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Frontrunning: November 26

  • National Guard, police curb Ferguson unrest as protests swell across U.S. (Reuters)
  • Ferguson Reaction Across U.S. Shows Complex Racial Split (BBG)
  • Democratic senator Schumer: Democrats Screwed Up By Passing Obamacare In 2010 (TPM)
  • Veto threat derails Reid tax deal (Hill)
  • Justice Department Investigating Possible HSBC Leak to Hedge Fund (WSJ)
  • Merkel hits diplomatic dead-end with Putin (Reuters), and yet...
  • Merkel Said to Reject Ukraine NATO Bid as Rousing Tension (BBG)
  • HSBC, Goldman Rigged Metals’ Prices for Years, Suit Says (BBG)


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"Failed" Bund Auction At Record Low Yield And All Other Key Overnight Events

While there has been no global economic outlook cut today, or no further pre-revision hints of "decoupling" by the appartchiks at the US Bureau of Economic Analysis,  both European and US equities are pointing at a higher open, because - you guessed it - there were more "suggestions" of "imminent" QE by a central bank, in this case it was again ECB's Constancio dropping further hints over a potential ECB QE programme, something the ECB has become the undisputed world champion in. The constant ECB jawboning, and relentless central bank interventions over the past 6 years, led to this:

  • GERMANY SELLS 10-YEAR BUNDS AT RECORD-LOW YIELD OF 0.74%

The punchline: this was another technically "failed" auction as it was uncovered, the 10th of the year, as there was not enough investor demand at this low yield, and so the Buba had to retain a whopping 18.8% - the most since May - with just €3.250Bn of the €4Bn target sold, after receiving €3.67Bn in bids.



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U.S. Drone Strike Math – 41 Terrorists Targeted, 1,147 People Killed

A lot of Americans have an impression that drone strikes are less damaging to civilian populations than conventional airstrikes. This would be false..."A new analysis of the data available to the public about drone strikes, conducted by the human-rights group Reprieve, indicates that even when operators target specific individuals – the most focused effort of what Barack Obama calls “targeted killing” – they kill vastly more people than their targets, often needing to strike multiple times. Attempts to kill 41 men resulted in the deaths of an estimated 1,147 people, as of 24 November." We strongly believe that the reason so many Americans blindly support the widespread use of drones is due to the mistaken belief that they are precise and result in few civilian casualties. It’s important to get some of the facts out to the public in order to have a more informed debate on the matter.



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Caught On Tape: Car Ploughs Into Demonstrators During Ferguson Rally In Minneapolis

Suddenly the countrywide Ferguson protests, which had progressed peacefully at least until now, took a turn for the ugly, when as the Star Tribune reported moments ago, A vehicle plowed through a group of demonstrators in Minneapolis several hours ago during a march and rally in the wake of last night's grand jury decision.



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The Unbearable Over-Determination Of Oil

Is the price of oil today driven more by global growth and supply/demand factors or by monetary policy factors? We hope it doesn’t surprise anyone when we say that we think monetary policy dominates ALL markets today, including the global oil market. What’s the ratio? Our personal, entirely subjective view is that oil prices over the past 3+ months have been driven by 3 parts monetary policy to 1 part fundamentals. How do we come up with this ratio? For the past 3+ months the oil Narrative has been dominated by public statements from influential answer-suppliers talking up the oil price dynamic of a rising dollar and monetary policy divergence. That’s the source of our subjective view of a 3:1 dominance for monetary policy-driven factors over fundamental-driven factors. However – and this is the adaptive part where we play close attention to Narrative development and dissemination – the noise level surrounding this Thursday’s OPEC meeting is absolutely deafening.



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"Bearish" Mark Spitznagel Profiting Strongly Since 2009, Warns "Only So Much Debt An Economy Can Take"

Mark Spitznagel, author of "Dao of Capital" and among Wall Street's most bearish investors, is (profitably) holding out for a disaster. Despite noting that "The Fed has taken it further than it has ever taken it before," NY Times reports that Spitznagel's fund Universa has profited strongly even as stocks hit record highs. Large pessimistic bets usually lose a lot of money when stocks are rising, but Universa is saying that its investment strategy has been able to produce consistent gains since then, including a 30% return last year. While ackowledging Fed policy is capable of driving stock prices higher, Spitznagel warns, it will ultimately be self-defeating, "there is only so much debt that an economy can take on."



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Grant Williams: The Consequences Of Economic Peace

The following chart-heavy presentation from Grant Williams is among his best as he wends his way methodically from the 19th century to the present day (and into the future) examining "The Consequences of the Economic Peace." From Keynes to Kondratieff and from Napoleon to Nixon, Williams looks at the ramifications of several decades of easy credit and attempts to draw parallels with a time in history when the world looked remarkably similar to how it does now (as he notes "that last time didn’t end so well, I’m afraid.") The real day of reckoning (Williams notes rather ominously), when the unconscionable level of debt that has been built up during the fiat money era finally topples over under its own weight like the giant wave in The Perfect Storm, lies ahead of us.



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The Swiss Referendum On Gold: What's Missing From The Debate

A “YES” vote for the gold referendum is a first step towards redressing the imbalance that exists between the SNB and the people of Switzerland. A “YES” vote will begin a process to restore restraint, accountability, and transparency on an institution that took advantage of the removal of its previous gold holding constraint already once before to explode its balance sheet, reinvent itself as a hedge fund, and significantly expand into areas of policy far beyond its original remit. Central banks should be lenders of last resort and systemic regulators. In a direct democracy, decisions regarding taxation, membership in trade / political unions, and the autonomy of the national currency should be determined by popular vote not decreed or circumvented by central bank edict.



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Forget Ferguson, 244 Teenagers Have Been Shot In Chicago Since Michael Brown Died

While the events down in Ferguson play out, back in Chicagoland, HeyJackass reports that the same old bullshit continues day in and day out with nary a peep. In the 107 days since officer Darren Wilson shot and killed 18 year old Michael Brown – 12:03pm, Saturday, August 9th – the following stupidity has taken place in Chicago: 155 homicides (74% black males), 725 shot & wounded, and 244 teenagers (13-19) shot and wounded... but that's just scratching the surface. So what is it about these stats that hasn’t caused people to lose their collective shit?



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The 2014 Oil Price Crash Explained

Old hands will know that it is virtually impossible to forecast the oil price. The anomalous recent price stability of $110+/- 10 we believe reflects great skill on the part of Saudi Arabia balancing the market at a price high enough to keep Saudi Arabia solvent and low enough to keep the world economy afloat. While it may not be possible to predict the actions of the main players, it is easier to predict what the outcome may be of certain actions may be. A drop in demand for oil of only 1 million barrels per day can account for the fall in price from $110 to below $80 per barrel. The future price will be determined by demand, production capacity and OPEC production constraint. A further fall in demand of the order 1 Mbpd may see the price fall below $60. Conversely, at current demand, an OPEC production cut of the order 1 Mbpd may send the oil price back up towards $100. It seems that volatility has returned to the oil market.



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Something Appears To Be Going On With Gold

Something appears to be happening to gold. That something is either China finally revealing its true gold inventory, which is unlikely, or, more likely, the biggest fat finger in the history of gold, as a liquidity testing algo goes absolutely insane in the pre-open period (and loses its job on the BIS' payroll). Or, most likely, just an ongoing bad print.



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As Ferguson Trembles Ahead Of Night #2, Obama Pivots Back To Immigration Reform - Live Feed

Having rather dramatically failed to quell the emotions of America's unemployed youth last night, as all across the nation, it appears Michael Brown's father's emotional outburst to "burn this bitch down" trumped the President's appeal that "protests should be peaceful," Obama is pivoting rapidly to another raging success - Immigration Reform.



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On This Day, 138 Years Ago, The Idea Of QE Was Born

On this day in 1876, a group of influential, yet irate, Americans met in Indianapolis. Their primary purpose was to send a message to Washington on how to get the economy moving again.... So this group decided that what was needed was re-inflation (put more money in everyone's hands, you see). The method they proposed was to issue more and more money. Cynics called them "The Greenback Party". And on this day, the Greenbacks challenged Washington by running an independent for President of the United States. His name was Peter Cooper. He lost but several associate whackos were elected to Congress.



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2,200 National Guard Troops To Be Deployed In Ferguson Tonight, Up From 700

While last night's events in Ferguson raised many eyebrows over the decision to release the Jury decision late into the night, and even more tempers, as rampant destruction and looting quickly became the means by locals express their indignation with the US judicial system, some say they could have been worse. Still, just to make sure the second night of the Ferguson protests is not a replica of what happened yesterday, moment ago Missouri governor Jay Nixon announced he would dispatch a massive 2,200 national guard troops, up from 700 on Monday night: a presence that is set to make the city resembles an all out warzone. One can only hope the similarities end there.



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