Archive - Mar 27, 2014

The intricate and convoluted connections between Germany and Russia exude a peculiar aroma.

With Scotland moving ever closer, Crimea having chosen their own path, and Venice overwhelmingly voting for secession from Italy, the Spanish government has put its foot down on the Catalonia's planned independence referendum. As Time reports, In a Tuesday ruling, Spanish judges found Catalonia’s planned independence referendum to be unconstitutional. Of course, just as in Crimea, this is being ignored by the Catalan government - a region seen as the powerhouse of the Italian economy - who exclaimed "this will have no effect on the process."

The central premise of the Keynesian Cargo Cult is that this mechanism of making it cheap and easy to borrow money will work a kind of magic that can only be manifested by dancing around a fire at night waving dead chickens and chanting "humba-humba." The Keynesian cargo Cult calls this magic "animal spirits." Unfortunately, waving dead chickens while dancing around a fire doesn't do anything in the real world, and neither does making it cheap and easy to borrow more money. You poor, dumb, deluded fools. You've destroyed our economy, our values and our ability to deal with reality. Your faith is as boundless and disconnected from the real world as your policies.

The US Senate is more than happy to hand over a few billion and confirm sanctions:

• *SENATE PASSES UKRAINIAN AID BILL WITH RUSSIAN SANCTIONS
• *HOUSE PASSES VERSION OF UKRAINIAN AID, RUSSIAN SANCTIONS BILL

But, it seems the IMF's requirements for Ukraine's bailout are too much for the locals to bear:

• UKRAINE PARLIAMENT FAILS TO SUPPORT FIRST BID TO PASS ANTI-CRISIS LAW REQUIRED FOR IMF DEAL

Lawmakers will continue to work on the bill as it seems they approve the top-line budget but not the taxes required to get there... beggars can be choosers again maybe?

Yesterday we reported that in an attempt to unclog Europe's broken credit and monetary piping, European regulators are preparing to get their hands dirty by easing rules on, and unleashing, an asset class once labelled toxic sludge, i.e., all the worst of the worst debt that was the reason why Europe is in a 6 year-old depression, and hope and pray it somehow fixes itself. Today, the ECB reported the latest data on European credit creation in the private sector. Or rather lack thereof. Because at -2.2%, this was essentially an all time low private sector loan "growth" (rather, credit destruction). Which means Europe will have to throw all the toxic sludge it can find in its desperation to reignite yet another credit bubble, something Bernanke's cronies appear to have done far more admirably.

A patented idea whose time has come...

Making friends and mending fences and reinforcing his 'promise' noto to spy on friends and to have NATO's back... in Rome with Italy's newest Prime Minister Renzi...

• *RENZI SAYS OBAMA'S MESSAGE TO EUROPE SOUND, CLEAR
• *RENZI SAYS EU, U.S. SHARE VIEW ON UKRAINE
• *RENZI SAYS OBAMA'S CHALLENGE TO EU IS 'FASCINATING'

Fascinating indeed?

The more the West attempts to "isolate" Russia and pushes it away from its "core values" and of course the US Dollar, the more Russia will seek the safety of a non-dollar based system. We have previously described how Putin has been scrambling to enmesh Russia in tight bilateral commodity-based trade with both China and India, and now it is Russia's turn to announce it would seek its own "national payment settlement system" following last week's surprising and unmandated service halts by both Visa and MasterCard, which as Vladimir Putin said earlier today, will be a "bid to reduce economic dependence on the West."

A week ago, we wrote that "Turkey Set To Block YouTube Momentarily, After Google Refuses To Yank Clips Exposing Prime Minister." As of minutes ago this too prediction appears to have come true based on reports from inside the country that Google's popular video service is now also blocked.

Filed under 'most ironic story of the day', California Senator Leland Yee, who authored gun control legislation, has been busted by the FBI for conspiracy to deal firearms without a license and to illegally import firearms. As AP reports, Yee is also accused of accepting tens of thousands of dollars in campaign contributions and cash payments to provide introductions, help a client get a contract and influence legislation. House of Cards much?

Moments ago, the always laughable realtor advertising agency known as the NAR, reported that its agents were not making as much money as they had hoped, when pending home sales in February tumbled by 10.2%, well below expectations of a -9.0% drop, and below the January decline of -9.3%. Why? Here is what the cuddly Larry Yun, NAR chief economist, said was the culprit: "Contract signings for the past three months have been little changed, implying the market appears to be stabilizing. Moreover, buyer traffic information from our monthly Realtor survey shows a modest turnaround, and some weather delayed transactions should close in the spring." In other words, the February collapse was further aggravated by ongoing harsh weather in February. That's fine - we even went so far as showing where the regional sales moves were in February. What is quite visible on the chart below is that the largest collapse in February activity was in Southern states, which is clearly due to the Tropical Vortex.

Must be the weather... (though if you want to believe that, do not look at the regional breakdowns)... Pending home sales fell 10.2% YoY - the worst in 3 years (notably worse than the 9% drop expected by the meteorologists in the economics departments of the big banks). This is the 8th month in a row of home sales drops (pre-weather).

For the first time in over 6 weeks, all major US equity indices are in the red for 2014. Early-year leaders Nasdaq and Russell are being crushed by the battering of Biotechs and monkey-hammering of Momo names. Since FOMC, Momos are down 14% and Biotech down 12%. The high-growth hope is fading and nowhere is that more evident than the tumble in 30Y yields - now at 10 month lows. The hopes that financials would lead have nw left as they are also in the red post-FOMC (post-CCAR hope).

With the hours counting down to the latest deadline for open enrollment for Obamacare coverage, it appears the administration needs more keg-standing bro's, easy women, and twerking Richard Simmons to get the message out. A new survey by Kaiser finds 6 out of 10 unaware of the deadline. When reminded of the mandate and the deadline, half of those without coverage as of mid-March say they think they will remain uninsured.

For the 5th day in a row, US equities have levitated in the pre-open and faded away quickly soon after. Today is different though in 2 ways: the pump was de minimus and the dump is early. It seems the initial claims good news is indeed bad news for stock investors. Treasuries continue to bear flatten once again as 30Y is rallying and 5Y selling off further; gold is steady at around $1300 and the USD is rallying modestly. Copper and oil prices are rising. European stocks are also faltering with DAX giving up all its early gains.