Clearly boxed in by the concern that any increase in their QE program will shift sentiment from stimulus to monetization, the BoJ kept the money-printing the same but redirected focus by raising the ceiling on their bank lending facility (from JPY3.5 trillion to JPY 7 trillion). This is being presented to the public as dovish despite the balance sheet recession's debt minimization - not profit-maximization - mantra as was oh so well illustrated by the dismal GDP prints since Abenomics has been in existence. It's not like Japan needs "low-interest" rate loans... are their rates high? Of course, in order to maintain some semblance of hope and belief in this new "common knowledge", USDJPY was smashed higher (running stops over 102.50) and that leveraged Nikkei futures up over 400 points in the space of a few minutes. S&P futures are modestly higher but EM FX is drifting lower. The question on everyon's lips, of course, is - what is the BoJ's half-life?
A curious finding emerged in the latest 13F by Soros Fund Management, the family office investment vehicle managing the personal wealth of George Soros. Actually, two curious findings: the first was that the disclosed Assets Under Management as of December 31, 2013 rose to a record $11.8 billion (this excludes netting and margin, and whatever one-time positions Soros may have gotten an SEC exemption to not disclose: for a recent instance of this, see Greenlight Capital's Micron fiasco, and the subsequent lawsuit of Seeking Alpha which led to the breach of David Einhorn's holdings confidentiality). The second one is that the "Soros put", a legacy hedge position that the 83-year old has been rolling over every quarter since 2010, just rose to a record $1.3 billion or the notional equivalent of some 7.09 million SPY-equivalent shares. Since this was an increase of 154% Q/Q this has some people concerned that the author of 'reflexivity' and the founder of "open societies" may be anticipating some major market downside.
Two years into California's drought and locals are repeating (mantra-like) "we've never seen anything like it." They are right, of course, since this is the worst period of rainlessness since records began... but if Cal Berkeley professor Lynn Ingram is correct, they ain't seen nothing yet. The paleoclimatologist fears, if very long-run history repeats, California should brace itself for a mega drought, as National Geographic reports, a drought that could last for 200 years or more... since the 20th century was a 'wet anomaly'.
The technical set up on Gold looks increasingly bullish and Citi's FX Technicals group continues to expect further gains. The picture on Silver also looks constructive and Citi notes, over time it may well outperform Gold. A weekly close above the $1,434, if seen, would suggest extended gains towards $1,685 and beyond. As they warn (gold bears), we may have “seen this movie” before... as late 70s deja-vu happens all over again.
The 17th of February, 2014, marked the annual observation of George Washington's birthday and the 5th anniversary of the American Recovery and Reinvestment Act. At a cost of $19.90 for each dollar of economic growth, almost $8 million for each job created and a loss of nearly $600,000 of fixed investment, it is hard to suggest that the government interventions have been successful. The WSJ sums it up succinctly, "The failure of the stimulus was a failure of the neo-Keynesian belief that economies can be jolted into action by a wave of government spending... The way to jolt an economy to life and to sustain long-term growth is to create more incentives for people to work, save and invest." Of course, 5 years on, the Keynesian argument remains "fool proof." The only reason that the economy is not growing faster is because the government is not doing enough. However, if the economy slips back into a recession, it will simply be because the government did not do enough. You simply can't argue against logic like that.
It may not be one of the core three (somewhat) realistic and accurate econometric indicators of China's economy (which as a reminder according to premier Li Keqiang are electricity consumption, rail cargo volume and bank lending), but when it comes to getting a sense of capacity bottlenecks in China's fixed investment pipeline - be it in ghost cities or the latest skyscraper building spree - nothing is quite as handy as commodity, and particularly iron ore (if not copper, which as we have explained before has a far more "monetary/letter of credit" function in China's markets), stockpiles at China's major ports. The logic is simple: no stockpiles means end demand by steelmakers is brisk and there is no inventory build up which in turns keep Australia, Brazil and other emerging markets happy. Alternatively, large stockpiles indicates something is very wrong with final demand, and hence, the overall economy. One look at the chart below, which shows how much iron ore has been stockpiled at China's 34 major ports (spoiler alert: it just hit an all time high), should explain at which of these two extremes China currently finds itself.
The Devil pens a motivational letter to his minions in America.
"Ignorance, my poor dear Americans, will not save you, nor will your ceaseless pathetic bleatings of excuses, justifications and rationalizations save you from the rank harvest of what you have so assiduously sown for the past five years. Indeed, your excuses and rationalizations push My poisoned blade deeper into your nation's heart with every lie, every excuse, every frantic justification for your own entitlement.
I await 2014 with high expectations, so crack on, My minions; our goal is within reach."
Keynes will be remembered as "a man with a great many ideas that knew very little economics," Friedrich Hayek notes in this brief interview and when challenged on his 'parochial' knowledge of economic history he was "not sheepish in the least... he was much too self-assured." Hayek's perspective casts Keynes in a very different light than his fan's apostolic adoration might suggest, "he was utterly contemptuous of anything that had been done before." While Hayek describes Keynes as one of the most intelligent people he had known, he perhaps sums up the man's work in this brief phrase - "economics was just a side-line for him." As we note below, many describe Keynesian policy as 'dumb', however a more appropriate word would be 'foolish'.
Having been 'busted' for their manipulation of events in Ukraine (and exposing their views of the European Union), it seems US diplomats have been up to their old tricks once again... this time in Venezuela. "Go Conspire In Washington," was the clear message sent to the US as President Maduro expelled three US diplomats from his country, accusing them of plotting with anti-government protesters in an attempt to topple his socialist government. This is the second time Maduro has kicked out US diplomats (3 more were expelled in September for 'conspiring with government opponents') as he blasted comments by John Kerry as "yet another maneuver" by Washington to "legitimize attempts to destabilize the Venezuelan democracy unleashed by violent groups in recent days."
Did you know that the U.S. state that produces the most vegetables is going through the worst drought it has ever experienced and that the size of the total U.S. cattle herd is now the smallest that it has been since 1951? Just the other day, a CBS News article boldly declared that "food prices soar as incomes stand still", but the truth is that this is only just the beginning. If the drought that has been devastating farmers and ranchers out west continues, we are going to see prices for meat, fruits and vegetables soar into the stratosphere. Already, the federal government has declared portions of 11 states to be "disaster areas", and California farmers are going to leave half a million acres sitting idle this year because of the extremely dry conditions.
Sadly, experts are telling us that things are probably going to get worse before they get better (if they ever do).
When overnight we were following the Ethiopian Airline hijacking story, one thing that was missing from the Twitter narrative was the lack of any reports of scrambled Swiss fighter jets - something that has become a staple when an airplane deviates even modestly from its course above the continental United States. As it turns out it wasn't merely a journalistic oversight: there were, in fact, no fighter jets scrambled. Why? Because the hijacking which took place around 3 am, and culminated with the 767 landing in Geneva just after 6 am, took place outside of regular air force hours! No really: "... the Swiss airforce is only available during office hours. These are reported to be from 8am until noon, then 1:30 to 5pm."
As we showed over the weekend, it is abundantly clear that for all the talk of reform, Chinese authorities have found the gap between words and deeds uncrossable. First, Chinese authorities bailed out the relatively small CEG#1 Trust (for fear of contagion); second, the PBOC injects CNY 375 bn into short-term repo to save banks from a liquidity crisis at year-end; third, total social financing rose by the largest amount on record in January (despite all the talk of deleveraging following the Plenum); and now, fourth, thanks to a CNY 2bn loan (to an entirely insolvent coal company), Chinese authorities have bailed out a 2nd wealth-management product - this time even smaller - piling on the moral hazard.
“Guidance” is the new organizing credo of US financial life with Janet Yellen officially installed as the new Wizard of Oz at the Federal Reserve. Guidance refers to periodic cryptic utterances made by the Wizard in staged appearances before congress or in the “minutes” (i.e. transcribed notes) from meetings of the Fed’s Open Market Committee. The cryptic utterances don’t necessarily have any bearing on reality, but are issued with the hope that they will be mistaken for it, especially by managers in the financial markets where assets are priced and traded.
Presented with no comment...
The strength of the real estate market should not be measured by price appreciation, or the number of new and existing home sales. It should be measured by the support of underlying fundamentals and whether they can help to withstand economic cycles without policy makers having to go hog wild just to avoid a total collapse.
So how healthy is the real estate market today?