Archive - 2014

If the recent batch of longer-dated Treasury auctions were a barnburner with unprecedented demand for "high quality" collateral with duration longer than 3 years, then today's just concluded 2 Year issuance was somewhat more tame: moments ago the Treasury sold $27 billion in 2 year paper at a yield of .703%, 1 basis point inside the .713% When Issued. Still, this was the highest yield on 2 Year paper since March 2011.

"if anything defines 2014 for me, it’s the advent of incessant claims for which no proof – apparently – needs to be provided. Everything related to Ukraine over the past year carries that trait; the economy too, and now Sony/North Korea. Never any proof, you just have to believe what your government says."

Moments ago we learned that for all talk of a commodity "bottom", the "energetic" dead cat has resumed its inverse bounce. To wit:

• BLOOMBERG COMMODITY INDEX EXTENDS DROP TO LOWEST SINCE 2009

So what does that mean? The answer: it all depends on whose narrative one chooses to believe and/or which narrative the US Ministry of truth is promoting at any given day in order to boost confidence.

Just a week ago we detailed how China was preparing to bailout Russia's liquidity crisis via the 150 billion yuan swap line the two nations agreed in October. Today, as Bloomberg reports, we got confirmation as two Chinese ministers offered support for Russia. China will provide help if needed and is confident Russia can overcome its economic difficulties, Foreign Minister Wang Yi was cited as saying; and Commerce Minister Gao Hucheng said expanding a currency swap between the two nations and making increased use of yuan for bilateral trade would have the greatest impact in aiding Russia. The Global Times (mouthpiece for the Comunist Party) wrote in an editorial this weekend, "Russia is an irreplaceable strategic partner on the international stage." Isolated?

Kyle Bass' "nickel" trade is alive and well. A new report from the U.S. Mint reveals that it’s still not cost-effective to make pennies and nickels - Americans lost $105 million in 2013 due to their production.

It appears that the Q4 earnings season "bloodbath" predicted by harbinger Jefferies is right on track. According to Citigroup, Q4 is shaping up to be nothing short of a disaster for bank earnings. To wit: "Primary revenues decreased 17% yoy over Oct-Nov, notably impacted by weaker lending trends, per Dealogic industry data. Issuance revenues also declined while advisory revenues increased slightly. Loans revenues fell 61% yoy over Oct-Nov with leveraged finance particularly lower, given weaker market conditions [ZH: uhm, market hit all time highs in both October and Novemer?!]. By contrast, DCM revenues increased 11% over the same period, primarily driven by higher IG issuance (+27% yoy), partially offset by lower HY, down 12%." Which is odd: remember how everyone said banks are being punished for low volatility? Apparently the only thing worse for banks than zero/low vol was... high vol.

Despite stocks ignoring the momentum ignition efforts, USDJPy just briefly broke 120 once again. That appears to have been the flash signal for 'someone' to dump vast quantities of precious metals in the futures markets... "unrigged"

 Banks and other financial entities have literally bet an amount equal to over SIX TIMES GLOBAL GDP on interest rates.

This Federal Reserve is running on the final fumes of its credibility. Counsel “patience” as it might, other institutions and the people running them may run out of patience with it and start running for cover. When currencies catch fire, even a run on the bank becomes an exercise in futility. The rot is spreading from the margins to the center. Not even very far in the background, there is wreckage everywhere as events spin out of the pretense of control. What an opportunity for another country, say a country with an already foundering currency, to dare introduce money partially backed by gold.

From Evil Dr Kim...

Having exuberantly reached its highest level since September 2013 last month (despite the total collapse in mortgage applications), it appears the ugly reality of the housing market has peeked its head out once again. As prices rose, existing home sales plunged 6.1% - the most since July 2010 (against an expected 1.1% drop) to 4.93mm SAAR (the lowest in 6 months). As usual there is an excuse for this carnage... NAR's Larry Yun blames the stock market (and rising home values). Quite a conundrum for the Fed...

The private sector – the part that pays the bills – is only $12 trillion. Total debt – government, corporate and personal – in the US is now $58 trillion (misreported yesterday as $59 trillion… but what’s a trillion dollars between friends?). That’s nearly five times the real economy that supports it. Assuming an annual interest rate of 2%, even if you could contain debt increases to 3% of GDP a year, the productive part of the economy would have to grow at 5% just to stay even. If the average interest rate were to rise to that level again – and sooner or later it will – it would take $3 trillion to service America’s debt – or one-quarter of private sector output. That can’t happen. The wings would fall off first.

In Parts I and II (click Sprott News), readers saw how all of the public debts of our nations (past and present) were the direct result of fraud, and thus legally unenforceable – on two bases. Firstly; the bankers of these Big Banks proclaimed themselves the world’s foremost financial experts. On that basis; they not only received privileged treatment for these Big Banks, they were recipients of confidential financial and economic information from our governments, as fiduciaries who were claiming to be acting in our best interests.

The whole "North Korea hacking Sony" story had gotten so bizarre over the past week, there was nothing stopping it from jumping fully into the rabit hole. Which it did overnight when as the FT reported, North Korea warned of strikes against key sites in the US in retaliation for Washington blaming Pyongyang for the recent Sony cyber attack, saying any US punishment over the incident would lead to damage “thousands of times greater”. The NDC said its 1.2m-member army was ready to use all types of warfare against the US. “Our toughest counteraction will be boldly taken against the White House, the Pentagon, and the whole US mainland, the cesspool of terrorism, by far surpassing the ‘symmetric counteraction’ declared by Obama,” said the NDC statement, carried by official news agency KCNA.

It all looked so rosy just a few short hours ago. WTI crude has slipped from over $58.50 (once again testing that upper band of resistance) to back below $56 and down almost 2% from Friday's close (not stabilizing). While the S&P and Dow (futures) remain green, the Nasdaq has tumbled into the red on the heels of Gilead's weakness (the 6th largest name in the Nasdaq 100).