Archive - Nov 2014

While today's Draghi press conference is expected to be rather contentious, nobody was expecting much if anything from the actual quantitative rates announcement. Sure enough, that's precisely what the ECB delivered when moments ago it announced it would keep all three rates unchanged, with the Deposit Facility rate continuing its trek through NIRP land at -0.20%.

"we do not expect any additional easing to be announced in addition to the various measures adopted between June and September. We expect Mr Draghi’s remarks to be focused on the Comprehensive Assessment of Euro area banks, and on the fact that the decline in oil prices is lowering headline inflation in most advanced economies."

With last night's latest Japanese flash crash firmly forgotten until the next time the trapdoor trade springs open and swallows a whole lot of momentum chasing Virtu vacuum tubes, it is time to look from east to west, Frankfurt to be precise, where in 45 minutes the ECB may or may not say something of importance. As Deutsche Bank comments, "Today is the most important day since.... well the last important day as the ECB hosts its widely anticipated monthly meeting." Whilst not many expect concrete action, the success will be judged on how much Draghi hints at much more future action whilst actually probably doing nothing.

You remarkable pig. You can thank whatever pig god you pray to that you haven't turned me into a murderer.--Fletcher Christian

At 12:50pm Tokyo time, Nikkei 225 Index was sitting pretty, up 0.5% for the day. Then came the tumble. Over the next 22 minutes, Nikkei Index lost 1.8% to touch intraday low of 16,725.45. USD/JPY followed suit, but with a lag, based on data compiled by Bloomberg; currency slid from 115.38 to 114.46 during that period, marking 0.8% drop. Japanese banks sold down Nikkei to take some money off the table, given its 8% advance since Oct. 31 when BOJ announced its latest easing, which in turn caused USD/JPY to retreat, according to a Tokyo-based FX sales trader. Nikkei 225 closed down 0.9%, reversing earlier gain of as much as 0.6%

Central Banks shorting Gold and Silver to preserve their status as Masters of the Universe.

"... the admissions of financial danger by internationalists, the sharp drop in stocks at the beginning of fall, the reversal of the political theater, and the fact that mainstream investors now recognize the illegitimacy of the markets yet continue with the scam anyway, signals the last gasp of the global economy. I expect increasing market instability from this point on, as well as numerous geopolitical distractions which will be blamed for the fiscal chaos. Needless to say, the coming storm is a deliberately engineered one, meant to achieve very specific goals, including a fearful and panicked populace, easy to manipulate as the system goes off the rails for the last time."

Shit just got real. The Bank of Japan said it will buy 100% of new bond issuance.

It would appear the blood-red pen of veto will be running dry by the time the President's term is up based on Mitch McConnell and John Boehner's WSJ op-ed explaining "now we can get Congress going." As they begin, "Americans have entrusted Republicans with control of both the House and Senate. We are humbled by this opportunity to help struggling middle-class Americans who are clearly frustrated..."

Thanks to improving life expectancy and the Federal Reserve's financial repression lowering yields, US company pension funds have been hit by a double whammy. As Moody's warns, companies will have to find $110 billion in the next seven years to fund pension liabilities shortfalls. Moody's adds, "given these increasing liabilities and cash drains, we expect to see an acceleration in lump sum offers," as firms try to derisk.  Of course, if the pension funds just followed Japan's lead and went all-in on stocks, there would be no problem, right?

No money-back guarantee? Seems 'unfair'!

Economic data from China have generally been on the weak side of late, but not catastrophically so. And yet, apart from growing weakness in aggregated data, we also see more and more anecdotal evidence that the economy is deteriorating.

Unbeknownst to many, America is gripped in a saline shortage that is "Potentially related to the flu season." A shortage, which according to the ISM is now in its 10th month. That must have been some flu season. Then again, counting back from October, the first month when there was a saline shortage was in January of this year, when incidentally there wasn't much if any major flu outbreak as most people were staying home and away from the infamous Polar Vortex. Yet one key event did take place just around January of 2014. The WHO reminds us what: "On 26 December 2013, a 2-year-old boy in the remote Guinean village of Meliandou fell ill with a mysterious illness characterized by fever, black stools, and vomiting." 

Japanese bond yields have crept slowly higher since the big flush on Monday and Nikkei 225 is 2.6% below its highs on Monday seemingly pinned at 17,000. We note this as Abe & Kuroda's currency collapses yet another big figure to 115.00 (up 7 handles in 7 days from pre-FOMC) - the highest in over 7 years. The crucial 120 line in the sand should be crossed early next week at this rate... What was the trigger for tonight's exuberance, we hear you ask, why the Japanese market opening - which sent USDJPY instantly up 40 pips.

We've written a lot about Japan lately as what happens today under the no longer rising sun is going to have such repercussions worldwide that it would be foolish not to pay attention. Moreover, there’s something about what Bank of Japan Governor Haruhiko Kuroda said this morning that both perfectly and painfully illustrates to what depths, economically as well as morally, the country has sunk.