Archive - Jan 27, 2014

The last time the Turkish Central Bank announced, after the fact, it has failed to intervene decisevely in FX markets, the country's currency collapse became a vivid example of what happens when monetary collapse looms and the monetary authority is unable to do anything about it. This morning, things got even more surreal after the Turkish lira cratered from 2.32 to a record low against the dollar, just shy of 2.39, when at 5:30 Eastern time, the Turkish CB decided to do what Draghi, Bernanke et al are so good at doing: threaten with some unknown future action, in the process spooking everyone into covering shorts, when it unexpectedly announced it would meet on 28 January 2014, Tuesday evening to discuss recent developments and take the necessary policy measures for price stability. The decision would be announced at midnight. A fitting hour for yet another central bank bailout...

A slew of favorable overnight news, including a stronger than expected German IFO business climate print, reports that Draghi has signalled he would be prepared for the ECB to buy packages of bank loans to households and companies, when he said "the ECB might be able to buy securitised bank loans if they could be packaged as asset-backed securities in a transparent manner" (a QE-lite will hardly make the market happy), a largely expected bail out of the Chinese Trust Equals Gold imminent default (more in a subsequent post), as well as the announcement of Argentina's new liberalized dollar purchase capital controls (which have a monthly purchase limit as well as a minimum income threshold), not to mention the traditional USDJPY levitation which drags all risk along with it, were unable to put an end to the ongoing rout in emerging markets, which saw the Turkish Lira collapse to fresh record lows before it jumped on news the Turkish Central Bank would hold an extraordinary meeting tomorrow (if the recent intervention by the CB is any indication, watch out), not to mention the Ruble, Zloty and even the Ukraine Hryvna dump as the outflows from EMs continued over a mixture of tapering fears as well as concern that the one way fund flow would accelerate creating its own positive feedback loop. Is today the day the fund flow exodus will finally be halted? Stay tuned to find out and keep a close eye on the USDJPY - the most manipulated, confiduing-boosting "asset" in the world right now, more so than gold even.

Selling hope, after all, is the stock and trade of the Sell Side.  But we all need to take a step back and ask ourselves just where we stand on the proverbial economic timeline... 

Earlier, we debunked an alarmist Forbes story about halted cash transfer by PBOC decree, which was erroneous along various lines all explained previously, not in the least that the actual announcement had first appeared some three weeks ago. And despite the kneejerk reaction of some of our more fatalist readers and not to mention the general public, the reality is that China has more than enough real problems (Trust Equals Gold being at the forefront) and certainly does not need to add imaginary, made up ones, conceived only with the intention of generating conflated ad revenues through click-baiting headlines. Which is why we commend Forbes for, better late than never, pulling the story even without providing an explanation of how this story appeared in the first place. Because where the article once was, there is only a 4-0-Forbes now...