Archive - May 2014

Two days ago, we told you about how the US appears to be destroying its banking system with the FATCA deadline - it’s as if they’re deliberately trying to weaken one of the few things that still gives the US a shred of power in the world anymore. Fast forward to today and the next shoe appears to have dropped... The FT reported yesterday that JP Morgan has started freezing accounts, declining credit card charges, and terminating customer relationships with foreign diplomats and politicians. All of this is under pressure from the US government to scrutinize banking relationships with "politically exposed persons", or PEPs. Apparently once you’re a PEP, you’re always a PEP. So banks are simply shutting these relationships down.

Land of smiling faces...

US equity price action warns of trouble, BofAML's Macneil Curry warns. Since the start of this year, Tuesdays have consistently resulted in positive returns for US equities; but this week's failure to follow through with that pattern, coupled with the Russell 2000’s first close below the 200-day moving-average since November 2012, warns of trouble ahead. Indeed, the Russell is dangerously close to completing a 4 month "Head-and-Shoulders Top". A close below 1099 is needed to complete the pattern, exposing significant downside to 1057 (5-year trendline), ahead of 988/975 (Head-and-Shoulders obj.).

"Ukraine’s biggest bank, Privatbank, says the situation in the eastern cities of Donetsk and Lugansk has reached a critical point that is too dangerous for staff to go to work." This is a warning of what can happen in the middle of an economic crisis in the modern era. With everyone relying upon government handouts and the dwindling supply of actual real physical paper money (cash), we can easily end up in a situation of barter.

+ Updates on Ukraine

Despite all the words - and equity market rallies (confirming that it must be true) - it would appear Mr. Putin and his men have been quietly "not" preparing for all-out war (which makes us wonder, aside from the ICBMs, just what it would look like if they were actually preparing for war). Below is a clip of today's "simulated massive nuclear attack" drills conducted in Russia. It is in short, stunning.

Mario Draghi has gone and done it: "Now that the June meeting is explicitly going to be crucial, not doing anything next month would in our view completely shatter the ECB’s credibility, and trigger a further appreciation in the euro exchange rate" - Deutsche Bank

Since companies going public and their investment bankers want to create good value for your shareholder dollars, I thought I'd present some percentage graphs of recent IPOs and the dynamite profits they've returned to the general public. Please note I am including the entire history of each firm since their initial offering. Congratulations, one and all!

As "The Russian Spring" spreads across various sub-regions of current non-Russian sovereign nations, Russian historian Sergey Lebedev warns that Transdniestria is “the first liberated part of Novorossiya,” Putin’s term for what he sees as a new state spreading across Ukraine into Moldova and perhaps beyond... here is what that region will look like... welcome to Novorossiya, or as one would translate it... New Russia.

Something amusing, or rather, shocking was revealed when we decided to check on a fact Jim Grant noted yesterday in the fine print of the iShares Biotech ETF, also known as the IBB...

If one had to use one word to describe today's 30 Year bond auction, it would "atrocious." With the When Issued expecting the 30 Year refunding (CUSIP: RG5) to price at 3.40%, instead we got one of the biggest rails in recent history when the Treasury announced that the high yield required to sell $16 billion in 30 Year paper was a whopping 3.44%. To be sure, this was the lowest 30Y auction yield since June of 2013, however we may be reaching a point when there is simply no issuance demand for new paper. This was perhaps best seen in both the Bid to Cover which tumbled from 2.52 in April to just 2.09, the lowest since August 2011, and the hit rate of the Indirects, who took down 40.4% of the auction, and were hit for 99.7% of the bids tendered - a whopping result. Directs fled as well, taking down just 8.4% of the auction, the lowest since March 2013, leaving Dealers with 51.2% of the auction, the most also since March 2013.

• AEROSPACE DEFENSE FORCES SUCCESSFULLY REBUFFED SIMULATED MASSIVE NUCLEAR MISSILE STRIKE DURING DRILLS - RUSSIAN DEFENSE MINISTRY
• NORTHERN, PACIFIC OCEAN FLEET'S STRATEGIC SUBMARINES LAUNCH TWO BALLISTIC MISSILES AS PART OF ROUTINE TRAINING - DEFENSE MINISTRY
• RUSSIA LAUNCHES TOPOL ICBM, HITS KAMCHATKA TARGET
• RUSSIAN STRATEGIC OFFENSIVE, DEFENSIVE FORCES IN HIGH READINESS - PUTIN
• RUSSIAN DEFENSE MINISTER STATES PERMANENT READINESS OF NUCLEAR TRIAD

The economy is changing in structural ways that affect not just the job market but the nature of work itself.

One of these markets has been confirmed as "not rigged" by the SEC... the others - have all been proved to be manipulated by various bankers over time... who's right?

Confused by the market? You are not alone with irrational and "Fear of Missing Out" momentum trades and (not so great) sector re(un)rotation all that matters (as has been the case for years with fundamentals not relevant for about 24 months now), so here are some tips from Scotiabank's Guy Haselmann who believes "market noise can be simplified into the following: QE= risk on, End of QE=risk off. QE is now half way toward ending, so now is the time to adjust. The fact that…… EM central banks are hiking, China is attacking its credit bubble, and Japan hiked its VAT tax while the “third arrow” is M.I.A., are also reasons to de-risk. If sanctions on Russia expand to products or industries, then real problems to EU growth will arise. This is something to watch carefully."