Archive - Apr 2014

While the world is watching US stocks and breathing a sigh of relief that they are not crashing (yet) today, there are some significant moves afoot in other critical markets. USDJPY has broken below 102 continuing its slide (JPY strength) on the heels of the BoJ's disappointing lack of additional money-printing. Perhaps even more critically is the surge in prices of oil (Brent and WTI) as news break of tanks rolling once again in Eastern Ukraine. A glance at the charts below and one can't help but wonder how long stocks can hold these gains today...

Today's 3 Year $30 billion auction, if not remarkable, was memorable for two things: the high yield, coming at 0.895% precisely on top of the When Issued, was materially above the March 0.802% which is to be expected courtesy of the Fed's "dots", as the short end keeps rising, and in fact was the highest pricing yield since the 0.913% seen last in September. And not surprisingly, the Bid To Cover picked up to 3.361, above the TTM average of 3.286, to celebrate the higher yield offered on "near money good" collateral, if hardly surging to all time BTC high recorded long ago in October 2012.

We live in a pretend economy. It is important to recognize this condition, especially if you are an investor. Current market behavior is concerning.  Bonds and stocks remain volatile and near record levels. Markets ignore the continuing stagnation in the pretend economy, buoyed apparently by government liquidity injections. To justify investing today in these markets, one must anticipate one or both of the following: economic growth is about to surge; and/or market values can continue to rise from here, potentially further widening the already large gap between valuations and fundamental economics. No reading of the economic tea leaves suggests a surge in economic growth is coming. Indeed, a critical analysis of the data makes one question whether there has been a recovery at all. Certainly any recovery has to be labeled as abnormal. Playing these markets in any conventional manner is akin to writing insurance policies for suicide bombers.

Update: as expected the denial of the propaganda didn't take long: PROTESTERS IN LUHANSK, UKRAINE, DENY HAVING EXPLOSIVES AND  HOLDING HOSTAGES IN STATE SECURITY BUILDING

While the source of the most recent developments in the Ukraine is the country's state security services and should thus be taken with the usual mine of salt, Reuters is reporting that pro-Russian separatists have placed explosives in a building they seized in the eastern city of Luhansk and are using weapons to hold around 60 people against their will.

While we are sure the men of the world are applauding quietly from the background, President Obama's plan for equal pay is likely to appeal to the females in his audience - especially those who might vote... it is perhaps ironic that the President brings this up once again - and for good reason is the gender pay inequality gap is indeed worsening - when it is the women of America that have regained all their jobs (and then some) since the recession while men have not...

We believe ourselves to be credible and intelligent, even though nearly all our working capital, our knowledge, is corrupt and seriously tainted.

Presented with no comment...

As we noted previously, the US remains convinced that "there is strong evidence suggesting some of [the pro-Russian] demonstrators were paid," and Russia, in the same vein, responded that they "are particularly concerned that the operation involves some 150 American mercenaries from a private company Greystone Ltd., dressed in the uniform of the [Ukrainian] special task police unit Sokol." So, this morning's 'claims', substantiated, we presume, by YouTube clips and CIA promises, that John Kerry blasted to his Twitter followers is remarkable: "it is clear that Russia special forces and agents have been the catalysts behind the chaos of the last 24 hours in Ukraine." Clear... proof?

Despite Russia's veiled threat that any ongoing action against pro-Russian demonstrators had the potential to instigate civil war and bring action by the Russian forces, Ukraine's interior minister Arsen Avakov has announced, Reuters reports, that Ukraine has launched an "anti-terrorist" operation in the eastern city of Kharkiv and about 70 "separatists" have been arrested for seizing the regional administration building. Is this the red-line that Putin laid down last night?

Presented with little comment aside to ask if 4th time is the charm for the 'hoped for' earnings recovery in Europe...

Hey, remember me?

Another quarter, and another attempt at predicting the future by the people whose predictions have become the biggest butt of all economics jokes, even more so than Paul Krugman columns. We are talking, of course, about the IMF's World Economic Outlook update.

Overnight weakness on the back of disappointment in the BoJ and PBOC was ignored entirely in the few minutes into and past the US open this morning. Perhaps it was the IMF's outlook? Perhaps it was just algos desperate to get back to VWAP to enable institutional sellers out? Whatever it was, the insta-vert-ramp in stocks at the open - entirely disconnecting from bonds, FX carry, and credit - has now reversed. Biotech's early 0.6% gain, gone. S&P's early 5 point rally, gone... and JPY crosses are no help at all as USDJPY tests 102 lows...

If the Fed is so powerful, why is it so cowardly and fearful that it has to cloak its theft of our money and its transfer of the wealth to the banks? What's it so afraid of? That we might wake up to the fact that we're being Fed to the sharks, every day, one morsel at a time?

Some out there were waiting on the International Monetary Fund’s new World Economic Outlook report to be issued today. Some were waiting. Most didn’t care, since it was going to contain a tissue of inter-woven statements that probably say what we have already been thinking (at least we could have hoped that they might be that honest) about the dire straits of the world economy.