Archive - Nov 2015

Will we never learn?

Following what has been a tremendous surge in bitcoin, which as we noted earlier had doubled from its August lows, rising as high as $420 less than an hour ago, a furious selling program was unleashed moments ago taking down the digital currency by nearly $50 on a sudden and dramatic surge in volume.

"The Russian plane that crashed Saturday in Egypt slowed suddenly and then plunged to the Earth at 300 miles (483 kilometers) per hour, according to revised data of its final moments captured by flight-tracking website FlightRadar24."

At the height of the financial crisis, the unprecedented decline in swap rates below Treasury yields was seen as an anomaly. The phenomenon is now widespread, as Bloomberg notes, what Fabozzi's bible of swap-pricing calls a "perversion" is now the rule all the way from 30Y to 2Y maturities. As one analyst notes, historical interpretations of this have been destroyed and if the flip to negative spreads persists, it would signal that its roots are in a combination of regulators’ efforts to head off another financial crisis, massive corporate issuance (which we are seeing), China selling pressure (and its impact on repo markets) and "broken" wholesale money-markets.

Echoing the end of August face-ripping rally, WTI crude has soared almost 12% in the last 4 days, pushing the Dec contract above $48 for the first time since mid-September... And the reason? Well, The Fed is raising rates and they wouldn't do that if the economy was not awesome, right?

You will not be warned of the risks to your wealth by anyone in a position of power in the political financial hierarchy.

In a speech that was not supposed to discuss monetray policy, Mario Draghi appears to have been unable to control himself and repeated - once again - the same dovish message that he has for months: *DRAGHI: ECB WILLING TO ACT TO MAINTAIN MONETARY ACCOMMODATION, TO BE EXAMINED IN DECEMBER

And - once again - in its goldfish-memory-like manner, EURUSD legged lower, to the lows of the day as Pavlovian algos are unable to see through the same regurged jawboning.

As we noted earlier, the market is starting - it appears - to take The Fed seriously...

The growth of poverty in the United States is wildly out of control.  It turns out that there is a tremendous amount of suffering in “the wealthiest nation on the planet”, and it is getting worse with each passing year.  During this election season, politicians of all stripes are running around telling all of us how great we are, but is that really true?

Following a recent report documenting the surge in empty malls littering China, many suggested that this is indicative of a shift to online shopping and migration to platforms such as Alibaba. That may well be the case, but unlike in the US where one is assured at least some quality control and has a rational expectation that what was ordered online is what will be delivered, in China the reality is far different. According to China's official news agency, Xingua, more than 40% of goods sold online in China last year were either counterfeits or of bad quality, illustrating the extent of a problem that has bogged down the fast-growing online sector.

It's different this time... The last two times that Fed hike probabilities (and thus timing of liftoff) surged, the long-end of the bond market rallied (suggesting a premature hike would slow the economy medium-term). The last few days, since The FOMC Statement, Treasury yields have surged (with the short-end underperforming) as 10Y tops 2.25% and 30Y nears 3.00%. As BofAML noted, "if The Fed hikes rates and the long end yield tumbles, that means policy failure," and so we suspect, in all its confirming-bias perfection, the long-end is being sold to 'convince' the world that The Fed is right to raise rates.

Russia is reportedly set to host negotiations between the Assad government and the Syrian opposition in Moscow next week, although it isn't at all clear that the invitees play a meaningful role in the conflict. Meanwhile, Maria Zakharova is out with comments about Syria's political future which the Western media are interpreting as an admission that Russia is willing to let Assad go.

Bitcoin, at $400, is now at its highest since November 2014, having surged over 100% since the late-August 2015 lows when we first warned of China capital outflows using the virtual currency conduit. As we suggested, and was confirmed overnight, it appears the Chinese are just getting started...

Almost all serious analysts see a Terminal problem developing - "We will go from deflation to hyperinflation without seeing inflation." But hyperinflation is a political phenomenon. It is caused by those same authorities the masses think they can trust. When they are threatened, they will protect themselves by printing money on a scale we haven’t seen since the War Between the States (consumer prices in Richmond, Virginia, had risen 6,700% by the end of the war).