Mario Draghi Comedy Hour

On the day in which the ECB for the first time ever announced negative deposit rates, as in pay the bank holding the deposit, the ex-Goldman head of the ECB, Mario Draghi just confirmed he has a career in comedy when this monetary and political circus finally comes crashing down.

"It's completely wrong to suggest we want to expropriate savers" - Mario Draghi

... We are still laughing.

GM Fires 15, Disciplines 5 After "Deeply Troubling" Report

Former U.S. Attorney Anton Valukas report on GM's SNAFU is proclaimed as "extremely thorough, brutally tough, and deeply troubling," by CEO Mary Barra; but finds no collusion or conspiracy to boost bottom line at the expense of customers' lives. However, the report did find "a pattern of incompetence" and actions must be taken...

  • *GM REPORT CONFIRMS BARRA DIDN'T KNOW OF ISSUE PRIOR TO RECALL
  • *BARRA SAYS 5 EMPLOYEES DISCIPLINED
  • *GM'S BARRA SAYS 15 REMOVED FROM CO FOLLOWING VALUKAS REPORT

Of course, none of this matters as easy credit is fueling the sale of more Kevorkianesque GM cars than ever before...

Gold Pops & Oil Drops As Initial Bond/Stock/EUR Exuberance Fades

It was all fun and games until Draghi started speaking... the initial exuberance of what sounded like QE but wasn't really sent EUR to 1.35, stocks higher, and Treasury yields soaring. Then as reality sunk in that it was just not all that much... Gold started to surge, EUR rally back, stocks fade, and Treasurys rally... WTI crude is fading (and Bitcoin is rising) We're gonna need a bigger QE, Mario.

Irish Bond Yields Lower Than US Treasuries For First Time Since 2007

"Mission Accomplished" - We are sure in the world of escape velocities, terminal rates, risk premia, and endless free-money this all makes perfect sense... Irish 10Y bond yields are trading at 2.60% - below the US Treasury yield for the first time since 2007...

Draghi Reveals More: Will Do Targeted LTRO, Suspends Sterilization, Prepares ABS Purchases; No QE Revealed

The much anticipated additional measures have been revealed:

  • DRAGHI UNVEILS PACKAGE OF TARGETED LTROS, WORK TO PREPARE QE
  • DRAGHI SAYS INITIAL SIZE OF TARGETED LTRO PLAN IS 400BLN EUROS
  • ECB EXTENDS FIXED RATE FULL ALLOTMENT, SUSPENDS SMP STERILIZING
  • DRAGHI SAYS PACKAGE INCLUDES PREPARATIONS FOR ABS PURCHASES

In other words, even more actions along what was expected: keep in mind the last time the ECB did €1 trillion in LTROs it did exactly nothing to boost inflation or the "real economy." Furthermore, the ABS purchases aren't activated: just being "prepared." However, what was not revealed was the biggest wildcard: European QE, which as we said repeatedly, won't happen until Europe's deflation is far worse, if ever.

Initial Claims Miss, Rise 8k On Week

Despite multi-year high levels of layoffs according to Challenger's data, and ADP disappointing, initial jobless claims continues to ride around the lowest levels since 2007. Seasonally un-adjusted data saw claims drop 12,481 on the week but after the magical adjustment, initial claims rose 8k on the week and modestly missed expectations. Overall, the number of people claiming benefits dropped 40,279 to new cycle lows.

Mario Draghi's "More Policy Actions To Come" ECB Press Conference - Live Feed

Well he delivered NIRP... now it's time to really deliver. Having promised in the press release to announce further policy measures in the press conference, markets are holding back their enthusiasm for now. While we have already explained why any QE action she undertakes (whether small-scale SME ABS buying, LTROs, or large-scale sovereign bond buying) will not have any direct positive impulse to the real economy, we are sure even the merest hint of it will run stock markets higher, taking out stops all the way...

 

Gold & Euro Tumble As Draghi Promises More, Stocks & USD Jump

So the 'market' got what it wanted to start with - a rate cut into the red so banks can start charging for deposits - and despite an initial kneejerk higher in EUR and lower in stocks, they are now resuming to the path the central planners would like. EUR is down 40 pips and S&P futures up 4 points. The USD is rising (as EUR weakens) and there is significant pressure on gold and silver. Treasury yields are also sliding (despite the equity strength). The press conference is up next and Draghi has 'promised' to unveil more policy there... The reaction moves are fading as we post...so it better be good

ECB Cuts Deposit Rate To Negative For The First Time Ever

Congratulations Europe: you now get to pay your insolvent bank to keep your deposits for you. Today's cuts summarized and largely as expected:

  • Main Refinancing Rate cut by 10 bps to 0.15%
  • Marginal lending facility cut by 35 bps to 0.40%
  • Deposit facility rate cut by 10 bps to -0.10%. As in negative. As in deposits are now charged a fee.

And the ECB leave with the cryptic: "Further monetary policy measures to enhance the functioning of the monetary policy transmission mechanism will be communicated in a press release to be published at 3.30 p.m. CET today."

Challenger Job Cuts Soar 45%; Most Layoffs Since Feb 2013

Did it snow again in May? It seems the hopes for a pent-up demand-based bounce post the weather doldrums has once again been dashed by the hard data. Challenger, Gray, & Christmas just announced that job cuts soared by 45.5% year-over-year in May, the biggest annual rise in 9 months. However, what is perhaps even more worrisome is the actual number of layoffs, around 53,000, was the highest since February 2013. The layoffs in the South are a disaster, aside from the BP oil spill in Sept 2011, this is the most job cuts since Jan 2010. What no seasonal adjustments?

Frontrunning: June 5

  • Inside the White House's decision to free Bergdahl (Reuters)
  • Dimon’s Raise Haunts BNP Paribas as U.S. Weighs $10 Billion Fine (BBG)
  • Jobs Are on the Line as Banks' Revenue Slides (WSJ)
  • Wall Street Adjusts to the New Trading Normal (WSJ)
  • Nothing like objective, intense probes: GM recall probe to clear senior execs, finds no concerted coverup (Reuters)
  • ECB ready to cut rates and push banks into lending to boost euro zone economy (Reuters)
  • China Should Resist Further Stimulus, IMF Says (BBG)
  • Carney Finds Ally in Draghi as Key Rate Kept at 0.5% (BBG)
  • Assad wins Syria election with 88.7 percent of votes (Reuters)

Not An Algo Is Stirring Ahead Of The ECB's Announcement

In today's abnormally quiet overnight session one could hear a pin, or the USDJPY, drop: with everyone focusing on the ECB announcement in one hour, not a single algo is willing to make any big moves, or even start some momentum ignition, ahead of Draghi's announcement, which absent launching full scale QE, which it won't, will be a disappointment which means the EUR will ultimatly move higher after a kneejerk lower as the market forces Super Mario to do even more next time. As Bloomberg adds, a cut in refi and deposit rates is fully priced in and latest price action suggests investors brace for     disappointment if ECB stops short of signaling asset purchases or other liquidity measures to combat deflation.

ECB Decision-Day Guide (In 5 Simple Questions)

As we have heard numerous times this year already, tomorrow may be 'another' most important day of the year/cycle as Mario Draghi and his band of merry men at the ECB appear to be finally cornered (by market exuberance, macro weakness, and excess positioning) into "doing" something as opposed to just talking about it. While we have discussed the ins and outs of the potential for a small focused ABS bailout QE, negative rates, and why whatever Draghi does tomorrow will have minimal impact on the real economy; Bloomberg provides a quick and easy guide to the five things to watch for from Mario Draghi tomorrow...

Guest Post: Afghanistan - Obama's War

Last week, when President Obama made his trip to Bagram Air Base in Afghanistan, he claimed that "America's war in Afghanistan will come to a responsible end." This turned out to be the greatest applause line of his speech. With his assertion, Obama, in effect, declared himself the hero of the Afghan war -- the one who put an end to that nightmare. But what Obama failed to mention was that it was his war, and that nothing but unattractive scenarios lie ahead for that war-torn state.

China Composite PMI Employment Drops At Fastest Pace Since Feb 2009

After last weekend's schizophrenic expanding (official) / contracting (HSBC) Manufacturing PMI, China's Services PMI printed at 50.7 - its lowest since August 2011, as the business expectations index dropped to an 11-month low. The Composite PMI improved (after 3 months of contraction) but most notably, the composite employment declines at the fastest pace since Feb 2009. What is perhaps most worrisome is, as Markit notes, "The latest survey signalled the second-weakest degree of optimism since the series began in November 2005."

How The West Spies On The Middle East: The Location Of The GCHQ's Top Secret Internet Spy Base Revealed

Until yesterday, a piece of the global spying puzzle was missing: not because it did not exist, but because certain of Snowden's preferred outlets had refused to reveal it. That piece, as Duncan Campbell of The Register (incidentally Campbell has been breaking exclusives for more than three decades: he was the first journalist to reveal the existence of GCHQ in 1976) revealed yesterday, is the GCHQ's (and thus indirectly the NSA's) top secret middle eastern Internet spy base located in Seeb, Oman (officially known as Oman Comms Link Site 1), smack in the middle of the middle east, located southwest of the Straits of Hormuz, and in close proximity to America's closest petroleum-exporting "friends": Kuwait, Saudi Arabia, and the United Arab Emirates.

It's Not Just Europe; As Many As 16 California Counties May Seek Secession From The State

Frustrated with their representation in government, residents in two of California’s northern counties are heading to the polls to decide whether they should consider seceding from the state. As Reuters reports, campaigns in both Del Norte and Tehama counties are underway to convince residents that permanently separating from California is in their best interests. As many as 16 counties in northern California could potentially join the movement, AP reports, though official secession would require approval by the state legislature as well as the US Congress. If they all decide to seek separation, the counties would make up about a quarter of California’s territory..."We have the water, forests, timber, we have the minerals. We have unspoiled agricultural land. We would be the wealthy state if we were allowed to go back and use our natural resources ourselves."

7 In 10 Americans Believe The Crisis Is Not Over Or Worst Is Yet To Come: 52% Can't Afford Their Homes

According to a recent survey by the MacArthur foundation, during the past three years, over half of all U.S. adults (52%) have had to make at least one sacrifice in order to cover their rent or mortgage. Such sacrifices included getting an additional job, deferring saving for retirement, cutting back on health care and healthy foods, running up credit card debt, or moving to a less safe neighborhood or one with worse schools. More disturbingly, the survey also found that while there are some indicators that the American public’s views about the housing crisis are shifting toward the positive, large proportions of the public are not feeling the relief: seven in 10 (70%) believe we are still in the middle of the crisis or that the worst is yet to come. 

China Scrambling After "Discovering" Thousands Of Tons Of Rehypothecated Copper, Aluminum Missing

"Banks are worried about their exposure," warns one warehousing source, "there is a scramble for people to head down there at the minute and make sure that their metal that they think is covered by a warehouse receipt actually exists." The rehypothecated catastrophe that we discussed in great detail here (copper financing), here (all commodities), and here (global contagion) appears to be gathering speed as the China's northeastern port of Qingdao has halted shipments of aluminum and copper due to an investigation by authorities after they found "there is a discrepancy in metal that should be there and metal that is actually there."