“Cyprus is too small to fail. Look out for contagion.”
…It hasn’t really unraveled very far yet because the central bankers and governments of the world are getting away with what they are getting away with. It’s hard to argue that much confidence has been lost so far, but it will eventually because all of these currencies are going to buy less and less as inflation gets higher and higher.
It’s a huge train wreck. It will be a different kind of train wreck than 2008. It will be a massive train wreck just the same, and it won’t start until it starts. You won’t be able to predict when it starts, you will just have to be alert to the clues that something has changed.” …
Curious how in the New Normal a nation is brought to its untimely end without a single shot being fired? Dimos Dimosthenous, who has worked at the Bank of Cyprus for over 30 years, explains:
“That will be the end. Our jobs, our rights, our welfare funds will be lost and Cyprus will be destroyed.”
In short: not with a bang, but a bailout.
… But at least it still has the symbol for all that is wrong with the broke(n) status quo: the €
First, however, much more pain, because as Cyprus’ FinMin Sarris said a short while ago, uninsured depositors in the second largest bank Laiki which is now pending lqiuidation, may lose 80% (read 100%… or more), and wait up to seven years for a payout. Of course, with the majority of the “evil, tax-evading Russians” long gone having used the chaos and assorted loopholes in the past week to get out of Dodge, the only people punished are assorted local hard workers, and domestic businesses, now set to liquidate as soon as they can afford the bankruptcy filing fee.
A day after Nigel Farage told King World News the disaster in Cyprus had sparked bank runs in Europe, today acclaimed money manager Stephen Leeb spoke with KWN about what investors around the world should expect next. Here is what Leeb had to say in this powerful interview:“Cyprus is truly a disaster for the West. It basically says to every citizen of the West, if your country runs into trouble the governments can come along and just take your money. That’s basically what is says.”
“What worries me is if you have an individual who is retired with let’s say 300,000 or 400,000 euros in the bank, and they suddenly find they have had some of their money or a great deal of their money stolen by governments. Let’s say they are not retired and just run a small business and need to make a payroll. What happens in that situation?
The funds are frozen and then part of it is stolen. This is outrageous…
If enacting a levy on Cypriot depositors was a call for a bank run, then saying that the actions in Cyprus are a “template” for future recapitalisations in other Eurozone countries — as the Dutch Euro Group President Jeroen Djisselbloem did yesterday — was screaming it from the rooftops awash in a demented stupour, drunk on bullshitty Smets-Wouters DSGE and the ridiculous notion that the Euro is sustainable….
The global pool of government bonds with triple A status from the three main rating agencies, the bedrock of the financial system, has shrunk more than 60 per cent since the financial crisis triggered a wave of downgrades across the advanced economies.
The expulsion of the US, the UK and France from the “nine-As” club has led to the contraction in the stock of government bonds deemed the safest by Fitch, Moody’s and Standard & Poor’s, from almost $11 trillion at the start of 2007 to just $4 trillion now, according to Financial Times analysis.
March has seen a fairly brisk exodus from municipal bonds in what could be the first signs that investors are beginning to worry about fixed income.
The popular government finance instruments have seen fund outflows of more than $500 million—just a fraction of the $608 billion asset class but a move that caught some bond pros by surprise. The most recent week saw $261 million come out of the market, according to Thomson Reuters.
Be on your guard in coming weeks for declarations that market timing is dead.
That would be a warning sign that a market top may be imminent.
That’s because market timing goes in and out of popularity according to a fairly regular cycle: It is most popular at market bottoms (when advisers confidently pronounce that “buy-and-hold is dead”) and least popular at market tops (when buy-and-hold makes a big comeback).
Now that the Dow Jones Industrial Average (DJI:DJIA) is well above its 2007 high, and the S&P 500 (SNC:SPX) is poised to do so any day, I wouldn’t be surprised to start seeing market timing’s obituaries in coming weeks.
The world second largest economy is more than interesting from a precious metals buyer’s point of view. This is because China is the world’s largest holder of foreign reserves, with $3.3 trillion – far ahead of the second largest holder, Japan ($1.3 trillion).
According to data published by the World Gold Council, China’s gold reserves were the 6th biggest in the world (as of February 2013), but they amounted to only 1.7% of the overall Chinese foreign exchange reserves. The same ratio stands at 75.7% in the U.S., 72.8% in Germany, 72.1% in Italy and 70.5% in France – all countries surpassing China in the tonnage of gold held in their official vaults. It is obvious that there is room for growth in China’s gold reserves. Even if it were only to catch up with Japan (3.2%), it would have to almost double its gold holdings.
Let’s take a look at the growth of China’s foreign reserves.
As we previously expected, 2013 has started in a strikingly similar vein to 2012 and 2011 and we are nearing that deja-vu turning point once again. However, the extreme relative outperformance of stocks to bonds in Q1 suggests very sizable quarter-end pension-fund rebalancing flows – and perhaps today’s ramp was perfectly presented to enable that into the next two days.UBS expects US defined benefit funds to do sizable Q1 quarter-end rebalancing – anticipating $29-35 billion of equity outflows and perhaps as much as $15-19 billion of fixed income inflows. Equity outflows should be dominated by domestic stocks, with $22-27 billion of large cap and $10-12 billion of small cap sales. Furthermore, reading through the recent 10K statements of large corporate pension sponsors, they note consistent, and growing, interest in liability-driven strategies and even full-blown de-risking - supporting high grade long and intermediate government and corporate bonds. Not only are the flows pointing in a similar direction but the catalysts are lining up too.
Pension Related Q1 Rebalancing Estimates
Assessing pension asset allocation is as much art as science. Therefore, we provide ranges rather than a single number to account for the variability in the share of funds that rebalance their allocations regularly. Relative asset returns month-to-date and quarter-to-date are obviously the main driver of rebalancing activity; if equity and bond markets experience a strong bout of volatility between now and the quarter-end, the estimates below may look somewhat different.
Better US data and sentiment improvement in Europe help equities trounce bonds in Q1