Despite the eagerness of Abenomics and the new BOJ head Kuroda to have their cake and eat it too, in this case manifesting in soaring stock prices, plunging Yen, rising GDP and exports, and most importantly, flat or declining bond yields, so far they have succeeded in carrying out three of the four (assuming Japanese economic data reporting is more accurate than that of its neighbor China), as it is physically impossible for any central planner to completely overrule the laws of math, economics and physics indefinitely. In this vein, we have described on numerous occasions in the past several days the shock to the system that the massive one-way transfer out of all asset classes and into equities has engendered, and resulted in...
Not long after I penned The Options and Volatility ETPs Landscape, Credit Suisse (CS) added another buy-write / covered call ETP to the mix: the Credit Suisse Silver Shares Covered Call ETN (SLVO).
With SLVO, Credit Suisse is essentially extending the methodology they pioneered with the Credit Suisse Gold Shares Covered Call ETN (GLDI). In the case of both GLDI and SLVO, the ETPs are selling covered calls against the underlying commodity ETF for gold (GLD) and silver (SLV) in an effort to generate some income, and in so doing, choosing to forego some upside potential. In both instances, the ETP starts selling covered calls with 39 days until expiration and completes the sales...
Emerging economies have always run higher inflation rates than developed markets (DM) due to stronger growth. The spread in inflation rates has generally been steady, running roughly 2-3 percentage points. Recently however the spread has blown out to over 4% - a post-recession high.
Emerging nations selling into developed markets are losing pricing power and will have a tougher time keeping up with domestic labor cost increases (some of which are forced by their governments). EM corporate margins are already under pressure, ultimately weakening growth. India or Mexico are good examples (charts below). While temporary, this divergence could be quite disruptive in the near-term...
“Now this is not the end. It is not even the beginning of the end. But it is, perhaps, the end of the beginning.” – Winston Churchill
“Meanwhile, Europe continues to lag the improvements seen in the US economy and markets. Quite simply, Europe’s economy struggles with too many banks, too much debt and too little growth. A long history of empire, trade, war and commerce means a long history of banking. The world’s first state-guaranteed bank was the Bank of Venice, founded in 1157, and the world’s oldest bank today is also Italian, Monte Paschi di Siena (founded 1472). In many European countries, bank assets dwarf the size of the local economy...
Why, Yes! Of Course! The Voters Will Vote to End Social Security, Medicare, Dodd-Frank and the EPA...
Well, that didn’t take long, did it?
It began yesterday morning, with a Politico article by Jim VandeHei and Mike Allen, and an accompanying video by Allen, suggesting improper actions of the IRS resulting from its inability to adequately handle the tsunami of exempt-organizations applications, coupled with the DOJ’s overly aggressive use of its subpoena powers in trying to ferret out the source of a national-security leak to an AP reporter, might cause voters...
Several comments in yesterday morning’s post sent me back to GMO’s archive to pull some of Ben Inker’s work.
You should read yesterday morn’s commentary (here), than come back and read Inker. In particular, his piece Explaining Equity Returns.
The five takeaways are as follows:
1) GDP growth and stock market returns do not have any particularly obvious relationship, either empirically or in theory.
2) Stock market returns can be significantly higher than GDP growth in perpetuity without...
Has the Web and Social Media Finally Provided The Level Playing Field That Can Obsolesce The Mainstream Media?
Five years ago I posed the question, "Has the Web and the Blogosphere ushered in the Death of Radio?"
Looking at radio station revenues and ad rates, while their death is not necessarily eminent, the metastatization of a near terminal disease is.
Now, half decade later, is it time to pose that question for Mainstream Media in general?
Methinks there is a significant opportunity for those true entrepreneurs who can figure out how to make a better mouse trap. The infographic below says it all...
I challenge anyone to prove me wrong that confiscation of bank deposits is legalized daylight robbery.
Bank depositors in the UK and USA may think that their bank deposits would not be confiscated as they are insured and no government would dare embark on such a drastic action to bail out insolvent banks.
Before I explain why confiscation of bank deposits in the UK and US is a certainty and absolutely legal, I need all readers of this article to do the following:
Ask your local police, sheriffs, lawyers, judges the following questions...
It would appear that the credit markets both anticipated and began to price in what is now the worst recessionary period for the European Union on record a few days ago. However, their exuberant, ever-hungry colleagues over in equity land remain in the bad is good mode and can't get enough of these higher prices. Where ever we look around the developed world, equity prices are lifting as credit deteriorates. The masses ignored these lessons in 2007; are they ignoring it again? Or is this just another short-term divergence? If so, it is bond-buying time... if not, take your equity profits now because these divergences are unsustainable.
European stocks and credit...
On Tuesday 14th May, workers at Lonmin PLC, the world’s No. 3 platinum producer in South Africa began a wildcat strike. This caused immediate disruption of all mine production and led to concerns that South Africa was yet again to endure violence and disruption in its mining industry.
Both mining production and output in South Africa has suffered since 34 workers were shot dead by police on August 16th last year.
The disruption to the South African mining industry has led to a shortage in raw materials for the refining and minting...
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