Archive - Dec 2014

The attention being brought to bear upon Greece highlights once again the hollow nature of the “recovery” in Greece, Europe and the western world. The crisis is far from resolved - merely to use the very true cliche - kicked down the road. Well we appear to be coming towards the end of the road in Greece and this could set the stage for the next stage of the Eurozone debt crisis.

Today things for the former Goldman banker went from bad to worse, when as the FT reports, the ECB lost its "normal political cover" to make a bold decision, in fact the boldest decision in the ECB's history: one which could lead to a political and legal retaliation by Germany itself. The reason, as FT's Peter Spiegel explains, is that unlike previously when EU summits resulted in "greenlighting" blueprints which, if only on paper, enabled Draghi to proceed unconstrained, this time there was no such blank check compact. The bottom line, as Spiegel concludes, is that "Draghi won’t have the normal political cover he needs to make a bold decision early next year – a problem only compounded by the European Commission’s decision last month to put off the day of reckoning for France and Italy over whether they will face sanctions for failing to live up to the EU’s crisis-era budget rules."

Brent Crude crossed below $65 for the first time since 2009 this morning and WTI began to slide as inventories showed a bigger-than-expected build. But it was Saudi Arabia's oil minister al-Naimi who sparked the latest dump:

*NAIMI SAYS `WHY SHOULD I CUT PRODUCTION'?

And with that WTI plunged to a $60 handle on heavy volume...

On the other hand...

Ukraine bond prices have crashed to new record lows this morning - with even 2015 maturing debt trading at a 25% discount to face - following calls (admissions) by Ukraine's new (Lithuanian) economy minister that the government will need more IMF help on top oif its current $17 billion package. The country may need another $19 billion next year!!!

The game has been lost, but central bankers are still on the field, wandering around in disbelief that their unspeakable powers to issue money and credit have failed. You can print all the money you want, but it will never boost wages to keep up with prices.

Uncertain times call for unconventional thinking...

Could the Entire Post-2011 Move Be Just One Big False Breakout...A Blow Off Top Induced By Manic Money Printing?

Remember yesterday? When talking heads proclaimed the lows were in and due to the strength of energy stocks, this must mean the worst is over? And remember we - quietly - showed the massive divergence between crashing energy credit markets and the stocks on the day...? Well guess who was right?

While we were expecting that one-time "god of crude oil trading" would have a poor year as a result of his consistent bullishness on the crude space, we were quite astounded to learn, as Bloomberg first reported yesterday, that Andy Hall - the man whose name was for a decade legendary in the commodity space - would call it a day. And yet that pales in comparison to the WSJ report overnight than Phibro itself, Andy Hall's 113 year old employer currently owned by Occidental Petroleum after its sale by Citigroup, would liquidate in the US after it failed to buy a buyer, marking the end of an era.

Most readers are familiar with the fable of “The Goose That Laid The Golden Eggs”, or at very least, are familiar with the metaphor which was the moral of that fable: one should never kill a goose that lays golden eggs. Such advice seems obvious to the point of being simplistic, and yet it is wisdom which has not merely survived, but has been enshrined in the form of a fable.

At the latest ECB press conference Draghi said that. “The monetary policy team had this week discussed buying all assets except gold”; qualifying a claim by fellow member Yves Mersch two weeks ago that gold bullion could be included.” If central bankers truly believed in sound monetary policy the headline would have said “We’ll buy all your gold”. That would have propelled both gold and the European equity markets upwards. As it is markets on the continent get cheaper as the good doctor fiddles.

And other news moving markets today

From Bank of America: "The chart shows that around €400bn of Eurozone government debt and bills in our bond indices currently have negative yields.... In the topsy-turvy world of negative rates in Europe, it will seem as if credit is becoming the new government debt in places."

But the market acts deaf, dumb and blind...