Mish's Global Economic Trend Analysis |
- ECB Waters Down 2014 Stress Tests Second Time; Yet Another Sham Stress Test
- Christine Lagarde Warns of Lord Voldemort, Hopes to Put Deflation Ogre in a Bottle
- Singapore Set for Icelandic-Style Property Bubble Meltdown; Hype or Reality?
| ECB Waters Down 2014 Stress Tests Second Time; Yet Another Sham Stress Test Posted: 16 Jan 2014 01:17 PM PST Bloomberg reports ECB Said to Favor 6% Capital Requirement in Stress Test when it puts them through a simulated recession later this year, said two euro-area officials. Strict Rules Revisited With a hat tip to ZeroHedge, let's flash back to an October 23 Bloomberg report: ECB Capital Definition Tougher in Stress Test Than Review The European Central Bank said it will use stricter rules when stress testing banks' balance sheets next year than it will to study their assets, as it seeks to prove its credentials as the region's financial supervisor.What About Sovereign Bonds? Are Sovereign bonds a major source of risk? One would think so. At least one should think so. Yet, just today, the ECB whitewashed sovereign bonds as a no risk item. Via translation from El Economista please consider Most of the public debt held by banks not penalized in the stress test. What looked like was going to be a strict stance of the European Central Bank (ECB) regarding sovereign debt portfolios of financial institutions, is not so.Another Sham Stress Test As a result of that preposterous trading-book rule, banks will shift 100% of their sovereign bonds to their hold-to-maturity bucket, at least for the duration of the test. Thus, not only have we seen a 25% reduction in capital that banks have to hold, effectively all sovereign bonds are deemed to be risk-free for the test. Listen to what Ignazio Angeloni, head of the ECB's financial stability directorate says today: "At first sight the 6 percent target looks manageable and less ambitious than what people might have expected. However, given Draghi has been very explicit in willing to carry a tough and credible stress test, this might also imply that the macro adverse scenario the ECB will apply will be much more severe than what the EBA did last time." Angeloni Translated: "At first glance it appears we watered down the stress tests. And we did do just that. However, the tests are still credible, because we say they are". Recall what Mario Draghi said in October. "Banks do need to fail to prove the credibility of the exercise. If they do have to fail, they have to fail. There's no question about that." Draghi Translated: "If banks have to fail, they have to fail. However, our mission is to make sure the stress tests are weak enough so that no banks fail or only a token number of hand-picked banks fail. We have not yet decided on the number, but we can guarantee you, it won't be big." Mike "Mish" Shedlock http://globaleconomicanalysis.blogspot.com |
| Christine Lagarde Warns of Lord Voldemort, Hopes to Put Deflation Ogre in a Bottle Posted: 16 Jan 2014 10:50 AM PST In a speech at the National Press Club in Washington, IMF managing director Christine Lagarde stated "If inflation is the genie, then deflation is the ogre that must be fought decisively." With that sentence Lagarde did something most central banks won't: discuss Lord Voldemort, the deflation ogre, by name. Please consider Christine Lagarde warns of growing threat of deflation. "With inflation running below many central banks' targets, we see rising risks of deflation, which could prove disastrous for the recovery," said Ms Lagarde, in a speech at the National Press Club in Washington. "If inflation is the genie, then deflation is the ogre that must be fought decisively."Time to Unbottle the Inflation Genie Clearly Lagarde wants to unbottle the inflation genie. How do I know the inflation genie is in a bottle? Well the ECB told us so in December of 2005. Here is proof the monster was captured:  The above images is from a self-serving ECB video that attempts to brainwash school kids and teachers about ECB definition of "price stability". The wizards' main worry now is "You-Know-Who" and "He-Who-Must-Not-Be-Named".  At a recent conference of economic wizards, Lagarde dares to speak the unspeakable: "Lord Voldemort is on the loose". Charlatans or Wizards? In reality, charlatans like Christine Lagarde and all the alleged central bank wizards would not know "price stability" if it flew up and bit off their noses. For a thorough trashing of the propaganda spouted by the central bank wizards, please see Money as Communication: A Purposely "Non-Educational" Fallacious Video by the Atlanta Fed Looking for Real Economic Wizards? I am pleased to again mention that John Hussman is a speaker and host of the second annual Wine Country Conference will be held May 1st & 2nd, 2014. We have an exciting lineup of speakers for this year's conference.
In addition, we expect confirmation from a number of other highly respected fund managers and speakers. This year's event is two days and will include additional "break-out" groups. For speaker bios, please check out Wine Country Conference Speakers. This Year's Cause: Autism $100,000 of the money raised last year came from a generous matching grant from the John P. Hussman Foundation. Some of us in the industry who have done well are making an effort to make a difference. John Hussman is at the very top of that list. One of John's kids has severe autism. This year, all net proceeds will go to support autism programs. Conference Details For further details about the 2014 conference, please see Wine Country Conference May 1st & 2nd, 2014 Nothing Like It! This event is not just another "come and hear someone talk" kind of thing. Attendees and their significant others can expect an educational, fun, and relaxed time. Last conference, we arranged wine tours. They were a big hit. We will do so again. One of the wine estates we visited had a Bocce Ball court. On a couple of miracle shots, I won both games I played. Stay an extra day and golf or travel. I did. The conference hotel is a fun place in and of itself. Unlike many other conferences, you will have easy access to speakers. Want to chat with me, Steen, John, or anyone else at the conference? You will have an easy chance. Not only do we have an excellent lineup of speakers, you will have an opportunity to meet with them, have intimate discussions on important investment topics, with a lot of fun on the side, including wine tours and great wine. There's nothing like it in the investment business. And your money goes to a great cause! What can be better?  Mike "Mish" Shedlock http://globaleconomicanalysis.blogspot.com |
| Singapore Set for Icelandic-Style Property Bubble Meltdown; Hype or Reality? Posted: 15 Jan 2014 11:23 PM PST Several people sent me emails regarding an economic pending bust in Singapore. Given that it's easy enough to accept or discard such ideas based on preconceived notions, I asked a friend who lives in Singapore for his comments. First, please consider the article Why Singapore's Economy Is Heading For An Iceland-Style Meltdown. Like Iceland in its heyday, Singapore's economic stability and vitality – on the surface at least – has made it the envy of the world at a time when most Western economies are languishing with feeble growth, and high rates of unemployment and poverty. Singapore's booming finance and real estate-focused economy has earned it the moniker "The Switzerland of Asia", and finance professionals from all over the world are flocking to work there to take refuge from the hard-hit financial sectors in their home countries. Singapore's unemployment rate is a mere 1.8 percent even as the country's red hot construction sector has been attracting overseas workers, and a growing number of wealthy citizens are hiring domestic helpers from neighboring countries like the Philippines and Indonesia. The ranks of Singapore's wealthy are growing rapidly thanks to the country's asset bubbles, which is helping to fuel a luxury consumption boom in everything from high-end apartments to exotic supercars.Hype or Reality? There is much more to the article, but what appears above is sufficient to understand the claim. While I do not have firsthand knowledge regarding Singapore, one of my regular contacts "Richard" lives there. I sent Richard the above link and asked about his views. He responded ... Hello MishMike "Mish" Shedlock http://globaleconomicanalysis.blogspot.com |
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