Archive - Oct 2015

The Saudis Hate Iran Because It’s NOT a Monarchy

WSJ’s Fed whisperer is always good for a bit of Eccles propaganda and so, for whatever it's worth to you, we present the following Hilsy interpretation of the just-released minutes from the “most important” Fed meeting in recent history.

Given the tumble and stock save since September's infamous "chickening out" FOMC Meeting, investors hope today's minutes will provide some color on just how close Janet and her merry men were to pulling the trigger:

• *FED OFFICIALS SAID `PRUDENT' TO WAIT FOR CLARITY ON OUTLOOK
• *FOMC MINUTES: MOST PARTICIPANTS SEE LIFTOFF CONDITIONS MET THIS YR
• *FOMC MINUTES: ALL BUT ONE MEMBER SAID ECON COND DIDN'T WARRANT HIKE

With all the blame pinned on global turmoil (which has now "calmed" apparently) the S&P 500 has roundtripped to unchanged post-FOMC and given these minutes which suggest this was not a close-call at all. However, this was before the Sept payrolls data.

Pre-FOMC Minutes: S&P Futs 1988.25, 10Y 2.095%, Gold $1145, EUR 1.1285

"The force that they have deployed down there is actually quite impressive for a rapid deployment of a week or so. It is all arms, combined arms, attack aircraft, it is the attack helicopters and artillery, rocket artillery. NATO is ready and able to defend all allies, including Turkey against any threats."

Frequent followers of the German public campaign “Repatriate our Gold“ already know how intensively we have been struggling since 2011 (and longer) with Deutsche Bundesbank to finally – after more than 50 years of external storage of Germany’s gold – get credible transparency regarding this matter. Some progress was brought about recently (2012 disclosure of the whereabouts of Germany´s gold by BuBa; 2013 partial repatriation plan announced by BuBa; 2013 and ongoing through 2015 alleged physical repatriation of approximately 200 tons to date – equaling approximately 10% of Germany’s gold abroad). But real proof and transparency is still lacking from Bundesbank’s side!

“If the US is serious about ensuring that China does not dominate these waters, then the longer it waits, the riskier its freedom-of-navigation activities will become.”

If you’re a fan of dovish policymakers who are committed to Keynesian insanity, you can always count on Minneapolis Fed chief Narayana Kocherlakota who is out today with the latest hint that NIRP is coming to America.

Just two weeks after House speaker John Boehner dramatically announced his premature resignation without cause from his position seemingly in an attempt to difuse the tension within the GOP, there has been another just as dramatic development when moments ago we learned that Boehner's chosen successor Kevin McCarthy has withdrawn his candidacy for the speaker position: "While I am grateful for the encouragement I’ve received, I will not be a candidate." This puts in jeopardy not only any future negotiations over US government funding when the continuing resolution expires in mid-December but more importantly puts into question what happens with the US debt ceiling when the US government runs out of emergency measures some time in early November as Jack Lew has warned is the deadline for getting a deal struck.

Following two stellar auctions earlier this week, when both the 3 and 10 Year showed substantial demand, and in the case of the latter a near record surge in foreign central bank takedown, today's final 30Year auction went without a glitch as the Treasury sold $13 billion in the RN0 reopening, which priced at 2.914%, through the When Issued 2.917%, lower than the 2.98% in September, and virtually unchanged from the yield the 30Y paid at the last auction of 2014. In other words, just like stocks, so the long end of the curve has gone exactly nowhere in 2015.

To combat Islamic militants the White House says threaten national interests, the U.S. has spent nearly $100 billion to arm and train foreign militaries across the Middle East, North Africa and South Asia, an analysis by Vocativ shows. And nearly all of them are reeling from setbacks that threaten to undermine what’s become a core component of American foreign policy in these regions. As a former military commander and United States ambassador in Afghanistan recently noted, "our track record at building security forces over the past 15 years is miserable."

Americans who are unemployed (or earn less than $50,000 per year) are the most upbeat in six months accoridng to Bloomberg Comfort survey data. Despite near-record layoffs, stagnant incomes, global instability, and domestic uncertainty, the jobless are happier and happier as full-time-workers lose faith.

The urgency of the moment favors cooperation, while geography gives Russia major advantages in leading the fight. The highly charged political atmosphere in the U.S., in the midst of a Presidential election, only adds to the fog of war in Syria, forcing public denials and secret agreements where there needs to be utmost clarity, making military cooperation in Syria almost impossible, while raising the risks of accidental conflicts between so-called partners. Adding to the confusion is the increasingly cordial meetings between Russian and Saudi leaders.

WTI Crude has recovered the losses following yesterday's DOE-reported inventory and production rise as it appears comments from OPEC Secretary-General Al-Badri told The IMF that demand will climb more this year than previously projected (coming on the heels of EIA's comments that oil companies worldwide will cut investments in oil exploration and production by a record 20 percent this year.) USD weakness is also helping drive algos to run stops in crude.

Over the past 5 years, the one forecast that was clear to anyone with even an introductory grasp of economics and finance, is that a Chinese economic collapse is inevitable and just a matter of time. Apparently, in retrospect, this was also clear to the head of the IMF, Christine Lagarde, who during a press conference in Lima, said the following:LAGARDE SAYS CHINA'S SLOWDOWN WAS PREDICTABLE, IS A "GOOD MOVE"  There is just one problem with that: of all market participants, the IMF is perhaps the only one who did not predict China's slowdown. Quite the opposite.

US equity markets have shrugged off China's disappointing open and surged back to the highs of the day (with Trannies leading). However, a few of the "gurus" favorite stocks are not buying the dip... as the so-called FANG names are notably weaker over the last 3 days...