BOJ Warns Monetization May Lead To Severe Inflation, Rise In Long-Term Interest Rates; Yet Will Buy ¥350 Billion In Bonds 

Submitted by Tyler Durden on 05/08/2011 21:28 -0400

It appears not only Bill Gross is insane enough to realize that direct monetization = inevitable interest rate hike. Slowly, even the central banks are starting to gravitate toward this conclusion.  From The just released minutes by the BOJ: "One member -- referring to some recent views that the Bank should underwrite JGBs to fund restoration and rebuilding -- expressed the opinion that such an action might initially seem to work well, but lessons drawn from history showed that it would eventually result in severe inflation and thereby inflict substantial damage on people's living situation. This member continued that the Bank needed to keep working to gain the wider public's understanding on this point. In relation to this, a few members expressed the view that, if confidence in the currency were impaired due to underwriting of JGBs by the Bank as the central bank, this might lead to a rise in long-term interest rates or instability in financial markets, and hamper the smooth issuance of JGBs." Something tells us this "member" was not Bernanke (aside from the obvious reason that Benny is a gaijin). And where else, we wonder, have we seen this: an initial boost which fades away, leaving just concerns about runaway inflation. Is it possible that the dissident BOJ member can come to one or more FOMC meetings and actually give our clowns a first person perspective of how this whole "deflation battle" goes down 30 years in.

World's Largest Commodity Hedge Fund And Andrew Hall Taken To Cleaners On Last Week's Energy Plunge 

Submitted by Tyler Durden on 05/08/2011 21:45 -0400

And once again we get a reminder why the word "hedge" fund is such a misnomer. The FT reports the Clive Capital, the "world's largest commodity hedge fund" as defined by the FT (although we are more than confident various other and much largest "energy-heavy" funds would be much more appropriate for this moniker) lost $400 million out of its (paltry) $5 billion in total AUM during last week's coordinated energy take down, initiated by the forced margin intervention in precious metals. Clive "is the biggest of several big hedge funds believed to be reeling after the unexpected sell-off hit markets late last week." Clive is not alone: "Others, including Astenbeck Capital, the Phibro-owned fund run by Andrew Hall, are thought to have taken double-digit percentage point losses to their portfolios, according to investors." The FT's take: "The scale of the losses demonstrates that even the savviest investors in commodities were wrongfooted by the correction, one of the sharpest one-day falls on record." Our is slightly different: when a trade has enough momentum, and has been working long enough, even the quote unquote "savviest investors" become a momo chasing herd, with nobody hedging, and a massive drop in prices always likely to be the deathknell for some previously vaunted investor, whose only claim to fame was being lucky enough once to be at the right time and the right place, and to put a huge levered bet that worked out. And praying that he or she can recreate those conditions. 

 

 

 

 

Morgan Stanley Follows Goldman, Downgrades Economy 

Submitted by Tyler Durden on 05/08/2011 19:16 -0400

And like clockwork, the expect avalanche of economic downgrades greenlighted by Jan Hatzius begins. Heading up the lemming crew, as always, is Morgan Stanley's David Greenlaw. "We are adjusting our GDP growth forecast lower for the third time this year. We now look for +3.3% GDP growth over the four quarters of 2011 (versus +3.6% in our April update). Essentially, this puts us back to where we were in early December – before policymakers enacted a package of tax cuts aimed at stimulating the economy." In other news David, how do you spell roundtrip (and is a refund due)? Or "hockeystick?" Or how about an imminent push for more QEasing once the inflationary "shock" is forgotten (unless Saudi Arabia falls to the tsunami of "spooks on the ground" in which case all bets are off), just in case the virtuous cycle doesn't quite kick in, in this 3rd, and soon to be failed, attempt to jump start the economy. In other news, we can't wait to hear what validation LaVorgna, who is always at the very end of the lemming bus, comes up with to justify his feverish enthusiasm over the economy, which once again proves to be worth the amount of money DB's customers pay the firm's sales coverage to bet against them. 

 

 

 

 

FT's John Dizard concedes grudgingly to gold and even cites GATA

 

Banks Adding Treasuries Signal Lower Confidence In Recovery

 

 

 

Chris Martenson interviews Addison Wiggin: We Can't Afford the Solutions Needed To Reverse Our Decline



Goldman Sachs prodigy quits



Fannie Mae has asked the government Friday for an additional $8.5 billion in aid. (It lost $8.7 billion in the first three months of the year.)