Submitted by David Stockman via Contra Corner blog,
If you don’t think the current central bank driven economic and financial bubble is going to end badly, recall a crucial historical fact. To wit, the worldwide race of central banks to the zero bound and NIRP and their $10 trillion bond-buying spree during the last seven years was the brain child of Ben S Bernanke.
While the surge in Q1 market volatility has had a dramatic impact on asset prices, and led to some unprecedented central bank interventions to stabilize markets, one product that has seen a dramatic hit and has yet to rebound, is M&A.
According to BofA, North American M&A volumes declined again in March, falling to $107bn from $140bn in February, $157bn in January and the recent peak of $410bn in November of last year.
Moments ago the US Treasury priced its 4 Week Bill auction, which was unique in that at just $35 billion, was not only $10 billion lower than a month ago, but was the lowest since October 15.
This may or may not explain why after last week's curious auction yield of 0.20%, or 5 bps below the effective Fed Funds floor, today's auction showed an even more dramatic scramble for short term liquidity, when the government sold 4 Week Bills at a rate of 0.185%, or 6.5 bps below the rate charged by the Fed!
Yesterday's stunning announcement by the US Treasury, which released a report titled "Treasury Announces Additional Action to Curb Inversions, Address Earnings Stripping", and which was clearly aimed at ending not only all tax inversions, but the biggest pharma M&A deal in history, Pfizer's tax-inverting takeover of Allergan (pardon Actavis) hit AGN like a ton of bricks, sending the stock crashing 20%.
Via EvergreenGavekal.com,
“The areas of consensus shift unbelievably fast; the bubbles of certainty are constantly exploding.”
– REM KOOLHAS, RENOWNED DUTCH ARCHITECT AND HARVARD UNIVERSITY PROFESSOR
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