The ECB embarrassment. Borrowing 18 EUR generates only 1 EUR of GDP growth.
Independently from the effectivity of printing machines the ECB owns, the Eurozone is still in a very bad economic condition. According to the ECB to create 1 EUR of GDP growth the economy has to borrow another 18.5 EUR through QE or to use fashionable buzzword – ‘stimulus’.
This year the ECB has printed already 600 bn EUR creating growth of 31 bn EUR. For reference, the amount of Greek debt is equal to 360 bn EUR.
Abacab Fund Sees Mispricing In Options As Black-Scholes Has Become “Inadequate”
Abacab Asset Management's flagship investment fund, the Abacab Fund, had a "very strong" 2020, returning 25.9% net, that's according to a copy of the firm's year-end letter to investors, which ValueWalk has been able to review. Commenting on the investment environment last year, the fund manager noted that, due to the accelerated adoption of many Read More
Credit Suisse chairman warns against investment in European banks
Tidjane Thiam from Credit Suisse believes that banks in Europe are not the best choice to invest in. He added that “only a fool would try to make a five-year prediction.”
“I think the next nine months are going to be difficult” (…) “risk is everywhere, risk is everything.” It is visible in volatility when any news about banks can make or break the day – Thiam pointed out.
Since last year’s summer index of European banks lost 30%. Thiam was late with his warning but we can add it to the collection of admissions describing how weak European banks are today.
Syria: American propaganda loses ground
The US administration tries everything to show Russian and Syrian governments in the worst possible light while bombs produced in the US are devastating Yemen thanks to Saudi campaign.
Fortunately for truth, the situation in Syria is reported by more and more sources. Syrian rebels cooperate with al-Qaida or admit being a part of it. Reuters informed about rebels coordinating with Jaish al-Fatah when they are planning their operations. This puts them next to a former branch of Syrian al-Qaida.
In Hama, a group of Syrian rebels armed with American anti-tank weapons joined their forces with Jund al-Aqsa. What we can call a subsidiary of al-Qaida.
The virtual reality also has its own war. If you are interested in Syrian conflict you know the Twitter profile of 7-year old Syrian girl – Bana Alabed. Surprisingly, Eastern-Aleppo inhabitant knows perfect English, has a very good broadband connection and is doing her reporting while bombs are landing outside of her windows. Below you can find a message where Bana tries to convince the world “it’s better to start 3rd world war instead of letting Russia & Assad commit a ‘holocaust’ in Aleppo.”
Washington tries to break BRICS. Brazil is the next target
Americans tried to hit BRICS and pushed for impeachment of democratically elected president Dilma Rousseff. At the end of August, Michel Tamer Vice President in Rousseff cabinet was sworn to office. During his inauguration speech, he asked fellow Brazilians to trust him. It was three weeks after the speech that he unveiled his plan to privatise the biggest Brazilian companies. Cronies are going to grab oil sector first.
UK: the end for farming subsidies? Who loses out?
Brexit may result in British farmers losing subsidies. We are talking about big money here and this money sometimes lands in extraordinary hands rather than help small farmers. For example, taxpayers contribute 400 000 GBP to Saudi prince Khalid Abdullah al-Saud racing horse stables.
There are also other entities earning millions from the EU. Below you can find the list of 10 biggest beneficiaries of the European Agricultural Guarantee Fund.
90 days after the Brexit, still no Armageddon
During remain campaign, high authorities were prophesizing catastrophe which Brexit inevitably would bring. Standard & Poor’s forecasted investment paralysis in the UK.
Ultimately, citing Jeff Desjardins, the only victim of Brexit is the reputation of well-known economists after their predictions failed miserably.
Source: Visual Capitalist
Above you can see the performance of EUR vs GBP and main British index FTSE100.
Pound visibly fell vis-à-vis EUR but it is still higher than after 2009-2011 crisis. Looking at FTSE100 it is reaching its historical records. Since the referendum, it gained 12%.
The American crusade cost 5 trillion USD and led to 65-fold increase in terrorist attacks
Fifteen years, since 9/11 attacks, the US spent 5 trillion USD to fight terrorism according to PhD Net Crawford, a political science professor at Brown University.
Apart from the question how this country being in debt for 19.5 trillion USD could have spent 5 trillion on the war on terror we should also ask: what about the results? From Reader Supported News analysis it seems that since 2002 a number of terrorist attacks increased 65 times.
In 2014, 74% of all terrorist attacks around the world happened in Iraq, Nigeria, Afghanistan, Pakistan or Syria. From this list, only Nigeria did not experience the US intervention. On the other hand, we cannot be sure because Hillary Clinton refused officially classifying Boko Haram as an ISIS-affiliated terrorist group in Nigeria. Additionally, Boko Haram back in 2009 was a minor group but gained a lot (money, influence) thanks to the Libyan conflict.
5 warning signs mainstream media paid no attention to
The state of the global economy is worrying. Nonetheless, the presidential elections in the US and Syrian conflict take all the air time. Here are 5 important signs from big banks:
1. HSBC alarmingly warns about the future equity sale,
2. The IMF confirmed dangers regarding Deutsche Bank situation,
3. Bank of America informed about the inevitable recession,
4. Major investor Macquarie Group warned that private sector will not benefit from QE3,
5. The Bank for International Settlements cautioned about the economic slowdown in China.
Royal Bank of Scotland with problem similar to Deutsche Bank
Due to penalties incurred by the RBS, it may need to pay in the upcoming years up to 27 billion USD. This sum is close to the market capitalisation of the bank.
Parallels to DB situation are easily recognisable. German giant was penalised by the American Department of Justice with the fine of 14 billion USD. Sum unprecedentedly higher than common expectations and close to the market capitalisation of the DB causing equity price to tank.
Why is the New Silk Road scary for Washington?
Six years ago Vladimir Putin presented a vision of free trade zone spanning from Lisbon to Vladivostok. This caused panic in Washington putting pressure on Germany to quickly block this idea.
Today we see even more ambitious plan being realised through the New Silk Road – an attempt to integrate Eurasia.
Beijing is convinced that countries would join the project and reap the benefits of the initiative rather than contribute to the cost of the Sino-America conflict.
In Pentagon’s defence strategy created 24 years ago, we can find this excerpt saying that the basic goal is to prevent the creation of new enemy possessing enough resources to become a superpower. Territories to supervise against such eventuality: Western Europe, East Asia, former USSR and South-Western Asia.
If you find similarities with ‘divide and conquer’ strategy you are right. The strongest country provokes conflicts between weaker states and enters them as an arbitrator preserving dominant position. This is why the US is engaged in so many conflicts around the world. ‘Divide and conquer’ was successful in many examples but did not prevent the rise of China.
Protectionism vs globalisation
Events like Brexit or possible Donald Trump win interfere with the economic integration strategy created by the IMF and the World Bank. Growing chasm between different layers of society resulted in the general public demanding change and more protectionism. This is why the popularity of AfD in Germany or Donald Trump in the US is growing. We cannot rule out a possibility that in just a few years we will be in the middle of the crisis and protectionism will be shown as the main reason behind it. This is when globalism becomes the cure for everything.
“The consensus in policy-making circles was that more trade meant better economic growth,” said Standard Chartered bank economic researcher Ding Shuang, who worked at the IMF between 1997 and 2010. “But the benefits weren’t shared equitably, so now we see a round of anti-globalisation, anti-free trade. Globalisation will stall for the moment until we can find a way to share those benefits” – Shuang added.
In other words, the remedy for today’s problems caused by globalism is… even more globalism and more equitable version of it.
American debt jumps up drastically
Barack Obama can add to his legacy another negative record – the rate at which his administration adds debt. The fiscal year was closed with 1.4 trillion USD (7.5% GDP) fresh debt. For comparison, Marshall Plan’s cost was equal to 4.3% GDP. As a result, total debt of the USA is now at 19.5 trillion USD.
Also worth mentioning is the fact that according to legal requirement American deficit has to oscillate around 3% GDP. This official version is proclaimed for the whole year and one day, debt just explodes adding hundreds of billions of dollars.
Price of the Swiss National Bank jumps
It is not the first time we mention the SNB. You already know that the Swiss bank is investing in American equities. But there are not many people paying attention to the fact that shares of the SNB are traded publicly:
Since July the SNB noted a 60% hike in its price. This happened when the index of the Swiss stock exchange barely moved. The topic is not touched by media which does not change the fact we should ask a question whether someone tries to take over the SNB.
Is it possible? The corporate structure of the SNB is complicated. 45% is owned by Cantons, 15% is owned by Canton banks and private investors and other entities have 40%. Private investors can significantly affect the equity price. We should not expect any details about this possible trade anytime soon.
Independent Trader Team