“To fight this recession the Fed needs more than a snapback. Alan Greenspan needs to create a housing bubble to replace the NASDAQ bubble.” - clown posse Paul Krugman in 2002.
Addendum to yesterday’s junk bond post (at Actionables) . When you finally get a headline and story like this out of mainstream financial outlet like Bloomberg, it means the Fed is in big trouble: Fed Joining in Alarm over Distortion it Enabled. I added a chart to that post showing the huge surge of lite-covenant issuance in 2012. Then in January sales of so-called covenant-lite loans represented about 55 percent of the debt sold to non-bank lenders, the greatest proportion ever, Morgan Stanley analysts wrote in a Jan. 25 report. Covenant-lite debt does not carry lender protection such as financial maintenance requirement.
Purdue land economist discusses potential for a farm bust.
Those who believe that paper wealth will buffer any correction in the farm economy forget that land and farm machinery are likely to depreciate in tandem — and that adjustment could be swift when it happens, Boehlje warned. What’s more, nearly 85% of farmers’ net worth consists of farmland today — a far more concentrated investment than before the land crash of the 1980s.
Insider selling doesn’t really tell us when the fast, hot money bolts to the downside, but it is useful to reinforcing what we already know about the economy and stock valuations. Corporate insiders were “aggressively selling their shares,” reported Mark Hulbert. And they were doing so “at an alarming pace.” The buy sell-to-buy ratio had risen to 9.2-to-1. They’d been aggressive sellers for weeks. In addition to Google’s exec Eric Schmidt’s offering of Google stock comes several billion in other public offerings all in one afternoon. There were six large secondaries totaling several billion announced Monday.
Average cash balances remain at 3.8%, but those overweight cash fell to 2% (from 8%), the lowest read since February 2011, according to the BAML Fund Manager Survey. BAML sentiment index (how constructed: flows, positioning, price action) now measures extremely bullish (inverse indicator meaning bearish for market).
Meanwhile in Japan Mrs. Watanabe has gone nuts using margin.
Gold has run into a buzz saw for typical reasons: government interventions in the market. India is the premiere gold consumer in the world and the government raised the import tax on gold to 6% from 4%, the second such increase in 10 months. The goal is to artificially beat down strong demand. This is being offset by substantial demand out of China and Russia, but there has been enough small liquidation out of the GLD ETF to keep some pressure on. Total short positions in gold amount to 168.2 tons, well above the five-year average of 100.8 tons, according to Standard Bank.
The big story and a key reason to hold gold is that I am now totally convinced that Fed and Bank of England have leased out their gold to TBTF banksters in a lease scam. Yes, the gold is at the Fed, but paper claims on the physical gold held under Liberty 33 are orders of magnitude greater than the actual physical gold these claims supposedly have recourse to. That will be the ultimate emperor wears no clothes trade.
It is increasingly obvious that the new crisis/bust, won’t be an exact replica of the last one. It’ll be based on the a different set of imbalances. The unsustainable fiscal position is fast making “managing” this crisis very problematic, if not the problem. How do you bailout a bailout when the problem is too much money and fictitious capital around?