Archive - Feb 17, 2014

“Guidance” is the new organizing credo of US financial life with Janet Yellen officially installed as the new Wizard of Oz at the Federal Reserve. Guidance refers to periodic cryptic utterances made by the Wizard in staged appearances before congress or in the “minutes” (i.e. transcribed notes) from meetings of the Fed’s Open Market Committee. The cryptic utterances don’t necessarily have any bearing on reality, but are issued with the hope that they will be mistaken for it, especially by managers in the financial markets where assets are priced and traded. 

Presented with no comment...

The strength of the real estate market should not be measured by price appreciation, or the number of new and existing home sales. It should be measured by the support of underlying fundamentals and whether they can help to withstand economic cycles without policy makers having to go hog wild just to avoid a total collapse.

So how healthy is the real estate market today?

Is the Treasury's rescue of Fannie Mae and Freddie Mac unfair to private shareholders?  Yup.  And they deserve it. 

Two weeks ago, gold jumped to a then-2014 high, following reports out of India that the head of India's Congress Party, Sonia Gandhi was pushing the government to cut its duty on gold and other restrictions. Today, now that the upward move in gold has finally resumed, it appears that the nation with the world's most draconian gold capital controls, is finally starting to crack under pressure from the people, as well as a surge in gold smuggling via illegal channels to unprecedented levels. Reuters reports that India "will look into relaxing gold imports curbs, but won't let its current account deficit (CAD) balloon, Finance Minister P. Chidambaram said on Monday."

For a plan that culminated with a hijacked plane landing in Geneva, Switzerland, it was anything but a "Swiss watch" execution.

• Venezuela's Lopez says ready for arrest at Tuesday march (Reuters)
• Record Chinese liquidity sends Shanghai Composite back to green for the year (WSJ)
• Deflation Threat Worries G-20 Roiled by Emerging Markets (BBG)
• Neither U.S. nor EU has strategy for Ukraine (Reuters)
• AngloGold Ashanti Chairman Steps Down (WSJ)
• Italy Yields Seen Climbing as Renzi Gets Mandate (BBG)
• Group Led by Starr Near Deal to Buy MultiPlan (WSJ)
• Thai PM under siege, lengthy protests take toll on economy (Reuters)
• The Value of Annoying Co-Workers (WSJ)

After tumbling as low as the 101.30 level overnight on atrocious GDP data, it was the same atrocious GDP data that slowly became the spin needed to push the USDJPY higher as the market became convinced that like everywhere else, bad news is great news and a relapse in the Japanese economy simply means more QE is coming from the BOJ despite the numerous articles here, and elsewhere, explaining why this very well may not be the case. Furthermore, as we noted last night, comments by the chairman of the GPIF panel Takatoshi Ito that the largest Japanese bond pension fund should cut its bond holdings to 40% were used as further "support" to weaken the Yen, and what was completely ignored was the rebuttal by the very head of the GPIF who told the FT that demands were unfair on an institution that has been functionally independent from government since 2006. The FSA “should be doing what they are supposed to be doing, without asking too much from us,” he said, adding that the calls for trillions of yen of bond sales from panel chairman Takatoshi Ito showed he "lacks understanding of the practical issues of this portfolio.” What he understands, however, is that in the failing Japanese mega ponzi scheme, every lie to prop up support in its fading stock market is now critical as all it would take for the second reign of Abe to end is another 10% drop in the Nikkei 225.

The Sickle of Liberty...