Archive - Nov 2014

Essential...

What best shows that for Venezuela it is essentially game over, is that as the chart below shows, Venezuela’s international reserves declined $1.3 billion in the week after President Nicolas Maduro transfered $4 billion of Chinese loans to the central bank. In other words, the scrambling oil exporter was forced to burn one third of its Chinese bail-out loan to keep itself solvent. The country’s reserves dropped to $22.2 billion today, according to central bank data. As Bloomberg also notes, Maduro on Nov. 18 ordered the Chinese loan proceeds to be moved from an off-budget fund, so that they would show up in reserves and help boost investor confidence in an economy beset by the world’s highest inflation and widest budget deficit. The following day, Venezuelan bonds rose the most in six years in intraday trading. “If the plan was to calm the bondholders, then burning through a third of that money in five working days doesn’t do it in any way,” Henkel Garcia, director of Caracas-based consultancy Econometrica, said in a telephone interview.

If you ever needed proof that the financial press has been completely indoctrinated in the cult of Keynesian central banking consider the following...

Having already tumbled 10bps on the week, US Treasury yields plunged 4bps after the US equity market cash session closed... to the lowest 30Y yield close since May 2013.

Not 'off the lows'

Because nothing says "spend on Black Friday" like a fractionally positive Dow Jones Industrial Average closing in the green with a last minute surge that gets its from red to just barely green... and completely unrigged. 

Despite the best efforts of business media to paint a rosy picture of the Black Friday spend-fest, stocks had only one trajectory - from upper left to lower right - from the open. Small Caps were slammed but all major indices gave up significant knee-jerk "energy schmenergy" gains to close ugly. However, The Dow was pushed just into the green - and new record highs - to prove everything in the centrally planned world is awesome. Crude oil prices were monkey-hammered to 5-year closing lows. The USDollar gained on the day - after 3 down days - and combined with Swiss referendum expectations, gold faded notably (as did Silver with oil). Treasury yields tumbled 10-12bps on the week and HY credit notably underperformed.

Because nothing says global demand is picking up like the biggest collapse in crude oil prices since April 2009...

Explain...

All consumption... no production...

It is no secret that one of the primary drivers of relentless S&P 500 levitation over the past two years, ever since the start of Japan's mammoth QE, has been the use of the Yen as the carry currency of choice (once again as during the credit bubble of the early-2000s), whose shorting has directly resulted in E-mini levitation. One look at the intraday chart of any JPY pair and the S&P500 is largely sufficient to confirm this. Those days, however, may be coming to an end, at least according to Goldman which overnight released a note saying that the Yen is "Almost at breakeven: Further yen depreciation could be a net burden."

We should be glad the price of oil has fallen the way it has (losing another 6% today as we write this). Not because it makes the gas in our cars a bit cheaper, that’s nothing compared to the other service the price slump provides. That is, it allows us to see how the economy is really doing, without the multilayered veil of propaganda, spin, fixed data and bailouts and handouts for the banking system.

Still paying a #Div/0 valuation for Facebook or Twitter based on expectations of exponential growth in eyeballs, or rather "eyeballs"? Then perhaps read this first. ".. many of the “users” on social media sites aren’t real people at all – they’re celebrity staff tweeting on behalf of their employer, or PRs promoting a company, or even fake accounts for people that don’t exist at all. In fact, half of all Twitter accounts created in 2013 have already been deleted."