13 August 2013
26 April 2013
15 April 2013
News for the Week of April 15 - April 22, 2013
British retail giant, Tesco, quits the USA: writes off a $3.5 Billion loss globally
S&P 500 Suffers Worst Decline of the Year on China, U.S. Economic Data
McDonald's To Employees: Smile More, Don't Worry Be Happy
Gold on Track for Biggest One-Day Fall Since 1983
Paul Farrell: 9 dark omens show U.S. growth will fall near zero
How a Hoodie Manufacturer in the USA has sold out its entire stock for months to come
The Art World and the 1% Sociopaths Who Support It
09 April 2013
Kyle Bass Interview With Bloomberg TV: "If Monetary Policy Is The Only Game In Town, Then We're In For A World Of Trouble"
Kyle Bass, whose Dallas-based hedge- fund firm Hayman Advisors LP made $500 million in 2007 betting against U.S. subprime mortgages, said the Bank of Japan's recent doubling of money is "the beginning of the end" for Japanese Government Bonds.
Bass has been short - long term - the JGBs for three years already and announces he's only betting 1-2% of his capital to possibly make 300 times his wager. This bet has been a loser so far, and it is called the "Widowmaker" bet by wags on Wall Street. Despite this, Bass is now more firmly committed to his view the JGBs will blow up sooner than later.
He thinks when the Japanese Government Bonds finally crash and burn, that it will happen rapidly and because they have 20 years of "buildup" behind them.
Bass made one observation which rings true: "The whole world is chasing yield." He points out the US stock market is being led by formerly big dividend paying utilities which are not the normal stocks to lead a rally. As he said, "Things that don't typically lead us into new highs, it's because of their dividend yields."
Another notable quote: A host asks Bass about other instruments with yield which are popular at this time. He observes, "With Bernanke pinning rates at zero," . . . "structured credit, and even mortgage credit, they're one of the most liquid areas of the marketplace today. People can't get enough of them. And think about sub-prime credit . . . 97% of the 20,000 line items are still rated below investment grade, they're still junk. The ratings based buyers aren't even there yet! The money is being mis-allocated by the printing press."
On Gold
On gold, Bass admits his firm has always had a position in gold. "Monetary policy is the only policy in town. I am perplexed as to why gold is as low as it is."
". . . The global monetary base is north of $70 Trillion, all the gold in existence is only $7 or $8 Trillion, there's only $2-$3 Trillion of investable gold . . . at some point in time, I'd rather own gold than paper. I just don't know when that time is."
Bass goes on about gold, "They can't print any more. They can mine some more. They can't (produce) at the rate the Central Banks are printing money. I just view gold as another currency, it's that simple. I don't view it as a commodity."
"If Monetary Policy is the only game in town, then we're in for a world of trouble."
On Housing
"We're not expecting housing to get materially better, but we're not expecting it to get materially worse."
"We think it (housing market) will marginally improve going forward.
On Interest Rates & Quantitative Easing In The USA
"One of my underlying beliefs is that the US rates can't go up. For a long time Bernanke said low for a long time, then he said low for two years. I think he means low forever, as long as he can keep them there. Every point of interest rates, every full one-hundred basis points of interest rates represents another $150 Billion in interest rate payments."
"It is crazy to think we can raise interest rates by 100, 200, 300 basis points." Bass suggests the Fed might only be able to raise rates 25 to 50 basis points tops, and says, "I don't think we can raise interest rates."
He explains because of his views on interest rates, he believes ". . . housing will have a bid."
". . . If rates go higher, all bets are off on my perspective in housing."
Bass has been short - long term - the JGBs for three years already and announces he's only betting 1-2% of his capital to possibly make 300 times his wager. This bet has been a loser so far, and it is called the "Widowmaker" bet by wags on Wall Street. Despite this, Bass is now more firmly committed to his view the JGBs will blow up sooner than later.
He thinks when the Japanese Government Bonds finally crash and burn, that it will happen rapidly and because they have 20 years of "buildup" behind them.
Bass made one observation which rings true: "The whole world is chasing yield." He points out the US stock market is being led by formerly big dividend paying utilities which are not the normal stocks to lead a rally. As he said, "Things that don't typically lead us into new highs, it's because of their dividend yields."
Another notable quote: A host asks Bass about other instruments with yield which are popular at this time. He observes, "With Bernanke pinning rates at zero," . . . "structured credit, and even mortgage credit, they're one of the most liquid areas of the marketplace today. People can't get enough of them. And think about sub-prime credit . . . 97% of the 20,000 line items are still rated below investment grade, they're still junk. The ratings based buyers aren't even there yet! The money is being mis-allocated by the printing press."
On Gold
On gold, Bass admits his firm has always had a position in gold. "Monetary policy is the only policy in town. I am perplexed as to why gold is as low as it is."
". . . The global monetary base is north of $70 Trillion, all the gold in existence is only $7 or $8 Trillion, there's only $2-$3 Trillion of investable gold . . . at some point in time, I'd rather own gold than paper. I just don't know when that time is."
Bass goes on about gold, "They can't print any more. They can mine some more. They can't (produce) at the rate the Central Banks are printing money. I just view gold as another currency, it's that simple. I don't view it as a commodity."
"If Monetary Policy is the only game in town, then we're in for a world of trouble."
On Housing
"We're not expecting housing to get materially better, but we're not expecting it to get materially worse."
"We think it (housing market) will marginally improve going forward.
On Interest Rates & Quantitative Easing In The USA
"One of my underlying beliefs is that the US rates can't go up. For a long time Bernanke said low for a long time, then he said low for two years. I think he means low forever, as long as he can keep them there. Every point of interest rates, every full one-hundred basis points of interest rates represents another $150 Billion in interest rate payments."
"It is crazy to think we can raise interest rates by 100, 200, 300 basis points." Bass suggests the Fed might only be able to raise rates 25 to 50 basis points tops, and says, "I don't think we can raise interest rates."
He explains because of his views on interest rates, he believes ". . . housing will have a bid."
". . . If rates go higher, all bets are off on my perspective in housing."
News & Views For Week Of April 7 - 13, 2013
Note: I will be adding the freshest news and opinion pieces to the top of this list, refreshing it daily, sometimes at night, somtimes (shudder) during daylight hours. - Rock
- PC Company Stocks Hammered On Thursday
- Front Running The Fed With TBTF Insider Trades
- Australia: Hits 3 Year High In Unemployment
- Takata Air Bag Recall Affects 3.4 Million Late Model Honda, Nissan & Toyota Cars
- Charles Hugh-Smith explains, with charts, which European small depositors will be shaken down next
- Goldman Sachs Takes The Opposite Trade Of What It Is Selling It's Clients (Muppets) . . . Again: Buys Gold, Sells Bonds, Tells Clients To Do The Opposite
- First Solar (Nasdaq: FSLR) Blows Away Analyst's Expectations, Sees Very Bright 2013 through 2015, causing stock to jump 31.28% yesterday
- 4.2 Million Borrowers To Receiving Payments This Friday of $300 to $125,000 From 13 Firms Who Botched Foreclosures
- Student Loan Rates Boost Government Profit As Debt Damps Economy
- Kyle Bass takes way out of the money bets against Japanese Government Bonds: "The investors ran the other way from the central bank, they didn’t run with it. I find that to be fascinating.”
- Natural Gas Reserve Estimates Upped Again For The USA
- The Big Picture: Ugly Chart Contest
- Matt Taibbi: The Growing Sentiment on the Hill For Ending 'Too Big To Fail'
- Auto sales for March highest since 2007
05 April 2013
All This Quantitative Easing . . . And The Lowest Money Velocity In 50 Years?
One picture speaks 10,000 words . . .
but I'll add a few anyway:
but I'll add a few anyway:
- The Fed has created $2.2 in new money since the 2008 crisis
- About half of this money is currently parked in the Federal Reserve by banks and is collecting interest
- Much of the other half of this money is sitting on banks' books to shore up new reserve requirements.
- Hence, the remainder of the money outstanding is changing hands more slowly than at any time in the past 50 years, meaning banks are not lending as readily as they have in past good times/bad times. Nor are consumers borrowing and spending as they once did
- As consumers pay off debt, money is "retired" and goes to money heaven
- When money is retired and evaporates to money heaven, it cannot be used as a basis for more fractional reserve lending. Hence, new money must be created with the hope banks will finally get up off that money and lend it to people who will start consuming again and increasing the exchange of said money (i.e., a pick up in "velocity" of money exchanges). We are a nation now addicted to consumption to boost GDP. Savers are anti-American.
- Hence the Fed will continue to create new money to try and get the banks to lend and the consumer to borrow and spend. Bernanke's heir apparent, Janet Yellen of the San Francisco Federal Reserve Bank, is already signalling she will focus on GDP growth as much as lower unemployment. To reignite growth, money must start circulating at a faster velocity.
- Hence, keep your eyes on this chart for any uptick in the near future
- Meanwhile, bet on QE to continue well into 2014 as M2 shows no basing as of yet on this chart
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