Archive - 2014

As we assess, how many analysts predicted teh 10 year at 3% and how many analysts were long oil

What assures that the relentless low in TSY yields continues is that, courtesy of a market that is so broken and counterintuitive that for a record 6 years bad news is good news, and the worse the economy the higher stocks and bonds go, hedge funds will continue bidding up Treasurys, which they bought on hopes that this time the recovery will be right around the corner. And sure enough, as BofA reports overnight, hedge fund specs "sold 10-yr contracts increasing net short position to largest in three years. 10-yr contracts have now been sold in six of past seven weeks."

• Police officers' slaying raises pressure on New York mayor (Reuters)
• People Call for Cooling of Racial Tensions After Murder of NYPD Officers (BBG)
• The $6.3 Trillion Frenzy That Vanquished Treasury Bears (BBG)
• China Investigates Possible Stock-Price Manipulation (WSJ)
• Citigroup Was Wary of Metals-Backed Loans (WSJ)
• UPS Turns Parking Lots Into Sorting Centers to Add Speed (BBG)
• U.S. Move to Normalize Cuba Ties Boosts Firms’ Asset Claims (WSJ)
• Meredith Whitney’s Fund Said to Drop 11% as Office Put on Market (BBG)
• Railcar Bottleneck Looms for Oil (WSJ)

There are two key events driving overnight risk prices: first, there is the Bloomberg story that "China Offers Russia Help With Currency Swap Suggestion", which was previously covered extensively here a week ago, but now that the algos have official confirmaiton they have sent the Ruble shorts into a panic short squeeze, with the USDRUB tumbling another 5% as of latest. The other key development pushing oil prices modestly higher again, is yesterday's speech by Saudi oil minister Ali al-Naimi who "expressed confidence prices will pick up", however not due to a drop in supply - because he made it very clear OPEC will never cut output and instead will wait for the high cost producers to exit the game - but amid improved economic growth.

Just a day after the premeditated execution of two NYPD officers in New York by a deranged, suicidal psychopath, two more police officers have been shot in America today. In St.Louis, an off-duty officer was shot multiple times and remains in critical condition while in Tarpon Springs, Florida, 45-year-old officer Charles Kondek - a 17-year-veteran and father of 5 children - was shot and killed early Sunday morning.

Fast forward to today when we are about to learn that Newton's third law of Keynesian economics states that every boom, has an equal and opposite bust. Which brings us to Texas, the one state that more than any other, has benefited over the past 5 years from the Shale miracle. And now with crude sinking by the day, it is time to unwind all those gains, and give back all those jobs. Did we mention: highly compensated, very well-paying jobs, not the restaurant, clerical, waiter, retail, part-time minimum-wage jobs the "recovery" has been flooded with. Here is JPM's Michael Feroli explaining why Houston suddenly has a very big problem.

"The oil-price weapon, in the face of the terminal enfeeblement of the Obama administration, is the last recourse before the Saudis and Turks, whatever their autocues of racist rhetoric, invite Israel to smash the Iranian nuclear program from the air."

While "lowflation" continues to stun central bankers around the world, Zee Germans remain stoic on the sidelines (courtesy of Jens 'nein nein nein' Weidmann's last voice of reason left in the world) in their derision of the ECB's sovereign QE efforts. If you wondered why they are so vehemntly opposed to the printing of money... perhaps the following chart will help explain - just how quickly a nation can swing from 'zee stabilitee' to 'zee hyperinflation'.

The Global Monetary Reset is under way, but people have not noticed it yet. The key is the move to zero interest rates.

Banks are selling a record amount of U.S. structured notes tied to the stocks of fast-growing, volatile technology companies such as Facebook and Twitter. As Bloomberg Briefs reports, sales of securities linked to Facebook soared to $457.6 million this year, more than double the $204.2 million issued during the same period of 2013. Bloomberg notes that investors are flocking to products tied to social media companies, where more volatile share prices help banks improve structured-note terms that have been hurt by low interest rates... and issuers are "trying to put shiny objects in front of the client," as the BTFD mentality gets increased leverage (and downside risk). Investors have purchased $1.88 billion of structured notes linked to the 10 most popular technology stocks so far this year - 31% more than the same period in 2013 - and $32.7bn equity- and commodity-linked notes this year alone (up ~10% YoY). As we warned last week, counterparty risks are rising.

Having confirmed unequivocally, in a statement by the FBI and reiterated by President Obama, that "the North Korean government is responsible" for hacking Sony, it appears the YouTube-less 'evidence' the FBI provided is being questioned by the hacking-collective 'Anonymous' and former Lulzsec hacker Sabu. As The Daily Beast reports, the hackers blasted, the North Koreans "don’t have the technical capabilities," and added "we all know the hacks didn't come from North Korea, and "all of the evidence FBI cites would be trivial things to do if a hacker was trying to misdirect attention to DPRK." Meanwhile, on Saturday afternoon, Guardians of Peace, the hacking group that’s so far claimed responsibility for wreaking havoc on Sony, posted a message online mocking the FBI’s investigation - a series of gyrating animated bodies shrieking, "You are an idiot!"

It is a tyranny of the PhDs. It is a group-think mania that has gone global. It’s also only a matter of time before the central bankers’ money printing spree takes down the very bubble-ridden financial system it has so recklessly spawned.

In an oddly familiar echo of Bernie Madoff's massive ponzi collapse, The Telegraph reports, a currency trader has vanished along with £130  million in investors’ cash in an alleged fraud that could be one of the biggest in recent British history. Joe Lewis, 59, is being investigated by police over almost $200 million which he claimed was in clients’ accounts (incluidng professional footballers and golfers) but now no longer exists. In a stunning email sent to clients 2 weeks ago, Lewis admitted that his company - JL Trading - had stopped operating in 2009 (after suffering heavy losses on disastrous FX trades), adding that "I have covered up my mistakes from everyone including my staff, no one else knew what was happening." The father of two has since failed to answer emails and phone calls, and at his Istanbul apartment a doorman said he had not been seen for a few weeks.

When the conventional media ordains oil inevitably dropping to $40/barrel, we start looking for something else to happen - like oil going to $70/barrel. There are number of reasons this isn't as farfetched as it might seem at the moment.