Archive - Feb 2014

It does not appear that things are getting any better for the virtual currency exchange named after "Magic: The Gathering."

• *FBI SAID TO BE PROBING POSSIBLE CRIMINAL VIOLATIONS BY MT. GOX
• *U.S. SAID TO REQUEST DOCUMENTS FROM BITCOIN SERVICE PROVIDERS
• *MANHATTAN U.S. ATTORNEY SAID TO BE REVIEWING MT. GOX SHUTDOWN

No real reaction yet in price across Bitcoin exchanges. Bloomberg BusinessWeek summarizes "where did the bitcoins go?" below

It would appear French President Francois Hollande's promise to bring jobs to the nation continues to fail dismally. Perhaps it was his recent trip to the US, but French Jobseekers rose more than expected for the 3rd month in a row to a new record high of 3.316 million. Joblessness has now risen for 30 of the last 32 months. The last 5 months have seen jobseekers reaccelerate - surging by 2.5% (the most in 6 months). So, in a nutshell, things are getting worse, faster for the 2nd largest economy in Europe (and 5th largest in the world).

As CNY unwinds, Russia-Ukraine safe-haven bids, and Turkish Lira (erdogan corruption) concerns flood back into the USD as a safe-haven, precious metals have come under pressure this morning. Gold has been sold but remains relatively stable but Silver is suffering its biggest down day in almost 2 months ad the gold-to-silver ratio surges back up to ts 4-month average.

Despite the surge in "seasonally-adjusted new home sales", un-seasonally-adjusted mortgage applications tumbled 8.5% this week, the biggest drop in 3 months as the modest January bounce has been almost entirely unwound. This pushes the broad MBA mortgage applications index down to near its lowest in 14 years. However, the home-purchase index continues to collapse. Purchase applications are down 30% from their May highs plunging in the last few weeks to their lowest level since 1995. Must be the weather, eh? Or is it like Bob Shiller warned yesterday, the unwind of "bubble thinking," especially as "gains are slowing from month-to-month and the strongest part of the recovery in home values may be over."

Shortly after today's surprising announcement by Russia that it would conduct broad military drills in Central and Western Russia, which would include 150,000 troops, we posted a rhetorical question: How will NATO respond?  Moments ago NATO responded:

• NATO: INDEPENDENT, STABLE UKRAINE KEY TO EURO-ATLANTIC SECURITY
• NATO ALLIES CONTINUE TO BACK UKRAINE SOVEREIGNTY, ALLIANCE SAYS
• NATO BACKS `INVIOLABILITY OF FRONTIERS' ON UKRAINE: ALLIANCE
• NATO SAYS IMPERATIVE THAT UKRAINE ARMY DOESN'T INTERVENE

And as the military escalations - now on both sides - escalate some more, the algos are BTFATH. Let's sit back and watch which back off first.

The developments are bullish for gold prices as various bitcoin exchanges had captured capital flows from investors and speculators who are skeptical of the current financial and monetary system and many of whom would have previously have bought gold and silver.  Some of this capital is more likely to flow into gold in the coming months.

A few days ago we reported that the Ukraine decided to call Russia's "trump card" bluff - that would be everyone else's reliance on Russian gas supplies - when it drastically cut imports of Russian gas by 80% in February, seemingly to demonstrate its energy independence from Puting. Now Russia has decided to take the Ukraine to task, by announcing it has halted oil deliveries to the Ukraine Odessa refinery. Hopefully the Ukraine, whose foreign currency reserves tumbled from $17.9 billion on February 1 to $15 billion currently, has alternative means of supplying itself with energy from benevolent sources, particularly those who are willing to provide the country with oil in exchange for goodwill.

The Russian Ruble has weakened almost 1% today, pressing above 36 against the USD and nearing all-time record weakness. The Hrynia is collapsing. The Turkish Lira is re-collapsing and the EUR is having its worst day in over a month as safe-haven flows flood back to the USD following various headlines from the Russia-Ukraine border.

Following last month's biggest miss in 5 months, New Home Sales were revised higher in Jan and rose 9.6% in February to 468k (beating the 400k expectations by the most in 13 months). This is a new five-year high for new home sales. The "catastrophic" storm-battered NorthEast had new home sales of 33k - the highest since June; and the Snow-covered South saw huge sales. Home prices are up year-over-year by 3.4% but dropped to their lowest since August. If this does not entirely dismiss the 'weather is to blame' meme for any other macro weakness, then what does?

We haven't seen the once ubiquitous morning drubbing of precious metals for a while but this morning gold (and more so silver) have been hammered. US equities' overnight quiet meltup has given way as AUDJPY is once again fully in charge. Emerging market FX is tumbling (Turkish Lira as well as Ukraine). Treasuries are rallying once again as the USD soars on the back of EUR weakness. It appears Russia's actions (Readiness tests) this morning are prompting a flight to USD and bond safety for now (and as the turmoil picked gold has stopped dropping).

As we reported last night, in a scorching 175-page report, the Senate Subcommittee on Investigations threw the book at the second largest Swiss bank Credit Suisse for allowing up to 22,000 Americans to avoid paying taxes for years. Today is the obligatory post-report spectacle which since it is headed by Carl Levin, of Goldman "Shitty Deal", fame, promises to be quite a populist fest.

Not a day passes without a YouTube clip being released showing some collonade of Russian vehicles headed into the Ukraine, and specifically into the Crimea, where the Russian base of Sevastopol is located, and where the biggest pro-Russian support groups are to be found. Today, we show the following Youtube clip taken recently with a dashcam, several miles above the port of Novorossiysk near the village of Gaiduk, which shows Russian vehicles carrying assorted military equipment being carried toward the Crimean.

"There is a big flight to quality," warns one trader as the spread between interest rate swaps (implicitly bank risk) and government bonds soared to a record high. This "crisis gauge" flashing red is also followed by 3 month SHIBOR (short-dated interbank lending rates) surging to an 8-month high. China's CDS have jumped 30bps since the Fed taper and as Bloomberg reports that billionaire investors like George Soros and Bill Gross have drawn uncomfortable parallels between the situation in China now and the US before 2008 (when this crisis gauge was key in spotting the carnage to come). Simply put, the banks don't trust each other...

Dear MtGox Customers,

As there is a lot of speculation regarding MtGox and its future, I would like to use this opportunity to reassure everyone that I am still in Japan, and working very hard with the support of different parties to find a solution to our recent issues. Furthermore I would like to kindly ask that people refrain from asking questions to our staff: they have been instructed not to give any response or information. Please visit this page for further announcements and updates.

Sincerely,
Mark Karpeles

Following yesterday's admission by the new head of Ukraine's central bank of the considerable bank runs in recent days and the rapid dwindling of central bank reserves, Sergiy Kruglik - the director of international affairs for the bank - announced this morning that Ukraine has adandoned the dollar peg and will adopt a flexible exchange rate. The Hyrvnia collapsed through 10.00 on the news and is now trading 10.40 at record lows against the USD.