Archive - Jan 2015

In an awkwardly uncomfortable non-cheerleadery few minutes on CNBC this morning, he-who-must-be-listened-to (when he is buying stuff and not selling it) - Carl Icahn - dropped a few truth bombs on an unsuspecting Scott Wapner. Starting with warnings about energy sector debt, fearing a surge in defaults and "what management can do to hurt you" if you own that debt, Icahn then moved on to discuss today's ECB move and its implications. Confirming his "extremely cautious" stance to the overall market, Icahn explained how "the reason the stock market has gone up is because of the Federal Reserve," and now the rest of the world is jumping on the bandwagon "with all this issuance of money," and the implicitly strengthening USDollar "will come home to roost at some point." While not pointing to a specific point in time, Icahn concluded, "you do have to be extremely cautious and we have hedges on.. and it's too early to buy oil stocks/bonds."

A crashing Yen failed to help Japan or fix its economy, but while Japan may now be a lost cause, the Keynesian masterminds of the world will give it another try, and following today's Draghi's announcement, the EURUSD has crashed to the lowest level since 2003, tumbling over 200 pips, and printing below 1.14 moments ago. However, in a clear indication that the party for the USD-bulls may be ending, none other than the US commerce secretary moments ago said the impact of a rising dollar on exports and economic growth bears monitoring.

In the short space of an hour - following weeks of battles and a recent standoff in Sana'a with Houthi rebels - all the well-laid plans of the US manipulators has gone astray:

*YEMEN GOVERNMENT RESIGNS, PRIME MINISTER PRESENTS RESIGNATION TO PRESIDENT AMID REBEL STANDOFF
*YEMEN PRESIDENT HADI HAS RESIGNED, AIDE SAYS

This comes after signing a short-term peace deal following an admission that they had lost control. And with oil-prices plunging once again, which means social instability in the middle east is about to explode making the Arab spring of 2011 seem like child's play by comparison, things around the globe are about to take a dramatic turn for the worse.

Have we passed the tipping point for Brazil? We'll know in a few months.

"There will first be a pernicious excitement, and next a fatal collapse." -- Walter Bagehot, Lombard Street (1844)

Everyone knows the positives, or rather positive, even if nobody at the ECB is willing to come out and say it: the ECB's QE - whose structural details were laid out previously - will boost stock prices, and... that's it. Who benefits as a result of this has now become a socioeconomic and philosophical discussion. So here, courtesy of ADMISI's Marc Ostwald, are the negatives.

If speeches like the State of The Union this week, and the reactions to it, make anything clear, it’s that the PR guys won the fight against critical thinking. All you need to do is get people to believe whatever it is you got for sale. And 99.9% of people are easily fooled. That’s how you define democracy in 2015: how many people can you fool? Which is the most convincing sleight of hand?

With NATO's top military commander, General Breedlove, proclaiming that fighting in Ukraine is worse than pre-truce levels (and noting he could not confirm Poroshenko's Russian force numbers accusations), the news overnight, as The Telegraph reports, that Ukrainian forces appeared to withdraw from Donetsk airport last night, ending an 8-month battle in a bitter blow for pro-Kiev forces and apparent triumph for the Russian-backed separatists they are fighting. While the Pro-Russian separatists' Pyrrhic victory over the completely destroyed (as we noted here) airport may be a blow, a Ukrainian military spokesman on Thursday played down the surrender of the terminal buildings, saying it was simply a tactical withdrawal. Additionally, Russia has denounced an attack on a bus in separatist-held Donetsk which killed civilians as a "monstrous crime."

Those curious to learn why Greece is the only country excluded form the ECB' QE (for now), will not find any additional information in the ECB's supplement on its asset purchase program. Neither will they learn why something that is in effect monetary financing, and is prohibited by Article 123, is not monetary financing. However, they will learn that the proceeds from the ECB's money printing can be used "to buy other assets and extend credit to the real economy." The ECB adds that "In both cases, this contributes to an easing of financial conditions." Actually the only thing it will contribute to is making the world's billionaires into the world's trillionaires.

Well so much for ECB QE sparking economic growth and inflation expectations... And then EIA confirms last week's crude oil inventory build was the largest since 2001! WTI is now nearing a $45 handle once again...

It was just on Monday when the Danish central bank, clearly panicking about the peg of the Danish Krone to the EUR, surprised the world when in an unexpected rate cut it went NIRPer, sending its deposit rate from -0.05% to 0.2%. Moments ago it doubled down with its second rate cut for the week, this time sending the rate from -0.20% to -0.35%. At this rate we should hit -0.5% next Tuesday and be well into the -1% territory two weeks from today. And not only that, but as Bloomberg observes, "The Danish central bank “also seems to have been intervening in the market prior to the ECB meeting,” Jes Asmussen, chief economist at Svenska Handelsbanken AB in Copenhagen." In other words, the Danish Krone's peg days are most likely numbered.

We are much closer to the end of the Central Bank-fueled $100 trillion bond bubble than ever before. This could be the beginning of the end.

After over 2 years of dragging, pardon the bad pun, the market by the nose, ever since his "whatever it takes" speech in July 2012, Draghi finally folded and launched QE. This, as Credit Suisse warned last week, and as stocks are starting to realize, may have been the longest "sell the news" build up in history. Of course, CS worded it more poetically: "the QE Dream becomes reality" and far more importantly, as it also adds: "the dream may prove far more powerful as a market driver than the reality."

There are many ways in which our corrupt governments, and the Corporate media (which acts as their parrot) seek to undermine and persecute those who acquire and hold precious metals. Two of their most-loathsome habits concern precious metals and taxation.

30Y US Treasury yields have collapsed over 14bps since Draghi unleashed QE... and US equities now well in the red post-QE.  Not exactly the kind of risk-on "buy buy buy" everyone was hoping for as European Peripheral bond risk spreads are rising...