Archive - Dec 2013

Treasury yields are surging on the ADP's Good news this morning with 10Y topping 2.84% - its highest yield in almost 3 months. The USD is surging, stocks are fading; but despite an initial dip... gold is rallying.

Moments ago, the Census Bureau announced that in October the US trade gap narrowed to $40.6 billion (which still missed expectations of "only" a $40 billion deficit) from an upward revised September deficit of $43 billion, as oil sales boosted exports to record level. Total exports rose to a record $192.7 billion up $3.4 billion from last month's $189.3 billion, while imports rose just $1 billion to  $233.3 billion resulting in a $40.6 billion gap. Among the report highlights: October exports of goods and services ($192.7 billion), exports of goods ($135.3 billion), and exports of services ($57.4 billion) were the highest on record; October imports of goods and services ($233.3 billion) were the highest since March 2012 ($234.3 billion); and perhaps the best news for shale fans: October petroleum exports ($12.5 billion) were the highest on record.

Judging by massive revision in the October print, from 130K to 184K, or nearly a 50% error, one would think that instead of actually tabulating specific private jobs as it by definition does, using the data entering the ADP private payrolls system, the ADP makes its estimate of jobs based on high inaccurate surveys just like the BLS. Either that, or it was desperate to catch up on the upside to the BLS' own propaganda numbers, which are just as "realistic." That said, the November ADP print soared from 130K to an upward revised 184K in October blowing through expectations of 170K and printing at a whopping 215K. And so the Taper dance is back on as everyone will now expected Friday's NFP to come in scorching hot, and force the Fed to cut its monthly flow by a whopping $10 billion to $75 billion.

It is only fitting that on the morning in which Europe levied the largest cartel fine in history against the criminal syndicate known as "banks", that Goldman Sachs would issue its #6 "Top Trade Recommendation" for 2014 which just happens to be, wait for it, a "long position in large-cap bank indices in the US, Europe and Japan." Supposedly, in a reflexive back and forth that should make one's head spin, this also includes Goldman Sachs (unless they specifically excluded FDIC-insured hedge funds, which we don't think was the case). So is Goldman recommending... itself? Joking aside, this means Goldman is now dumping its bank exposure to muppets.

• Deutsche Bank gets biggest combined penalty of €725.4mln.
• SocGen fined €445.9mln for Euribor manipulation.
• RBS agrees to pay €391mln in cartels
• JPMorgan fined €79.9mln in JPY LIBOR case.
• R.P. Martin Holdings Ltd fined €247,000
• UBS and Barclays escape fines as EU whistle-blowers.

• EU Fines Financial Institutions Over Fixing Key Benchmarks (Reuters)
• Euro-Area Economic Growth Slows as Exports, Consumption Cool (BBG) - someone has a very loose definition of growth
• Ukraine Officials Scour Globe for Cash as Protests Build (BBG)
• Oops: Franklin Boosted Ukraine Bet to $6 Billion as Selloff Began (BBG)
• Japan Plans 18.6 Trillion Yen Economic Package to Support Growth (BBG) - or about 2 months of POMO
• How Peugeot and France ran out of gas (Reuters)
• Iran threatens to trigger oil price war (FT)
• Abe Vows to Pass Secrecy Law That Hurts Cabinet’s Popularity (BBG)
• Brazil economy turns in worst quarter for 5 years (FT)
• Australia’s Slowdown Suggests RBA May Need to Do More (BBG)
• Biden calls for trust with China amid airspace dispute (Reuters)

While there was a plethora of macro data (starting with some ugly numbers out of Australia which clobbered AUD pairs overnight), China HSBC Services PMI dipping slighlty from 52.6 to 52.5, Final Eurozone PMI Services (printing at 51.2 up from 50.9 and beating expectations of the same on an increase in German PMI numbers from 54.5 to 55.7 and a decline in French PMI from 48.8 to 48.0), Eurozone retail sales declining by 0.2%, on expectations of an unchanged print, and much more (see  below), perhaps the most important news of the day came from Japan which many expect will be the source of much more easing in the coming months and thus serve as marginal lever to push global fungible markets higher. However, not only did various BOJ officials for the first time in a while talk down expectations of a QE boost, but the head of the Japan GPIF said that it doesn't need to sell JGBs right now as it would "rock markets" and that instead can achieve its targeted 52% weighing as bonds mature, that it may buy foreign bonds instead to raise weighting to core target (as the Fed buys Japan bonds?), and that it will be very difficult for Japan to hit the BOJ's inflation target in 2 years. Is Japan already getting cold feet on rumors of more QE and did it realize there are only so many assets it can monetize. If so, watch out below on the EURJPY which has now priced in about 700 pips of expected BOJ QE boosting in early 2014.

Getting ready for Christmas? What’s Santa got in his sack for you this year? Well, if there’s one thing you should be preparing for, then it can only be the big crash of February 2014. 

Although Vice President Joe Biden’s trip to Northeast Asia this week will likely focus on defusing tensions over China’s new Air Defense Identification Zone (ADIZ), this is hardly the only issue plaguing the U.S. in Asia. In general, U.S. Asia policy during the second Obama administration has lacked focus as senior officials have been preoccupied with domestic and other international challenges. Moreover, a number of other issues suggest that the administration continues to give inadequate attention to the Asia-Pacific, and the results it is getting reflect this relative neglect.

Ongoing anti-regime demonstrations in Ukraine are weighing on investor's risk perceptions as CDS spike to near three-year highs today (up over 100bps). At a minimum developments lower president Yanukovich's chances of remaining in power beyond the spring 2015 elections and possibly undermine his hold on power earlier, further decreasing the likelihood of sizeable financial support from Russia. With Moody's earlier comments on the nation's "precarious external liquidity" position; as Goldman warns, with even higher political uncertainty ahead, an acceleration of capital outflows might also follow and while they think the authorities will eventually turn to the IMF to avoid a disorderly sell-off of the currency, recent events arguably raise the risks to that view. However, the capital outflows are already having an impact as Reuters notes, Russian banks are considerably exposed as Ukrainian banks should deposit runs escalate.

"Interest in PCs has remained limited, leading to little indication of positive growth beyond replacement of existing systems," is IDC's under-stated way of saying that personal-computer shipments are projected to fall 10.1% this year, by far the biggest annual decline on record. At IDC’s projected sales rates, shipments worldwide will stay at just more than 300 million through 2017, or barely above 2008 levels.

A world, in which former permabears David Rosenberg, Jeremy Grantham and now Hugh Hendry have thrown in the towel and gone bull retard, and where none other than the Chief Investment Officer of General Re-New England Asset Management - a company wholly-owned by Warren Buffett's Berkshire Hathaway, has issued one of the direst proclamations about the future to date and blasts the Fed's role in creating the biggest mess in financial history, is truly upside down...

As an experiment, Bloomberg Businessweek typed the names of the 50 states into Google to see what people most frequently ask about them. The questions range from dumb (well, mostly dumb) to revealing, both about the states and about the people doing the searching. Lots of questions about carrying a gun, buying alcohol, getting divorced, and fighting union organizers. Whether a state is in the Midwest or South seems to be a particular obsession. But the most common question about the states is even more basic: Is it a state? or Is it racist?

Among Cliff Asness' top peeves are commonly held and oft-repeated beliefs that are wrong or misleading and can potentially hurt investors. The asset manager politely requests people stop saying - "There is a lot of cash on the sidelines." Everyone should pay attention...

One of the following seems very eager to please his new master...