The European Peripheral Problems have been painful, but some banks have actively been winding down the exposure. Stratfor reports;
Despite the recent Greek bailout by the International Monetary Fund and European Central Bank, investors remain wary of the possibility of contagion from Greece and the eurozone’s troubled periphery to the core economies of the region. While the eurozone’s strongest economies do have a significant exposure to Greece, Italy, Spain, Ireland and Portugal, their banking institutions have been actively working to divest from these holding since the beginning of the crisis. Germany has been particularly successful, reducing its exposure to fragile economies by more than 40 percent and making itself less vulnerable to a potential default from these countries. It is only recently that Berlin reversed its no-bailout policy regarding the European periphery, a move that contradicts the risk-minimizing and divesting behavior exhibited by its financial sector since the beginning of the eurozone crisis.
As we pointed out earlier this year, volatility is broken. Due to different effects by the QE programs, volatility, and especially VIX, has behaved rather “strange” since the beginning of the QE programs. Many frustrated vol traders have experienced this effect during the last year, and will continue experiencing it until everybody is dragged into believing there is minimal risk in the system. The skew has on the other hand traded somewhat differently, but it is not only an effect of “pro traders” buying protection, but we won’t go into those discussion here.
Instead are presented some charts on the skew (actually the skew in relations to VIX) and SPX index, courtesey of Macro Story. Are we up for some big drop in the Markets, or do we still need the last desperate Alpha chaser to join the bull run? One thing is for sure, not many, even of the experienced vol traders community, understand what is going on in the vol complex, and therefore we expect the unexpected to happen during the autumn.
For further reading on broken volatility and this year’s best vol report, artemis volreport.
Charts, Macro Story
When asked about the end game as he sees it Faber remarked, “Well as I look at Europe and I look at the US and especially at politicians and at central banks, I think the way it will play out is that they will have further massive monetary stimulus and that eventually we will have a reset in the global economy.
But it won’t happen right away this reset, and only after the money printing will have essentially exhausted itself, when it reaches a painful level like in Latin America when we had inflation around 70%, 80% per annum or more, it reached a very painful level where reform was then initiated.”
When asked about the eventual monetary reset he expects and how he sees that playing out Faber had this to say, “Well when the reset comes it will be say a hundred dollar bill will be exchanged for a one dollar bill or something like this. Before we have the Great Reset, the government they will increase the war effort under whatever excuse that will be but I think that is the likely course of action…The wealth destruction will be interesting because…the people that suffer the most before the reset happens are actually the cash holders.”
Ful King World Interview with Faber, click here.
From Gold Core,
Contributing editor to Money Week, Dominic Frisby, has just released an excellent video – ‘Gold: Independent Money’.
A picture paints a thousand words and a video hundreds of thousands of words and this is a very informative video about our modern monetary system, fiat currencies and gold. It shows how fiat money has led to wars, massive debt, social inequality, economic bubbles, rampant consumerism, and environmental destruction.
‘Gold: Independent Money’ can be seen here:
It shows that a return to a gold standard would help ameliorate today’s monetary, financial and economic ills.
“A gold standard will not cure every social ill in the world, nor will it stop all senseless wars. Nothing will.
However, by now it should be clear to everyone that the current fiat system is good only for bankers, brokers, politicians, war mongers, and the already wealthy. Everyone else loses as inflation eventually eats away at what’s left of the rapidly shrinking ‘middle class’.
All fiat currencies including the US dollar are doomed. The only debate is the path it takes to get there.”
We have heard about that 1% of Top earners ruling the US. Below some further insight into the 1% and the top within that 1%.
This article was written by an investment manager who works with very wealthy clients. I knew him from decades ago, but he recently e-mailed me with some concerns he had about what was happening with the economy. What he had to say was informative enough that I asked if he might fashion what he had told me into a document for the Who Rules America Web site. He agreed to do so, but only on the condition that the document be anonymous, because he does not want to jeopardize his relationships with his clients or other investment professionals.
A highly complex and largely discrete set of laws and exemptions from laws has been put in place by those in the uppermost reaches of the U.S. financial system. It allows them to protect and increase their wealth and significantly affect the U.S. political and legislative processes. They have real power and real wealth. Ordinary citizens in the bottom 99.9% are largely not aware of these systems, do not understand how they work, are unlikely to participate in them, and have little likelihood of entering the top 0.5%, much less the top 0.1%. Moreover, those at the very top have no incentive whatsoever for revealing or changing the rules. I am not optimistic.
Full article on the growing inequalities in the American Society.
For all news, continue reading below.
The cost of trading US Treasury futures was set to rise on Monday as the CME Group adopted defensive measures given the impasse in Washington over raising the Federal debt ceiling, the FT reports. CMEhttp://ftalphaville.ft.com/thecut/2011/07/26/634126/cme-raises-requirements-on-trading-treasury-futures/
Prince Alwaleed bin Talal, News Corp’s most powerful shareholder after the Murdoch family with 7 per cent of the media conglomerate’s voting shares, has rebuffed calls to change its dual-class share structure or leadership in the wake of the phone-hacking affair. The long-standing friend of Rupert Murdoch http://ftalphaville.ft.com/thecut/2011/07/26/634091/alwaleed-backs-murdochs-on-news-structure/
A deal on the debt ceiling looked further away than ever after Monday night speeches by President Barack Obama and Republican House speaker John Boehner. Mr Obama urged congressional leaders to reach a “fair compromise” over the next few days to avoid a US default http://ftalphaville.ft.com/thecut/2011/07/26/634046/no-title-locked-3/
Anshu Jain and Jürgen Fitschen are set to take over the reins of Deutsche Bank as co-chief executives next May, succeeding Josef Ackermann after his decade in charge of Germany’s biggest bank, reports the FT.http://ftalphaville.ft.com/thecut/2011/07/25/634011/deutsche-bank-announces-co-ceos/
Bank of Ireland has been saved from possible government control by a group of overseas institutional investors that has agreed to buy up to €1.12bn ($1.6bn) of the troubled lender’s shares. Wilbur Ross, the US billionaire, a large Canadian firm and a number of US fund managers are thought to be among the investors that have committed to buy a stake of up to 37.3 per cent in the bank. http://www.ft.com/intl/cms/s/0/db7af348-b6bb-11e0-ae1f-00144feabdc0.html#axzz1TBR7mQo3
German industrial groups are set to add to rising cash piles when they report quarterly results this week, piling pressure on corporate boards to explain how they plan to make best use of their huge liquid resources.Siemens, the industrial conglomerate, and Volkswagen, Europe’s biggest carmaker by sales, are among scores of companies generating large amounts of cash as a result of strong demand in emerging markets for German-engineered goods. http://www.ft.com/intl/cms/s/0/e6ddc964-b3ae-11e0-855b-00144feabdc0.html#axzz1TBR7mQo3