Archive - Mar 17, 2014

A few days ago, copper prices and the Chinese stock market were roiled by speculation that another - the second in a row - Chinese bond default may be imminent, in the shape of Baoding Tianwei Baobian Electric (TBE) a maker of electrical equipment and solar panels, whose bonds and stock were suspended from trading a week ago after reporting massive losses. A few days later, TBE "promised" not to default when its next interest payment is due in July (although how the insolvent company can see that far into the future is just a little confusing). And yet the market shrugged and contrary to its recent idiotic euphoria to surge on even the tiniest of non-horrible news, barely saw a rise. Today we may know the reason: overnight Bloomberg reports that second Chinese corporate bond default may be imminent after the collapse and arrest of the largest shareholder of closely held Chinese real estate developer Zhejiang Xingrun Real Estate Co, which just happens to be saddled with 3.5 billion yuan ($566.6 million) of debt.

Putin Is No Mad Man to Russians as Power Play Trumps Economy (BBG)
Alibaba picks U.S. for IPO; in talks with six banks for lead roles (Reuters)
Russia hearts selling German energy: Billionaire Fridman’s L1 Buys RWE Unit for $7.1 Billion (Bloomberg)
Malaysia plane search straddles continent as police focus on crew (Reuters)
Saudi Crown Prince’s visit to China set to bolster investment (Al-Awsat)
Bugatti-Driving 26-Year-Old Tied to Penny-Stock Website (BBG)
Vodafone agrees $10 billion deal to buy Spain's Ono (Reuters)
The Hidden Rot in the Jobs Numbers (WSJ)
SocGen Ex-Trader Kerviel Walks to Forget Loss as Judgment Looms (BBG)
U.S. Banks’ $75 Billion Payout at Stake in Fed Tests (BBG)

Beijing leadership’s quandary is that the struggle to refashion the Chinese economy with further liberal economics comes up against the determined effort of the CCP to maintain its power monopoly

Here is the latest via Reuters: just hours ago, Crimea's parliament officially applied to become part of Russia. The parliament "made a proposal to the Russian Federation to admit the Republic of Crimea as a new subject with the status of a republic," according to a statement on its website. A Crimean parliamentary delegation was expected to arrive in Moscow on Monday to discuss the procedures required for the Black Sea peninsula to become part of the Russian Federation. "If everything’s signed we’ll become a fully fledged region of the Russian Federation Wednesday or Thursday,” First Deputy Prime Minister Rustam Termigaliyev says in interview at govt headquarters in Simferopol. Termigaliyev added that Crimea will promptly get $1b aid from Russia in near-term, and that Hryvnia reserves enough for 10 days, then Crimea will switch to ruble. April pensions “most likely” to be paid in rubles. Crimea can be self-sufficient in natural gas after today’s nationalization of Chernomoreneftegaz. Crimea risks 150,000 hectares being left without water if Ukraine shuts off supply, though that’s “not critical,”  says Termigaliyev.

It took only a 60 USDJPY pip overnight ramp to send US equity futures 20 points off the overnight lows in the immediate aftermath of the Crimean referendum, which from a massive risk off event has somehow metamorphosed into a "priced in", even welcome catalyst to buy stocks. The supposed reasoning, and in a world in which Virtu algos determine the price action of the USDJPY from which all else flows based solely on momentum we use the word reasoning "loosely", is that there was little to indicate that the escalation between Russia and Ukraine was set to accelerate further. As we said: an annexation is now seen as risk off, something even Goldman appears unable to comprehend (more on that shortly). In macroeconomic news, European inflation - at least for the Keynesians - turned from bad to worse after the final February inflation print dropped from the flash, and expected, reading of 0.8% to just 0.7% Y/Y, a sequential increase of 0.3% and below the 0.4% expected, confirming that deflationary forces continue to ravage the continent. The only question is how soon until Europe comes up with some brilliant scheme that will help it join Japan in exporting its deflation.

Waste is a many splendid thing that in all circumstances we attempt to reduce and get rid of, shunning it like a pariah. Well, perhaps almost all circumstances. There are times when waste is just the by-word for government these days. But, are we all equal in the quantity of waste that is generated in our countries’ governments?