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Russia Central Bank Responds To Domestic Dollar Shortage, Starts Currency Swaps

With the Ruble hitting record lows once again today against the USDollar, it appears concerns over USD liquidity are growing in Russia. The Russian central bank has unveiled an FX swap operation, allowing firms to borrow dollars in exchange for Rubles for a duration of 1 day (at a cost of 7%p.a.). Of course, this squeeze on USD funding - driven by Western sanctions - will, instead of isolating Russia, force Russian companies (finding USD transactions prohibitively expensive) into the CNY-axis, thus further strengthening the Yuanification of world trade and the ultimate demise of the USD as reserve currency.



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The "Calpers vs Hedge Funds" Debate In Just Two Charts

While some are shocked by Calpers' decision to abandon hedge funds as an investment class (the first of many such "exits"), there really should be no surprise here. As we have said year after year after year (and so on), it was only a matter of time before limited partners said "enough" and stopped paying 2 and 20 to overpaid asset managers in a world in which central banks have "guaranteed" there is no longer any risk, just to underperform the market for a whopping 6 years in a row now. And to showcase where Calpers decision came from here are just two charts.



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Goldman's Take On China's "Stealth QE"

"Domestic media (Sina) reported that the PBOC conducted RMB 500bn of Standing Lending Facility operations with the big 5 commercial banks (ICBC, BOC, BoCOM, CCB, ABC). The reports note that the duration is 3 months and the RMB 500 bn is evenly split among the banks. This amount is roughly the same as a 50 bps cut to RRR for the whole banking system on a static basis. There is no official confirmation from the PBOC yet. Still, such an easing would be consistent with our expectation that (1) monetary policy will loosened amid the drastic slowdown in activity growth and falling inflation, and (2) full scale RRR and interest rate cuts are unlikely because they would be viewed as aggressive stimulus."



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What Happened After China's Last "Stealth QE"?

In a worrying sense of deja-vu all over again, today's rip higher reflects perfectly the US equity market's knee-jerk reaction to the last 'Stealth QE' from China on July 28th. That did not end well as hot money flowed out to the instantaneously "easiest" central bank in the world...



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Markets React Violently To China's Stealth QE

From copper to high-yield credit and from stocks to bonds and gold, markets are reacting violently to the headlines from China that they are unleashing another 500bn Yuan "stealth QE"... everything is rallying.. except the USD (biggest drop since May).



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Hilsenrath Front-Runs Fed: Hints "Considerable Time" Language Will Remain

The last week has been dominated by sell-side strategists raising hawkish concerns about this week's FOMC with a focus on the drop of the "considerable time" language describing the period from the end of QE to the start of rate hikes. The Wall Street Journal's Fed-whisperer Jon Hilsenrath just dropped a rather large hint that that the "considerable period" language will remain... Given the economic backdrop, they don’t want to send a signal right now that rate increases are imminent." Here's what the street thinks...



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China Launches CNY500 Billion In "Stealth QE"

It has been a while since the PBOC engaged in some "targeted" QE. So clearly following the biggest drop in the Shanghai Composite in 6 months after some abysmal Chinese economic and flow data in the past several days, it's time for some more. From Bloomberg:

  • CHINA’S PBOC STARTS 500B YUAN SLF TODAY, SINA.COM SAYS
  • PBOC PROVIDES 500B YUAN LIQUIDITY TO CHINA’S TOP 5 BANKS: SINA
  • PBOC PROVIDES 100B YUAN TO EACH BANK TODAY, TOMORROW WITH DURATION OF 3 MONTHS: SINA

Just as expected, the Chinese "derivative" currency, the AUD, goes vertical on the news, and the S&P 500 goes vertical alongside:. As for those confused what the SLF is, here is a reminder, from our February coverage of this "stealth QE" instrument.



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Meanwhile In Ukraine, The Parliament Is Being Stormed, Again - Live Webcast

Yesterday, in the aftermath of the popular anger aimed at Ukraine's president Porohsneko following his "Bohnering" on Ukraine's demands for a free trade agreement with Europe, we said the new president's days are likely numbered. Less than 24 hours later, this has started to play out, and as the live feeds below show, the Kiev parliament is being stormed by what appears to be discontent from the right wing "Right Sector" political group, despite today's ratification of the meaningless EU pact, whose purpose was to offset popular anger at the delay of the trade agreeement. Moments ago from Bloomberg: UKRAINE PROTESTERS ATTEMPT TO ENTER PARLIAMENT BUILDING: UNIAN  Below is a live feed of what may soon be the second political coup in Ukraine in under 1 year.



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'Janus' Yellen And The Great Transition From Risk-On To Risk-Off

In our era of omnipotent central banks worshipped by the Status Quo, we have a goddess of financial transitions--Janus Yellen, the two-faced chair/deity of the Federal Reserve - to usher in the Great Transition from risk-on to risk-off.



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Obama To Send 3,000 Ebola-Fighting Boots-On-The-Ground To Africa; CDC Warns America "Now Is The Time To Prepare"

On the heels of yesterday's almost unbelievable forecasts of the exponential rise in Ebola case counts - and warnings of a 20% chance of Ebola reaching the USA by year-end, WHO officials have confirmed that their previous forecasts of 20,000 cases "does not seem like a lot today." This has, according to Reuters, the United States announced on Tuesday that it would send 3,000 troops to help tackle the Ebola outbreak as part of a ramped-up response including a major deployment in Liberia, the country where the epidemic is spiralling fastest out of control. Perhaps even more worrisome - for those who explained how 'contained' Ebola was - is the CDC's release of an Ebola checklist warning American healthcare workers "now is the time to prepare."



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Stocks Go Vertical (Again), Just Because

In a desperate attempt to keep AAPL above $100 again, US equity markets are deja-vu-ing yesterday afternoon's sudden (and newsless) vertical ramp to run stops this morning. As Rule 575 hits, it appears the new algo plan is just run stops wherever they may hide, because nothing says buying-panic (and selling VIX panic) like the uncertainty of a Fed meeting, Scottish vote, and Alibaba disruptions...



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What A Difference Two Weeks Makes: Spot The Cognitive Dissonance In These Two Headlines

Because what's two weeks between propaganda spewing friends?



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Scotland Prepares For Bank Runs; 'Quietly' Sends Millions Of Banknotes North

As the Scotish independence vote draws near and remains too close to call, some analysts are suggesting Plan B for Scotland may be to choose to opportunistically default. This has done nothing to calm concerns of the aftermath of a "yes" vote - despite US asset managers proclaiming it irrelevant. Nowhere is that more clear than, as The Independent reports, Britain’s banks have been quietly moving millions of banknotes north of the border to cope with any surge in demand by Scots to withdraw cash in the event of a Yes vote in Thursday's independence referendum, it has emerged. Bankers stressed there has been no sign yet of any increase in the amount of withdrawals from deposit accounts or ATMs, but the moves have been taking place over the past week or so in order to make sure ATMs do not run out on Friday in the event of a panic reaction to a “yes” vote.



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Producer Price Increase Lowest In 2014 As Energy Slides

PPI Final Demand was unchanged in August (+0.0% against expectations of +0.0%) making it lowest monthly gain since December 2013 (after revisions moved May's data). Across the board producer prices rose (or didn't) as expected with Final Demand YoY +1.8%. Energy prices fell 1.5% MoM and was the biggest driver of PPI's relative weakness but notably prices for finished goods fell 0.3% - the biggest drop since August 2013.



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