Archive - 2014

First Janet Yellen makes the cover of Time, and concurrently so as not to be left behind, Businesweek, well-known for its suggestive covers (housing, hedge fund managers, the Tea Party), has posted an even more provocative creature on its own cover: a Unicorn - one which is supposed to symbolize, you guessed it, Bitcoins - and serves as the anchor for the Bloomberg-owned magazine's extensive profile of the digital currency, with the following teaser: "Why are investors so crazy for an alterantive currency invented by a phantom?"

Gold is slightly higher today but lower this week. Investor sentiment remains extremely bearish but physical buyers continue to accumulate at these low prices. The UK Royal Mint has run out of 2014 British gold sovereigns due to unprecedented demand.

Between his downbeat "more downside risks" outlook, "extended low inflation" perspective, and strengthened "forward guidance," Draghi has, once again, managed to talk down the EUR (for now). EURUSD has dropped almost 100 pips since he began speaking..."we firmly reiterate our forward guidance that we continue to expect the key ECB interest rates to remain at present or lower levels for an extended period of time," adding that "the Governing Council strongly emphasizes that it will maintain an accommodative stance of monetary policy for as long as necessary." US Treasuries are rallying alongside this tumble.

The Department of Labor states that there is no indication that the winter storm affected this week's numbers (though they are likely to remain volatile through January) as jobless claims dropped from a ubiquitously revised-upwards 345k to 330k this week - the lowest level since the end of November (even as NSA data jumped from 451k to 486k on the week). Continuing claims rose modestly back into the middle of the range of the last 4 months just like initial claims. The emergency claims data is lagged so we will not see the impact of congressional decisions on that until 2 weeks from now but its worth noting that the data we alreayd have shows 104,000 dropping off the rolls. California, Pennsylvania, and Michigan topped the initial claimants list with California worse than this time last year.

Despite record unemployment, record loan delinquencies, and record low loan creation, Mario Draghi and his merry European men decided now was not the time to cut rates to "help" the real economy. Of course, with peripheral bond and stock markets exploding higher why would he - Europe's 'problems' are solved if the market is to be believed. Of course the ECB press conference will have its smattering of negative rate discussions, QE teases, and OMT confidence-inspiration but the multi-year highs in EUR will continue to hurt Europe's exporters means he'll have to try sometime to jawbone it down.

It looks like Time just hinted at who its man, er woman, of 2014 will be with its just released cover showcasing Janet Yellen "The Sixteen Trillion Dollar Woman" which wraps her first interview since being confirmed as Fed chair.

The nation may be slowly thawing from its deep freeze "polar vortex", but that is no comfort for tens of thousands of Ohians, whose water supply has literally frozen in the past day after the valves at the Avon Lake Municipal Utility plant were planted in ice, dramatically lowering the supply of water. NBC reports that "tens of thousands of customers in several counties in Ohio are facing a dramatic water shortage after the intake valves at a key plant that draws water from Lake Erie apparently froze amid the wild winter weather." As a result, the mayor of Avon had a modest proposal as a response to the caticestrophy: don't flush your toilets. At least there is toilet paper, which is more than Venezuela, and its 480% returning in 2013 stock market can say.

As was broadly expected, and contrary to November's surprising announcement, the ECB kept its rates unchanged. No response in the EURUSD. In 45 minutes Mario Draghi will explain just how he plans on reviving Europe's moribund and record low loan creation.

• Carney Guidance Threshold Strained as BOE Holds Policy (BBG)
• Does one laugh or cry: China Tells Banks to Improve Disclosures in Shadow-Lending Fight (BBG)
• Big Business Doubles Down on GOP Civil War With Tea Party (BBG)
• CIA sued for records on possible role in Nelson Mandela arrest (RT)
• Bridge Scandal Destroys Christie's 'Nice Jerk' Image (BBG)
• Borrowers Hit Social-Media Hurdles (WSJ)
• U.S. Leverage in Iraq Tested As Fears of Civil War Mount (WSJ)
• Austerity drive cuts into Chinese inflation (FT)
• Dish Pulling Its Bid for LightSquared (WSJ)
• BlackRock agrees to end analyst surveys (Reuters)
• Germany defends economic policies after US criticism (FT)
• Bank of Korea Holds Rate Even as Yen Clouds Export Outlook (BBG)

The overnight session began on a dour mood, with both the Shanghai Composite and Nikkei sliding (the former once again just barely above 2,000,  latter once again dropping below 16,000), even though Chinese CPI came below expectations suggesting the PBOC has some more room to ease and not rush into liquidity extraction (which just happens to blow out repo rates like clockwork), while in Japan BOJ board member Shirai implied the Japanese QE can be extended and expanded as needed. Europe had a weak start although shortly after 3 am Eastern staged a dramatic turnaround supported by a bounce in the EUR (and ES driving EURJPY) leading to broadly higher stocks, supported by solid demand for Portuguese 5y bond syndication, as well as oversubscribed debt auctions by the Spanish Treasury which sold above the targeted amount and consequently saw SP/GE 10y spread fall to its tightest level since April 2011. At the same time, having been propped up by touted redemption flows ahead of Spanish and French bond auctions, absorption of supply shortly after 1000GMT resulted in an immediate selling pressure on Bunds. Helping lift spirits was a rumored $1 billion trade order in September S&P futures, as well as chatter by the Greek PM that the country was like Portugal and Ireland, prepared to get back into the bond markets.

The following article from the New York Times is extraordinarily important as it perfectly highlights the incredible hypocrisy of the U.S. government when it comes to overseas slave labor and human rights. While the Obama Administration (and the ones that came before it) publicly espouse self-important platitudes about our dedication to humanitarianism, when it comes down to practicing what we preach, our government fails miserably and is directly responsible for immense human suffering.

Following a Washington reporter's request to the Navy to turn over documents related to the Navy Yard Shooting, a US Navy official mistakenly forwarded an internal email outlining instructions on exactly how to avoid his Freedom of Information request. As RT reports, hours after NBC's Scott Macfarlane's tweets on the matter went viral, the Navy "regretted the incident" and re-iterated its "commitment to transparency."

15 months after acquiring three disputed islands in the Senkakus, and amid growing tensions with the Chinese following tit-for-tat air-defense zones, Abe's visit to the war-shrine, and public-opinion battles; Japan may have just cranked the rhetoric dial to 11. As Japan Times reports, the Japanese government will nationalize about 280 islands whose ownership is unknown out of the about 400 remote islands that serve as markers for determining Japan’s territorial waters.

Armed groups, demanding autonomy for eastern Libya, have invited foreign companies to buy oil from ports they have seized in defiance of the central government in Tripoli. As Reuters reports, "If a ship docks in one of the closed ports," warned Libya's defense ministry, "then we will destroy it," but the group, led by tribal leader and 2011 civil war hero Ibrahim Jathran, shrugged off Tripoli’s warning, stating "we welcome global oil companies ... The oil security guards will guarantee the safety of tankers." The development adds to an air of chaos as the weak Tripoli government struggles to rein in the armed groups that helped oust Muammar Gaddafi in 2011 but which kept their guns and are now demanding political power and a bigger share of the country’s oil wealth.

It's been one of the worst years for gold in a generation. A flood of outflows from gold ETFs, endless tax increases on gold imports in India, and the mirage (albeit a convincing one in the eyes of many) of a supposedly improving economy in the US have all contributed to the constant hammering gold took in 2013. Perhaps worse has been the onslaught of negative press our favorite metal has suffered. It's felt overwhelming at times and has pushed even some die-hard goldbugs to question their beliefs... not a bad thing, by the way. To us, a lot of it felt like piling on, especially as the negative rhetoric ratcheted up. This is why it's important to balance the one-sided message typically heard in the mainstream media with other views. Here are some of those contrarian voices, all of which have put their money where their mouth is...