Archive - Mar 2014

Following yesterday's abysmal employment and service data which led to an unchanged close it quite clear that the market has returned to a mode where it ignores all newsflow - at least the bad, which is due to the weather, the good news is due to the recovery - and instead is simply driven by such "fundamental drivers" as the momentum and position of the Yen carry trade. And overnight the USDJPY positively exploded following news that the Japan advisory committee has decided the nation's pension fund, the GPIF, does' t need a domestic bond focus. Implicitly this means that the GPIF will soon be able to purchase stocks like Facebook and Tesla, which is a guaranteed way of generated short-term gains and longer-term total losses for the Japanese pensioners. Of course, when the latter happens, nobody will have been able to foresee it and some scapegoat somewhere will be summarily fired. As for what this means for futures, the drift higher has made SPOOs rise once more and at last check was just below if not at new all time highs on an ongoing barrage of increasingly negative macro news.

Palladium has gained 5.5% during the last five days of the crisis and is up 7.9% year to date. Ore deposits of palladium are rare and are mostly located in Russia and South Africa. Russian resource nationalism, as has been seen with natural gas, could lead to supply disruptions and to palladium going higher in the coming months. Some analysts believe palladium may be in deficit for most of the next decade as Russia depletes stockpiles and industrial uses and investment demand for the precious metal increase.

Below is the photo that reveals why US and EU bankers despise Russian President Putin so much

The pool of potential capitulators is practically peopleless...

Presented with little comment, suffice to add former Washington DC RT correspondent Liz Wahl's comments that "personally she cannot be part of a network funded by the Russian government that whitewashes the action of Putin..."  At least RT was correct when it said yesterday that "Contrary to the popular opinion, RT doesn't beat its journalists into submission, and they are free to express their own opinions, not just in private but on the air."  One wonders if Ms. Wahl's next stop will be MSNBC, FOX or CNN, where the truly unbiased coverage can be found.

The last time a leaked phone call out of Ukraine was released about a month ago ostensibly by the Russian NSA equivalent, one between US assistant sec state Victoria Nuland and the US envoy to the Ukraine, Geoffrey Pyatt, it was revealed that the real puppet masters behind the Maidan movement, and the true instigators of the Ukraine "revolution" were none other than the "developed" world superpowers, lead by the US. Also revealed were tensions between the US and EU strategies on how to overthrow the current government, culminating with the infamous "Fuck the EU." Needless to say the US, which implicitly confirmed the recording, was angry at Russia and accused it of using dirty tricks. That's ironic, because when it comes to "dirty tricks" what is about to be presented, blows the top off anything Russia may or has done to date.

General Keith Alexander, who has furiously denounced the Snowden revelations, said at a Tuesday cybersecurity panel that unspecified “headway” on what he termed “media leaks” was forthcoming in the next several weeks, possibly to include “media leaks legislation.” Alexander genuinely thinks that intelligence officials know best, and should not be subject to any sort of accountability. You don’t need to be a card-carrying member of the ACLU to see how dangerous this perspective is. To endorse this notion that “journalists have no standing when it comes to national security issues,” is to effectively make illegal one of the most important free speech rights in any democracy. This sort of attitude represents the antithesis of American values.

When Hillary Clinton compared Russia's incursion into Ukraine to the early days of Nazi Germany's expansion, she joined an illustrious band who have compared Russian President Vladimir Putin to Adolf Hitler since the 2008 Georgia crisis.

Premier Li Keqiang delivered his first government work report at the opening of the National People’s Congress (NPC) meeting last night. The new government promises to speed up reform, manage debt risks, fight pollution, and yet maintain 7.5% economic growth all at the same time but as SocGen'sWei Yao warns, this is going to be nothing if not challenging. Maybe mindful of a potential miss, Yao points out that policymakers seem to give themselves a small degree of flexibility by using new phrases like “a reasonable range for the growth rate” and “the growth target is
flexible”. Mission intractible or mission impossible?

Members of the Ukrainian parliament have had their mobile phones hacked by equipment installed in Russia-controlled Crimea, according to the nation's security services. Reuters reports that "an IP-telephonic attack is under way on mobile phones of members of Ukrainian parliament for the second day in row."

"When you see that in order to produce, you need to obtain permission from men who produce nothing; when you see that money is flowing to those who deal not in goods, but in favors; when you see that men get rich more easily by graft than by work, and your laws no longer protect you against them, but protect them against you, you may know that your society is doomed." - Ayn Rand

Catherine the Great “accomplished many things under difficult circumstances”--Angela Merkel

"Hello there citizen! I hope you are enjoying your day. I also hope you are enjoying your freedom from oppression that our kind, benevolent government provides. As a former lead bureaucrat in the Obama Administration, let me assure you, Washington is working around the clock to protect you and add fulfillment to your life..."

The word “tantrums” referenced in the title was the paper’s attempt to explain adverse market reactions, e.g., last year’s reaction from ‘taper-talk’. The authors stated that risk premiums can jump quickly, simply because non-bank market participants (read: mutual funds) are motivated by their peer performance rank. The authors had 3 subsequent conclusions: 1) the relative peerperformance race causes momentum in return; 2) return chasing can reverse sharply; and 3) changes in the stance of monetary policy can trigger heavy fund inflows and outflows. These conclusions partially explain (empirically) the herd mentality and momentum in recent years behind tight credit spreads and elevated equity prices. Investors are so fearful of missing the upside and underperforming peers that they frantically scramble to remain ahead of them (i.e., seek risk). However, the conference and paper suggests that there is a threshold point during the Fed’s attempt to normalize policy where the tide reverses and investors join in a selloff in a race to avoid being left behind. This is why I’ve been calling it the greater fool theory. The most surprising part of the conference was Rubin’s keynote speech. Rather than speak about Washington’s messy politics or such, he basically gave a speech that criticized and questioned Fed policy.