Archive - Sep 2014

While BofAML's Michael Hanson expects Yellen’s overall tone to remain dovish, market perception will be key. The combination of changes to the forward guidance language, upward drift of the dots, and any comments seen as potentially hawkish, could lead to a selloff...

Moments ago, as was widely preannounced, the US Treasury unveiled its latest round of Russian sanctions. While the bigger picture was well-known, here are some of the highlights:

• U.S. SANCTIONS FOCUS ON FINANCIAL, ENERGY, DEFENSE SECTORS
• U.S. TREASURY ADDS SBERBANK TO SANCTIONS LIST,
• U.S. TREASURY SANCTIONS AFFECTS GAZPROM, GAZPROM NEFT, LUKOIL, ROSNEFT, AND SURGUTNEFTGAZ
• U.S. TIGHTENS DEBT FINANCING RESTRICTIONS TO 30 DAYS

And instantly: PUTIN: GOVT DRAFTING PROPOSALS TO RETALIATE AGAINST SANCTIONS

Despite Gallup's poll showing consumer confidence going nowhere this year, and Bloomberg's consumer comfort level for high-income earners collapsing, the government's UMich Consumer Sentiment measure has soared to its highest since last July's exuberance (at 84.6). Take your pick which data you trust...

It appears the upwards revisions for retail sales and not missing expectations for the headline data is the good news that is bad news for markets. With just a few days until the FOMC, it seems market perceptions of potential fed hawkishness (no good excuses recently not to be) is weighing on bonds and stocks. Treasury yields are accelerating higher (10Y above 2.60% for first time since July) tracking oddly perfectly with USDJPY and stocks, having entirely decoupled from JPY, are tanking on the rising rates/Fed hawkishness concerns. Of course, it's Friday so anything goes before we close.

File this under Devil's Advocate: what if the easy money in the stock market is no longer the "guaranteed" Bull melt-up but the Bearish bet on a sudden air pocket? Just as a thought experiment, put yourself in the shoes of the money managers who have the leverage to move the markets.

Retail Sales rose 0.6% in August - precisely as expected - with July revised from 0.0% to +0.3% but Ex-Autos the +0.3% growth, which matched the revised July number, was the slowest since January's "harsh weather" impact. The 'control group' (ex food, auto dealers, and building materials) missed expectations at +0.4% vs +0.5% exp slipping to its slowest growth in 3 months. Under the surface it appears the gains in sales are driven mostly by a 1.5% rise in auto sales - as more subprime credit is loaded onto the US consumer.

It appears the 'broad coalition' that President Obama so confidently described just two days ago is crumbling faster than the Iraqi army. First UK and Germany deny support for airstrikes in Syria and now Turkey refuses to allow a U.S.-led coalition to attack jihadists in neighboring Iraq and Syria from its air bases, nor will it take part in combat operations against militants, a government official. US Secretary of State John Kerry arrived in Ankara this morning to 'build the coalition' but, as AFP reports, Turkish officials have already made their position clear, "Turkey will not be involved in any armed operation but will entirely concentrate on humanitarian operations." Their 'excuse': "our hands and arms are tied because of the hostages," but follows PM Erdogan's recent shunning of Obama.

Yesterday's YouGov poll, which saw the "No" camp regain the lead with 52% of the vote, was said by some to be the end of the "Yes" momentum observed last weekend when the Yes posted its first majority since polling began, Then moments ago, the momentum in the momentum changed once again, with the Guardian releasing the latest Scottish referendum poll by ICM which took place between September 9-11 polling a "a representative sample of 1,000 people", and where the vote was said to be "too close to call", as the margin collapsed once again, this time shifting the momentum in favor of the Yes vote, which received 49% of the vote, and No getting 51%, however 17% of the voters are "yet to make up their minds."

• Russia faces new U.S., EU sanctions over Ukraine crisis (Reuters)
• Glasgow pulls no punches in welcome to 'Save the Union Express' (Guardian)
• Pound Seen Tumbling Up to 10% on Scottish Yes Vote (BBG)
• Moscow stifles dissent as soldiers return in coffins (Reuters)
• Ukraine's leader sees no military solution of crisis, eyes reforms (Reuters)
• Venezuela Threatens Harvard Professor for Default Comment (BBG)
• Australia Raises Terror Alert to Highest Level in a Decade (BBG)
• Activist Investors Build Up Their War Chests (WSJ)

While today's key news event will likely be the preannounced latest, third, round of anti-Russian sanctions and the Russian retaliation, the reality as DB notes, is that the market seems to be seeing "some fatigue" in this story with the ECB, Scotland and next week's Fed meeting taking center stage. As a result, and ahead of expectations of change in Fed language which should carry a more hawkish tone, the dollar has been bid up some more overnight, leading to fresh multi-year highs in the USDJPY, and the now-paired TSY trade, with 10Y yields up to 2.57%, although this may now be in short-term oversold territory. The latest Scottish poll appears to have dented some of the "Yes" momentum, with 52% of the polled saying they would vote No in the referendum, although right now neither side has a clear majority when factoring in the undecideds: which means it will come down to the wire next week, with clear implications for Europe's secessionist movements if the Yes vote still manages to prevail, not to mention massive ramifications for the UK.

It has been said, correctly, if only by those who see beyond the false "left-right" paradigm, that those who call the shots in US politics, and thus American socio-economics, are not so much America's lobbying corporations, but the people behind the corporations - i.e., those who have the money... all of it. Obviously, nobody has more money than America's billionaires. So who are the true puppetmasters who determine America's fate? For one answer we turn to Brookings Institution Governance Studies Director Darrell West in whose upcoming book "Billionaires: Reflections on the Upper Crust" ranks the 25 most influential American billionaires.

If the West bombs Islamic State militants in Syria without consulting Damascus, LiveLeak reports that the anti-ISIS alliance may use the occasion to launch airstrikes against President Bashar Assad’s forces, according to Russian Foreign Minister Sergey Lavrov. Clearly comprehending that Obama's new strategy against ISIS in Syria is all about pushing the Qatar pipeline through (as was the impetus behind the 2013 intervention push), Russia is pushing back noting that the it is using ISIS as a pretext for bombing Syrian government forces and warning that "such a development would lead to a huge escalation of conflict in the Middle East and North Africa."

What will $1 million buy in New York City? A diamond-encrusted Cartier men’s watch. A small fleet of 2014 Bentley Continentals. Or maybe your very own parking spot in SoHo... "Parking is in serious demand and has proven an excellent investment with no sign of a decline."

Yellen, we have a problem...

It’s not just homeowners who have to worry about rising interest rates, the Federal government might soon get a taste of its own medicine. From the admittedly partisan Republican Senate Committee on the Budget comes this report outlining how federal interest outlays will dovetail with other expenses in the future. "By the end of the budget window in 2024, however, CBO forecasts that interest payments will nearly quadruple to an astonishing $880 billion."