PLAY IT AGAIN, MARIO

Of all the homo sapiens species, few are more stubborn than bureaucrats and agenda wonks. Negative interest rates to date have caused more pain than remedy, but don't tell that to central bankers.

A piece in the today's WSJ notes: The battering of European financial stocks is putting heat on the European Central Bank not to slash subzero interest rates even lower next month, but its policy makers say they are considering a further cut.

Shares of European banks and insurers have tumbled recently, falling more than broadly slumping markets. Financial firms have been hit in part because negative rates erode their profit. Fears of more rate cuts have worsened the rout, investors say. But ECB policy makers are sending the message that they aren’t swayed by such concerns when reconsidering their €1.5 trillion ($1.7 trillion) stimulus at the next policy-setting meeting on March 10.

Negative rates amount to charging a fee on deposits, rather than paying interest. By charging banks to deposit funds, the ECB hopes to spur them to lend more aggressively and bolster the eurozone’s sluggish economy. ECB President Mario Draghi told European lawmakers on Monday that the bank won't hesitate to use all its policy tools at its disposal in its goal of reigniting inflation, trumpeting the success of ultra low rates in bolstering the bloc’s economy. Some members of the bank’s 25-member Governing Council have advocated deep cuts.

Just last month one of the ECB's so called top economists was quoted as saying negative rates are an "extremely effective policy tool." One of the unintended side effects, and there always is one either ignored or not considered beforehand, is banks will start charging more for their loans to make up for the costs of storing their cash with central bankers. Such would ramp up the cost to borrowers and could further stifle lending.

In the same issue of the Journal another story about an online lender raising its fees strikes an interesting chord. Or at least it should.

Prosper Marketplace Inc. has started charging borrowers more for loans on its platform, as the company deals with a greater risk of defaults while striving to keep its loans attractive to investors with higher-yielding alternatives.

The San Francisco company, which runs one of the biggest online consumer-lending platforms, told investors who buy its loans Monday that it was raising its rates by on average 1.4 percentage points due to “the current turbulent market environment that we have witnessed since the beginning of 2016.” That means Prosper’s borrowers pay more, while investors who buy the loans it makes earn higher returns.

Online lenders like Prosper aim to use powerful data and automated networks to reach borrowers with loans that are cheaper than competing bank services like credit cards. Unlike some lenders, they generally don’t hold their customers’ loans on the balance sheet, instead passing them along for a fee to investors ranging from hedge funds to individual investors.

If you don't recognize the building blocks here of something with a fetid odor, load up your portfolio with a swatch of these loans once they're out there. Just don't neglect your evening prayers.

BARE CUPBOARD

There is growing concern that investors are losing faith in central banks.

We have written about this frequently. The repercussions should that come about would be severe since it's fairly widely believed the Fed and it's central banking buddies are out of ammunition notwithstanding what MSM  propagandists roll out almost daily.

It was once thought to be a fringe possibility as an economic tool, but negative interest rate policies are quickly becoming more common around the world.

Denmark’s NationalBank was the first to employ negative rates in July 2012. It has been followed by the likes of the European Central Bank (ECB), the Swiss National Bank (SNB), Sweden’s Riksbank and, most recently, the Bank of Japan (BOJ).

That this author writes NIRP was once thought to be fringe consideration given their sudden  widespread popularity among global central bankers tells you everything you need to know. The financial central bank wizardry cupboard is bear, folks

Here's an interesting read on the subject from Business Insider down under.

businessinsider.com/theres-a-big-problem-with-negative-interest-rates-2016-2

OVERNIGHT

Crude oil was the topic de jour overnight as wishful thinking turns to actual hope about a cap on oil production moved investor to worry a bit less. U.S. crude finished up 2.1% at $31.34 a barrel. That up move followed a 7% spike Wednesday. Iran apparently had a change of heart and let it be known that it supported a cap led by Russia and Saudi ministers.

Stocks across Asian apparently like the news as they were mostly up Thursday. Reuters reported: MSCI's broadest index of Asia-Pacific shares outside Japan rose 1.8 percent, pulling further away from a three-week low struck last week when a widespread chill in risk appetite amid concern about the euro zone banking sector depressed equities globally.

Another market move apparently came from  the minutes of  The Fed's January FOMC meeting that revealed some concern about tighter global  financial problems hurting the U.S. outlook and noted their concern about hiking interest rates several times this year as was previously announced before all the turmoil erupted in January.

Add to that St. Louis Fed a President late Wednesday. It would be "unwise" for the central bank to continue hiking rates given declining inflation expectations and recent equity market volatility, St. Louis Fed President James Bullard said late on Wednesday in comments that mark a stark change of direction for one of the Fed's more hawkish inflation foes.

In other markets the dollar was down slightly versus the yen and the euro and gold traded sideways after exiting a three-day losing run in response to the Fed's comments.  We doubt if this is, as the words of a classic pop song from the past goes, this is the start of something big.

JUST KEEP THE FAITH

The European oracle is at it again. This guy ought to get the Noble Peace Prize for jawboning.

It's Dragster time, Mario Draghi, the European Central Bank President unfurled another of his great attacks on what MSM, in their lockstep, ignorant cheer-leading, calls "stubbornly low inflation." The only stubbornness here is the failure of these self-appointed economic gurus unwillingness to admit their policies have been and are an abysmal failure.

But take a deep breath and slow your heart rate down, Magic Mario stands "'Ready' to Do More," the WSJ reports today. The European Central Bank won’t hesitate to boost its stimulus in March if it believes recent financial-market turmoil or lower oil prices could weigh further on stubbornly low inflation, ECB President Mario Draghi said.

“The ECB is ready to do its part” to bolster the eurozone’s economy, Mr. Draghi told European lawmakers in Brussels, underlining the bank’s readiness to reconsider its €1.5 trillion stimulus at its next policy meeting on March 10.

There are a lot of funny lines in here. "The ECB is ready to do its part," is just one of them. We thought that's what they been doing.

The hearing, at the European Parliament, was keenly watched by investors for signs of how the ECB might respond to the recent bout of financial-market volatility. European bank stocks have come under particular pressure, raising fears that rising equity costs could constrain lending and undermine the ECB’s efforts to boost the economy.

“The ECB is facing a credibility challenge,” both in terms of its ability to drive inflation back toward its target, and in protecting the stability of the eurozone’s financial system given the sharp drop in bank stocks, said Lena Komileva, an economist with G+ Economics in London.

The ECB isn't alone in facing this so-called "credibility challenge." More and more people around the globe are catching on to these bureaucratic eunuchs.

In the same section of the Journal the cheerleaders there rolled out a new column with this preface:
 Today begins a new column called Streetwise...on markets and economics. Its goal is to explain how markets really work--or don't work--what that means for investors. Excuse us for the thought, but we were under the impression that that's what this more than a century old scribe has been doing all these years.

The crux of the article is that negative interest rates haven't created the expect reaction in currency markets. Negative rates are supposed to weaken not strengthen currencies. A host of central banks from Denmark to Sweden implemented negative rates. But enter stage left, Japan, and somehting happened on the way to bolster your export markets.

Then yen after just one down day rallied against the U.S. dollar and is now 4% higher than before the cut. Ditto for Sweden last week and its krona after the Riksbank cut rates to -0.5%. The article continue to confirm your worst nightmare, saying that central banks "retain the ultimate weapon to fight deflation: the printing press."

Negative interest rates are the symbolic band aid on a gaping wound that requires much subcutaneous undermining to repair properly and cause real healing. The author then goes on to push the establishment party line, quipping: "...this looks more like a lack of belief in the power of negative rates than a loss of trust in the entire central bank arsenal."

He precedes this insightful gem with the usual potshots at the gold bugs, a necessary stratagem for telling us all that despite the facts, fiat money is alive, well and printable. His conclusion is the usual one we hear from Keynesian in-doctrinaires, the cuts were too small.

But here is his kicker: If things get worse, the Fed will really roll up its sleeves and unleash the really big guns to save us all, QE4.

Just keep the faith in central bankers, folks, and we'll get you through this. We feel better now. Hope you do.

THEY NEVER STOP

Well, they're at it again, the closet and non-closet globalists. The latest is former Treasury Secretary Lawrence Summer's call for a global mothballing of large currency notes, in this case the $100 bill.

Not so long ago under a similar guise, the stopped issuing larger notes like the $500 and so forth. The results like a bad election are in: it didn't make a dent in stopping the illegal actions and for one basic reason, though there are many others, human ingenuity.

The motive is always the same shopworn one, to protect us and get those awful bad guys. Funny thing is the bad guys, the real bad guys, the regulators and politicians, never go to jail for their pathetic, egregious errors and crimes against us, the people. One could make a great case for prosecuting members of the FOMC for their crimes against retirees and the elderly fixed-income crowd with their pitiful ZIRP policies.

This isn't about bad guys at all; it's about your freedom of choice, your individual sovereignty. This is just another not-so-subtle step in the drive to create a cashless global society. If the people of this nation continue their lemming-like ignorance for finding out what's stake here, they will well deserve the consequences.

Meanwhile, for more on the subject, here's post from zerohedge.com/news/2016-02-16/capital-controls-hayek-versus-imf. Fail to read it at your own pocketbook freedom and personal peril.

REAL LEVEL PLAYING FIELDS

 
Politicians love to use celebrities to make their political agenda points on topics as varied as climate change to gun control to children starving in Africa.

What's fair game for one ought to be fair game for another. After the recent Paris terrorist attacks, in particular the one at the concert where 89 lost their lives,, the lead singer of the band playing that  night, an American, had this to say as he paid his respects to those assassinated.

In an emotional interview with iTele, during which he cried, Hughes questioned whether France’s strict gun control policies have saved any lives. 

“Did your French gun control stop a single [expletive] person from dying at the Bataclan? And if anyone can answer yes, I’d like to hear it, because I don’t think so.. I think the only thing that stopped it was some of the bravest men that I’ve ever seen in my life charging head first into the face of death with their firearms,” he said.

“I know people will disagree with me… but that night guns made them equal. And I hate it that it’s that way. I think the only way that my mind has been changed is that maybe until nobody has guns everybody has to have them. ‘Because I don’t ever want to see anything like this ever happen again and I want everyone to have the best chance to live and I saw people die that maybe could have lived. I wish I knew for sure if they could have had a better chance because there were some real angels, real wonderful people in that show that aren’t alive today and I really wish they were.”
theepochtimes.com/n3/1967607-singer-whose-paris-concert-was-interrupted-by-terrorist-attack-says-everybody-should-carry-guns-to-thwart-massacres/

Don't let bureaucrats and politicians decide your definition of real level playing fields.

As we understand it the band is back in Paris again to perform.

OVERNIGHT

Asian shares traded so-so over night with the Hsng Seng Index in Hong Kong and the Korean KOSPI up slightly at 0.3% while the Nikkei was down O.7% and Australian shares also traded slightly lower. The Shanghai Composite Index barely budged while oil traded higher with Brent reaching a high of $35.55 before settling lower just under $33.

Oil gained some traction based on a possible agreement between Russia and Saudi to cut production making the rounds, but lacking any confirmation investors remained cautious

Here's more from the WSJ: The tepid performance in Asia follows a rally in U.S. stocks on Tuesday when they reopened after a holiday Monday. The S&P 500 was up 1.7%, notching a 3.6% gain over the past two trading days, its biggest two-day rally since late August. The South Korean won reached its weakest level against the U.S. dollar since July 2010, on expectations that the Bank of Korea is drawing closer to cutting interest rates. The bank had left interest rates unchanged on Tuesday.

The won was last down 0.4% at 1,222.33 won to one U.S. dollar.

In China, authorities guided the yuan slightly weaker onshore at 6.5237 to one U.S. dollar, after letting it strengthen to its strongest level against the U.S. dollar this year earlier in the week.

NON-MONITORED BUREAUCRATS

 
You like bureaucracies?

Here's story from Spain you'll love. Forget Arthur Conan Doyle's "The Case of the Dog Who Didn't Bark." Here's a bureaucrat, still on the payroll, who didn't show up for work for six years and nobody noticed.

It's a great example of who's watching the so-called watchers? It's also just one more lesson why you don't blindly follow the non-monitored central bankers of the world.

http://www.theepochtimes.com/n3/1966230-company-finds-out-man-didnt-work-for-6-years-after-trying-to-give-him-award/

BY ANY OTHER NAME

We mentioned in our Overnight log that gold traded down off its recent high last Thursday. For a long time now we've been saying the goal of central bank bureaucrats and regulators is to destroy the natural inherent correcting process truly free markets posses where true buyers and true sellers can meet it they so deem.

Another name for this is risk aversion, a term the control-freaks adore. Understand, too, that if you speak up they will come after you with a bevy of well-selected epithets. And if things continue to go awry, with a lot more than that. There's serious danger here as the plot thickens and the temple foundations start to shake.

The hour glass on central banking is upside down as a case in Canada points out. People are wising up. As this article points out, they are not democratic institutions. And the last thing they care about is your interest.

Mandated risk aversion, by any other name, is called control.

zerohedge.com/news/2016-02-15/gold-price-pulls-back-fed-signals-slower-rate-hike-cycle

OVERNIGHT

Though Monday was a holiday in the U.S., futures in U.S. stocks that trade overseas overnight were up around 1.2 percent as Asian shares rallied Tuesday led by Chinese stocks and an apparent stabilizing in the yuan.

Hitting its highest level so far this year against the dollar before backing off  a bit, uncertainty caused by volatility in markets recently has shook up investors causing many to flee the yuan for safer ground. Such is somewhat surprising given last week's volatility at a time when Chinese markets were shut for a week-long holiday.

The WSJ reported: The Shanghai Composite Index was last up 2.8% at 2823.86, extending gains from the open. The smaller Shenzhen market gained almost 3%, while the Hang Seng Index was up 1.5%. Investors were buying one of the most beaten up stock markets globally this year, as a recovery in global markets started Monday and picked up across the Asia today.

The Nikkei Stock Average was up 0.9% and the S&P ASX 200 edged up 0.1%.

Earlier Tuesday, China reported that new loans hit a monthly record in January, with financial institutions issuing 2.5 trillion yuan ($385.5 billion) in fresh debt. The new credit figure was up significantly from the 597.8 billion yuan recorded in December and was also above the 1.9 trillion yuan forecast by The Wall Street Journal’s poll of 13 economists.

The Hong Kong Hang Send rallied nearly 3% on the news. Whether this will prove lasting remains to be seen. Again, according to the Journal, A bigger-than-expected fall in the currency last summer and at the start of this year had sparked selling in Chinese equities that spread across the globe. Despite gains earlier today, the Shanghai benchmark is still flirting close to a 50% loss from its highs last June.

“The key question is whether Beijing can keep money inside the country,” said Zheng Chunming, an analyst at Capital Securities.

Based on the above, however, U.S. markets might open the holiday-shortened trading week Tuesday higher given that oil prices were higher as stories again circulated about another meeting among some OPEC members and a possible agreement to cut production that would, if so, lend more stability to markets and perhaps calm investor nerves. Gold also traded down on the news after making it recent high of $1262.90 late last week.