josephine_witt) April 15, 2015


This is her manifesto which she threw at Draghi while dumping confetti on him:

the leaflet i printed out yesterday, just if anybody asks what i was throwing at #draghi at #ecb #confettigate today! pic.twitter.com/w3VrnWfKZR

— Josephine Witt (@josephine_witt) April 15, 2015

A closer read:

We own our own lives -

and in the face of the overwhelmingly powerful external
environment of the ECB’s monetary police,
sometimes it’s hard to remember.


We own our own lives -
and they’re not the chips in the ECB’s gambling game,
not to be played with, not to be sold, not to be devastated.


We own our own lives!
-will be the outcry of those who face repression,
when we begin to see our poverty not as personal defeat or unchangeable destiny.


master of the universe,
I come to remind you that there is no god,
but there are people, behind those lives,
and if you rule instead of serving,
you will hear our outcries louder, brighter, inside and outside your halls, everywhere, and you shall deserve no rest.


And while the ECB can only persist in its autocratic hegemony, depending on states of surveillance and police,
finally, the daily violence is enrooted here,
we will find our radical answers
and act with no violence against those human disasters.


Because we will not accept the insane narrative that the ECB wants to impose to all people wherein even freedom of speech and dignity can be sold to the bank in order to survive. Persisting in its arrogance against the people, the ECB increases perilously its own debt to them. A press conference is not enough to call it "democracy".
I do not expect this illegitimate institution to hear my voice, neither to understand my message,
it would be too much to ask,
but I know for a fact that a lot of people do understand very well the matter.
Today I'm just a butterfly sending you a sentence, but be afraid more are coming. We will take back the power over our own lives.
The ECB’s debt is not yet paid.

Surprisingly coherent for a 21 year old.

At the end of the day one Mario Draghi was surely delighted that what the protester rained upon him today was soft and does not cause bodily harm. One can only hope confetti is the only thing that ever rains down on Draghi and other unelected central planners.

The following clip seemed to sum up perfectly just what The PBOC is attempting to do (and just exactly how it will end). With Chinese equities entirely decoupled from any sense of fundamentals, elementary-school-educated people piling their life savings into a market that is up 100% YoY amid the worst economic conditions in a decade or more, and margin trading that is surging (and now being probed - as Reuters reports, PBOC Shanghai has asked banks to check margin trading risks); how could anything go wrong?


There's this... fun-durr-mentals...


And then there's this...


Which was followed by this tonight (from Reuters)

The Shanghai branch of China's central bank has ordered commercial lenders to check for risks in their margin trading business, according to a memo obtained by Reuters.


The move comes after margin trading soared among brokerages, prompting regulators to clamp down on risky behaviour earlier this year.


The People's Bank of China (PBOC) ordered commercial banks to provide their margin trading accounts and a list of connected wealth management products (WMP), according to the document and two sources with direct knowledge. This was supposed to have been completed by the end of March.


As China's economy faces its slowest growth for a quarter-century this year, the country's banks made 1.18 trillion yuan worth of new loans in March, beating expectations as authorities ramped up efforts to dampen the impact of sluggish expansion.


In the second half of 2014, margin trading increased rapidly in Shanghai and Shenzhen, with data showing that banks are one of the main sources of margin finance funding, according to the memo. As a result, there was a need to ensure the business is transparent and control risks, it added.


The PBOC asked commercial banks to report risks and the measures that they will adopt to handle them.

Which made us think of this... So close and yet so far


"We got this... oh wait a minute... oops"

*  *  *

Deja Vu all over again?

By Dan Weil at Newsmax Former White House budget director David Stockman isn’t exactly jumping head over heels for Hillary Clinton’s presidential campaign. Her flaws: “she thinks war is peace; deficits don’t matter; the baby boom is entitled to the social insurance they didn’t earn; and that the Fed’s serial bubble machine is leading the…

Earlier today, we reported that Germany is preparing a contingency plan to deal with the fallout from a Greek default, the odds of which analysts are now putting at even money. According to Die Zeit, Berlin is looking at options to keep the Greek banking sector solvent (i.e. make sure there are still euros in the ATMs) even in the event Athens misses a payment to the IMF next month. Germany also indicated it was prepared to let Greece go should Tsipras, Varoufakis, and their merry band of Syriza socialist saviors be unwilling to adopt reforms in exchange for assistance to the banking sector. In the event the Greek government remains steadfast in its “where’s our money” approach to negotiations, Brussels will reportedly assist the country in transitioning back to the drachma. In the midst of the (continuing) drama, UBS is out with a new note which warns against adopting the idea that a Grexit would prove to be an isolated event. Here’s more:

Investors seem to have embraced the belief that if Greece were to walk away from the Euro, it would walk alone with minimum contagion to other countries. This belief is dangerous. UBS does not believe Greece will leave the Euro as our base case scenario. However, if Greece were to depart, there a distinct possibility that other countries would join Greece in exiting the monetary union. This is because of the way contagion is spread in a monetary union breakup, and it could happen within months of a Greek departure…

The chart gives some indication of the complacency of markets. Interest in a Greek exit from the Euro (as signified by Google searches for the somewhat irritating portmanteau "Grexit") recently reached an all-time high, but the relative concern for a wider Euro area problem has seemingly fallen far below the levels of 2011 and 2012. 

UBS goes on to caution investors against attempting to take anything away from an assessment of eurozone sovereign spreads vis-a-vis GGB yields. The logic is simple: spreads simply don’t mean anything in the face of excessive monetary easing:

The complacent suggest that while Greece continues to have significant fiscal problems, other member states in the Euro area have fewer significant fiscal problems (as reflected by bond prices), and thus a Greek exit from the Euro would not provoke a reaction in other bond markets…


This syllogism seems appealing, but it ignores the distorted nature of modern bond markets. Indeed it is a moot point as to whether a bond yield today contains any useful information about the real economy or the risks that surround it, given the consequences of financial repression acting in concert with quantitative policy…


Bond markets are unlikely to be the catalyst for a monetary union breakup, and probably not a terribly good signal of the threat. Investors should take little comfort from the current narrowness of bond spreads or the behaviour of Euro area government bond markets. 

The simple fact of the matter is that it is redenomination risk that could fuel an EMU breakup. That is, if people no longer believe that the union is indissoluble and instead begin to view the whole ill-fated experiment as little more than a set of fixed exchange rates, all bets are off and it won’t even matter who is solvent and who isn’t when the depositors are beating down the doors.

When examining the risk of contagion from any possible Greek exit from the Euro we come back again and again to the fact that in every monetary union collapse of the last century, the trigger for breakup was not the bond markets, current account positions, or political will, but banks. If ordinary bank depositors lose faith in the integrity of a monetary union they will hasten its demise by shifting their money out of their banks – either into physical cash, or into banks domiciled in areas of the monetary union that are perceived as "stronger". Both of these traits were evident in the US monetary union breakup, and have been in evidence in more recent events this century. The contagion risk after a possible Greek exit arises if bank depositors elsewhere in the Euro area believe that a physical euro note held "under the mattress" at home today is worth more than a euro in a bank – because a euro in a bank might be forcibly converted into a national currency tomorrow. In a breakup scenario it is more likely that retail bank deposits withdrawn will end up as physical cash, owing to the difficulties of opening and using a bank account in a different country.


This is not a question of banking system solvency. Highly solvent banks will be subject to deposit flight if it is the value of the currency in that country that is uncertain…


The contagion story is serious. Even if a depositor thinks that there is only a 1% chance their country will exit the Euro, why take a 1% chance that your life savings are forcibly converted into a perceived worthless currency if by acting quickly (and withdrawing deposits) one can have 100% certainty that your life savings remain in Euros?


If Greece were to walk away from the Euro, then the policy makers of the Euro area would have to convince bank depositors across the Euro area that a Euro in their local banking system was worth the same as a Euro in another country's banking system, and that the possibility of any other country exiting the Euro was nil. If that double guarantee was not utterly credible, then the risk of other countries joining Greece in exiting the Euro would be high.


This suggests that financial markets are treating the risks around Greek exit with too little regard for the probable dangers. 

March was a record month for CLO issuance with $15.2 billion in deals coming to market, bringing the YTD total to $29 billion and making Q1 2015 the best first quarter in history for CLO new issue volume. 

As Deutsche Bank notes, supply (in terms of the loans backing the deals) isn’t necessarily aligned with demand which should keep spreads tight because when yield-starved investors can get 150bps over LIBOR for an AAA-rated tranche (let’s just forget the fact that there’s no telling what “AAA” even means anymore), they’ll take it, especially when loaning money to recently bailed out European countries will now guarantee you a loss (thanks, NIRP) and when your deposits may be taxed to subsidize new home buyers’ mortgages. 

Another factor is limited supply of new collateral... Without issuance picking up we are likely to see loan spreads tightening given the strong demand from CLOs and that in turn would require CLO spreads to tighten.

So that explains the demand side of the equation and touches on underlying supply (i.e. leveraged loan issuance), but what accounts for the fact that Q1 2015 was the best first quarter on record in terms of bringing deals to market? Here’s Bloomberg to venture a guess:

Only 10 out of the top 30 money managers may be able to comply with new regulations requiring them to hold a 5 percent stake in funds they manage, which take effect in December 2016, according to consulting firm Oliver Wyman.


Managers “want to get deals done early before risk retention kicks in,” Rishad Ahluwalia, the London-based head of global CLO research at JPMorgan, said in a telephone interview.


The risk-retention rule, released in October, is part of of the 2010 Dodd-Frank Act enacted in response to the credit crisis that was fueled in part by the securitized debt that bundle mortgages. CLOs bundle speculative-grade corporate loans that have been used to finance some of the biggest buyouts in history.

The thing about choosing the reference pool for a CDO is that if you have to retain some of the credit risk then you might be inclined to be a bit more selective in choosing what goes into the underlying portfolio, and that’s no fun because once you start asking about underwriting standards lenders get nervous and the universe of collateral starts to dry up and then the whole securitization machine grinds to a halt which isn’t good for anyone who gets to collect fees along the way as loans are sliced up and sold to “sophisticated” investors who may or may not be buying into the next Abacus. Well, it only took one implosion of the entire global financial infrastructure for the government to catch on to the fact that securitization can encourage poor underwriting standards and last October — a short six years after this very same originate-to-sell model collapsed the entire system — America’s regulators attempted to address moral hazard by requiring CLO issuers to retain 5% of the credit risk to the deals they bring to market.

As a reminder, here’s what Bloomberg had to say at the time: 

U.S. regulators will make investment firms or banks that create securities backed by high-risk corporate loans retain a portion of their new deals.


The final rule released today includes a requirement that managers of collateralized loan obligations ranging from Apollo Global Management LLC and Symphony Asset Management LLC hold on to at least 5 percent of the debt they package or sell.


Alternatively, banks underwriting CLOs could hang on to a piece.


The rule has drawn protests from bankers and managers of the funds and would make it more expensive to put together CLOs, which have been issued at a record pace this year. Regulators are trying to curb excessive risk taking in response to the credit crisis that was fueled in part by securitized debt, particularly in the mortgage market.

So in short, record issuance seems to indicate that issuers want to get these deals to market before they’re forced to hold onto 5% of the possibly-toxic credit risk they’re selling to investors, something which isn’t exactly confidence inspiring when one is looking to assess the degree to which we’re all safer in the post-crisis financial world. Where the whole thing gets really amusing though is in the government’s 500-page final rule on the issue wherein banks and other “commenters” (i.e. all ABS issuers) attempt to explain why the rule isn’t fair and the government attempts to explain why the commenters are being completely ridiculous.

Here’s the government stating the obvious: 

Moreover, contrary to commenters’ suggestions, as discussed below, developments in the CLO and leveraged loan market suggest that CLOs present many of the same incentive alignment and systemic risk concerns that the risk retention requirements of section 15G were intended to address. CLO issuance has been increasing in recent years. Paralleling this increase has been rapid growth in the issuance of leveraged loans, which are the primary assets purchased by most CLOs. Heightened activity in the leveraged loan market has been driven by search for yield and a corresponding increase in risk appetite by investors…


The agencies note that there is evidence that this increased activity in the leveraged loan market has coincided with widespread loosening of underwriting standards. In fact, a recent review of a sample of leveraged loans by the Federal banking agencies found that forty-two percent of leveraged loans examined were criticized by examiners. The agencies believe that increases in the origination and pooling of poorly underwritten leveraged loans could expose the financial system to risks….


As discussed in more detail below, these developments in the leveraged loan and CLO market represent similar dynamics to issues in the originate-to distribute model that were a major factor in the recent financial crisis. For these reasons, and others discussed below, the agencies believe it is appropriate to apply risk retention rules to open market CLOs as well as balance sheet CLOs. 

While that seems to make all kinds of sense (which is rare as it relates to analysis by official regulatory bodies, especially those whose mandate it is to oversee the financial markets), the PE firms and Wall Street banks of the world were quick to explain that actually, the risk retention rule should not apply because CLO issuers are not “securitizers” and (get this) CLOs are not really asset backed securities. Perhaps anticipating that even the government wasn’t gullible or lobbied enough to accept such a ridiculous excuse, the “commenters” attempted to play the old “one move and the underqualified borrower gets it” routine.

As discussed in the reproposal, many commenters on the original proposal raised concerns regarding the impact of the proposal on open market CLOs. Some commenters asserted that most asset management firms currently serving as open market CLO managers do not have the balance sheet capacity to fund 5 percent horizontal or vertical slices of the CLO. They asserted that imposing standard risk retention requirements on these managers could cause independent CLO managers to exit the market or be acquired by larger firms. According to these commenters, the resulting erosion in market competition could increase the cost of credit for large companies that are of lower credit quality or that do not have a third-party evaluation of the likelihood of timely payment of interest and repayment of principal and that are represented in CLO portfolios above the level that otherwise would be consistent with the credit quality of these companies.


The agencies received many comments asserting that the proposed options for open market CLOs would be unworkable under existing CLO practices and would lead to a significant reduction in CLO offerings and a corresponding reduction in credit to commercial borrowers. These commenters asserted that the likelihood of a significant number of lead arrangers retaining 5 percent risk retention (in any of the forms permitted by the rule) would be remote and only the largest CLO managers would be able to finance the proposed risk retention requirement through the standard risk retention option. While larger managers might have sufficient financing, several commented that the risk retention requirements would make the management of CLOs less profitable and might cause many managers to decrease their activity in the market. One commenter highlighted a recently issued paper by the Bank of England and the European Central Bank to suggest that risk retention rules in Europe that apply to CLO managers have contributed to a reduction in European CLO issuance. Several commenters asserted that if the risk retention requirement causes a reduction in participation by open market CLOs in the leveraged loan market, some of the resulting reduced credit availability would be replaced by non-CLO credit providers, but cost of capital and instability in the market would increase. 

So essentially, it’s all about keeping credit flowing to deserving borrowers and not at all about a desire to keep exposure to 5% of a collateral pool littered with loans to “companies that are of lower credit quality or that do not have a third-party evaluation of the likelihood of timely payment of interest and repayment of principal” off of the books. 

The real punchline though is the government explaining that despite commenters’ objections, issuers are indeed securitizers because they securitized the underlying loans and CLOs are indeed asset backed securities because, well, they are securities backed by assets.

Certain commenters also asserted that open market CLO managers are not “securitizers” under section 15G of the Exchange Act and, therefore, the agencies do not have the statutory authority to subject them to risk retention requirements...

As explained in the reproposal, the agencies believe that CLO managers are clearly included within the statutory definition of “securitizer” set forth in section 15G of the Exchange Act. Subpart (a)(3)(B) of section 15G begins the definition of a “securitizer” by describing a securitizer as a “person who organizes and initiates an asset backed securities transaction.” 


CLOs clearly meet the definition of “asset-backed security” set forth in section 3 of the Exchange Act, which defines “asset-backed security” as “a fixed income or other security collateralized by any type of self liquidating financial asset (including a loan, a lease, a mortgage, or a secured or unsecured receivable) that allows the holder of the security to receive payments that depend primarily on the cash flow from the asset.”  As discussed above, a CLO is a fixed income or other security that is typically collateralized by portions of tranches of senior, secured commercial loans or similar obligations. The holder of a CLO is dependent upon the cash flow from the assets collateralizing the CLO in order to receive payments. Accordingly, a CLO is an asset-backed securities transaction for purposes of the risk retention rules.

*  *  *

So at the end of the day, no one wants to eat their own cooking — not even 5% of it. 

Submitted by Simon Black via SovereignMan.com,

On March 16, 1936, the government of the United States published the very first edition of the Federal Register.

President Roosevelt had been taking a lot of heat over the previous year; under his New Deal program, dozens of government agencies were passing new rules, regulations, and codes at an absolutely feverish pace.

It became impossible for anyone to keep track of them—even the other agencies within the government.

So in the summer of 1935 they created a new law requiring every executive agency to publish a daily, official record of their activities.

This official record was called the Federal Register. And it would contain a complete set of every rule, regulation, code, and proposal issued by each of the executive agencies.

The first edition was published on March 16, 1936. It was sixteen pages.

Every single work day since then, without fail, the government has published the Federal Register.

Its first full year (1937) contained a total of 3,450 pages. By 1942, the Federal Register had grown to over 10,000 pages.

It passed 20,000 for the first time in 1967. More than 30,000 in 1973. And more than 40,000 the following year in 1974.

The Federal Register exploded during the 1970s, in fact, touching nearly 90,000 pages by the end of the Carter administration.

During Reagan’s time, the publication shrank to under 50,000, only to rise again under subsequent presidents.

The longest edition ever published was logged at 6,653 pages in a single day, during the administration of Bush II.

President Obama has averaged nearly 80,000 pages per year, far and away the highest of any President in US history.

This morning’s edition, in fact, is a whopping 358 pages full of new rules, regulations, and proposals.

Did you read it? Neither did I. But as the old saying goes, ignorance of the law is not an excuse.


This is absurd. Every single one of those regulations makes people less free.

They criminalize the most innocent behavior and make it impossible for the average person to know what’s legal and what’s not as if we all have some some civic duty to read and memorize 80,000 pages per year of government regulation.

4,500 criminal statutes now exist under US Code. That’s 1,500 times more than the three crimes outlined in the Constitution– piracy, treason, and counterfeiting.

(Ironically, the Federal Reserve and commercial banks commit the latter on a daily basis…)

We’ve seen this theme countless times throughout history.

Under Diocletian’s reign, the Roman Empire’s body of laws and regulations multiplied like rabbits.

He centralized all aspects of the economy, controlling wages, prices, commerce, and agricultural activity. Violations in many cases were subject to the death penalty.

And when people complained, he told them that the barbarians were at the gate, and that individual liberty needed to be sacrificed for the greater good of security.

By Diocletian’s time, Rome was already bankrupt. His regulations pushed the Empire over the edge.

It’s not much different today. Each and every one of these obscure regulations COSTS MONEY.

So it’s not surprising that as the number of pages in the Federal Register has increased, so has the US federal debt.

In order to pay for all of this bureaucracy, every citizen has become subject to an increasingly complex and punitive tax system, enforced at the point of a gun by a bankrupt government desperate to keep the party going.

During a Q&A this evening, Richmond Fed's Jeffrey Lacker unleashed a stream of what can only be described as total idiocy:

  • *LACKER: INDICATORS POINT TO NEED TO RAISE RATES THIS YEAR (US macro data is the worst since Lehman?)

These are the people that the world trusts to centrally plan the world? The people that are there to 'save' investors at the merest downtick in stocks? They seriously have no clue whatsoever!!

You decide...

*LACKER: INDICATORS POINT TO NEED TO RAISE RATES THIS YEAR (US macro data is the worst since Lehman?)




Because last time all it took to stop the bleeding was $4 trillion in Fed balance sheet expansion.



And everything looks so calm now across the asset-classes...


So part from all that - We are sure Mr.Lacker knows what he is doing...

*  *  *

While the world gasped last night when China's production-based, and goalseeked GDP number came in at 7.0% - the lowest in 6 years...


... the truly scary numbers were in the details, which revealed unprecedented deterioration. The key among these were shown previously, and are as follows:

Plunging consumer sentiment: oddly this hasn't been offset by China's unprecedented stock bubble.


The worst retail sales in 9 years:


Tumbling auto sales:


The weakest fixed asset investment (recall that in China capex spending accounts for over half of GDP growth) in the 21st century


Industrial production worse since the Lehman crisis:


And of course, home prices:


Which brings us back to China's "7.0%" GDP. Because as Cornerstone Macro reports, "Our China Real Economic Activity Index Slowed To Just 1.6% YY In 1Q."

The indicator in question looks at many of the components shown above, such as retail sales, car sales, rail freight, industrial production, and several others, to determine an accurate indicator of the true state of China's economy.

It finds that not only is China's economic growth rate not rising at a 7.0% Y/Y rate, but is in fact the lowest it has been in modern history!

And a 1.6% growth rate by what was formerly the world's most rapidly growing (and largest according to the IMF) economy explains perfectly what happened with the US economy over the past 6 months. Hint: it has nothing to do with the winter, and everything to do with China hard landing into a brick wall.

* * *

Ok, so China's economy is cratering yet its stock market is the best performing in 2015 in dollar terms (Russia may be the only exception). How does one reconcile these two seemingly incompatible concepts?

The answer is simple, and GaveKal's note today, titled Slumping Growth, Booming Market, touches on it.

The equity market’s performance has been driven mostly by the government’s policy response, rather than by the economic data. While economic growth has continued to weaken, Chinese stock markets have enjoyed the biggest rally since 2007, with a huge run-up in the domestic A-share market, which has now spilled over to Hong Kong. The flows last week were especially heavy, forcing the Hong Kong Monetary Authority to intervene in the currency market to offset huge capital inflows—despite a big gain in the US dollar. A strong US dollar usually means a weak Hong Kong stock market, but the relationship has broken down because this time Chinese funds, rather than global investors, are driving the bull run.

Actually it's much simpler than all that. As we explained over a month ago, "QE In China Is Now Inevitable." The Pavolovian algos are merely frontrunning it.

Which, incidentally is good news. Because once China also goes all in, and nobody else is left, then the real fun begins.

EURUSD just exploded 80 pips higher as Japanese markets opened (once again for no good reason - just like DAX at the EU close). No ther markets are moving with it (as both spot and futures are poked higher on relatively heavy overnight volume). We assume this is just the machines over at Virtu (which IPO'd at a $19 price tonight) celebrating... after all they said the FX market was the next to be rigged by them (allegedly)...



On heavy volume...


Remember what happened after the BATS IPO... could be a fun open tomorrow.

Submitted by Raul Ilargi Meijer via The Automatic Earth blog,

From southern Europe to the far north, matters are shifting, sometimes slowly, sometimes faster. There are moments when it seems all that goes on is the negotiations over the Greek dire financial situation and its bailout conditions, but even there nothing stands still. The Financial Times ran a story claiming Greece is about to default on its debt(s), and many a pundit jumped on that, but there was nothing new there. Of course they are considering such options, but they are looking at many others as well. That doesn’t prove anything, though.

Yanis Varoufakis’ publisher, Public Affairs Books, posted a promo for an upcoming book by the Greek Finance Minister, due out only in 2016, mind you, that reveals a few things that haven’t gotten much attention to date. It’s good to keep in mind that most of the book will have been written before Yanis joined the new Greek government on January 26, and not see it as a reaction to the negotiations that have played out after that date.

Varoufakis simply analyzes the structure of the EU and the eurozone, as well as the peculiar place the ECB has in both. Some may find what he writes provocative, but that’s beside the point. It’s not as if Europe is beyond analysis; indeed, such analysis is long overdue.

Indeed, it may well be the lack of it, and the idea in Brussels that it is exempt from scrutiny, even as institutions such as the ECB build billion dollar edifices as the Greek population goes hungry, that could be its downfall. It may be better to be critical and make necessary changes than to be hardheaded and precipitate your own downfall. Here’s the blurb for the book:

And The Weak Suffer What They Must
Europe’s Crisis and America’s Economic Future

“The strong do as they can and the weak suffer what they must.” —Thucydides



The fate of the global economy hangs in the balance, and Europe is doing its utmost to undermine it, to destabilize America, and to spawn new forms of authoritarianism. Europe has dragged the world into hideous morasses twice in the last one hundred years… it can do it again. Yanis Varoufakis, the newly elected Finance Minister of Greece, has a front-row seat, and shows the Eurozone to be a house of cards destined to fall without a radical change in direction. And, if the EU falls apart, he argues, the global economy will not be far behind.


Varoufakis shows how, once America abandoned Europe in 1971 from the dollar zone, Europe’s leaders decided to create a monetary union of 18 nations without control of their own money, without democratic accountability, and without a government to support the Central Bank.


This bizarre economic super-power was equipped with none of the shock absorbers necessary to contain a financial crisis, while its design ensured that, when it came, the crisis would be massive. When disaster hit in 2009, Europe turned against itself, humiliating millions of innocent citizens, driving populations to despair, and buttressing a form of bigotry unseen since WWII.


In the epic battle for Europe’s integrity and soul, the forces of reason and humanism will have to face down the new forms of authoritarianism. Europe’s crisis is pregnant with radically regressive forces that have the capacity to cause a humanitarian bloodbath while extinguishing the hope for shared prosperity for generations to come. The principle of the greatest austerity for the European economies suffering the greatest recessions would be quaint if it were not also the harbinger of misanthropy and racism.


Here, Varoufakis offers concrete policies that the rest of the world can take part in to intervene and help save Europe from impending catastrophe, and presents the ultimate case against austerity. With passionate, informative, and at times humorous prose, he warns that the implosion of an admittedly crisis-ridden and deeply irrational European capitalism should be avoided at all cost. Europe, he argues, is too important to be left to the Europeans.

How dire the situation is in Greece becomes obvious from the following article by documentary film maker Constantin Xekalos, posted on Beppe Grillo’s site. It makes you wonder how Europe dare let this happen. How it could possibly have insisted prior to the January elections that the Greeks should vote for the incumbent government, and how someone like Eurogroup head Dijsselbloem could ever have had the gall to point to “all the progress we’ve made”.

Greece, The Euro’s Greatest “Success”

Greece is a social disaster zone. 3 million people are without guaranteed healthcare, 600,000 children are living under the breadline and more than half of them are unable to meet their daily nutritional needs. 90% of families living in the poorer areas rely on food banks and feeding schemes for survival, and unemployment is approaching 30%, with youth unemployment approaching 60%. These are not just numbers, they are real people. In order to show their faces and tell their stories, writer and documentary film maker from Crete and now living in Florence, Constantin Xekalos, decided to make a documentary film entitled: “Greece, the Euro’s greatest success “. In today’s Passaparola he talks about this documentary film and about the suffering of the Greek people that he has encountered in his personal experience. Today it is all happening, but is Italy next?


The healthcare tragedy in Greece When we made this documentary it was said that 1/3 of the Greek population, (more than 3 million people,) were without any guaranteed healthcare. In the interim that number has grown. They have been abandoned. If you go to a hospital, obviously a public one, they will treat you and they will accept you if it is an emergency, but if you are admitted, you then have to pay. If you are unable to pay, they send the bill to the Receiver of Revenue’s office and they take it from there. If you have no money, they start with foreclosure, even your home , even if it is your only home!


This is crime against society that is totally unacceptable. In an advanced and so-called democratic Country that is part of the western world, things like this are totally inconceivable, absurd and unacceptable. I repeat, this is crime against society that we absolutely cannot accept! If you are ill, democracy guarantees the treatment you need, otherwise it should be called by some other name. When a child is not guaranteed the nutrition he/she needs, a mere helpless child, or elderly people that are no longer able to look after themselves, then that is no longer democracy. Some of the older Greeks were telling me that when the Germans were there during the occupation in the Second World War, the people lived exactly like they are living now.


The Greeks are dying of hunger 90% of Greek families living in the poorer areas are obliged to rely on food banks and feeding schemes in order to survive. Unfortunately there are many in this situation. We toured a number of Athens’ districts and in each and every district there is a square where good people, people who care about others and truly have a sense of community have rolled up their sleeves and, with the help of the Church, are providing meals for those who would otherwise have nothing to eat. Every district has its own square. I saw children passing out because of lack of food, but are too embarrassed to admit it. We simply cannot accept this kind of thing. It’s a crime when children go without food to eat. I will shout that from the rooftops until I burst and I hope that they lay charges against me: it is a crime when a child cannot get enough to eat!


The disappearance of the Greek middle-class Many good people found themselves unemployed from one day to the next, not through any fault of their own and not by choice, not lazy people as they would have us believe. They want to work but at this point there simply are no jobs any more. The social fabric is gone, there is no more middle-class, it is virtually nonexistent. All there is is an ever-shrinking oligarchy of very wealthy people and then the rest of the people who are becoming ever poorer. Very real poverty! Currently, and here I’m talking about the latest data from a month ago now, someone who does indeed find a job has to accept a salary of €300 a month . Take into account that Athens is a very expensive city to live in, even more so than Florence. I happen to live in Florence so this is just by way of example, but I was horrified at the thought. How on earth do these people manage to live? There is no way that they can live decently, there is no longer any dignity and therefore they cannot be free: they are destroying your soul as well as you body!


Over 50% of young people are unemployed Youth unemployment is now standing somewhere between 50% and 60% . The young people do whatever they can, they accept any kind of position, even things that not right and unfair, simply because necessity forces them to accept job offers that should not even be made. I saw jobs offered at €100 a month . This sort of thing is now happening here in Italy as well.

What all this will eventually lead to, inevitably so, becomes clear from the following. Anti-euro, anti-immigrant, anti-bailout and down the line anti anything to do with the failed European project. In Finland, of all places, the anti-euro party looks certain to get into the next government. Finland’s economy is in tatters, despite its AAA rating, and people increasingly choose to see the world through blinders.

Anti-Euro Finnish Party Gets Ready to Rule as Discontent Brews

The anti-euro The Finns party, which eight years ago got just 4% of the vote, is now dressing itself up for Cabinet seats as Finnish voters are set to oust the government after four years of economic failure. The Finns, whose support is based on equal parts of anti-euro, anti-immigrant and anti-establishment sentiment, have captured voters on the back of the euro-area’s economic crisis and a home-grown collapse of key industries. In the 2011 election, during the height of the euro crisis, it shocked the traditional parties by winning 19% of the vote. “We can’t be ignored, because a strong majority government won’t be possible without us,” Timo Soini, the party leader, said [..]


The country is struggling to emerge from a three-year recession after key industries such as its papermakers have buckled amid slumping demand and Nokia Oyj lost in the smartphone war, cutting thousands of jobs. The government has raised taxes and lowered spending, adding to unpopularity, and on top of that have been bailout costs for Greece and Portugal, among others, which have eroded finances for Finland, still top-rated at Fitch Ratings and Moody’s Investors Service. “Our stance will be very tight, no matter what,” Soini said. “Nothing is forcing Finland to participate in these bailout policies. If we don’t want to take part, we can refuse.”


Soini’s recipe for fixing the economy includes encouraging exports, backing entrepreneurship, investing in road infrastructure and cutting red tape. The party seeks to balance public finances through budget cuts of as much as €3 billion and higher taxes for the wealthy. The euro-skeptic group will probably join a three-party coalition. Polls predict more than 50 seats out of 200 for the opposition Center Party.


The Center Party backed bailouts and loans for Greece, Portugal and Ireland while in government in 2010 and 2011 and was then ousted. It has since opposed further help, alongside The Finns party. The Center Party and us will have a majority within the government, if it keeps the stance it has had,” Soini said. His group isn’t currently pushing for Finland to exit the euro. Still, “Finland should under no circumstances declare it will always and forever stay,” he said.


The party first negotiated joining government after the 2011 elections, after catapulting to third place with 39 lawmakers. Its opposition to euro-area bailouts in the height of the crisis meant the door to government was closed. In 2007, its five seats didn’t qualify for an invitation to join talks to form a ruling coalition. “We’ve grown, we’ve moved forward, we’ve stabilized,” Soini said. “It’s a key goal for us to consolidate our backing and be one of the big parties, so that we’re not just a one-vote wonder.”

Of course, there are worse options than the True Finns. You can get from anti-immigrant to downright extreme right wing, where Greece may be headed if Europe doesn’t adapt to Syriza’s view of what the eurozone might be.

The prevailing views amongst Europe’s richer nations, and its domestic banking sectors, don’t look promising. And when the European project crashes to a halt, things are not going be pretty. The wisest thing for Brussels to do may well be to try and dismantle itself as peacefully as it can. But Brussels is far too loaded with people seeking to hold on to the power they have gathered.

Still, there’s no denying they have held sway over rapidly deteriorating conditions on the ground (though they will prefer to lay the blame elsewhere), which will down the line lead to their own downfall. They better listen to Yanis now.

While broadly-speaking, both 'hard' and 'soft' macro data has disappointed, the scale of those 'missed expectations' is stunning - worst since Lehman. While this is blamed on weather, the fact is that America had 30% less snow this year than last and still, as the following four chartsmen of the recession-pocalypse show, the YoY drops are on a scale not seen outside of a recession...


US Macro Data has surprised to the downside on a scale not seen since Lehman...


So here are the four charts that can only be ignored by the likes of Liesman, Kudlow, and Cramer...

Sales are weak - extremely weak. Retail Sales have not dropped this much YoY outside of a recession...


And if Retail Sales are weak, then Wholesalers are seeing sales plunge at a pace not seen outside of recession...


Which means Factory Orders are collapsing at a pace only seen in recession...


And finally - coming full circle - it appears everyone is scrambling for credit to afford to maintain even a semblance of living standards (and lift retail sales) but "rejections" of credit requests have never - ever - been higher...


So the credit available to goose retail sales, which will goose wholesale sales which will drive factory orders... is no longer available to every muppet with a 500 FICO (old or new version) Score!!

*  *  *

But apart from that, given that US equities are at record highs, everything must be great in the US economy.

Bonus Chart: Just in case you figured that if domestic credit won't goose the economy, what about the rest of the world... nope!! Export growth is now negative... as seen in the last 2 recessions.


Zircon - This is a contributing Drupal Theme
Design by WeebPal.