Archive - Apr 4, 2013

Tyler Durden's picture

Is It Beginning? Biggest JGB Price Collapse In Over 10 Years Triggers TSE Circuit Breakers





Just over 4 hours ago we discussed the stunning collapse in 10Y Japanese bond yields. Since then - things have taken a very dramatic turn for the worse for bonds. 10Y JGB yields have exploded higher. The move from 32bps to 65bps triggered circuit breakers on the Tokyo Stock Exchange in JGB Futures trading as JGB prices plunged by their largest amount since September 2002. We can only imagine there is liquidations galore occurring given the massive outsize moves we are seeing in Japanese bonds, stocks, FX, swaps, and CDS. Did the BoJ just lose control?

 

 

Tyler Durden's picture

Guest Post: We're Living Through A Rare Economic Transformation





In 1993, management guru Peter Drucker published a short book entitled Post-Capitalist Society. Drucker identified that developed-world economies were entering a new knowledge-based era as opposed to the preceding industrial-based era - which represented just as big a leap from the agrarian-based one it had superseded. From this perspective, the nation-state is no longer indispensable to the knowledge economy, and as a result, Drucker foresaw the emergence of new social structures would arise and co-exist with the nation-state. Drucker summed up the difference between what many term a post-industrial economy and what he calls a knowledge economy this way: "That knowledge has become the resource rather than a resource is what makes our society 'post-capitalist.'  This fact changes fundamentally the structure of society.  The means of production is and will be knowledge." Though he doesn’t state it directly, this means that the highly centralized sectors of the economy, from finance to government, will be disrupted by a rapidly evolving, decentralized “society of organizations.”

 

Tyler Durden's picture

In Cyprus, Shock Turns To Anger





For a few days, the rest of the world looked on awaiting the riots and social unrest in Cyprus that we have become accustomed to from their fellow unter-sufferers Greece and Spain; but it never came. However, as Reuters reports, the public shock (and numbness) over the tough terms of the so-called bailout is now turning to anger as million of Euros remain locked inside the country's banks. The people are "disappointed and angry," that the politicians are out of touch, and, "the big guys, who had the information, managed to take their money abroad." No one has answers for them, "I wrote to the central bank and they came back saying that it was not their competence, so whose competence is it?" as frustration boils over, "absolutely nothing adds up." But perhaps the saddest truth is that the Cypriots are resigned to years of hardship, "I am going to find myself on the street with no future, only debts. But we will fight to the end. We have nothing left to lose." It seems when a people has nothing to lose that anything is possible...

 

Tyler Durden's picture

On The Money-ness Of Bitcoins





Bitcoins have been much in the news lately. Against the background of renewed concerns about the integrity of the euro zone and the imposition of capital controls in Cyprus, the price of a bitcoin has tripled over the last month and reached more than $141 for 1 BTC. Are we witnessing the spontaneous emergence of an alternative virtual medium of exchange, as some would put it? This article offers an answer to this question by considering three aspects of the economy of bitcoins: their production process, their demand factors, and their capacity to compete with physical media of exchange. Virtual monies, of which bitcoins seem to be the most perfected specimen up to date, do not allow acting individuals to manage the uncertainty of the future as well as material monies do. They could serve to intermediate exchanges among those who invest in the technology that creates them, stores them, and transfers them. Nevertheless, they could never achieve that degree of universality and flexibility that material monies carry with them by nature. Thus, on the free market, commodity monies, and presumably gold and silver, still have a great comparative advantage.

 

Tyler Durden's picture

Japan's Debt Crisis Visualized





In just a few short minutes, inspired by Kyle Bass, Addogram presents a short visual explanation of Japan's debt problem. In the time it takes Ben Bernanke to print $13.7 million you'll have a deep understanding of Aso, Abe, and Kuroda's impending debt crisis.

 

govttrader's picture

US Treasuries vs Stocks - One Of These Things Does Not Look Like The Other...





Today saw a massive short covering trade occur in the US Treasury market.  Is this a trade to fade??

 

Tyler Durden's picture

Nikkei Soars, Japanese Bond Yields Collapse On BoJ Front-Running





If there is one thing the Fed taught the world's investors it was to front-run them aggressively; and whether by unintended consequence or total and utter lack of belief that despite a 'promise' to do 'whatever it takes' to stoke 2% inflation the BoJ are utterly unable to allow rates to rise since the cost of interest skyrockets and blows out any last hope of recovery, interest rates are collapsing. Japan's benchmark 10Y (that is ten years!!) yield just plunged from 55bps (pre-BoJ yesterday) to 34bps now. That is a yield, not a spread. Nothing to see here, move along. Of course, not to be outdone, Japanese stocks (Nikkei 225) are now up 6.75% from pre-BoJ (3% today) trading at 13,000 - its highest since September 2008 (Lehman). But there is one market that is showing its concerns at Japan's inevitable blow up - Kyle Bass' 1Y Jump risk has more than doubled in the last 4 months.

 

Tyler Durden's picture

Guest Post: The Fallacy Of The Fed Model





One of the simplest, most overused and popular assertions is that claim that stocks must rise because interest rates are so low.  In fact, you cannot get through an hour of financial television without hearing someone discuss the premise of the Fed Model which is earnings yield versus bond yields. The idea here, once formalized as the "Fed Model," is that stocks' "earnings yield" (reported or forecast operating earnings for the S&P 500, divided by the index level) should tend to track the Treasury yield in some fashion. This simply doesn't hold up in theory or practice.

 

Tyler Durden's picture

Fed's Fisher: "Too-Big-To-Fail Regulation Should Be Written By A Sixth-Grader"





QE "is not a Buzz Lightyear policy," Dallas Fed's Fisher explains to Bloomberg TV's Stephanie Ruhle, "this will not go on forever." He admits there are limits to their (and implicitly the ECB or BoJ) policies - "we just have to figure out what they are." The always outspoken fed head goes on to explain why he believes the Fed's policy should be "dialed back... Not go from wild turkey, the liquor by the way, to cold turkey; but certainly slowing it down now." The too-big-to-fail banks are absolutely gaining from a substantial cost-of-funding advantage (over smaller banks) with their implicit government guarantee and Fisher expresses disappointment in the reams of pages that constitute new regulation adding that he would prefer "a simple statement saying they understand there is no government guarantee... It could be written by a sixth grader," as Dodd-Frank "needs repair." His fears are exacerbated by Cyprus as he notes, "[in Cyprus] you have an economy that is held hostage by bank failure and institutions that are too big to fail. We cannot let that happen in the U.S. ever again and the American people will not tolerate it."

 

Tyler Durden's picture

Kyle Bass: "Japan Will Implode Under Weight Of Their Debt"





As the fast-money flabber-mouths stare admiringly at the rise in nominal prices of Japanese (and the rest of the world ex-China) stock prices amid soaring sales of wheelbarrows following Kuroda's 'shock-and-awe' last night, it is Kyle Bass who brings these surrealists back to earth with some cold-hard-facting. Out of the gate Bass explains the massive significance of what the Japanese are embarking on, "they are essentially doubling the monetary base by the end of 2104." It is a "Giant Experiment," he warns, but when you are backed into a corner and your debts are north of 20 times your government tax revenue, "you're already insolvent." Simply put, Bass says they have to do something and they have to something big because they are "about to implode under the weight of their debt." For a sense of the scale of the BoJ's 'experimentation', Bass sums it up perfectly (and concerningly), "the BoJ is monetizing at a rate around 75% of the Fed on an economy that is one-third the size of the US!"

 

Tyler Durden's picture

CME Hikes Yen, Nikkei Futures Margins By 19%-33%





Two years ago, warning of a bubble in gold/silver/PMs was all the rage. Luckily, those days are long gone, allowing one to accumulative hard assets in peace, in a declining paper price environment, without the thundering herd in the rearview mirror. Nowadays, the ever-"vigilant" mainstream media has moved on, and has been so very observent to spot a new bubble in bitcoins. As we always do, we decided to have some fun at the MSM's expense, and tweeted the following earlier today:

It appears the CME heard us, and moments ago proceeded to hike margins across the entire Yen future spectrum by anywhere between 19% and 33%.

 

Tyler Durden's picture

...And If You Call Now, You Can Get $2 Billion In California Bonds At A Low, Low Price





Presented with little comment aside to note the 'special' pre-sale ends April 10th - Your State Needs You! Of course, if California wants to really sell these bonds, they should take a page out of Japan's book - Sex sells Bonds.

 

Tyler Durden's picture

They Came, They Saw, They Got The Hell Out Of UBS In 7 Days





Housing is recovering. The Fed has your back. The consumer is healthy. All things that would suggest the commercial-mortgage bond business should be on the cusp of a renaissance. So the question is - what did Brett Ersoff and John Herman see, seven short days after being promoted to run the UBS real-estate finance division, that made them depart the venerable Swiss firm with the paintball sized Stamford trading floor?

 

Tyler Durden's picture

A Ton Of Gold Bricks: What Capital Flight Looks Like In Italy





Curious why so little has been said about cash flowing out of Italy's banks, especially when even UniCredit's CEO today proudly warned everyone he is all for confiscating uninsured deposits as long as "everyone else is doing it" - and no, he is not kidding, so when it does happen, nobody will be able to say they weren't warned. Maybe it is because Italian cash is actually not leaving the country at all. Instead, real "wealth" is departing the boot-shaped nation, quietly and under the radar, as fast as it can in another form: gold. As the clip below from Bloomberg shows, a car was intercepted at the Italy-Switzerland border, with a very special cargo: numerous bars of gold weighing a whopping one ton, worth $6 million. Furthermore, one can be absolutely certain that for every car that is caught at the border with a ton of "golden" cargo, there are 99 that pass through undisturbed and undetected. Which makes perfect sense: what better way to circumvent shadow capital controls such as those virtually everywhere in Europe, than to convert one's paper money within country A so it stays in country A, into a far more valuable, anonymous and transportable store of wealth, such as gold, and quietly move it to country B, the one where the risk of deposit confiscation is (for now at least) far less?

 

Tyler Durden's picture

Down, Up, Down, Up, Down, Up, Down, Up, Down, Up, Down... Up





For the first time since 1981, the S&P 500 has rotated from up to down to up for 12 days in a row - adding 4 points in that time. 10Y Treasury yields have dropped 8 of those 12 days and closing today at 1.75% - their lowest of the year, the biggest 10-day drop in yields in five months - but stocks ignored that correlation. EURJPY was the story of the day as JPY weakened 4% against the USD from the BoJ news - but stocks ignored that correlation. Oil slumped once again on the day (-4% on the week) - but stocks ignored that correlation. Stocks in general oscillated intraday around VWAP (as we sense the algos have no confidence in their correlations) and real money awaits tomorrow's NFP debacle.

 
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