Archive - May 17, 2013

Moments ago the USD value basket - the DXY - rose to highs not seen since July 2010. The recent 6.6% swing is at an annualized 25% rate of appreciation. The dollar appears to have now become the flight-to-safety currency, which historically has been associated with plunging risk values. However, now that the dollar strength is simply a function of other central banks perceived as diluting their currencies more, and injecting capital flows into the G-0 system, all of which is expected to sooner or later make its way to US stocks, this is paradoxically, now a risk on factor. For US companies that have to export into such an environment, this may not be quite risk on, but that is something one can roundly ignore for now.

To vaguely paraphrase Mike Tyson, "everyone has a plan for a socialist utopia, until they run out of toilet paper." This is just what happened to Venezuela, where in the image vacuum left following the death of leader Hugo Chavez, things are rapidly falling apart for the oil-rich country.

• Mine union threatens to bring South Africa to 'standstill' (Reuters)
• Russia Raises Stakes in Syria (WSJ) - as reported here yesterday 
• Japan buys into US shale gas boom (FT)
• Bill Gates Retakes World’s Richest Title From Carlos Slim (BBG) - so he can afford a Tesla now?
• China Wages Rose Sharply in 2012 (WSJ)
• Regulators Target Exchanges As They Ready Record Fine (WSJ)
• Citi Takes Some Traders Off Bloomberg Chat Tool (WSJ)
• After Google, Amazon to be grilled on UK tax presence (Reuters)
• Apple CEO Cook to Propose Tax Reform for Offshore Cash (BBG)
• French, German politicians to pressure Google on tax (Reuters)
• Gold Bears Revived as Rout Resumes After Coin Rush (BBG)
• A stretched Samsung chases rival Apple's suppliers (Reuters)

Is that analysts just don't understand the Google Business Model?

Those hoping for a slew of negative news to push stocks much higher today will be disappointed in this largely catalyst-free day. So far today we have gotten only the ECB's weekly 3y LTRO announcement whereby seven banks will repay a total of €1.1 billion from both LTRO issues, as repayments slow to a trickle because the last thing the ECB, which was rumored to be inquiring banks if they can handle negative deposit rates earlier in the session, needs is even more balance sheet contraction. The biggest economic European economic data point was the EU construction output which contracted for a fifth consecutive month, dropping -1.7% compared to -0.3% previously, and tumbled 7.9% from a year before.  Elsewhere, Spain announced trade data for March, which printed at yet another surplus of €0.63 billion, prompted not so much by soaring exports which rose a tiny 2% from a year ago to €20.3 billion but due to a collapse in imports of 15% to €19.7 billion - a further sign that the Spanish economy is truly contracting even if the ultimate accounting entry will be GDP positive. More importantly for Spain, the country reported a March bad loan ratio - which has been persistently underreproted - at 10.5% up from 10.4% in February. We will have more to say on why this is the latest and greatest ticking timebomb for the Eurozone shortly.