Archive - Aug 29, 2014

Asset managers are long, while dealers, hedge funds, and other buy side investors are short. Using alternative positioning indicators, we assess where we can give credence to the CFTC data, and where there is more to the picture than the CFTC data reveals.... The clearest position concentration is short USTs (Figure 1). As the grey shaded squares indicate, the short has increased materially over the last 3 months. Equally importantly, there is an absence of corresponding longs in any client group to balance these shorts. Together that points to the prospect of even lower UST yields.

Last week, Ukrainian Prime Minister Yatsenyuk pushed a bill through the Verkhovna Rada that would see his country’s gas transportation system sold off to a group of international investors. The provisions of the law would permit the transit of natural gas to be blocked. This decision may hurt the fragile industrial recovery in Germany and finish off Ukraine’s potential as a gas transit route to Europe.

"Strategy" or "No Strategy"? Minutes after last night's admission by the President that "we don't have a strategy yet," the White House public relations department went into full damage control mode. Shameless spokesman Josh Earnest used the word "strategy" 33 times in a brief interview with CNN's Wolf Blitzer and this morning the "clarifications" continue. As NBC reports, “The president hasn't yet laid out a specific plan for military action in Syria,” White House press secretary Josh Earnest. “And the reason for that is simply that the Pentagon is still developing that plan and he is still reviewing it.” This seems to us like yet another admission that there is 'no strategy' akin to being half pregnant.

"In the end, they did it, but we wanted it"--Jean Baudrillard

This won't last... here's 3 reasons to consider why...

Remember all those allegations that Obamacare would be an unmitigated disaster for businesses, especially smaller companies? Well, now we have some facts. A week ago we noted that the Philly Fed found that Obamacare was a disaster for business, and now no lessor entity than the Congressional Budget Office (CBO) is out with its latest forecasts, concluding "certain aspects of the Affordable Care Act will tend to reduce labor force participation." While we already noted that 'work is punished' in America, it appears now that with Obamacare, non-work is actually incentivized.

We believe Fed’s actions would be more appropriately described as permitted cancerous beliefs to spread throughout the financial system, thereby killing Democratic Capitalism which is the basis of the capital markets. Today we’re going to explain what the “final outcome” for this process will be. The short version is what happens to a cancer patient who allows the disease to spread unchecked (death).

Attending costly games is on the margins of the household budget. When the credit card gets maxed out, attending is no longer an option. We're not suggesting professional sports isn't the greatest thing since sliced bread: we're simply asking if attending pro sports games has become unaffordable to the average American.

Plus:

The Day Tokyo Got Blasted by Fukushima Radiation

Shortly after it was revealed by Politico that NBC had stooped to new lows in favoritist nepotism, having paid Chelsea Clinton an annual salary of $600,000 for "occasional" reporting work, in effect making her one of the highest paid if not the highest paid "reporter" in the world, the former first daughter quickly stunned everyone when, in the aftermath of her mother's just as stunning commentary on personal wealth and what being "broke" in the New Normal apparently means, she stated rhetorically that "I was curious if I could care about money and I couldn't." So, moments ago, to prove that she really no longer cares about such earthly things as money, since between her hedge fund husband and her parents, she has more than she can possibly spend in one lifetime, AP reported that Chelsea Clinton is quitting her job as a reporter at NBC News.

UPDATE: *JPM CUTS 1Q EUR/USD EST TO 1.28 VS 1.30; 2Q EST TO 1.26 VS 1.28

Having flip-flopped from forecasting EUR strength for the next 12 months in April (target 1.40), Goldman has rapidly ratcheted down its expectations for the flailing currency to 1.30 previously and now forecasts EURUSD at 1.20 in 12 months. As Goldman notes, "because we believe the dynamics of the Euro have fundamentally changed and because we expect cyclical outperformance of the US, a prolonged period of Euro undervaluation can be expected and this is reflected in our longer-term forecasts." Trade accordingly...

The last time Poland 'spoke' it was to accuse Russia of invasion (and the time before that it was to accuse the government of giving the USA blow jobs), but this time actions speak louder than words:

*POLAND BLOCKS FLIGHT OF RUSSIAN DEFENSE MINISTER'S PLANE: RIA

Defense Minister Soigu's plane was forced to U-turn and land back in Bratislava.

It appears a combination of Cameron scaremongery and weak-spending-driven GDP downgrades has sparked a realization in stocks (for now) that maybe bonds are on to something. As 30Y Yields drop closer to a 3.05% handle (and fresh 15-month lows), stocks have rolled over notably this morning... Of course, it is Friday though and all that pent-up de-escalation buying power on the sidelines is just itching for new new highs in stocks.

Following his nation's elevated terror threat level, UK Prime Minister David Cameron went full scaremonger:

"We are in the middle of a generational struggle against a poisonous extremist ideology that I believe we will be fighting for years and probably decades."

Warning that "ISIS represents a greater threat than anything before," (even Hitler?) he plans to introduce new laws to "make it easier to take people’s passports away."

Following the significantly weaker-than-expected spending data, the sell-side has begun its inglorious downgrades of the exuberant hockey-stick growth expectations they all extrapolated off Q1 lows... Goldman cut from +3.3% to +3.1% and Barclays slashed Q3 GDP expectations from +2.7% to a mere +2.2%.