The question of whether 'tapering is tightening' is often discussed but what is really meant is - when the Fed tapers, will risk assets suffer (and bonds benefit)? The answer is - yes. As Gavekal finds, long-dated US government bonds are following the reduction in QE nearly perfectly so far. The link between Fed asset accumulation and these various bond yields is unmistakable, especially for longer duration bonds, and this simple model shows how even lower bond yields may be in the offing as the Fed puts on the breaks. For junk bonds, this seems to portend higher spreads, which may help to put the recent widening of spreads in context.
Ebola Epidemic Update: US Citizen Dies In Nigeria, Virus Poses Threat To Britain, Liberia Declares State Of EmergencySubmitted by Tyler Durden on 07/30/2014 - 20:45
- State Department has confirmed that one U.S. citizen died from Ebola in Nigeria after being infected in Liberia.
- Victim who died in Lagos was bound for U.S., and was an American citizen
- U.K. Foreign Secretary Philip Hammond said the virus poses a threat to Britain, and will hold an emergency meeting.
- Ebola center run by Americans closed after Liberia disturbances
- Two Peace Corps volunteers under observation after coming into contact with individual who later died of Ebola
- Sierra Leone’s top Ebola doctor dead after contracting virus
Huxley’s Brave New World dystopian America had a good run from 1950 until 2000. Our keepers kept us fat, dumb, distracted, and in debt up to our eyeballs. Since 2000 Orwell’s 1984 dystopian Surveillance States of America seems to be taking shape, under the watchful eye of our very own Big Brother, the NSA. Fear, punishment, slogans (See Something Say Something) and appeals to non-thinking patriotism have replaced freedom, liberty, individual rights, the Constitution, personal responsibility for our own lives and questioning authority. Are you a believer? “One believes things because one has been conditioned to believe them.” – Aldous Huxley – Brave New World; Or a truth seeker? “You shall know the truth and the truth shall make you mad.” – Aldous Huxley
It's all over but the crying: having explained Argentina's position (i.e. not giving to so-called vulture funds), Economy Minister Kicilloff explains:
- *KICILLOF SAYS HEDGE FUNDS NOT WILLING TO GIVE DELAY ON RULING
- *KICILLOF SAYS HARD TO BELIEVE ARGENTINA IN DEFAULT IF HAS FUNDS
- *KICILLOF SAYS ARGENTINA CAN'T COMPLY WITH COURT RULING
- *HOLDOUTS DIDN'T ACCEPT ARGENTINE OFFER: KICILLOF
As Bloomberg notes, by defaulting today, Argentina may trigger bondholder claims of as much as $29 billion -- equal to all its foreign-currency reserves. Just remember that the last 2 days have seen 'smart money' buy Argentine bonds and stocks to all-time record highs.
If you like your disposable income... forget it. Health-care insurance premiums for individuals in California rose between 22% and 88% in 2014 from last year, even after the federal health-care overhaul. This has led, as Bloomberg reports, to Proposition 45 - a bill that would grant regulatory say on proposed premium increases. "Unless Proposition 45 is passed we are going to continue to see dramatic year-over-year increases," warned Insurance Commissioner Dave Jones.
Fortune has smiled on judo coach Arkady Rotenberg, bringing his businesses Google-like growth and a key role in staging the Winter Olympics. It has now brought down on him the wrath of the U.S. and European governments.
More blowback... UK Foreign Secretary Philip Hammond suggests imposing sanctions on Russia are a shared sacrifice that European nations must make. While the sanctions were "designed to maximize the impact on Russia and minimize the impact on EU economies," he warns his fellow Britons that, "It will affect our economy..." As RT notes, London will likely be hit hardest among the EU powers because of its intimate financial relationship with Moscow and we are already seeing UK home prices fall as oligarch flows slow.
Ask yourself the following set of questions: Do people seem better informed today in the developed world? Smarter? Is the discourse more sophisticated? The answer is a resounding “no” to all those questions... In the absence of [a basic ground in history, political science, philosophy and civilization], all of these Twitter and Facebook bits alight on a population that lacks the tools to sort or analyze what they are reading while scrunched over their Androids... This overabundance of information and opinion is not a positive development in our view (although we are certainly not suggesting it be curtailed or controlled by governments).
After an exuberant day in Argentine bond and stock markets, we are nearing a decision. With a handful of hours left until it's all over, various 'deal's have been proposed today from Argentine bankers as a last-minute rescue package. S&P has already decided that it's a done deal:
- *ARGENTINA CUT TO SD FROM CCC- BY S&P
- *ARGENTINA DEFAULTED ON $13B IN FOREIGN DEBT, S&P SAYS
- *ARGENTINA MISSED $539M BOND PAYMENT, S&P SAYS
And now, Argentine Economy Minister Axel Kicillof will speak in a press conference at country’s consulate in Manhattan (ironically a block from the holdouts' office).
Whole Foods management seems to have read our lament and acted accordingly. On the chart below see if you can figure out which is the company's quarterly stock repurchase and capex activity without peeking at the legend.
Having waited until after the US equity markets closed, Portugal's troubled Banco Espirito Santo unveiled an enormous EUR 3.577 Billion loss - that is 15 times larger than the loss the bank suffered a year earlier. The data - to end-June, before the crisis really got going - already shows notable deposit flight, a 73.1% plunge in banking income, and a EUR 3 billion collapse in repoable assets (i.e. liquidity). On the heels of this Portugal's securities regulator has enforced a short-selling ban on BES... we suspect they would not have done that if all was systemically well in Portugal.
House Republicans are expected to formally approve their lawsuit against President Obama today. As John Boehner wrote earlier in the week, "President Obama has overstepped his constitutional authority — and it is the responsibility of the House of Representatives to defend the Constitution." Voting has started on the 'impeachment lite' bill...
While equity markets were in focus for the mainstream, the big moves today occurred in Treasuries and oil prices. From the GDP release this morning, Treasury yields surged higher, rallied briefly after FOMC, before closing near the high-yields of the day (up around 10bps or the most in 9 months). Oil prices started to tumble at around 1030ET, flushed again on EU close, tumbled early afternoon on sanctions headlines, then pumped-and-dumped after FOMC to close at near 3-month lows (below $100). Equity markets surged on GDP, dumped on sanctions, pumped-and-dumped on FOMC, then lifted to the close. Only the Nasdaq ends the day above pre-GDP data levels. On the day, only the Dow closed the day red. Gold and silver chopped around in a narrow range as the USD index roundtripped from early GDP gains after FOMC. VIX closed modestly higher on the day. The Russell 2000 is -4.2% for July, its worst month in 2 years.
Two weeks ago the head of the "most transparent administration ever" (perhaps to the NSA?), president Obama, told the common American to "not be cynical" and have hope. Today, speaking appropriately in an ornate theater in Kansas City, he had a message for republicans: "Stop being mad all the time. Stop. Stop. Stop just hatin’ all the time."