Archive - Jun 2013

The "red-line" has been crossed. The New York Times is reporting that:

U.S. CONCLUDES SYRIA USED CHEMICAL WEAPONS AGAINST REBELS: NYT, and
NYT SAYS EUROPEAN OFFICIALS REACH SAME CONCLUSION ON SYRIA
MCCAIN SAYS U.S. TO PROVIDE WEAPONS TO SYRIAN REBELS

And alongside that finding, as part of (or justification for?) the arming of the Syrian rebels, the WSJ reports that the US Military is calling for a limited no-fly zone inside Syria. The seriousness of this escalation must be put in the context of a desperately-needed distraction for the current administration - which makes the decisions being made even more concerning in their potential for extremes.

In an almost perfect mirror-image of last week the dump in stocks into Thursday was caught and ramped back to new highs. Today is the best day for the S&P 500 futures market since the first day of the year. Volume was well below average which is exemplified by the fact that the VWAP (or market balance point for the day) closed down 4 points despite ES up over 20. The bounce was already on a roll before Hilsenrath sparked some last minute momentum surges above yesterday's highs.

The last time Hilsenrath tried to be relevant, back on May 22, he essentially said to ignore anyone who tried to time the Taper (but don't call it a Taper) when he said: "when the Fed shuts off bond buying, it won’t be abrupt and it won’t be predictable." So just to make sure market expectations of tapering are actually very predictable, if at least on the short end, moments ago Hilsenrath once again hit the tape with the following: "Fed Likely to Push Back on Market Expectations of Rate Increase: Federal Reserve officials have been trying to convince investors for weeks not to overreact when the central bank starts pulling back on its $85 billion-per-month bond-buying program. An adjustment in the program won’t mean that it will end all at once, officials say, and even more importantly it won’t mean that the Fed is anywhere near raising short-term interest rates. Investors aren’t listening." So here comes the Hilsenrally to save the day by making investors listen, even if not so much for the benefit of stocks this time, as for bonds, which little by little are starting to lose it.

With the JPY trading through 93 at one point overnight, Nikkei September futures traded through our stop of 12,700. Although futures are now trading back above our stop, testament to the enormous volatility in the market there, on the basis of the Tokyo close, we were stopped out with a potential loss of 6.16 percent. Japanese markets continue to roll back gains and unwind inflation expectations, moves that we now think are excessive given the firm commitment to ease. But with the June BOJ meeting now past, it is somewhat less clear what will shift sentiment in the near term.

Bloodied, but here to help...

Emerging from a hearing with NSA Director Keith Alexander, Reps. Mike Rogers (R-Mich.), chairman of the Intelligence Committee, and Dutch Ruppersberger (D-Md.), the senior Democrat on the panel, said Snowden simply wasn't in the position to access the content of the communications gathered under National Security Agency programs, as he's claimed. "He was lying," Rogers said. "He clearly has over-inflated his position, he has over-inflated his access and he's even over-inflated what the actually technology of the programs would allow one to do. It's impossible for him to do what he was saying he could do... I hope that we don't decide that our national security interests are going to be determined by a high-school dropout who had a whole series of both academic troubles and employment troubles," Rogers said.

Feel like you've seen this all before... you have...

We now know that the US is not the cleanest dirty 'economic' shirt but it seems that the "well, where else are you going to put your money?" argument remains in full 'myopic' swing. The problem - we've seen this suspension of belief before...

Being poor is like a game of poker where if you lose, the other players get to screw you. And if you win, the dealer screws you. A bunch of you reading this are among the 45 million “working poor” in America, and if you’re not, you know somebody who is. People are quick to tell you to pick yourself up by your bootstraps and just stop being poor. What they don’t understand is the series of intricate financial traps that makes that incredibly difficult...

What you hear is a giant hissing sound. And what you get is capital destruction and wealth transfer.

... Is that it is for temporary workers.

NSA Leaks Help – Rather than Hurt – the United States

Following the 3 and 10 year auctions in the last two days, today's 30 Year $13 billion reopening completed the trifecta of ugliness, pricing at a surprisingly wide 3.355%, or three whole basis points above the When Issued, which traded at 3.324% at 1pm - the biggest tail in a long time. It was also the highest yield for a 30 Year since March 2012. The internals were not pretty either - the Bid To Cover coming at 2.47, well below the TTM average of 2.59 but hardly the massive BTC collapse that we saw in yesterday's 10 Year. And just like yesterday, the Directs ran for the hills taking down just 8.5%, compared to 15.2% in the past year average, Indirects taking 40.2% and 51.3% or so left for the Dealers who will be happy to stock up on some more collateral.

There's no way to sugarcoat the dismal performance of the precious metals in recent months. But a revisitation of the reasons for owning them reveals no cracks in the underlying thesis for doing so. In fact, there are a number of new compelling developments arguing that the long heartbreak for gold and silver holders will soon be over.

$1.4 trillion in QE bought a bear market for Japan. Good luck to the rest of the QE crowd.