Archive - Mar 2014

• One-Ship Ukraine Navy Defies Russia to the End (WSJ)
• Crimea-Induced Trading Surge Stokes Moscow Exchange Rally (BBG)
• Moscow says Ukraine stops Russian crews disembarking in Kiev (Reuters)
• New images show more than 100 objects that could be plane debris (Reuters)
• Anger of Flight 370 Families Explodes in Beijing (BBG)
• Murdoch Promotes Son Lachlan in Succession Plan for Empire (BBG)
• Facebook to buy virtual reality goggles maker for $2 billion (Reuters)
• Syrian Regime Exploits Rebel Despair (WSJ)
• King Digital IPO price may not bode well for stock (Reuters)
• Rothschild in Twitter Spat as Bakries Cut Ties With Miner (BBG)

Another morning melt up after a less than impressive session in China which saw the SHCOMP drop again reversing the furious gains in the past few days driven by hopes of more PBOC easing (despite China's repeated warning not to expect much). A flurry of market topping activity overnight once again, with Candy Crush maker King Digital pricing at $22.50 or the projected midpoint of its price range, and with FaceBook using more of its epically overvalued stock as currency to purchase yet another company, this time virtual reality firm Oculus VR for $2 billion. Perhaps an appropriate purchase considering the entire economy is pushed higher on pro-forma, "virtual" output, and the Fed's capital markets are something straight out of the matrix. Despite today's pre-open ramp, which will be the 4th in a row, one wonders if biotechs will finally break the downward tractor beam they have been latched on to as the bubble has shown signs of cracking, or will the mad momo crowd come back with a vengeance - this too will be answered shortly.

When we left China last night, it was all shits and giggles that bad news is great news and a Chinese stimulus plan will be here any minute to save the day. Having realized the sad fact that is not going to happen (as we explained here most recently) and the specter of banks runs looming, this evening's session has seen property developer stocks tumble - retracing all of last night's losses - the Yuan plunges by the most in a week back above 6.2150. Copper is holding in for now at the magic $300 level but corporate bond prices are falling once again (worst run in 4 months).

If you are like most Americans, paying taxes is one of your pet peeves.  The deadline to file your federal taxes is coming up, and this year Americans will spend more than 7 billion hours preparing their taxes. When the federal income tax was originally introduced a little more than 100 years ago, most Americans were taxed at a rate of only 1 percent. But once they get their feet in the door, the social planners always want more. Since that time, tax rates have gone much higher and the tax code has exploded in size. Why do we have to have the most convoluted tax system in the history of the planet?

The Diplomat‘s Justin McDonnell spoke with Larisa Smirnova, an expert on Sino-Russian relations and professor at Xiamen University, about the crisis in Ukraine, Russian foreign policy, and more.

What if this was the year where the Treasury curve bear flattened completely as happened in 1994? That is the question that BofAML'sHans Mikkelsen addresses in this worrying report. His warning, as the majority of high grade investors nowadays have total return - as opposed to excess return – objectives, a complete bear flattening of the Treasury curve would be quite devastating. And furthermore, "reverse rotation" into higher-yielding bonds could punish stocks much more than most talking-heads prefere to consider.

The Greek economic collapse, depression and bankruptcy has seen many odd things in its brief and often times violent history (in those days when the violent elements were not on strike), but this surely is the first time when one of the countless Greek bailouts may be on the rocks due to the disagreement over the definition of "fresh milk." No, really. Reuters explains that Greece's government risks another rebellion over bailout terms this week after milk producers lobbied against a move to free up prices as part of efforts to make the economy more competitive. Basically, for Greeks, milk is fresh if it is 5 days old or less, yet according to the always fascinating codex of the Troika, "fresh" can be labeled anything that is as old as 11 days.... including the salmonella bacteria it contains. What's worse, is that the "spoiled milk" scandal, far from a joke, has swept over the country, and now even threatens to topple the government.

Straight Out of the Third Reich - User's Manual

Nothing to see here, move along. While it appears the Russians are willing to pay the price of modest sanctions from the west to 'liberate' their fellow countrymen, the fallout from further tension with Ukraine could "boomerang" once again on the divided nation. As RBC Ukraine reports, the Minister of Energy and Coal Industry Yuriy Prodan said at a press conference today that "oil reserves will last for 28-29 days" in Ukraine. After that, the negotiation begins as Ukraine already owes billions for previously delivered gas - as Ukraine's natgas storage levels more than halved in the last 3 months.

How Are The Spooks Messing With Your Computer and Reducing Your Productivity?

The dismal list of financial executive deaths has recently increased to 11 in the last few months. Speculation has surrounded many of these deaths (and suicides) as to the reasoning; none more than the first - William Broeksmit, an executive who worked in Deutsche Bank's risk function and advised senior leadership who hanged himself in his South Kensington home in late January. However, as the WSJ reports, we now know why this poor man felt compelled to take his own life: he was "anxious about various authorities investigating areas of the bank where he worked" (and yes, we are well aware of the grammatical and temporal impossibilities suggested by this article's title).

Thirsty Californians are pinning their hopes that worried farmers in Australia are right. After months of the Polar Vortex dumping snow on the US east coast and drought on the west coast (and crushing the American Dream of an 'escape velocity' economy), The US Climate Prediction Center issued an El Nino watch bring hope of a big rain year for California, floods in South America, and dismal droughts in Southeast Asia. The Australian Bureau of Meteorology said an El Nino could occur during the southern hemisphere winter from May-July. Increased sea surface temperatures suggest an increasing chance of the global weather phenomenon and the great rotation from a Polar Vortex to a Solar Vortex.

What exactly is happening in this globalized world? What’s happening in the world that one day somebody constructed in which everybody had access to everybody’s private life via social networks and even some had access to it through special programs that they gave fancy names to like Prism and the President’s Surveillance Program?

It doesn’t take a rocket scientist to figure out that an unsustainable debt burden soundly tolls the death knell of a nation’s economy, and its government. Unfortunately, it can sometimes take a rocket scientist to figure out what the real numbers are; governments have a vested interest in not being transparent about their debts and interest payments. Obligations are obligations, no matter who they’re owed to. Taking this into account, total US interest payments in Fiscal Year 2013 were a whopping $415 billion... This means they actually spent approximately 26% of their available tax revenue just to pay interest last year.. much higher than the 1868 Ottoman Empire at the end of its reign...

Presented with little comment aside to ask... if 'weather' can do this much damage to the US economy and 'faith' in the wealth effect-building benefits of the US equity market are this weak, then there are a few uncomfortable truths about to punch some talking heads in the mouth...