Archive - Feb 21, 2014

The die has been cast, and it appears that the world is finally on the path to the great "carry-trade unwind" endgame. If so, this is what it will look like...

1. Within 48 hours of the signing of this agreement, a special law will be adopted, signed and promulgated, which will restore the Constitution of 2004 including amendments passed until now. Signatories declare their intention to create a coalition and form a national unity government within 10 days thereafter. 

2. Constitutional reform, balancing the powers of the President, the government and parliament, will start immediately and be completed in September 2014.

3. Presidential elections will be held as soon as the new Constitution is adopted  but no later than December 2014. New electoral laws will be passed and a new Central Election Commission will be formed on the basis of proportionality and in accordance with the OSCE & Venice commission rules.

4. Investigation into recent acts of violence will be conducted under joint monitoring from the authorities, the opposition and the Council of Europe.

5. The authorities will not impose a state of emergency. The authorities and the opposition will refrain from the use of violence. The Parliament will adopt the 3rd amnesty, covering the same range of illegal actions as the 17th February 2014 law.

The Chinese Gold & Silver Exchange Society is prepared to spend at least HK$ 1 billion to set up a gold vaulting warehouse in mainland China that will be able to store a massive 1,500 tonnes of gold. Owning gold directly and in a fully allocated, fully segregated account and with an ability to take delivery remains vital.

"If Ukraine breaks apart, it will trigger a war," warns a senior Russian government official. The FT reports Russia is prepared to fight a war over the Ukrainian territory of Crimea (where the largest ethnic Russian population lives and they have a military base). Conjuring images of the 2008 Russian invasion of Georgia, the official told the FT, "they will lose Crimea first [because] we will go in and protect [it], just as we did in Georgia." The Kremlin regards the Georgian conflict as the biggest stand-off between Russia and the west since the end of the Cold War and it has fed determination in Moscow to push back against what it believes to be western attempts to contain Russia.

All you need to know about the New Normal breed of crony capitalism and unbridled hypocrisy is once again best exemplified by the following quote by Charlie Munger - the lifetime business partner of crony capitalist par excellence Warren Buffett - from May 2013, in which he said that "I think it is very stupid to allow a system to evolve where half of the trading is a bunch of short term people trying to get information one millionth of a nanosecond ahead of somebody else. It's legalized front-running. I think it is basically evil and I don't think it should have ever been allowed to reach the size that it did. Why should all of us pay a little group of people to engage in legalized front-running of our orders?" Noble, noble words Charlie. What Munger, however, did not disclose is that as part of the Berkshire Hathaway-owned Business Wire news service, the company was enabling just this "basically evil" frontrunning, by allowing some, those who could afford the hefty fee of course, to make Munger and Buffett even richer and to subscribe to BW's HFT direct news access which gave them a few millisecond headstart and in the process frontrun everyone else.

Inquiring fringe lunatic low brows want to know...

Most people in the world believe you get what you pay for. Furthermore, the dream of a meritocratic society remains alive and well in the corporate world. As the following chart shows, however, the US (and perhaps even the world) better hope that they don't get what they are paying for...

Six months ago a "glitch" halted all ATM withdrawals, and Credit and Debit card transactions for Russia's largest bank but today, the CEO of the huge bank has no such "glitch" to blame:

*SBERBANK SEES RUN ON ITS BANK MACHINES IN UKRAINE, GREF SAYS
*SBERBANK HALTS LENDING IN UKRAINE, GREF SAYS

We suspect that whether an agreement is in place or not, this will continue.

Several hours ago, and a day after the latest truce lasted about a few minutes before the the shooting returned and resulted in the bloodiest day of Ukraine's protests so far, there was hope that the situation in Ukraine may finally be getting resolved, when Ukraine's President Viktor Yanukovich announced plans for early elections in a series of concessions to his pro-European opponents. As Reuters reported earlier, Russian-backed Yanukovich, under pressure to quit from mass demonstrations in central Kiev, promised a national unity government and constitutional change to reduce his powers, as well as the presidential polls. He made the announcement in a statement on the presidential website without waiting for a signed agreement with opposition leaders after at least 77 people were killed in the worst violence since Ukraine became independent 22 years ago. This comes in the aftermath of S&P's announcement overnight that the Ukraine will default in absence of favorable changes.

So is this the favorable change that everyone has been expecting. Nope.

• RBS plans dramatic scaling back, to fire 30,000 of its 120,000 workers (FT)
• Zuckerberg’s Data Stance Faces Privacy Backlash in Europe (BBG)
• WhatsApp Shows How Phone Carriers Lost Out on $33 Billion (BBG)
• Markets flooded with cash, should Fed prep to stamp out risk? (Reuters)
• Venezuela threatens to expel CNN over protest coverage (BBC)
• Firm Stops Giving High-Speed Traders Direct Access to Releases (WSJ)
• Obama Budget to Delete Proposal to Limit Social Security (BBG)
• Energy Holdings Prepares for a Breakup (WSJ)
• EU Struggles to Streamline Bank-Failure Plan for Weekends (BBG)
• Madoff said JPMorgan executives knew of his fraud (Reuters), and JPM admitted as much when it settled with the DOJ

This was one of the all too real Bloomberg headlines posted overnight: "Asian Shares Rally as U.S. Manufacturing Data Beats Estimates." Odd: are they refering to the crashing Philly Fed, or the just as crashing Empire Fed data? Wait, it was the C-grade MarkIt PMI that nobody ever looks at, except to confirm that where everyone else sees snow, the PMI saw sunshine and growth. Remember: if the data is weak, it's the snow; if it's strong, it's the recovery. Odder still: one would think Asian shares care about manufacturing data of, say, China. Which happens to be in Asia, and which two nights ago crashed to the lowest in months. Or maybe that only impact the SHCOMP which dropped 1.2% while all other regional markets simply do what the US and Japan do - follow the USDJPY, which at one point overnight rose as high as 102.600, and brought futures to within inches of their all time closing high. Sadly, it is this that passes for "fundamental" analysis in this broken market new normal...