Archive - May 7, 2014

Four Facts Which NEITHER Mainstream Democrats Or Republicans Want You To Know About

In mid February Fed's Tarullo first opined on the "stretched valuations" in small and high-tech companies in the US - while careful not to label the entire market a bubble. It seems, given Janet Yellen's comments today, that this is the new meme...

• *YELLEN SEES POCKETS OF POSSIBLE OVER-VALUATION IN SMALL CAPS (So don't fight the Fed! Sell!)
  
• *YELLEN SAYS EQUITY MARKET VALUATIONS ARE IN HISTORICAL RANGES

And then there's this:

• Yellen: Can't Detect Asset Bubbles With Any Certainty

Perhaps the following 2 charts will help...

Earlier today, before the high-beta, higher-trash selloff resumed, the main catalyst that pushed the market higher was the following headline:

• PUTIN: RUSSIA PULLED BACK TROOPS FROM UKRAINIAN BORDER

Turns out all Putin was doing was merely trying to give his buddies yet another higher price level from which to sell. To wit:

• NATO HAS NO INDICATION OF WITHDRAWAL OF RUSSIAN MILITARY FORCES FROM UKRAINE BORDER-NATO MILITARY OFFICIAL
• UKRAINE SAYS RUSSIAN MILITARY DRILLS CONTINUING ON BORDER
• UKRAINE BORDER SVC CAN'T SAY WHETHER RUSSIA ARMY IS WITHDRAWING

It is almost as if Putin was merely pulling the electronic legs of the high freaks with premeditated intent...

Yellen's not helping...

In a few short minutes, Fed Chairmanwoman Janet Yellen will hold the first part of her two-day testimony in Congress before the Joint Economic Committee (followed by testimony before the Senate Budget Committee), in which she will regale members of congress with tales about harsh weather in the first quarter, and who snow managed to subtract over $50 billion from the US economy in Q1.

It seems the US "costs" are not working on Russian assets. Apparently on the back of diplomatic-sounding comments from Putin, Russian stocks, bonds and currency are the new fear-of-missing-out trade and are soaring: *GAZPROM +7.3%, MOST SINCE MARCH 4; ROSNEFT +4.6%, MOST SINCE SEPT 2013; SBERBANK +10% MOST SINCE NOV. 2011

*RUBLE EXTENDS ADVANCE VS BASKET, STRENGTHENS 1.1% TO 41.2082; *RUSSIA'S 2027 OFZ BOND EXTENDS GAINS, YLD DROPS 28BPS TO 9.19%

Unfortunately US equities are not so exuberant...

It now appears the status quo is moving to destroy any last semblance of privacy with regard to your personal brokerage accounts. Yep, in the name of “stopping fraud” and the practices of unscrupulous brokers, the Financial Industry Regulatory Authority (FINRA) wants to launch a program called Cards, or the Comprehensive Automated Risk Data System. This electronic system sounds a lot like the so-called metadata the NSA is collecting on everyone’s internet usage. This “robocop” would collect a weekly “record of activity at all of the more than 4,100 brokerage firms nationwide.” For your own good of course. Oh, and yeah, to stop terrorists or something...

The problem with inflation is that it is a lot easier to create than contain. The Fed continues with its dubious claims that inflation is too low, but the markets and prices are saying otherwise.

Focusing on what is actually important and market-moving (or will be with a 4-6 week delay in this rigged, non-discounting, broken market) and what most are ignoring for now, is that as previously reported on several occasions, East Ukraine is about to become the next Crimea, following an indepedence referendum that is set to take place in the self-proclaimed Donetsk people's republic on Sunday May 11. And as Itar-Tass reproted moments ago, the results will be in as soon as aweek from today or May 14 which means Russian troops will be officially in what will then be former east Ukraine by the end of next week.

With all eyes firmly focused on WWIII in Ukraine (oh, and don't forget Al Qaeda's pivot to attacking Saudi Arabia), China - as we noted here - decided now was the appropriate time to send an oil rig into Vietnamese (admittedly uncertain) territorial waters. The Vietnamese are not happy and is blasting China this morning after a Chinese vessel intentionally rammed two of its ships. As Reuters reports, the foreign ministry in Hanoi said the collisions took place on Sunday and caused considerable damage to the Vietnamese ships with six people sustaining minor injuries. Vietnam's foreign minister noted, "Chinese ships, with air support, sought to intimidate Vietnamese vessels. Water cannon was used," adding that "Vietnam won't fire unless China fires first." China has not yet responded to the Vietnamese allegations of ramming, but did have this to say, "The United States has no right to complain about China's activities within the scope of its own sovereignty."

Non-Farm productivity fell most in a year at 1.7% in Q1 - notably worse than the 1.2% drop that was expected. Output growth slowed dramatically and real compensation also fell. However, unit labor costs surged 4.2% (its most since Q4 2012) as unit non-labor costs tumbled 2.7% (its worst since Q4 2012). Must be the weather - pay those that made it through the weather more as their productivity plunges... and all will be well in Q2 - the man on the TV said so.

Forget POMO, today's market is all about FOMO - fear of missing out - when Ukraine is 'fixed' and new newer-er highs are achieved. All it took this morning to lift S&P futures 8 points was a headline that:

PUTIN, OSCE HEAD BURKHALTER TO DISCUSS UKRAINE CRISIS

USDJPY responded instantly, as did bond yields (higher) and gold (lower) as it's clear that everything will be fixed now. Of course, the Geneva "de-escalation" lasted 1 days; this latest "diplomacy" should last hours if not minutes, but for now the high freaks are delighted and upward momentum has been restored.

Bank of America, whose stubborn, and quite abysmal "short Treasurys" call, has been one of the worst sellside trade recos in recent history and cost investors countless losses, has an update. Only instead of doing a mea culpa and finally admitting it was wrong, the bailed out bank has decided to provide humor instead. Namely it too has joined the ranks of countless others providing an "explanation" (or in its case, an "excuse") for the relentless bond bid. The punchline: "cold weather."

According to GMO's Jeremy Grantham, the six most important asset bubbles in modern times are the following:

When Obama repeatedly chanted "costs" should the Kremlin continue to ignore him, it appears he was referring to western corporations, because overnight we got the first batch of companies scapegoating no longer snow in the winter but - what else - the Ukraine. Leading this morning's scapegoat parade is SocGen, which following in Barclays' footsteps reported a 13% tumble in its Q1 profit, plunging to €315 million from €364 million. The reason for this huge hit to profits apparently was a €525 million ($731.26 million) write-down at its Russian bank - the same bank which, as recently as April 11, saw SocGen "increase its stake in Russian subsidiary Rosbank which it said was part of a long-term commitment to Russia. The deal comes as Russia's economy is under pressure partly as a result of sanctions imposed by the United States and Europe to protest against Moscow's annexation of Crimea." So SocGen was dumping money into a Russian subsidiary well after the Ukraine conflict  had begun, knowing quite well it would be "forced" to take a Rosbank charge mere weeks later! Why yes, of course.