"As global bond yields break ever higher, it appears The Bank of Japan is realizing it is losing control of its yield curve and today unleashed a double-whammy to stifle the bond bears... Whammy 1 - BoJ offers to buy unlimited 10Y notes at 11bps. Result - a 0.5bps drop in the JGB yield!!"
"The SNB raked in ENORMOUS investment profits because they printed hundreds of billions of francs, which inflated the prices of assets that they themselves were buying. And today, because of those artificial investment gains that they engineered for themselves, the SNB is now the most profitable company in the world. Oh, and just so you know the other half of the story, while the central bank is raking in record profits, total debt in Switzerland has skyrocketed."
"Washington has suspended it way into a $5.7 trillion increase in the public debt in just six years since October 2011. That is, during a period which supposedly constitutes the third longest business expansion in US history. At the end of the day, you can't borrow your way to prosperity. That's the oldest rule in the book of sound money and sustainable finance. And it's about ready to be learned all over again."
Every day provides increased evidence that developed-world sovereign debt is quite literally "a bubble in search of a pin", as Peter Schiff put it in his 2011 book 'Crash Proof'. Continue reading →
"Bank of Japan Governor Haruhiko Kuroda said on Friday he had no plan to expand monetary stimulus now, blaming sharp declines in oil costs for keeping consumer inflation distant from the bank's ambitious 2 percent target. While he maintained his optimistic view of the economy, Kuroda stressed his resolve to ease monetary policy further if risks threaten achievement of the BOJ's price target. The remarks, made in response to a question by an opposition lawmaker, pushed down Japanese stocks on disappointment that no immediate monetary stimulus was forthcoming." Continue reading →
"Denmark’s biggest mortgage bank says there’s a 'real risk' Copenhagen is heading into a property bubble. Property prices in Copenhagen have risen 40-60 percent since the middle of 2012, when the central bank first resorted to negative interest rates to defend the krone’s peg to the euro. The benchmark deposit rate has been minus 0.75 percent since February as Denmark’s currency war intensified, and most analysts surveyed by Bloomberg see negative rates lasting at least through 2017. The Danish regulator this month warned Danske Bank against pursuing a growth strategy in Sweden as the housing market there shows signs of imbalances." Continue reading →
"The Fed's new restrictions come from the Dodd-Frank Act of 2010, which brought in a wave of reforms after the financial crisis. Under the new rule, banks that are going bankrupt -- or appear to be going bankrupt -- can no longer receive emergency funds from the Fed under any circumstances. However, it's important to note that the new rule allows the Fed to judge by its own measures whether a firm qualifies for its emergency aid. The idea is the Fed can still lend to banks during times of emergency, but the bank must be able to pay it back. Yet the true health of a bank in turmoil can be very difficult to assess." Continue reading →
"The big winners, to the tune of $1.6 trillion by the end of 2012, were the governments of the US, the UK and eurozone, from the reduced costs of servicing their debts and from the increased profits made by the their respective central banks (who magically create money to buy government debts which pay them interest). McKinsey believes that households have been significant losers from cheap money. How much have they lost? Well McKinsey says that from 2007 to 2012, the cumulative net loss of interest income for American households was $360bn, compared with a cumulative net loss of $160bn for eurozone citizens and $110bn (£70bn) for British people." Continue reading →
"The Federal Reserve’s failure to recognize its role in driving the third dangerous asset bubble in 15 years will destroy the central bank’s reputation for good, said Albert Edwards, global strategist at Societe Generale. Edwards said it’s too late to avoid another massive collapse in asset prices. 'This time the Fed’s largesse has fueled another corporate debt explosion,' he said. 'The real rate of corporate borrowing is even greater than was seen during the late 1990s tech bubble. This is 100 percent attributable to the Fed’s excessively loose monetary policy.'" Continue reading →
"The loan balances have been driven up by a combination of three factors -- strong car sales, rising car prices and low interest rates. Interest rates are low. Borrowers with top credit scores can get loans for less than 3%. But the amount owed is up 11%, a sign of the increase in the size of car loans due to rising prices. The average amount borrowed is about $21,700, and buyers owe nearly $18,000 on average. The average new car purchase price now stands at $32,529, according to sales tracker TrueCar. The average car loan balance is rising faster than it is for mortgage loans, according to TransUnion. The average payment now stands at just under $400 a month." Continue reading →