Archive - May 2014

Russia may or may not be pulling its forces back from the Ukraine border, but in their place it is launching a massive, and just as symbolic airforce drill, profiled previously, which is taking place at the same time as the Ukraine presidential elections. A part of it can be seen in action, courtesy of the EuroMaidan YouTube channel, which reports that The Russian military conducted airborne drills outside Rostov-on-Don near the country's border with Ukraine. No dramatic Wagner music, but watch the Russian choppers fly in the clip blow.

Geithner Is Taken to the Woodshed

The destructive consequences of a parasitic Tyranny of the Wealthy and Majority have yet to play out, but they will, and sooner than most believe possible.

One of the most intellectually disingenuous statements made by western policymakers is that inflation is tame… nonexistent. However the actions of the World Bank this beggars belief as 'poverty' is re-defined (just like GDP) to ensure the planners can conjure hundreds of billions of dollars out of thin air without any consequences whatsoever. Zero risk.

Until now Russian retaliation against Western sanctions has been largely symbolic, culminating with this week's Holy Grail gas deal with China, 10 years in the making, which would not have happened on such a truncated timeframe had it not been for western prodding. However, now Russia may be getting ready for actionable retaliation against the west. RIA reports that Russia has prepared a "confidential document" with measures in response to Western sanctions, citing Kremlin advisor Andrew Belousov. And while it is unclear if the US will dare to issue any more sanctions against Russia, considering the Russian stock market is now back to pre-sanctions levels, thus proving their complete futility (and if anything will simply serve to bring Russia and China even closer), one development that would certainly infuriate Putin is the news that Ukraine may hold a NATO accession referendum as soon as June 15.

"The American consumer is not fully back and remains cautious," is the oddly real tone of Ken Perkins, president of Retail Metrics, reporting that U.S. retailers’ first-quarter earnings are trailing analysts’ estimates by the widest margin in 13 years amid weak spending by lower-income consumers intensified competition:

*U.S. RETAILERS MISSING ESTIMATES BY 3.2%, RETAIL METRICS SAYS, MISSING ESTIMATES BY MOST IN 13 YEARS

While extreme weather is tossed out as the reason for this miss, what is an ugly smoking gun is the expectations the chains are missing had already been significantly lowered. Hope remains strong as "pent-up demand" has analysts projecting a 8.6% surge in profits in Q2... as long as it's not too hot or cold or wet or dry.

We erred once again in heading to neutrality for the trend of this market remains upward and there is and has been and likely shall remain enormous levels of suspicion about the validity of the bull market to keep the market climbing the proverbial “Wall of Worry.” ... now we have to look to use any periods of weakness to cover in hedges put into place in order to get ourselves net long once again.

Treasury yields are tumbling... and so of course US equity prices are soaring as the S&P presses back up toward 1,900 and its all-time record highs. USDJPY is not supporting this spike so it's clear what is... VIX recovered its HP-spike from last night and that was all the momo ignition needed on a thin day to lift stocks ... This magical no volume ramp has lifted the Dow into positive territory for the month and year.

Last month's dramatic miss of expectations for a modest post-weather pop in new home sales (having dropped 14.5% month-over-month) so it was inevitable that there would be a bounce. Modestly beating expectations, 433k annualized new home sales in April was only a 6.4% gain MoM thanks to the upward revision of the big miss in March. This 'recovery' remains well below the peak see in January - right in the middle of the worst weather impacted time in US history if one is to believe what the media is spewing. Before the 'housing recovery is back on track' meme gets going though, there is the fact that homes sold in the Northeast fell to the lowest since June 2012... as the average home price fell to $320,100 - the lowest since August 2013.

Remember the legend of the great rotation? Neither do we. But we do know that a Treasury fund inflow of $3.06 billion, the largest since at least 2010 according to Bank of America, coupled with an equity fund outflow of $7.1 billion, means just one thing: the great unrotation is raging. It does beg one question, however, with equity funds dumping in the past week, just who is actually left BTFATH? (Don't worry, that's rhetorical - we all have Kevin Henry and the HFT crew to thank for the ongoing endless manipulation of the rigged market).

Curious how and why commercial bank traders manipulate the price of gold? The following detailed narrative from the FCA should answer most lingering questions.

Yesterday we highlighted the European people's growing 'revulsion' against Europe and overnight we got yet another confirmation that the status quo - despite record low bond yields and record high stock and real estate prices - are losing their grip on control. Having taken the lead in the polls last week, UKIP's Nigel Farage has scored a major victory in local elections in England with early results pointing to considerable gains for the euro-skeptic party:

UKIP GAINS 20 SEATS IN EARLY ENGLISH LOCAL-ELECTION RESULTS
U.K. TORIES LOSE 20 SEATS IN EARLY LOCAL-ELECTION RESULTS

As Reuters reports, one MP noted "I think Nigel Farage for quite a lot of those people is just a big sort of two fingers stuck up at what they feel is a sort of hectoring, out-of-touch elite."

Just like stocks go up on Tuesdays in the US (and Wednesdays in Japan).. and volatility always falls... so shortly after 8am ET this morning 'someone' decided it was the optimal time to unleash $450 million notional of gold futures. Just as we saw earlier in the week, this sizable dump only achieved a $5 depreciation in price as it seems the inexorable efforts of status quo stabilizers to ensure the only real indicator of empire collapse is not flashing red remain in full effect. Given that Barclays is now out ofthe business of rigging gold prices, the question remains: who is?

• The Fed can't print trade? World Trade Flows Fall in First Quarter (WSJ)
• PBOC’s Zhou Says China May Have Housing Bubble in ‘Some Cities’ (BBG)
• ECB's Weidmann - Reviving ABS market not task for central bank (Reuters)
• LOL: Fitch upgrades Greece by a notch to 'B'; outlook stable (Reuters)
• LOL x2: Spain Sovereign Debt Rating Upgraded by S&P (BBG)
• China Will Vet Tech Firms After Threatening U.S. Retaliation (BBG)
• US to claim victory over China in WTO car dispute (BBG)
• Obama urges Democrats to vote in midterms, attacks Republicans (Reuters)
• U.S. Military Pushes for More Disclosure on Drone Strikes (WSJ)