March 12. Copper takes it on the chin
–The latest victim of the knockout game is copper. Down 10% in last 4 sessions. Probably has something to do with inventory finance in China, where there are reports of using the same collateral for multiple loans. And while there are rumors of additional defaults coming, the PBoC likely accelerated the conflagration with this: “China’s top central banker put the country on course to free up interest rates on bank deposits within two years, an unprecedented move that would force the nation’s lenders to compete for customers by offering the best terms.” (WSJ). Nikkei down 2.5% today.
–In the US example of tightened finance, Congress proposes to wind down housing GSE’s: “The bill will call for replacing Fannie and Freddie with a new system of federally insured mortgage securities in which private insurers would be required to take initial losses before any government guarantee would be triggered.” Wait…PRIVATE LOSSES?! Inconceivable! Of course, the Flow of Funds report last week showed the gov’t both gives and takes, as mortgage debt continued to FALL in Q4. In 2013, Mortgage debt declined by $75 billion, but student loan debt increased by $61 billion. I’d rather have the house as collateral than junoir’s art history degree.
–Net changes in interest rates weren’t all that large, but the back end continues to lead a grinding rally higher. Ten year auction today.
–Interesting story on Drudge about geographically diverse and perhaps random attacks on the US electrical grid. http://freebeacon.com/report-u-s-electric-grid-inherently-vulnerable-to-sabotage/
