Archive - Jun 30, 2014

Gold is the best performing asset in H1 2014 (just beating crude oil). The USA is the worst-performing macro-economy in the world's majors in H1. The S&P 500 is up now 6 quarters in a row - its best run since 1998. The Russell 2000 had its best month since September but Trannies are leading the Dow by over 900bps year-to-date. "Most shorted" stocks had their 'best - biggest squeeze' month in 11 months. Gold and silver had great months. Today saw stocks rally then fade and bond yields rose then fell (down 1-2bps). The dollar slipped markedly on the day to 2-month lows as commodities surged (ex Oil) with Gold, silver, and copper all reaching multi-month highs (amid short-covering and CCFD unwinds). VIX closed the month higher.

Financial markets do the one thing better than nearly any other form of protest or lauding of government policies. When the financial markets are falling that’s a tell-tale sign something somewhere is wrong. Same for the lifting, where the rise lifts all giving policy makers as well as the general public at large explicit feedback of what is, as well as, what’s not working. Yet, once those indicators become an adulterated vehicle with the ability to mask true economic information, everything is lost. Just how pungent does today’s economic corpse need to stink before everyone understands it hasn’t been resting, or recovering, but has been dead for who knows how long? With a print of nearly 3% negative GDP, sustaining, or plodding along, or any other descriptor stating “recovering” is ludicrous.

GM has succeeded in achieving the impossible: it is no longer a joke. It is now just plain sad.

It's been a busy day for President Obama and he needs a win... a bright shiny PR moment, surrounded with immigrant children explaining how he is the Pied Piper that will save them all from the despotic servitude they come from. In an unplanned press conference President Obama will address his immigration reform at 1450ET through executive action. No lesser man than Cantor-buster Dave Brat opined that the President's policies "sound nice", like "the Kids’ Act, the DREAM Act, the ENLIST Act," but did little to address the growing influx of children. “The reason we have those thousands crossing the border is because of poor policy in the first place,” Brat added. We are sure Obama disagrees - besides, this has to be good for GDP, right? - The Broken Border Fallacy.

The promises of the master, used as currency to compel and reward our willing participation, can no longer be fulfilled since the economic system that is the ultimate delivery vehicle for those promises is about to sink beneath the waves.

It appears the same 'contagion' that is driving copper prices higher is also impacting gold and silver this morning. As we have noted previously, the CCFD unwind drives synthetic short (hedge) covering and inevitably rolls down the curve to drive spot strength (as the paper gold market tail wags the 'physical' market's dog). Gold is at 3 month highs and silver getting close...

Behold: a record $340 billion in reverse repos submitted by the world's financial institutions with the Federal Reserve, an increase of $200 billion overnight, and amounting to a record $3.5 billion on average among the 97 operations participants. Considering this is a clear quarterly event, it goes without saying that all the reverse repo is, is a quarter-end window dressing mechanism underwritten by Mr. Chairmanwoman itself.

There are some out there in the economic world that believe that banknotes are detrimental to the health of the economy and that they are currently stifling the recovery of the markets. Their solution: burn the damn things and let them go up in smoke. Replace them with electronic money and then the central banks around the world will be able to do more than just providing alternatives that don’t work to revamping the financial markets and boosting economic growth.

Earlier today Reuters reported that the European Commission said on Monday it had approved a Bulgarian request to extend a credit line of 3.3 billion levs ($2.30 billion) in support of banks that have come under speculative attack. “The Commission concluded that the state aid implied by the provision of the credit line is proportionate and commensurate with the need to ensure sufficient liquidity in the banking system in the particular circumstances,” the EU executive said in a statement. The statement said Bulgaria’s banking system was “well capitalised and has high levels of liquidity compared to its peers in other member states. For precautionary reasons, Bulgaria has taken this measure to further increase the liquidity and safeguard its financial system”. The move follows runs by jittery depositors on two major Bulgarian commercial banks in the space of a week. And while this latest backstop of the Bulgarian bank system should provide a respite from bank insolvency fears (if only for the time being), one wonders about Europe's true intentions.

Having had his omnipotence chipped away at last week, President Obama has - seemingly - been pushed too far by the Supreme Court's decision on contraception and Obamacare this morning: The White House stated...

SUPREME COURT DECISION ON CONTRACEPTION COVERAGE JEOPARDIZES HEALTH OF WOMEN EMPLOYED BY THESE COMPANIES
WILL WORK WITH CONGRESS TO MAKE SURE WOMEN AFFECTED BY RULING WILL HAVE SAME ACCESS TO CONTRACEPTION
WILL CONSIDER WHETHER PRESIDENT CAN ACT ON HIS OWN TO MITIGATE EFFECT OF SUPREME COURT RULING

Totalitarian? You decide... One wonders if the phrase "do you know who I am?" was uttered this morning?

U.S. Relies On Law of Non-Constitutional Countries

Copper has rallied almost 6% in the last few weeks with a 1.25% surge today sending the 'economic' metal back to near 4-month highs. This must means demand is picking up, right? This must mean the world is ok, right? Chatter is that this morning's home sales 'noise' surprise spike was the catalyst but it appears much more likely that a combination of a continued squeeze of a very-extended spec short position and the ongoing unwind of China's commodity-finance-deals is the real catalyst. As the market comes to terms with synthetic demand (CCFD unwinds buying back hedges) dominating any excess supply in the spot market, futures positioning still has more room to go.

"Why shouldn't the rich pay more taxes?" Simply put, there are not enough billionaires to pay the bill for everyone else. The problem is not that the rich do not pay enough, it is that government takes too much from the economy as a whole.

The more things change, the more they stay the same. Amid the growing geopolitical powder keg of 2014, the deafening roar of BIS-deniers proclaiming that everything bad is priced-in and nothing good is priced-in dominates the mainstream media. This is nothing new... as no less than The Financial Times proclaims on June 30th 1914 that "stock markets have been scarcely affected by the assassination of the heir to the Austrian throne... there's no evidence that stock holders took fright" as it's priced in (or contained?). It seems things didn't quite work out as 'priced-in'.

Moments ago the US Supreme Court - the same Supreme Court which two years ago upheld Obamacare but as a tax, something the administration has since sternly denied - dealt Obamacare its biggest legal blow to date, and alternatively handing Obamacare opponents their largest court victory yet, when in a 5-4 vote SCOTUS ruled that business owners can object on religious grounds to a provision of President Barack Obama's healthcare law that requires closely held private companies to provide health insurance that covers birth control.