Just in case you thought for a second that the sorry discipline we call economics couldn’t stoop any further into the gutter of academic idiocy and irrelevance, think again. It’s now being reported that ex-Goldman Sachs trader Fabrice “Fabulous Fab” Tourre (recently convicted on six counts of securities fraud) will be teaching an honors economics class at the “prestigious” University of Chicago. There’s nothing like an esteemed University setting the already culturally accepted example that ethics are for suckers. Stealing, cheating and corruption are the values most exalted in today’s world. It doesn’t matter how you achieve your wealth, as long as you attain it.
For the 3rd day in a row, the opening of the US day-session sparked some inexorable desire to buy stocks up to record highs - ignoring the realities of other assets like bonds (lower and lower yields), USD (soaring), VIX (rising), credit spreads (flat) and even JPY carry traders. And for the 3rd day in a row, the initial "pump" has failed and "dumped" back to AUDJPY reality. It seems the all-important green close for 2014 just won't hold (for now).
It was about a year ago when we noted a core component of the US housing non-recovery: the time to sell foreclosed homes had just hit a record of 400 days across the nation. Fast forward to today when even the last traces of the lie that sustained the housing recovery myth are being swept away, and we get the following article from Bloomberg titled "Foreclosures Surging in New York-New Jersey Market." The good news (according to some): thousands of people could live mortgage free for years until the bank delays obtaining the keys to the foreclosed property. This was money which instead of going to the mortgage owner, would instead go to buy Made in China trinkets and gizmos and otherwise keep the US retail party humming. Which brings us to the bad news: the party - retail and otherwise - is ending, as courts and banks finally catch up with inventory levels on both sides of the foreclosure pipeline, and those who lived for years without spending a dollar for the roof above their head are suddenly forced to move out and allocated the major portion of their disposable income toward rent.
The "most shorted" stocks have quadrupled the performance of the broad market this week as the dash-for-trash remains the best-performing strategy under the premise of an ever-rising strike Yellen put. The ammo for this latest rampapalooza, as we noted here, was hedge fund specs the 'shortest' in over a year which were then squeezed by an ever-present visible hand willing to sell JPY against any and everything in the world (or smash VIX - which ever works best). But as one more skeptical manager noted, "I’ve been a non-believer for so long that I just am not believing yet."
As today's actions by Russia have raised concerns and stirred flight-to-safety flows in the markets, The White House has decided to add its $0.02 worth:
- *OBAMA AIDE EARNEST URGES 'OUTSIDE ACTORS' TO RESPECT UKRAINE TERRITORY
- *EARNEST SAYS RUSSIA SHOULD AVOID `PROVOCATIVE' ACTIONS
- *U.S. WARNS RUSSIA TO RESPECT UKRAINE SOVEREIGNTY
Or else...? On the bright side, he did not say anything about crossed lines.
If yesterday's 2 Year auction was largely blah, today's issuance of $15 billion in 5 year bonds can only be described as blistering. While the high yield of 1.53% was strong enough to stop through the 1.538% When Issued, and the lowest since November's 1.34%, it was the Bid to Cover that showed just how much demand there was for paper, as 2.98 dollars in tendered bids were waiting for every dollar of allocation: this was the highest Bid to Cover since September 2012 and well above the 2.62 TTM average. This outlier print snapped the recent trend of declining BTCs and showed that when it comes to Bill Gross once favorite spot on the curve, there is no lack of demand, especially from foreigners, who took down 50.7% of the allotment, the highest since July and solidly above the 44.5% average. On the other hand, Directs who lately are hardly the best friends of the Dealer community, took down only 9.2%, the lowest also since July, leaving 40.2% for the dealers.
Ocwen Financial, dubbed by Moody's as poised to become the "next generation" of subprime lenders, has come under considerably pressure this morning amid news that NY State regulators are investigating the firm for "conflicts of interest"...
- *NY DEPT FINL SERVICES FINDS POTENTIAL CONFLICTS OF INTEREST
- *NY CITES REVIEW OF OCWEN'S MORTGAGE SERVICING PRACTICES
- *NY SEEKS INFO ON FINL INTEREST OF OCWEN EXECS IN AFFILIATED COS
It is the Mortgage Servicing Rights (MSRs) that has Moody's the most-concerned as the volumes required may force Ocwen (and others) to shift their business model to ever lower quality loans.
Update as things just got worse: TURKISH POLICE CLOSE DOWN GEZI PARK IN ISTANBUL, CNN-TURK SAYS
As we reported previously, on Monday new revelations in the graft scandal surrounding Turkish PM Erdogan in the form of a leaked phone conversation between him and his son, Bilal, detailing plans how to hide huge sums of cash, by some estimates up to $1 billion, brought back the political crisis that has gripped the nation front and center, and led to renewed demands by the opposition party that the PM resign. It also sent the USDTRY surging to levels not seen in weeks. We said: "Somehow we doubt that Erdogan will resign, however, this latest confirmation that the graft scandal that is and will continue to dodge the Turkish Prime Minister is not going away, may just be the catalyst that pushes the TRY, and with it some of the other recently pacified EMs, back into volatile mode." Today the crisis is fully back and so is the predicted volatility, with the Lira blowing out by another 400 pip to a level of 2.240, not seen since the first week of February when the Turkish central bank was scrambling to restore confidence in the imploding currency.
It does not appear that things are getting any better for the virtual currency exchange named after "Magic: The Gathering."
- *FBI SAID TO BE PROBING POSSIBLE CRIMINAL VIOLATIONS BY MT. GOX
- *U.S. SAID TO REQUEST DOCUMENTS FROM BITCOIN SERVICE PROVIDERS
- *MANHATTAN U.S. ATTORNEY SAID TO BE REVIEWING MT. GOX SHUTDOWN
No real reaction yet in price across Bitcoin exchanges. Bloomberg BusinessWeek summarizes "where did the bitcoins go?" below
It would appear French President Francois Hollande's promise to bring jobs to the nation continues to fail dismally. Perhaps it was his recent trip to the US, but French Jobseekers rose more than expected for the 3rd month in a row to a new record high of 3.316 million. Joblessness has now risen for 30 of the last 32 months. The last 5 months have seen jobseekers reaccelerate - surging by 2.5% (the most in 6 months). So, in a nutshell, things are getting worse, faster for the 2nd largest economy in Europe (and 5th largest in the world).
As CNY unwinds, Russia-Ukraine safe-haven bids, and Turkish Lira (erdogan corruption) concerns flood back into the USD as a safe-haven, precious metals have come under pressure this morning. Gold has been sold but remains relatively stable but Silver is suffering its biggest down day in almost 2 months ad the gold-to-silver ratio surges back up to ts 4-month average.
Despite the surge in "seasonally-adjusted new home sales", un-seasonally-adjusted mortgage applications tumbled 8.5% this week, the biggest drop in 3 months as the modest January bounce has been almost entirely unwound. This pushes the broad MBA mortgage applications index down to near its lowest in 14 years. However, the home-purchase index continues to collapse. Purchase applications are down 30% from their May highs plunging in the last few weeks to their lowest level since 1995. Must be the weather, eh? Or is it like Bob Shiller warned yesterday, the unwind of "bubble thinking," especially as "gains are slowing from month-to-month and the strongest part of the recovery in home values may be over."
Shortly after today's surprising announcement by Russia that it would conduct broad military drills in Central and Western Russia, which would include 150,000 troops, we posted a rhetorical question: How will NATO respond? Moments ago NATO responded:
- NATO: INDEPENDENT, STABLE UKRAINE KEY TO EURO-ATLANTIC SECURITY
- NATO ALLIES CONTINUE TO BACK UKRAINE SOVEREIGNTY, ALLIANCE SAYS
- NATO BACKS `INVIOLABILITY OF FRONTIERS' ON UKRAINE: ALLIANCE
- NATO SAYS IMPERATIVE THAT UKRAINE ARMY DOESN'T INTERVENE
And as the military escalations - now on both sides - escalate some more, the algos are BTFATH. Let's sit back and watch which back off first.
A few days ago we reported that the Ukraine decided to call Russia's "trump card" bluff - that would be everyone else's reliance on Russian gas supplies - when it drastically cut imports of Russian gas by 80% in February, seemingly to demonstrate its energy independence from Puting. Now Russia has decided to take the Ukraine to task, by announcing it has halted oil deliveries to the Ukraine Odessa refinery. Hopefully the Ukraine, whose foreign currency reserves tumbled from $17.9 billion on February 1 to $15 billion currently, has alternative means of supplying itself with energy from benevolent sources, particularly those who are willing to provide the country with oil in exchange for goodwill.
The Russian Ruble has weakened almost 1% today, pressing above 36 against the USD and nearing all-time record weakness. The Hrynia is collapsing. The Turkish Lira is re-collapsing and the EUR is having its worst day in over a month as safe-haven flows flood back to the USD following various headlines from the Russia-Ukraine border.