Archive - Mar 2014

By now it was only a formality, as the likelihood of the G-8 meeting taking place in Sochi in June, months after the Russian invasion of the Ukraine, was zero at best. So the fact that G-8, pardon, G-7 countries announced the halting of their preparation for a June vacation on the Black Sea should not surprise anyone.

The Bitcoin phenomenon has now reached the mainstream media where it met with a reception that ranged from sceptical to outright hostile. The recent volatility in the price of bitcoins and the issues surrounding Bitcoin-exchange Mt. Gox have led to additional negative publicity. It is clear that on a conceptual level, Bitcoin has much more in common with a gold and silver as monetary assets than with state fiat money. The supply of gold, silver and Bitcoin, is not under the control of any issuing authority. It is money of no authority – and this is precisely why such assets were chosen as money for thousands of years. Gold, silver and Bitcoin do not require trust and faith in a powerful and privileged institution, such as a central bank bureaucracy. Under a gold standard you have to trust Mother Nature and the spontaneous market order that employs gold as money. Under Bitcoin you have to trust the algorithm and the spontaneous market order that employs bitcoins as money (if the public so chooses). Under the fiat money system you have to trust Ben Bernanke, Janet Yellen, and their hordes of economics PhDs and statisticians.

With all eyes dismally fixed on Eastern Europe and the esclating tensions between the world's most powerful nations, we thought perhaps a little levity was appropriate. "Way To Blue" trawls the social media stratosphere of intellect and calculates a "desire to win" index that summarizes who we, the lowly members of the public, would most like to win the celebrated Academy Awards. It appears, in an odd coincidence to real-life, the debt-serfs of the world would most like to see "12 Years A Slave" win for Best Film.

Surprise! The pump on Friday afternoon has given way to the 5th 'dump' in 5 days as US equity futures have crumbled back top Friday's lows and are catching down to USDJPY's early weakness. Gold is up $10 at $1,338. It seems once again that stocks, despite all those talking heads on Friday afternoon so confidently explaining how Ukraine was priced-in, knew nothing... US Treasury futures are well bid implying 10Y -5bps at 2.60% and 5Y -4bps at 1.46%.

Several unconfirmed reports of two explosions being heard in Crimea's capital, Semferopol were on the wires and now The BBC has confirmed,

A loud bang was heard about 23:10 local time (21:10 GMT), following by a smaller blast, BBC reporters in Simferopol say.

Reports vary from "didn't hear any explosions" in Semferopol to Belbek Air Force base (In Sevastopol) is under Russian attack. Ukrainian Pravda confirms:

"Russian military, using 'stun' grenades, seized nearly all the buildings of the Ukrainian military in Belbek."

At this stage we see very little from the Ukraine priced into the market as a best-case (encroachment into Eastern Ukraine that is quickly and peacefully resolved) scenario appearing to be the blissful hope. However, as some of the other scenarios (described below) potentially come into play, whether in reality or perception, the risk to further downside in the market is significant. Since we are already recommending being short based on the economy and the misperception of the Fed’s next steps, you effectively pick up the conflict for free. With VIX being so low, picking up some downside protection makes a lot of sense here.

The last two weeks have seen events escalating at a rapid pace in Ukraine with the center of attention quickly shifting from Kiev's deadly protests to Crimea's "invasion." With Russia's Prime Minister Dmitry Medvedev warning that Ukraine's new leaders seized power illegally and predicting their rule would end with "a new revolution" and more bloodshed, we thought the following infographic would provide some context for how Ukraine got here so fast.

So you want to be a mortgage banker? then listen now to what i say   Just get liability insurance... and get ready to pay and pay... 

A picture explains things best, and The South China Morning Post's Jake van der Kamp's chart on China's net capital flows certainly says all you need to know about why Beijing is "playing silly games with the yuan again".

Here is what is and is not known about the location of US naval forces.

Incredible feats of statist bull$hit captured by ten remarkable (sic) Holywood Films (+ A-Hole in 1)

Since the start of 2014 the Russian Ruble has been for sale, and BofA's Macneil Curry warns, that trend will persist. With desk chatter that Russia's 2nd largest state owned bank VTB setting USDRUB exchange rate to 39.45 (a huge shift relative to Friday's close on MICEX was 36.05), trendlines are in peril.

With Friday's farcical 3:30pmET ramp firmly in mind, USDJPY has opened decidedly down-beat in very early (and illiquid) trading suggesting a rude-awakening for US equity futures when they open...

Yuan volatility is part of a major rebalancing of global trade. The next phase of EM turmoil will involve banking crises in several countries including China. 

Following last week's confirmation that capital expenditure in the land of the Free runs a very poor third to buybacks and dividends (and well anything that props up the over-inflated share prices of US corporates), and merely confirming what we have been discussing for the last few years (that Fed policy has focused management on short-term gratification and not long-term growth and stability), ex-PIMCO shit-cleaner-upper Mohamed El-Erian notes six reasons why the collapse in capex spend will continue and how central banks have failed to prime the pump of the real economy.