• Bruce Krasting
    12/18/2014 - 21:42
      The one thing that Jordan can't do in this war is appear to be weak.

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Everyone Do The Safe-Haven Scramble

Always happy to look to the silver lining in markets, amid the total and utter carnage across global FX, commodity, and equity markets, there are a few markets benefiting from the scramble for a safe-haven. Gold (and Silver) prices, after dropping yesterday, has retraced all those losses and is up over $20 to $1215. Even more impressively, 10Y Treasury yields traded with a 2.00% handle (down 8-9bps today alone). Notably ultra-short-term US T-Bill yields have collapsed to zero with the Feb 2015s trading -0.5bps. Bunds are also bid (down 5bps) at fresh record-low yields of 56.6bps! While not a 'safe-haven" per se, JPY is aggressively bid also as leverage and risk unwinds carry trades and squeezes USDJPY lower (briefly touching 115.50).



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Liquidity Siren: S&P 500 Futures Market Depth "Abysmal"

Paging Waddell & Reed... Even for this early in the US session, liquidity in the most-liquid financial instrument in the world is - in the words of Nanex's Eric Hunsader, "abysmal."



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Frontrunning: December 16

  • Ruble Sinks to 80 a Dollar Defying Surprise Russia Rate Increase (BBG)
  • Oil slumps near $59 for first time since 2009 on oversupply (Reuters)
  • Oil sinks, Russian moves fail to quell nerves (Reuters)
  • Fed Seen Looking Past Low Inflation to Drop ‘Considerable Time (BBG)
  • Students Among Dead as Pakistan Gunmen Kill 126 at Army School (BBG)
  • Repsol to buy Talisman Energy for $13 billion (Reuters)
  • Indonesia’s Rupiah Erases Decline After Central Bank Intervenes (BBG)
  • Anti-Islam Rally Grows as Immigrant Backlash Hits Europe (BBG)
  • Saudi Arabia is playing chicken with its oil (Reuters)


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The Sellside Reacts: "17% Rate Hike Not Enough" According To Citi, JPM; Goldman Positive: "Removes CBR Uncertainty"

A few short hours ago Russia shocked everyone with an unprecedented rate hike sending the nation's various interest rates some 650 bps higher. Well, according to the initial sellside responses from Citi and JPMorgan, as shocking as the move was, it is not nearly enough. Goldman is more positive, suggesting this move removes key uncertainty about CBR's willingness to stabilize RUB volatility.



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Ron Paul: "All I Want For Christmas Is A (Real) Government Shutdown"

Those who voted for the omnibus to avoid a shutdown fail to grasp that the consequences of blindly expanding government are far worse than the consequences of a temporary government shutdown. A short or even long-term government shutdown is a small price to pay to avoid an economic calamity caused by Congress’ failure to reduce spending and debt.



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A Lesson For Today's Currency Crises: Black Wednesday 1992 - When Intervention Failed

...as the Treasury waited for news, fear began to spread, "we waited minute by minute on updates from the market and then we learned that the billion or so [of taxpayer money] we had put aside Tuesday to defend the pound up to the weekend had gone in a few minutes on Wednesday morning," shattering the myth of government omnipotence.



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Russia Shocks With Emergency Rate Hike, Boosts Interest Rate From 10.5% To 17%

Following the biggest rout to the Ruble in ages, Russia - unlike Mario Draghi - instead of talking the talk decided to walk the bazooka walk and shocked all those long the USDRUB by unleashing an emergency rate hike (at 1 am in the morning) from the recently raised interest rate of 10.50% to... hold on to your hats... 17.00%, a 650 bps increase!



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Down with Grumpy Cat

In our dire era of increasing economic inequality, we need a symbol for the oppression of the masses. Now is time for a new revolution. All the talk of the American entrepreneur is bullcockey. Warnings about human complexity and the need for peaceful cooperation is just a smokescreen for tyranny. Our freedom lies in tearing down those better and more well-off than us. We are the glorious heirs to the brave candlemakers who sought to block out the sun. Where our French brethren fought for freedom from natural competition, we fight for the liberty of not feeling inadequate next to an adorable feline. It is the most noble of causes. For if inequality is a crime, then Tarder “Grumpy Cat” Sauce is hostis humani generis.



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When Central-Planning Fails: "Stimulative" Chinese Rate Cuts Spark Surge In Borrowing Costs

China faces epic unintended consequences in its efforts to 'manage' everything. As Bloomberg rhetorically asks, what if a central bank cut interest rates and borrowing costs rose?



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Yes, It's Possible For A Gold-Backed Renminbi To Dethrone The US Dollar

"Mutually assured destruction" now best describes the uneasy stand-off between an increasingly indebted US government and an increasingly monetarily frustrated China. So here's a quiz: 1) Which country is the world’s largest sovereign miner of gold? 2. Which country doesn’t allow an ounce of that gold to be exported? 3. Which country has advised its citizenry to purchase gold? Three questions. One answer. In each case: China. Is it plausible that, at some point yet to be determined, a (largely gold-backed) renminbi will either dethrone the US dollar or co-exist alongside it in a new global currency regime?



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China Manufacturing PMI Drops Back Into Triple-Dip Contraction, Lowest In 7 Months

Perhaps the collapse in oil prices does have something to do with demand after all? HSBC's China's Manufacturing PMI tumbled to 49.5 (missing expectations of 49.8), its lowest since May (and first contraction). This is the 3rd contractionary print in the last 2 years as HSBC notes "domestic demand slowed considerably," with only new export orders (to whom we wonder) improving. Employment slipped yet again as did output leaving HSBC no choice but to demand "further monetary easing," due to "rising disinflationary pressures, which fundamentally reflect weak demand."



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Where Are You Going, America?

Not that all politicians are bad, but those who have genuinely good intentions get drowned out, within seconds, by the ones for whom the need to have power over others is more important than anything else. And, on the whole they’re not very smart. So they get advisors who they feel do know, and these advisors all come from the same small niche of society that steer everybody’s hard-earned cash towards that same small niche of society. 99% of economists are religious nuts who do even the Roman Catholic church one better because they chart graphs to ‘prove’ their beliefs are true - they adapt the world to their theories, not the other way around, as physicists do.



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It's Not The Economy; It's The Flow, Stupid

With The Fed due to make some highly amibiguous, always dovish promises this week, we thought a quick look at the world of stocks and bonds through the eyes of the Fed would be useful...



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What America Does Not Understand About Russia & Oil

As hard as it is to believe - given the strength of the "Russia-is-doomed" meme - Crude oil prices for Russia (in Rubles) are unchanged since February... This is important as all costs are Ruble denominated while revenues are USD denominated, leaving Russian oil companies’ margins insulated despite the dollar decline in price. In addition, the Russian government is easing the export taxes which further improve the profitability of Russian oil. So as US Shale Oil sector is destroyed by its USD costs, it appears Putin's core energy industry is somewhat insulated... and America's late-80s "defeat The Soviet Union" playbook is failing.



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