Archive - May 2014

Until recently, it was mostly bankers that were the victims of a perplexing epidemic of untimely deaths, either at their own hand or the result of someone else's rage. Today that changed in Spain when hours ago a member of the ruling Partido Popular, and president of the council of Leon, Isabel Carraso, 59, was assassinated in broad daylight on a street in the center of the city of Leon. Her death was certified at 5:20 pm local time.

Ireland's Services economy is expanding at the fastest pace in the world, according to the latest round of survey-based PMI data from Markit. The worst...contraction... France Construction

UPDATE: AP reports Pro-Russian protesters declare independence for the Luhansk region in eastern Ukraine.

With local reporters citing officials claiming "direct talks between the eastern regions of Ukraine and Kiev are now out of the question", Russia's foreign ministry has commented directly that:

*RUSSIA SAYS SEPARATIST REFERENDUMS SHOW 'REAL MOOD' IN EAST
*RUSSIA EXPECTS KIEV GOVT TO REACH OUT TO EAST, WANTS 'RESULTS'

Adding that the Dontesk and Lugansk referenda short evidence of the people's strong will to make decisions on their own, Russia wants "immediate" talks in Ukraine on state governance... and cites Kiev's criminal unwillingness to engage in dialogue with his people.

• Goldman’s Andrew Wilson Says QE in Europe a 2015 Story If at All
  
• European economy would have to weaken significantly before QE comes into play, said Andrew Wilson, co-head of Global Fixed Income and Liquidy management team at Goldman Sachs Asset Management.
• Says Draghi has foreshadowed policy easing at next meeting, expects ECB to cut rates 1-2 times before they look to other methods such as an LTRO
• Says if other methods don’t work it would “ultimately have to be QE”

Across the 137 warehouses that the London Metal Exchange has begun tracking, 2 stand out. Having been at the center of allegations of manipulation of the metals markets - most notably Aluminum - thanks to monopolistic warehousing, the following report from the LME will not entirely shock that none other than Goldman Sachs (and Glencore) have simply incredible waiting times for delivery of the base metal. We discussed the monopolization (thanks to lax Fed regulation) here, here, here, and here and as Reuters reports lengthy logjams at warehouses monitored by the LME, the world's oldest and biggest market for industrial metals, prompted bitter criticism by consumers and sparked a wide-ranging reform program at the exchange. With nearly 2-year-waits for Aluminum delivery by Goldman - we are sure regulators will see nothing wrong at all.

BANZAI7 FOOD AND BEVERAGE WARNING...

After "most shorted" stocks had their best (i.e. worst or biggest loss) week in 2 years last week, it was perhaps not entirely surprising that 'they' would smash VIX and JPY to manufacture a short squeeze bloodbath this morning at the open...

Just a few days ago we highlighted what some had outlined as "Novorossiya" (New Russia) - the new territory being 'created' by the Russian Spring... today we see it from a slightly different angle - on the wall of Denis Pushilin's office - the leader of the new independent Donetsk Republic...

Just as we predicted last week, Crimea 2.0 is here.

• DONETSK PEOPLE'S REPUBLIC DECLARES ITSELF SOVEREIGN STATE: RIA
• UKRAINIAN SEPARATIST LEADER PUSHILIN SAYS ASKING MOSCOW TO CONSIDER THE ABSORBTION OF DONETSK REGION INTO THE RUSSIAN FEDERATION

While Putin has not yet confirmed it will, begrudgingly, annex Donetsk as a reminder earlier today the Kremlin said it "respects" the independence vote and calls for a "civilized implementation." And what could be more civilized than annexing two regions of Ukraine in under two months without firing a single shot?

If there was any confusion about what may be coming next, now that the bulk of the TBTFs are liquidating their commodities trading divisions having been caught manipulating virtually every physical asset under the sun (except for Goldman: the bank will first stage a mutiny at the Fed before it is forced to spin off its legendary J Aron commodity division which spawned such taxpayer generosity recipients as Gary Cohn and Lloyd Blankfein), the most recent events at Swiss commodities giant Mercuria should clarify "next steps." Because after Mercuria last month acquired JPMorgan's physical commodities trading business for $3.5 billion however without the scandal-plagued Blythe Masters, the Geneva commodities group needed someone to fill in the big enough shoes which may now belong to the world's largest, and very much still under the radar, physical commodities trader.  It picked Magid Shenouda, who was co-head of commodities for Goldman until the end of last year.

While US equity markets could not be more excited at the prospect of more bloodshed, more sanctions, and more WWIII, it seems the Ukrainian markets are not amused. Short-dated CDS are spiking, bond yields surging, stock prices tumbling, and the Hyrvnia is back at one-month lows. Ukrainian stocks are now the worst-performing market in the world and with 10Y bond yields back over 10% (and 5Y near 14%), it seems the exuberance for risk in Western markets is not spilling out into a nation that is 'saved' by the IMF loans and western confidence.

Just as Gold was monkey-hammered late last night, we warned in the pre-open that it might happen and sure enough... VIX has been smashed back under 12 this morning, lifting the Dow to new record-er all-time highs and sending the S&P chasing its highs too... why not... Draghi promised to do something, sometime soon (even as the Fed is tapering and China says no more stimulus). What is really helping is USDJPY 102 once again which provided the opening ramp ignition. For all those on the 'healthy' rotation bandwagon.. the Nasdaq and momo names are outperforming (Nasdaq now unchanged for May) - so it's not that. Gold is up $25 from overnight lows and Treasuries are flat to modestly weaker as stocks smash higher.

"If everyone in society is trying to get into the financing business, we may have entered a phase where a fever has started to affect our ability to think," warns one analyst of the bubble-fervor in China... but President Xi Jinping dashed the hopes of stimulus-hunters everywhere (once again) last night amid a slowdown that analysts forecast will lead to the weakest expansion since 1990. As Bloomberg reports, Xi said there will be no major stimulus and commented that "[Chinese] must boost [their] confidence, adapt to the new normal condition based on the characteristics of China’s economic growth in the current phase and stay cool-minded." In other words, keep calm and carry on (oh and don't lever any more carry trades please!).

Every wondered why the rest of the world envied the US middle-class? There were many reasons once, a long time ago and one of them was their affluence, their wealth, their ability to be able to afford whatever they wanted.