Archive - Oct 2014

There it was --- a real market come and gone in half an hour, like a pregnant panda at Edinburgh zoo. What did it mean and what should you do? You should pay attention to what happens to the direction of prices when volumes surge and markets work. When the veil is lifted, pay attention to what you see beneath. Last Wednesday, in the space of half an hour of active trading, the Treasury market had one of its most rapid rises ever recorded and equities fell sharply. There is a very simple lesson that when the markets finally break through the manipulation they move to price in deflation and not inflation. This is key because it means financial repression has failed. Such repression requires the artificial depression of interest rates but, crucially, it must be paired with boosting inflation above such rates. On October 15th 2014, if only for a few short minutes, market forces broke out and the failure of central bankers was briefly evident.

• Fed set to end one crisis chapter even as global risks rise (Reuters)... you mean, for the third time?
• Insider-Trading Probe Focuses on Medicare Agency (WSJ)
• He's sorry: Rajoy Apologizes as New Wave of Graft Allegations Hits Spain (BBG)
• China could 'punish' Hong Kong over protests, says ex-HK central bank chief (Reuters)
• Dubai Insists the Boom is Not a Bubble This Time Around (BBG)
• Bank-Data Sharing Accord Expands Push to Find Tax Cheats (BBG)
• Deutsche Bank Sinks to Third-Quarter Loss on Legal Costs (BBG)
• Kim Jong Un Executes 10 Officials for Watching Soap Operas (BBG)
• French drugmaker Sanofi sacks CEO Viehbacher (Reuters)

As Deutsche Bank observes, the Fed has been wanting to hike rates on a rolling 6-12 month horizon from each recent meeting but never imminently which always makes the actual decision subject to events some time ahead. They have seen a shock in the last few weeks and a downgrade to global growth prospects so will for now likely err on the side of being more dovish than in the last couple of meetings. They probably won't want to notably reverse the recent market repricing of the Fed Funds contract for now even if they disagree with it. However any future improvements in the global picture will likely lead them to step-up the rate rising rhetoric again and for us this will again lead to issues for financial markets addicted to liquidity. And so the loop will go on for some time yet and will likely trap the Fed into being more dovish than they would ideally want to be in 2015.

"The impact of his work is already being felt both here at the White House but across the government"--White House Shilltard Josh Ernest

"Since 9/11, those thank yous have been aimed at veterans with the regularity of the machine gun fire that may still haunt their dreams. Veterans have also been offered special consideration when it comes to applications for mostly menial jobs so that they can “utilize the skills” they learned in the military. While they continue to march in those welcome home parades and have concerts organized in their honor, the thank yous are in no short supply. The only question that never seems to come up is: What exactly are they being thanked for?"

The Swiss establishment has been reliant upon the public’s ignorance, but now they are up against a formidable opponent in Egon von Greyerz. Not only that, but they can clearly see that, as elsewhere around the world, the public is fast becoming disenchanted with the status quo; and that is potentially very dangerous for these people. What is important to understand here is that if the initiative passes it will be part of the Swiss constitution IMMEDIATELY - as some are suggesting. This means that the government and parliament cannot touch it. Only another referendum can change it. This is proper democracy for you. The closer we get to the vote on November 30, the bigger this story is going to become, and the bigger it becomes, the higher the chance that the yes vote wins. Should that happen, it will undoubtedly set off alarm bells throughout the gold market, as yet more physical gold will need to be repatriated and another sizeable, price-insensitive buyer will enter the marketplace.

Having disproven the "yield curve is not inverted so there cannot be a recession anytime soon" meme, we thought the following chart of a much more macro-economic-data-related indicator that appears to be a useful timing tool for suggesting recessionary conditions exist would provide some more useful context than an articially-manipulated 'market' interest rate. As Evergreen Gavekal notes, the ratio of coincident-to-lagging conference board indices has an admirable record as a recession forecaster... and is at its lowest level since Sept 2009.

At the midpoint between our two houses is a funeral home which, oddly, Marissa Mayer decided to buy a couple of years ago.........

How does it feel to live under a government that is getting even more paranoid with each passing day?  The American people are told that the emerging Big Brother police state is for our safety, but the truth is that it isn’t there to protect us.  It is there to protect them.

Despite the mainstream media's effusive celebration of ApplePay - despite numerous payment systems and NFC devices alreadt existing and failing to achieve any paradigm shift - it appears Tim Cook has pushed his company into an area of competition he was not full prepared for. Seemingly expecting the world's retailers to embrace the 'unique' payment system, first Wal-Mart & Best Buy, then CVS and now Rite-Aid have all blocked ApplePay. While proclaiming the success of signing up over a million credit card users in the first 72 hours, Cook seemed ticked off at the retailers who blocked him, "it's a skirmish," he said, as Reuters reports, jabbing "merchants have different objectives sometimes. But in the long arc of time, you only are relevant as a retailer or merchant if your customers love you."

The conspiracy theories surrounding the death of Total SA’s chief executive, Christophe de Margerie, started the second the news broke of his death. One has better odds of being struck by lightning at an airport then a snow plow, or any other ground support vehicles hitting a plane and killing all inside the plane. Did this direct threat to the petrodollar make this “true friend of Russia” - as Putin called de Margerie - some very powerful and dangerous enemies amongst the power that be, whether in the French government, the EU, or the US? How many other Western executives who dare to help Russia bypass sanctions - and turn it into an energy powerhouse - will die under suspicious circumstances?

Several months ago, a Russian rocket, carrying Russia's most advanced communications satellite, exploded on launch and the west was amused at Russia's seeming incompetence, while birthing extensive speculation of the NSA's involvement. Well, moments ago either Karma, or Russian hackers, intervened, and 6 seconds after launch, the NASA unmanned Antares rocket of rocket-maker Orbital Sciences, likewise ended its mission prematurely in a massive flaming fireball.

Most defenders of the state assume that government services help the poor. And, sometimes, some poor people do benefit financially from government programs. But there’s a hidden cost: taxation and mandatory programs (Social Security, for instance) that hurt the needy by restricting their choices. Government taxes away income that low-income households could invest in improving their lives. At the same time, state-sponsored benefits create incentives that keep the poor trapped in poverty.