Thursday, August 04, 2016

Today's Headlines

  • For Europe's Elite the Party Lives On After Brexit. Europe’s political elite may have missed the Brexit memo. Six weeks since U.K. voters rebuked the ruling class by choosing to leave the European Union, the region’s establishment has reacted by carrying on as before. The revolving door of former policy makers joining the finance industry has spun again, with European Commission President Jose Manuel Barroso signing up with Goldman Sachs Group Inc. and former Bank of England Governor Mervyn King joining Citigroup Inc. Meanwhile departed Prime Minister David Cameron is facing criticism for nominating numerous aides for honors, including his wife’s stylist. The perception of elite coziness risks further disenfranchising those backing Brexit, and peers across the continent who share the feeling of being left behind by the powerful and wealthy in the era of globalization and financial crises. A potential upshot is more support for populist parties that tap into alienation such as the U.K. Independence Party or France’s National Front. 
  • Politics May Have Helped Create Europe's Sovereign-Bank Loop of Doom. "Correlation does not imply causation, but it does waggle its eyebrows suggestively and gesture furtively while mouthing 'look over there,'" quipped the comic xkcd. A new working paper by Filippo De Marco and Marco Macchiavelli is likely to raise many eyebrows as it makes the case that political suasion may have created the very thing that helped plunge the eurozone into crisis, using stress test data to argue that higher state ownership and the presence of politicians on bank boards are linked to lenders' penchant for snapping up domestic government debt.
  • Carney Scorns Negative Rate Path Trodden Across World Economy. Mark Carney has looked at the road his most adventurous -- or desperate -- peers have taken, and decided it’s not for him. While unveiling a multi-pronged stimulus package aimed at staving off a post-Brexit U.K. slump on Thursday, the Bank of England governor also drew a line splitting the world into monetary jurisdictions that will cut interest rates below zero, and those that won’t. “I’m not a fan of negative interest rates,” Carney said after the BOE lowered its key rate to 0.25 percent and boosted quantitative easing. “We see the negative consequences of them through the financial system, we’ve seen that in other jurisdictions, we see the issues with savers.”
  • Goldman Sachs(GS) Joins Chorus Saying BOJ Easing Is Nearing Limits. (video) Goldman Sachs Group Inc. is the latest to join a chorus reasoning the Bank of Japan is reaching the limits of its stimulus program, just as nation’s bonds tumbled the most in more than three years. Governor Haruhiko Kuroda has struggled to get insurers and pension funds to cut their holdings of longer-dated Japanese government bonds, and speculation about the sustainability of the central bank’s debt purchases is unlikely to die down unless investors are convinced prices of the notes will decline, Rohan Khanna, a London-based interest-rates strategist, wrote in a research note. Goldman follows Pacific Investment Management Co. and former Ministry of Finance official Eisuke Sakakibara in saying Kuroda is running out of room to expand the BOJ’s record stimulus. 
  • Treasuries Rally, Pound Drops on BOE as Stocks Mixed Before Jobs. (video) The Stoxx 600 advanced 0.7 percent in London, after falling 1.9 percent in the first three days of the week. A gauge of lenders jumped 1.3 percent, for the best performance among the benchmark index’s 19 industry groups. The U.K.’s FTSE 100 Index soared 1.3 percent.
  • Greenspan Put Gone Wild as Critics See Markets Hamstringing Fed. It’s the Greenspan put gone wild. Or so the Federal Reserve’s critics would have it. No longer is the Fed just waiting for financial markets to be hit by a bout of turbulence and then lowering interest rates in response -- as former Chairman Alan Greenspan did. Instead, the critics contend, it’s become so sensitive to the risk of sharp market moves in the future that it’s pulling its policy punches now by repeatedly holding off on raising rates. “They used to respond, I think excessively, to what financial markets did,” said Willem Buiter, chief economist at Citigroup Inc. and a former policy maker at the Bank of England. “Now they don’t act in response to the fear that they have of how the market might respond to their actions.”
  • Manhattan Luxury-Condo Glut Ends Developer Rush for Land Deals. New York’s condo slowdown is upending the market for one of the most coveted assets in tightly packed Manhattan: land. Sales of parcels for development are plummeting as builders, seeing signs that a once-hot property market is cooling, offer prices that sellers won’t agree to. Just 48 land deals were completed in the first half of 2016, compared with 79 in the year-earlier period and 73 in 2014, according to brokerage Ariel Property Advisors. That may be a sign of a broader real estate slowdown to come, since land is often a leading indicator for the rest of the market.
  • Realogy Tumbles Most Ever as U.S. Luxury-Home Slump Hits Profit. Realogy Holdings Corp., owner of brokerage brands Coldwell Banker and Century 21, dropped to a record low as sluggish luxury home sales hurt the firm’s earnings. Shares of Realogy fell 13 percent to $26.62 at 12:47 p.m. in New York, after earlier slumping 15 percent, the biggest decline since the company’s October 2012 initial public offering at $27 a share. Realogy had second-quarter net income of $92 million, or 63 cents a share, down from $97 million, or 66 cents, a year earlier, according to a statement Thursday.  
Wall Street Journal:
Fox News:
  • Battle of the Billionaires: Clinton’s uber-rich backers pour money into Trump fight. Donald Trump has his billions, but Hillary Clinton has her billionaires. As the candidates formally enter the general election season after their conventions, the former secretary of state’s wealthiest backers are pouring money into political groups opposing Trump. Within the past year, according to a review by, a total of 24 billionaires have donated more than $42.5 million to two Clinton campaign arms and three allied super PACs. All this is in preparation for a blitz of advertising and other efforts to defeat Trump over the next three months – as some big-money Republicans stay on the sidelines.
  • Report: Hillary Clinton would hike taxes by $1.3 trillion. (video)
  • Top GOP lawmaker: Cash payment to Iran enabled terror funding. (video) Republicans have a problem with more than just the timing of the Obama administration's controversial $400 million payment to Iran earlier this year -- one top GOP lawmaker says the fact the payment was made in hard currency is another big red flag. According to House Foreign Affairs Committee Chairman Ed Royce, R-Calif., this could enable Iran to more easily fund groups like Hezbollah since hard cash is the regime's preferred way of financing terrorism. “If you’re going to have a transaction, the last thing you want to do with Iran … is to give that to them in unmarked bills, in hard currency, in Swiss francs,” Royce told Fox News on Thursday.
  • Wall Street wealth managers face growing competition. (video) One of Wall Street banks' biggest businesses is taking heat from competitors old and new. Many big banks are seeing fees from wealth and investment management divisions fall, putting a crimp in critical revenue at a time when Wall Street is having an increasingly tough time matching their return on equity targets.
Zero Hedge:

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