Archive - Mar 28, 2013

A quick glance at the Larnaca runways, also known as the Russian (and perhaps even other, but that would impair the media narrative that "only Russian tax-evading oligarchs are evil") private jet parking lot, shows that things are as heated as ever, although maybe just a tad less heated. Channel 4's Faisal Islam observes that while there are 12 private jets on the tarmac, this is one less then ten days ago. When this number drop to zero, the Cypriot depression has officially begun.

You should be recieving about 46% interest to compensate for the risk of using a Cyprus bank! Use this calculator to determine how much interest your EU (that's right, it ain't just Cyrpus) bank should be paying you. Guaranteed your getting ripped off! Wake up, and smell the confiscation coffee.

The extrapolators had expected an initial jobless claims print below 340k as the recent trend of noisy drift lower was expected to continue but alas it was not to be. The stretched rubber band of Arima-X revisions and adjustments had to correct sooner or later and sure enough, with a jump of 16,000 this week, initial claims missed expectations by the most since the second week of November (following Hurricane Sandy). The chaotic idiocy continues in Emergency Unemployment Compensation (which jumped 125k in the latest week) as the footprint of statistical manipulation is oh so evident in the V-Fib-like chart below.

Moments ago, as we prepare to put Q1 2013 to a close with a bout of window dressing that will send the S&P to all time highs, we got the final Q4 2012 GDP revision: a number largely meaningless, although it does put closure to the economy in 2012. And as with all economic numbers in the past year, it was not pretty, coming in at 0.37%, below estimates of a 0.5% print, although modestly better than the second Q4 revision when it was 0.14%. The full breakdown by various components is shown below, with the most notable, Personal Consumption Expenditures, showing a gradual and consistent decline over the past three months as it was revised relentlessly lower, dropping from 1.52% in the first revision, to 1.47% in the second, to 1.28% in the final. Offsetting this was a jump in Fixed Investment which rose to 1.69%, the highest since Q3 2011. Supposedly this implies that capital spending is soaring, when in reality companies continue to curb CapEx plans, instead focusing on short term shareholder gains such as buybacks and dividends, which is to be expected in the absence of any actual end-demand.

The decision to crush Cypriot depositors (first all of them, then just the uninsured ones) came in March, without any prior hints of the carnage that was about to be unleashed upon Cypriot bank unsecured liabilities. Or so the media narrative goes, because the last thing needed is to give skeptics any indication the "ad hoc" Troika plan was not so ad hoc after all, and some individuals - notably the whale depositors - were warned in advance, sparing them the indignity of pulling a few billion at €300 per day. Alas, as just released central bank data shows, there may be cracks in the narrative because in February, at a time when the Eurozone was supposedly getting better every day and the Dow Jones was on the verge of its all time high, Cypriot depositors pulled the largest amount of cash in over three years.

• Lines Form as Cyprus Banks Reopen (WSJ)
• Greek Bets Sank Top Cyprus Lenders - Banks at Heart of Cyprus Mess Were Bullish on Athens as Other Investors Fled (WSJ)
• Hollande Economic Woes Masked by Cyprus Fig Leaf (BBG)
• M&A Stumbles Amid March Deal Drought (BBG) ... but any minute now
• Train hauling Canadian oil derails in Minnesota  (Reuters) - must be an evil pipeline riding first class
• Slovenian Austerity After Cyprus Fails to Stem Yield Gain (BBG)
• Banks Seek to Overturn Judge’s Ruling in Critical Mortgage Case (NYT)
• Ships Costing U.S. $37 Billion Lack Firepower, Navy Told (BBG)
• OECD still gloomy on eurozone recovery (FT)
• BOJ's Kuroda says asset purchase limit already broken (Reuters)
• Kuroda warns Japan debt ‘not sustainable’ (FT)
• BOJ’s Kuroda Vows to Continue Easing Until 2% Target Achieved (BBG)
• South Korea cuts economic forecast (FT)

The BTFD mantra is alive and well in a market, where futures overnight briefly dipped to a low of -0.5% only to be set to open at record high, following the biggest one day drubbing in China in months, where the Shanghai Composite closed -2.82% after new rules were issued by the Chinese banking regulator to limit the expansion and improve the transparency of so-called “wealth management products”. The products, which are marketed as higher yielding alternatives to bank deposits, are often used to fund risky projects including property developments, short-term corporate lines of credit or for speculative purchases of commodities and have been identified as contributing to the rise of shadow-banking in China’s financial system. As Deutsche reports, Fitch estimates the total amount of outstanding wealth-management products was around 13 trillion yuan at the end of last year—equal to about 15% of total banking-system deposits. Japanese equities were also weaker overnight (Nikkei –1.3%) and the yen is 0.3% firmer against the dollar after BoJ Governor Kuroda told parliament that he has no intention of buying foreign bonds because doing so could be seen as currency intervention. Finally, South Korea informally entered the currency wars after it slashed its GDP forecast from 3% to mid-2%, announcing it would use "interest rates" to boost growth, which naturally means use of monetary means and directly challenging the BOJ.

The Japanese yen is the strongest of the majors today, where the focus remains on Europe and the re-opening of Cypriot banks. Capital controls are in place. Sure its a contradiction, but may not prove to be fatal, despite the EMU eulogies.

Moments ago Cyprus banks reopened, under heavy guard, without signs of a stampede. However, since as was made clear yesterday, all bank branches will serve merely as glorified ATMs, allowing for a maximum €300 cash withdrawal and practically no outbound cash transactions allowed, there has been no stampede, and no lines as the bulk of services provided legally are merely what one can find at an automated teller machine. The question is whether the five shipping container full of ECB cash delivered last night into the country will be enough to cover the cash-strapped public's demands, and for how long.