Archive - Mar 18, 2014

Blaming the weather for the sullen state of corporate or economic affairs has become a daily occurrence by analysts, pundits and corporate chieftains. However, Bloomberg's Rich Yamarone notes that while there has undoubtedly been a larger-than-normal impact this year, some sub-components of headline indicators suggest underlying weakness without the influence of snowstorms. Sinking economic activity cannot be blamed solely on poor weather, he adds, noting one client's comment that, "If we adjusted for weather, Napoleon would have taken Russia in 1812."

With Ukraine military spokespersons acknowledging that military snipers were in action around the base in Semferopol and blood having been spilled:

*UKRAINIAN INSTALLATION SEIZED BY UNIDENTIFIED GUNMEN: SELEZNYOV
*UKRAINIAN MILITARY UNIT UNDER ARREST IN CRIMEA: SELEZNYOV

it would appear - as the Ukraine PM warned - that the situation has "moved from the political to military stage." While things are quiet once again outside the military base, the following live feed will cover events as night falls...

If I feed at the trough, because that is what all cattle do, then I will be slaughtered in the killing house, because that is what all cattle do.

If there is one line that reveals how the Obama administration is perceiving the world, and specifically that it is all through the lens of the manipulated stock market, here it is...

As feared earlier, the attack by "unidentified" forces on a Ukrainemilitary base in Semferopol has resulted in fatalities:

• *UKRAINE SOLDIER KILLED AFTER UNIDENTIFIED GUNMEN STORMED BASE
• *UKRAINE SOLDIER'S DEATH IN CRIMEA CONFIRMED BY DEFENSE MINISTRY

And two further "self-defense" fighters are injured. Once again it seems the market misread Putin's comments and one wonders how will Turchynov respond?

For five long years, we have pursued the fantasy that we could return to "growth" without having to fix or change anything. The core policy of the fantasy is the consensus of "serious economists," i.e. those accepted into the priesthood of PhD economists protected by academic tenure or state positions: what we suffered in 2009 was not the collapse of leveraged crony-state financialization but a temporary decline of "aggregate demand" and productive capacity. The five-year fantasy that free money would fix all the distortions and systemic problems is drawing to a close. Why can't the fantasy run forever? The two-word answer: diminishing returns. Handing out subprime auto loans works at first because it pulls demand forward: anyone who wants or needs a new car buys one now, rather than put the purchase off a year or two. Eventually the marginal buyers default and demand falls off, and the distortions cause an even greater collapse in demand and auto loan quality.

UDPATE: *UKRAINE SERVICEMAN KILLED IN CRIMEA ATTACK:RTRS CITING INTERFAX

More headlines, more buying fuel for the algos, and apparently another step closer to all out war:

• CONFLICT IN CRIMEA HAS MOVED FROM POLITICAL TO MILITARY STAGE - UKRAINIAN PM YATSENIUK
• UKRAINIAN PM SAYS HAS ASKED DEFENCE MINISTER TO ORGANISE URGENT MEETING WITH RUSSIAN, BRITISH, U.S. COUNTERPARTS
• UKRAINIAN PM: "TODAY RUSSIAN SOLDIERS BEGAN SHOOTING AT UKRAINIAN SERVICEMEN. THIS IS A WAR CRIME"

What, still reading? Run, run, run to your nearest Virtu colocated terminal and BTFWWWIIID already!

If the idea is to anticipate what an adversary does, it behooves us, even if we do not believe in QE on moral grounds or on efficacy grounds, to consider how the ECB can have QE, which it appears under increasing pressure to do.  Here is such a course. 

BREAKING: US freezes diplomatic, consular relations with Syria; Orders non-US personnel to leave country.

— The Associated Press (@AP) March 18, 2014

Warren Buffett epitomizes everything that is wrong with the global economy, and the U.S. economy specifically. He is the consummate crony capitalist, a brilliant yet conniving oligarch who intentionally plays on the gullibility of the masses to portray himself as one thing, when in reality he is something else entirely. He publicly talks about how rich people need to pay more in taxes, then turns around and pioneers new ways for his company Berkshire Hathaway to avoid hundreds of millions in taxes. He thinks that by going on television stuffing ice cream cones and hamburgers in his mouth and acting all grandfatherly that no one will notice who he is really is and the incredible hypocrisy of his actions. Buffett’s latest elaborate scheme to avoid $400 million in capital gains taxes from the disposition of a large chunk of Berkshire Hathaway’s Washington Post stake (which was acquired in the 1970s for $11 million) absolutely takes the cake.

It seems, despite all the market's belief that Putin would go quietly into the night once more, that the situation is escalating:

• *GUNMEN STORM UKRAINE ARMY INSTALLATIONS IN CRIMEA: UKRAINE DEFMIN SELEZNYOV
• *GUNMEN STORMING CRIMEA BUILDINGS SHOOTING IN AIR: SELEZNYOV
• *UKRAINIAN OFFICER WOUNDED BY LIVE AMMUNITION, HAYDUK SAYS
• *ATTACKS ON UKRAINIAN UNITS INCREASING: NAVY CHIEF HAYDUK

Of course, the big question now is how will Ukraine respond? Because attacking (and injuring) citizens sure seems like a red-line someone should not be crossing (although, as per the referendum, that region is now Russian).

Not a week seems to pass without some banker or trader committing suicide. Today we get news of the latest such tragic event with news that 28-year old Kenneth Bellando, a former JPMorgan banker, current employee of Levy Capital, and brother of a top chief investment officer of JPM, jumped to his death from his 6th floor East Side apartment on March 12.

Many had feared (or expected), fallout from Crimea's referendum and subsequent accession to Russia may embolden ethnic minorities in many bordering nations to seek self-determination. It appears that is taking place in Moldova where Vedomosti reports that Mikhail Burla, head of the Transnistria region's legislature, has asked Russia's Duma for draft laws on accession to Russia to be altered to allow the region to join. The timing of this move is surreal as headlines appeared this morning that Europe is looking to speed up its "association" with Moldova. In a 2006 referendum, over 97% of Transnistrians voted to join Russia...

The PBOC is reported to be scrambling to bail out China's second corporate default in one month, real estate company Zhejiang Xingrun, even as the Chinese property developer market is crashing and rapidly shutting down. So why did the PBOC personally just go to Weibo to deny such speculation. And what happens next?

It seems the blatant unveiling of the HFT market's Holy Grail trading - Virtu (1 loss in 1238 days) - has raised some attention as Bloomberg reports, NY AG Eric Schneiderman has opened a broad investigation into whether U.S. stock exchanges and alternative venues provide high-frequency traders with improper advantages. As one European lawmaker noted, "the area of high-frequency trading is lacking suitable regulation," and Schneiderman warned "this new breed of predatory behavior gives a small segment of the industry an enormous advantage over all other competitors."  We wonder how this will affect Virtu's IPO given regulation is risk factor #1!