This post was published at TheRealNews
Yesterday we presented readers with one of the most pessimistic, if not outright apocalyptic, 2018 year previews, courtesy of BofA’s chief investment, Michael Hartnett who warned that in addition to the bursting of the bond bubble in the first half of the year, the stock market could see a 1987-like flash crash, potentially followed by a sharp spike in (violent) social conflict. However, in addition to his forecast, Hartnett also had one of the more informative, and descriptive, reviews of the year that was, or as he put it: 2017 was the perfect encapsulation of an 8-year QE-led bull market.
Here are his 15 bullet points that show why in 2017 we may have seen the biggest bubble ever (and why we can’t wait to see what 2018 reveals).
Da Vinci’s ‘Salvator Mundi’ sold for staggering record $450mn Bitcoin soared 677% from $952 to $7890 BoJ and ECB were bull catalysts, buying $2.0tn of financial assets Number of global interest rate cuts since Lehman hit: 702 Global debt rose to a record $226tn, record 324% of global GDP US corporates issued record $1.75tn of bonds Yield of European HY bonds fell below yield of US Treasuries Argentina (8 debt defaults in past 200 years) issued 100-year bond Global stock market cap jumped1 $15.5tn to $85.6tn, record 113% of GDP S&P500 volatility sank to 50-year low; US Treasury volatility to 30-year low Market cap of FAANG+BAT grew $1.5tn, more than entire German market cap 7855 ETFs accounted for 70% of global daily equity volume The first AI/robot-managed ETF was launched (it’s underperforming) Big performance winners: ACWI, EM equities, China, Tech, European HY, euro Big performance losers: US$, Russia, Telecoms, UST 2-year, Turkish lira
This post was published at Zero Hedge on Nov 22, 2017.
Just over a month ago, Kyle Bass discussed why he was long effectively “long Greece.”
Bass penned a Bloomberg editorial in which the hedge fund founder and CIO called on the IMF to stop bullying Greece – publicizing the fact that he is now effectively long Greece. Greek government bonds have performed reasonably well so far this year: They’re up about 16%, and if Bass is right, they could have another 20% to 30% over the next 18 months if the IMF abandons its insistence on austerity and acknowledges that debt relief will need to be part of the long-term alleviation of debt. Bass added that, in the near future, voters will elect a more business-friendly government that will help reestablish the country’s creditworthiness, much like the government of Mauricio Macri did for Argentina.
I think you also have an interesting political situation in Greece where I think there’s going to be a handoff from the current Syriza government to kind of a more slightly-center-right but very economically independent new leadership in the next, call it, 18 months.
And so, I think you asked why now? And I think you’re starting to see green shoots. You’re starting to see the banks do the right things finally in Greece and you are about to have new leadership.
So, I think that you’re going to see – and if you remember Argentina as Kirschner was going to hand-off – hand the reins over to someone that was much more let’s say focused on business and economics than being a kleptocrat, I think you’re going to see something again slightly similar in Greece where you have leadership today that might not be the right leadership and the government-in-waiting, I believe, and I think you know Mr. (Mitsutakous) – I think you’re going to see something great happen to Greece in the and next, kind of, two years.
This post was published at Zero Hedge on Nov 16, 2017.
The incredible credibility conundrum. By Bianca Fernet, Argentina, The Bubble: Trying to figure out what’s going on with Argentina’s Central Bank’s monetary policy right now is about as exact a science as checking out the horses as they parade around the paddock before a big race. There are clear favorites, a few dark horses, and until someone crosses the finish line it’s all guesswork. Except a lot less enjoyable because horses are cooler than politicians.
Argentina’s currency market hiccuped last week at the prospect that former President Cristina Fernndez de Kirchner has an actual shot at becoming a national Senator, representing the Buenos Aires Province. After hovering pretty close to AR $15 for the better part of the year, last week the US dollar exchange rate reached AR $18.
This post was published at Wolf Street by Bianca Fernet ‘ Aug 4, 2017.
Via The American Herald Tribune,
Bolivia’s President Evo Morales has been highlighting his government’s independence from international money lending organizations and their detrimental impact the nation, the Telesur TV reported.
“A day like today in 1944 ended Bretton Woods Economic Conference (USA), in which the IMF and WB were established,” Morales tweeted. “These organizations dictated the economic fate of Bolivia and the world. Today we can say that we have total independence of them.”
Morales has said Bolivia’s past dependence on the agencies was so great that the International Monetary Fund had an office in government headquarters and even participated in their meetings.
Bolivia is now in the process of becoming a member of the Southern Common Market, Mercosur and Morales attended the group’s summit in Argentina last week.
This post was published at Zero Hedge on Jul 25, 2017.
The hyperinflationary-hell in Venezuela’s currency is deepening as a crippling dollar shortage and a threat of oil sanctions (amid President Maduro’s attempts to rewrite the constition to maintain his grip on power) take their toll on the economy.
Venezuela’s Latin American neighbors urged President Nicolas Maduro to refrain from actions that might exacerbate the country’s political crisis in a disappointment to some regional governments that favored more direct and forceful criticism. As Bloomberg reports, Mercosur, South America’s largest trade bloc, called on ‘the government and the opposition not to carry out any initiative that could divide further Venezuelan society or aggravate institutional conflicts,’ in a joint statement issued at the end of a summit in Mendoza, Argentina. Member countries Brazil, Argentina, Uruguay and Paraguay were joined by Chile, Colombia, Guyana and Mexico in signing the statement.
International condemnation of the Maduro government’s plan to rewrite the country’s constitution to maintain its hold on power is gathering pace after the U. S. said it would impose sanctions on Venezuelan officials if Maduro goes ahead.
As we noted earlier in the week, The Trump administration is mulling over sanctions against senior Venezuelan government officials, and additional measures could include sanctions against the country’s oil industry, such as halting imports into the U. S., according to senior Washington officials who spoke to media.
This post was published at Zero Hedge on Jul 22, 2017.
Recently I spent a month in Buenos Aires. I went there to study the culture and the economy of a formrely prosperous land, filled with kind well-educated people.
One key lesson was this: Given enough time, bad policies will eventually ruin any advantage.
While not as bad off as it was in 2002, when the masses took to the streets banging pots and pans in protest of their nations ruined economy, the city of Buenos Aires is still clearly depressed. As are most of its people.
More than that, all hope has been lost. Every time a new politician is elected, things are promised to get better, but they don’t. Argentina’s current woes are the result of far too many successive political regimes that made terrible decisions. It’s a clear as simple as this: Bad policies lead to bad outcomes.
As we learned in our interview with Daron Acemoglu on Why Nations Fail, what matters most for widespread prosperity is that the political and economic institutions be fair and inclusive. From the podcast:
It all depends on incentives and opportunities. If people have opportunities to become rich, to open businesses, be innovative, do things that are going to further their interests and at the same time the nation’s GDP (Gross Domestic Product) and they have incentives to do so, that’s going to lay the foundations of economic prosperity.
This post was published at PeakProsperity on Friday, July 14, 2017,.
This is a syndicated repost courtesy of Credit Bubble Bulletin . To view original, click here. Reposted with permission.
Global Markets rallied sharply this week. The DJIA rose 223 points to a record 21,638. The S&P500 gained 1.4% to a new all-time high. The Nasdaq100 (NDX) surged 3.2%, increasing 2017 gains to 20.0%. The Morgan Stanley High Tech Index rose 3.4% (up 24.6% y-t-d), and the Semiconductors surged 4.7% (up 21.8%).
Emerging markets were notably strong. Equities rallied 5.0% in Brazil, 5.5% in Hong Kong, 5.1% in Turkey, 2.5% in Russia, 2.2% in Mexico and 2.1% in India. The Brazilian real gained 3.2%, the Mexican peso 3.0%, the South African rand 2.7% and the Turkish lira 2.3%. Global bond markets also rallied. Yields (local currency) dropped 27 bps in Brazil, 18 bps in South Africa, 16 bps in Turkey and 22 bps in Argentina. Here at home, five-year Treasury yields dropped eight bps (to 1.87%). U. S. corporate Credit also enjoyed solid gains. Across global markets, it appeared that short positions were under pressure.
Markets reacted with elation to Janet Yellen’s Washington testimony – widely perceived as dovish. In particular, the chair’s timely comments on inflation were cheered throughout global securities markets. A headline from the Financial Times: ‘Fed Chair Yellen’s Inflation Concern Buoys Markets.’ And Friday afternoon from Bloomberg: ‘S&P 500 Hits Record as Inflation View Turns Iffy’.
This post was published at Wall Street Examiner by Doug Noland ‘ July 15, 2017.
Instead of selling his soybeans for devalued pesos, Gustavo Tione exchanged 30 tons of soy for about 8,000 liters of diesel from the state-run oil company. This is just one example of a growing barter economy in Argentina as a 24% inflation rate rapidly erodes the value of the country’s currency.
As Bloomberg reports, the rise of barter is simple economics. Commodities hold their value better than than cash.
So, why bother with fiat currency if you don’t have to?
Barter is the most basic economic transaction. You give me something I want or need. In exchange, I give you something you want or need.
YPF, the Argentine energy company, uses barter to bypass the peso. The company barters with farmers, trading fuel for wheat, soy, and corn, and then sells it on the dollar-based export market for grain. Of course, this scheme will fall apart if the dollar crashes. Nevertheless, it illustrates the power of barter.
This post was published at Schiffgold on JULY 12, 2017.
The stock market is at all-time highs. Argentina, a serial defaulter just sold $2.75 billion worth of debt with a 100-year maturity. Commercial real estate is booming again. All of this irrational exuberance while the world’s government’s are over indebted, economies are punk, and hostilities are prevalent everywhere.
Are memories too short? Or testosterone too high? Therese Huston, cognitive psychologist at Seattle University, writes for The New York Times,
Researchers have shown for years that men tend to be more confident about their intelligence and judgments than women, believing that solutions they’ve generated are better than they actually are. This hubris could be tied to testosterone levels, and new research by Gideon Nave, a cognitive neuroscientist at the University of Pennsylvania, along with Amos Nadler at Western University in Ontario, reveals that high testosterone can make it harder to see the flaws in one’s reasoning.
Ms. Huston goes on to explain that people with high levels of testosterone have less activity in their ‘orbitofrontal cortex, a region just behind the eyes that’s essential for self-evaluation, decision making and impulse control.’
This post was published at Ludwig von Mises Institute on July 8, 2017.
A serial deadbeat (Argentina) got investors to buy 100-year bonds, Sri Lanka’s latest debt sale was oversubscribed by 10 times, tiny Belarus is poised to issue eurobonds, and even Papua New Guinea, the impoverished Pacific Island nation, is planning its overseas debut in the second half of the year.
But, as Bloomberg reports, that’s just a small sampling of the risks emerging-market investors have started taking, even as yields remain relatively thin.
But there’s more: defaulted notes from Mozambique are among the best performers in 2017. The Maldives, a tiny nation in the Indian Ocean, sold its first international bond earlier this month. And Ecuador, where the former president disparaged bondholders as ‘true monsters’ when he defaulted in 2008, had no trouble raising $3 billion.
Century bonds in EM are still rare, but have become more popular as global yields have collapsed…
This post was published at Zero Hedge on Jun 23, 2017.
This is a syndicated repost courtesy of Confounded Interest. To view original, click here. Reposted with permission.
US Treasury Secretary Steve ‘The Munchkin’ Mnuchin said on Bloomberg News today that Treasury is still considering issuing ultra-long sovereign debt. This comes on the news that Argentina is issuing a 100 year sovereign bond that is in hot demand. Reuters – Argentina sold $2.75 billion of a hotly demanded 100-year bond in U. S. dollars on Monday, just over a year after emerging from its latest default, according to the government.
The South American country received $9.75 billion in orders for the bond, as investors eyed a yield of 7.9 percent in an otherwise low yielding fixed income market where pension funds need to lock in long-term returns.
Thanks to a stronger-than-expected peso currency, the government has increased its overall 2017 foreign currency bond issuance target to $12.75 billion from its previous plan of issuing $10 billion in international bonds, Finance Minister Luis Caputo told reporters in Buenos Aires.
This post was published at Wall Street Examiner by Anthony B Sanders ‘ June 20, 2017.
Apparently while I was in the air yesterday flying between Asia and Europe, the financial system proved once again that it believes in magic beans.
The latest absurdity is that the government of Argentina sold $2.75 billion worth of bonds yesterday afternoon.
It’s not strange or unusual for a government to sell bonds; it happens multiple times across the world nearly every single day of the year.
What’s totally insane about yesterday’s bond sale in Argentina, though, is the duration of these particular bonds.
Remember that a bond is similar to a loan; as an investor, you’re basically loaning money to whichever government issues the bond.
And, like a loan, a bond has a maturity date – the date at which the government is supposed to pay you back the ‘face value’ of the bond.
often have a 3-7 year term. Student loans can easily go 10 or 15 years. A home mortgage can last 30 years.
It’s the same with government bonds, which often have a term up to 30 years.
This post was published at Sovereign Man on June 20, 2017.
When we previewed yesterday unexpected announcement that Argentina would join Mexico, Ireland and the U. K. in issuing a 100 year bond, just one year after emerging from its latest default, we said “we expected the potential yield of 8.25% to come down as the offering will likely be many times oversubscribed.” It was.
According to Reuters, late on Monday Argentina sold $2.75 billion of a “hotly demanded” 100-year bond in U. S. dollars, and as expected the surge for yield resulted in 3.5x oversubscription: the South American country received $9.75 billion in orders for the bond, which in turn lowered the final yield to 7.9% with a 7.125% cash coupon, from the initial price talk of 8.25% in what Reuters dubbed an “otherwise low yielding fixed income market where pension funds need to lock in long-term returns.” Luckily for those same pension funds, they never have to worry about returns on capital as there is zero chance Argentina will not default again in the next 100 years.
Meanwhile, courtesy of yield-starved investors around the globe, the Argentina government increased its overall 2017 foreign currency bond issuance target even more, to $12.75 billion from its previous plan of issuing $10 billion in international bonds, Finance Minister Luis Caputo told reporters in Buenos Aires, in large part to fund its soaring budget deficit. As Reuters notes, Argentina will tap international capital markets to finance a fiscal deficit of 4.2% of GDP. Caputo said Argentina has $2.6 billion in bonds left to be issued this year. The new paper could be denominated in euros, yen or Swiss francs. It is not clear if the remaining issues will be in 100 year or longer maturities.
This post was published at Zero Hedge on Jun 20, 2017.
Yield-desperate investors stop before nothing. What have central banks wrought? Junk-rated, deficit-plagued, inflation-whacked Argentina just sold $2.75 billion of 100-year dollar-denominated bonds. This was the first time ever that a junk-rated country was able to sell 100-year bonds denominated in a foreign currency, or any currency.
Argentina sports a ‘B’ credit rating from Standard & Poor’s. Five notches below investment grade. Deep junk.
And 100 years is a very, very long time for Argentina and its regularly beaten-up creditors: Just over the past 65 years, it has defaulted six times – in 1951, 1956, 1982, 1989, 2001, and its ‘selective default’ in 2014. Its default in 2001 on $80 billion of dollar-denominated debt was the largest sovereign default at the time.
And yet, yield-desperate investors don’t seem to care. According to The Wall Street Journal, demand for the private-placement offering was such that Argentina could sell those ‘century’ bonds at a yield of 7.9%, down from the initial price talk of 8.25%.
This post was published at Wolf Street on Jun 20, 2017.