Archive - Apr 9, 2012

Tomorrow will bring the end of a two-day policy meeting at the Bank of Japan which SocGen expects will result in the announcement of additional easing measures. Whether medium-term macro-economic issues or short-term risk tolerance fading weighs heavier on their minds as their efforts from the previous easing announced on Feb 14 are rapidly losing their effectiveness - especially evident in their recent inability to restrain JPY appreciation (which notably JPM believes will continue on the back of a disconnect between Commitment of Traders positioning and the JPY carry divergence - via Bloomberg's chart-of-the-day). Critically the exchange rate is a cornerstone of BoJ policy and while risk-off will drive JPY appreciation via carry unwinds (in a purely technical world) the political, currency, and economic factors that SocGen lays out suggests strongly that the BoJ (under increasing attack from politicians for its failure to reflate the economy) will bring out yet another bazooka to show its worth - and prove this time is different even as we noted here with inflationary concerns rising. Lastly, will JPY lose its carry-trade attractiveness and implicitly its impact on US equities even if they do ease dramatically or when will the market/politicians lose patience with a drip-drip-drip approach and side with China's view of a rising devaluation risk as we noted here recently.

One can write lengthy essays, op-eds, and client letters explaining both why the labor force participation rate is plunging due to innocuous reasons such as everyone over 40 retiring yesterday full of jouissance and excitement to begin the sunset phase of their lives using copious life savings earning 0.0001% in interest, or, inversely, why this is one great big propaganda ploy by the BLS to make Obama look good a few short months ahead of the pre-election debt ceiling breach, pardon, his re-election date. We prefer cutting to the chase. Here is today's chart of the day from BofA, which begs one simple question: when will the two time series recouple, because recouple they will, and how will America react to the realization it was lied to for 2% worth of unemployment "improvement"? The chart says it all.

Last Friday saw the release of a below-expected US Non-Farm Payrolls figure, causing flight to safety in particularly thin markets, with equity futures spiking lower and US T-notes making significant gains. Data from this week so far in Asia has shown Chinese CPI is still accelerating, coming in above expectations at 3.6% against an expected 3.4% reading. Looking ahead in the session, there is very little in the way of data due to the reduced Easter session in the US and the European and UK markets closing for Easter Monday.

Nothing is going on this morning that did not already happen at 8:30:01 am on Friday. As a result, the three robots who are the sole churners of stocks this AM will keep risk where it was just after NFP, because that is part of the new regime, one in which USD weakness is now stock weakness, and one where stocks have a ways to drop before NEW QE is greenlighted. Also with Europe offline all day, the robots won't even be able to frontrun the European close. Bank of America summarizes the lack of events shaping the market this morning.

With Iran supposedly sitting down on the bargaining table for one last, soon to be failed, effort at diffusing the nuclear situation, the key geopolitical event this week will be the launch of North Korea's Unha-3 rocket, which the country insists is a peaceful launch, and the satellite contained is for scientific research. Others are not as optimistic, and Japan has already taken precautions to intercept the rocket should it get precariously close to Tokyo. Even China has cautioned against such a launch. The tentative launch window to commemorate the 100th birthday of NK founder Kim Il-Sung is set for April 12-16. So what does the rocket look like? Here it is: up close and personal.

• JPMorgan Trader Iksil Fuels Prop-Trading Debate With Bets (Bloomberg), but, but, he is just proividing liquidity, and serving JPM's clients
• Short on tools, central banks left with words (Reuters)
• And the mainstream media finally catches up: Investors braced for fall in US profits (FT)
• Iran rules out pre-conditions to talks: Salehi (Reuters)
• North Korea ‘planning third nuclear test’ (FT)
• Japan to Hold Talks With China on IMF Contributions (Reuters)
• American Universities Infected by Foreign Spies Detected by FBI (Bloomberg)
• Is the Fed Promoting Recovery or Desperation? (Hussman)
• In Europe, Unease Over Bank Debt (NYT)
• Banks test ‘CDOs’ for trade finance (FT)

The worker bees of the global banking empire need to consider how and why they should actively choose to build beauty and life v. silently supporting the continuation of misery, immorality and death.