Jim’s Mailbox

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Courtesy of JB.

Jim

President Trump Has 3 Questions For Jeff Session(s)
February 21, 2018

President Trump is not letting up in his efforts to see ‘justice’ with regard years of ‘Russian meddling’ accusations and Deep State intervention.

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In a relatively calmly-worded tweet this morning, Trump pressured Attorney General Jeff Session (sic.) to open an investigation into the Obama administration over Russian meddling in the 2016 election.

“Question: If all of the Russian meddling took place during the Obama Administration, right up to January 20th, why aren’t they the subject of the investigation?”

“Why didn’t Obama do something about the meddling? Why aren’t Dem crimes under investigation?

Ask Jeff Session!”

Question: If all of the Russian meddling took place during the Obama Administration, right up to January 20th, why aren’t they the subject of the investigation? Why didn’t Obama do something about the meddling? Why aren’t Dem crimes under investigation? Ask Jeff Session!

— Donald J. Trump (@realDonaldTrump) February 21, 2018

More…

Our friend Robert with a very interesting observation!

Bill

Jim/Bill,

An interesting impact but it overlooks what is likely driving the increase in LIBOR rates. The repatriation of all of this cash held off-shore is going to be much hard than companies and their investors think.

Consider the impact on the banks where that off-shore cash has been held. Most of them will have leveraged the cash by 10+ times, and now that cash will not be there to support those loans. Watch how interest rates are going to rise in Europe and Asia particularly as that cash is repatriated. Few companies are the cash generating machines that Apple is. There’s going to be some very hurting banks.

Robert

Libor-OIS Blowing Out On Rising Repatriation Concerns, Collapsing Front-End Funding
February 21, 2018

While trader attentions have been focused on more conventional risk indicators like equities, yields and bonds spreads in the aftermath of the February VIX eruption, a less followed – if perhaps far more informative indicator – the USD Libor-OIS spread has been blowing up, widening to 32.7bp – the most since last Feb. 22 – as Libor sets higher for the 11th straight session, while commercial paper rates for financials are also rising as more issuers have been selling longer-dated obligations, and moving closer on the curve.

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So is there another dollar shortage quietly forming behind the scenes?

As it turns out, the answer may be yes, and the culprit is the same “echo taper” discussed here last year (and recently by Credit Suisse’s Zoltan Pozsar) , when we commented on the impact repatriation would have on rates, and especially the front-end.

Overnight, Bank of America reminds us that one of the biggest stories of 2018 for high grade credit is overseas cash repatriation as part of tax reform.

It is such a simple – yet powerful – story. During the ongoing 4Q earnings season we have now heard from most of the largest holders of overseas cash.  Although specific plans are obviously “work in progress” some clear patterns have emerged.

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Jim/Bill,

Gold drops $50 and the markets take notice and panic.

Bitcoin drops $1,000 and there is nary a blink.

But there is “golden” lining to this mentality.

The twinkle you may see in my eyes comes from the change in the market’s mindset to prices.

Years ago, reasonable expectations dictated moves in gold that were minimal compared to today’s equities and crytos. Were you to mention $5,000 gold, you would be laughed at and given a “tin foil” hat for your presumptions.

Reasonable expectations. A key concept when judging price movements.

Thousand dollars plus per share for the likes of Amazon, Google, Priceline, etc. makes $1,300 gold look surreptitiously cheap!

The public is becoming acclimated to the high numbers and high volatility and at some point, will recognize that $5,000 or more per ounce is not as outlandish as was perceived years ago. Much in the same way $35 to $800 gold in 1980 and more recently, $250 to $1,900 gold, took the investor market by surprise.

This all assuming no havoc (dollar collapse, debt collapse, derivative meltdown, hyperinflation, etc.) rears its head.

Then we can witness a top in prices that could defy our imagination.

CIGA Wolfgang Rech