Archive - Aug 14, 2014

Overnight weakness in Japan and Europe was no big catalysts for markets either way, but the moment Vladimir Putin uttered the words "avoid conflict" (as ooposed to saying 'destroy all of you'?), stocks took off. Weak jobless claims data sparked a dump but once cash markets opened, it was on like donkey kong as the worst volume day of a terrible volume week took stocks higher on the back of USDJPY. For the technically-minded, the S&P is testing up to its 50-day moving-average (DMA), Russell finding resistance at 100/200DMA, Trannies broke back above the 50DMA, and Nasdaq is on course for new highs. All this exuberance in stocks was shared by bonds as buyers bid 30Y yields to a 3.18% handle - lowest in 15 months (gaping divergence to stocks this week). USD oscillated but ended unch. Gold and silver limped higher as copper and crude were monkey-hammered. VIX ended at 3-week lows (after an opening slam lower) for day 15 of inversion. S&P futures volume 55% below average.

In a few moments, Missouri Gov. Jay Nixon will speak at 4:00 p.m. ET. about the turmoil in Ferguson. As NBC reports, Nixon canceled a planned visit to the state fair and said he would visit the St. Louis suburbs Thursday after a fourth night of civil unrest over the police killing of Michael Brown, an unarmed black teenager. Nixon said in an earlier statement that the worsening situation in Ferguson was “deeply troubling.”

As we feared during the day yesterday, when night fell in Ferguson, a combination of massive SWAT team presence and an increasingly disillusioned citizenry were a recipe for disaster. Over 70 heavily-armed police enforced quasi-martial-law in the troubled town, at least 10 people were arrested, tear gas and rubber bullets were unleashed, and 2 reporters were (briefly) arrested. Perhaps Rep. Justin Amash summed it up best, "Is this a war zone or a US city? Gov't escalates tensions w/military equipment & tactics."

Ferguson, Missouri:   What’s Really Going On ... And How Did We Get Here?

Presented with no comment...

Deja vu all over again as the 30Y Treasury yield plunges to new 15-month lows (a 3.19% handle!), the US equity market presses on to highs...

It appears Ukraine's Radical Party leader Oleh Lyashko is a glutton for punishment. In 2011, as Reuters reports, he was throttled and pushed to the ground by former Vice-Speaker Adam Martinyuk after he accused him of hypocrisy; and on a separate occasion Martinyuk threw a glass of water in his face. However, this morning, it got serious after he accused Independent Party Deputy Oleksandr Shevchenko of being a "pot-bellied fatty," who "instead of going to the Donbass and helping our guys, people like him go to parliament and raise their hands." Shevchenko's response - solid right cross to Lyashko's jaw, sending the smaller man staggering. One can't help but wonder how this approach to settling political scores would go down in Washington...

Global crises wreak havoc on all levels of existence, not to the mention the great cost to human lives. If we are to learn from history, however, it seems as though we might have to nevertheless brace ourselves for yet another one in the near future, as it marks the end of one saeculum and the start of a new economic paradigm aligned more positively with proper balances of trade, debt, and policies. The US is trying to postpone the crisis by printing money, however this is creating currency wars with nearly all major central banks in the world. As history has shown us time and again, causing this delay through money printing will only aggravate the problem, not only not preventing the inevitable, but indeed making the transition more painful and costly.

The numbers out last night were once again largely on the weak side of disappointing, with very little reaction and even less of an intuitive reaction. As Bloomberg’s Richard Breslow writes, this is the downside of everyone having the same positions. Simply put, we've been trained to catch the falling knife by the CBs, one of those trading strategies that will work until it doesn’t and when the knife slips you will really have a taper tantrum.

The only word to describe today's just concluded, and final for the week, auction of 30 Year paper can only be described with one word: blistering. First, the pricing yield itself, coming at 3.224% a whopping 2.5 bps through the When Issued, was the lowest since May 2013, just before the first Taper tantrum which sent yield surging only to regain all Ultra losses in the next year.

Ways for retail investors, and institutions small and large, to monetize a fundamental or economic outlook that the muppet masters will never tell you!

The Ukrainian parliament approved a law on Thursday to impose sanctions on Russian companies and individuals "for financing terrorism." As Reuters reports, Prime Minister Arseny Yatseniuk told parliament that "by approving the law on sanctions, we showed that the country is able to protect itself." The first 'threat' though - that European energy companies would have to agree major contract revisions when purchasing Russian natural gas, potentially disrupting supplies in the coming winter months - seems suicidal... and EU leaders are not happy. Slovak Premier Robert Fico asked rhetorically, "Isn't it strange that a country, which has signed an association agreement, a country, which we are all trying to help, is taking steps that jeopardize the interests of individual EU members?"

Despite global geopolitical crises exploding among the world's biggest producers of oil, WTI (and Brent) crude oil prices have tumbled to 5-month lows (WTI At $96). Despite the exuberant PMIs in China, Copper and Iron ore prices are collapsing (2-month lows). One can't help but wonder what global 'economic growth' must really be like if 'demand' for all these crucial growthy commodities looks so weak?

While we are sure President Obama will comment on the apparent US intelligence failure that Chuck Hagel explained last night - there were far fewer 'refugees' on Mt.Sinjar than expected... but Iraq is still a troubled nation; we suspect the calmer-in-chief will address the situation in Ferguson. Having already disappointed many African American residents of Ferguson, who rejected his previous comments as "insultingly inadequate," it seems the President will take a few minutes out of his day to address the turmoil in middle America... 'we tear-gassed some folks...'

Yesterday the market soared (and then forgot to correct) following fake news (subsequently rejected) that the leader of the east Ukraine rebels, Igor Strelkov, has been seriously wounded. It took minutes for the correct story to come out (he was ok), but now a follow up report indicates that something is indeed afoot in the Donetsk People's Republic, where moments ago, RIA (the infamous Russian news agency which set off Friday's market surge with its "deescalation" tweet) reported that Strelkov has resigned from his official post as Defence Minister of the breakaway republic.