Archive - Mar 17, 2014

Tensions around the North-Korea-flagged tanker that "illegally" obtained oil from rebels who hold a Libyan port have been escalating for the last week. However, The BBC reports that overnight US forces, at the request of both the Libyan and Cypriot governments, boarded and took control of the commercial tanker Morning Glory. The raid by Navy Seals took place in international waters south of Cyprus, said spokesman Rear Adm John Kirby. The US Seals operated from the USS Roosevelt, a guided missile destroyer, which "provided helicopter support and served as a command and control and support platform" and are now in "full control" of the vessell carrying 234,000 barrels of illicity-obtained oil. The message is clear - don't mess with the Petrodollar.

Comrade @BarackObama, what should do those who have neither accounts nor property abroad? Or U didn't think about it?)http://t.co/16KUTJPXOl

— Dmitry Rogozin (@DRogozin) March 17, 2014

Update: it appears that Surkov Twitter account is a fake. Which is unfortunate, since we are confident it captures his real feelings accurately. We do have this response, however, from the Russian house speaker, which is certainly real: RUSSIAN UPPER HOUSE SPEAKER MATVIYENKO SAYS U.S. SANCTIONS AFFECTING HER ARE "POLITICAL BLACKMAIL" - INTERFAX

Earlier we showed what Russia's deputy Prime Minister thought of Obama's sanctions (not much). Now, it is the turn of the first and allegedly most important person on the White House's list of sanctioned Russians in response to the Ukraine referendum, the infamous Vladislav Surkov, also known as the "gray cardinal" of the Kremlin, to opine. His "statement" to Obama needs no clarification.

The Zagat-style summary, the market is "extremely overvalued", but it will rise on an "increase in the level of profits" and "we expect an 8% rise in the level of earnings this year", even though "we expect many firms will issue negative earnings guidance ahead of 1Q 2014 reporting season that takes place from mid-April to mid-May."

Ok then.

Remember Newsweek's "shocking" inaugural print issue which claimed to have uncovered the creator of Bitcoin (by scouring the phone book), and of course poor Satoshi Dorian Nakamoto's 15 minutes of fame? Guess we can put that to rest. "I did not create, invent or otherwise work on Bitcoin. I unconditionally deny the Newsweek report."

With global equity markets exuberant (from US to Europe to Russia) at the prospect of US sanctions against Russia, we look forward to hearing from Comrade President Obama on why this is a punishment and why it's a bad thing for Russia (and where the next red line is)...

Despite no move in gold, silver, or US Treasuries, US equities (and JPY crosses) remain bid. But perhaps the most intriguing reaction to Obama's escalation is the surge higher in Russian stocks and rally in the Ruble... Putin and his oligarch friends must be pleased...

Despite last month's epic collapse in the NAHB Confidence index, the 'recovery' bounce this month missed expectations significantly making the 6th miss in the last 7 months (we assume that means its been winter-stormy for the last 7 months). Holding at levels seen in May 2013, future sales expectations dropped once again to 10 month lows as hope fades (or they expect more bad weather). The West (crushed by warm dry pleasant weather) continues to plummet but the NorthEast dropped to levekls not seen since Auguest 2012.

As was largely expected, the first retaliation by Obama has arrived, courtesy of a just issued Executive Order by the president, in which he has blocked and frozen "all property and interests in property that are in the United States, that hereafter come within the United States, or that are or hereafter come within the possession or control of any United States person" (i.e. assets) of not only the pre-coup Ukraine president Yanukovich and the Crimean leader Aksyonov, including all Russians that operate in the Russian arms industry, but most notably seven Putin aides. Not Putin himself of course - that would be too "escalatory"...

US equity markets are jubilant at the decision by President Obama to apply travel sanctions against numerous Russian citizens and entities (though we - like every other rational investor out there - are confused as to why this would be). The simple reason is a surge in the EUR (repatriation on this move by Obama) which jerked EURJPY dramatically higher and thus - smashed S&P 500 futures up over 12 points (on negligible volume)... Bonds and gold have hardly moved on this decision...

S&P 500 rise to new high recently was a "party for one" as other global indexes did not participate; "there are so many issues with the market that it strains the imagination," writes Sterne Agee technical analyst Carter Worth in note. Nikkei 225 "deteriorating for weeks" has “look and feel of an important topping-out formation” while European stocks at or below February lows. Small cap stocks, including solar, marine shipping, new-era dot.com, and micro-cap biotech stocks "surging with abandon"

Hardly surprising given February's biggest miss in 10 months that March's data would rebound and so it did from an initial -0.3% in Feb, March rose +0.6% (well above +0.2% expectations)  - 2.7% above last year's levels. This 0.6% rise is above even the most exuberant "economists" estimates. Utilities fell 0.2% (as weather warmed up) but what was most notable is the 7.4% surge in motor vehicles (the biggest in at least 6 months) - which are already sitting at record levels of absolute inventories and the highest inventory-to-sales since the financial crisis.

It has not been a good month for Boeing: first one of its 777s disappears in the now infamous Malaysian Airlines MH370 heist, which is increasingly looking as a hijacking commited by the pilots, and yesterday, a Delta Airlines Boeing 757, Flight 2412 from Orlandon to Atlanta, saw an entire panel tear off from its wing forcing the plane to make an emergency landing. At least this time the plane was tracked for the duration of the flight, perhaps because there was nothing that would be considered extraordinary in its cargo manifest, speaking of which, perhaps it is time for Malaysia Airlines to reveal just what was held in flight MH370's cargo hold. The detached panel did not impact the aircraft's ability to fly or land, Delta spokesman Anthony Black said of Flight 2412. "The crew, knowing that, followed procedure by declaring an emergency to air traffic control as they were landing, which gave them priority clearance to land and alerted ground crews." The airline is inspecting the plane to determine why the panel came off.

Since July of last year, the Empire Fed manufacturing index has only beaten expectations once as March data once again fell below consensus (5.61 vs 6.5 est.) - hardly confirming the weakness is weather-driven. The underlying sub-indices were ugly with the most worrisome being the outlook - despite some optimism for capex, the general business conditions 6-months ahead fell by the most since Oct 2011 to its lowest since July 2013 - which once again suggest this weakness is anything but weather-driven. The number of employees fell as inventories rose but the margin-compressing divide between prices paid and prices received is concerning.