Archive - Jan 2015

Laugh if you want to.  Cry if you want to, but the bull market for the US dollar has legs and life. 

And so with less than 24 hours to go, the ECB has decided to leak its deliberations not only to Merkel and Hollande, but Dow Jones. To wit:

DJ: ECB EXEC BOARD'S QE PROPOSAL CALLS FOR ROUGHLY EUR50B IN BOND BUYS A MONTH -  SOURCES
ECB SAID TO PROPOSE QE OF 50 BILLION EUROS A MONTH THROUGH 2016

More as we see it, but if indeed this will be a program without risk-mutualization and conditional and limited burden-sharing, where the hope was that Draghi would "shock and awe" the world with the size of the bond purchasing program instead, €600 billion per year looks decidedly on the low side of any "surprise" announcement where the whisper number was for €1 trillion per year, and if indeed this is the final formulation may result in a substantial disappointment for stocks after the initial kneejerk reaction.

We already did our post-mortem of last night's teleprompted annual evangelizing of Barack Obama's "straight to folks" propaganda that would make both Goebbels and Dzerzhinsky blush. So instead of repeating ourselves, here is AP with its own fact check of what can only be dubbed lie after lie, courtesy of the president of the "free world" and the head of the "most transparent administration ever."

In what is likely an effort to comprehend whether the market is satiated with a mere EUR 50 billion per month in printed money, this morning's leaked ECB QE announcement (due tomorrow) sparked total chaos in FX markets and, as Nanex notes, sending market liquidity to near record lows. This is a problem. With the 'real' volatility event not arriving until tomorrow, everyone has pulled out of the market already... setting the scene for a gappy Swissnado replay tomorrow morning.

Because nothing says 'stability' like a Central Bank in charge of things, the smartest richest men in the world have proclaimed in Davos this week that "we need a central bank of oil, like the central bank in financial world." As long as they are not Swiss, of course. Oil has been volatile today amid these calls for stability after Saudi Aramco comments on cutting projects (supply) sent prices higher, and was then talked back by the CEO bringing prices lower. Oman - the largest non-OPEC Middle East oil producer - blasted that "we have created volatility," noting it was having a "really difficult time," and that's "bad for business," demanding OPEC slow production. But it was The IMF that sparked the greatest concerns as it warned oil producers to treat this oil price drop as permanent noting that they expect these economies to lose $300 billion. only to be contradicted by OPEC's al-Badri who noted "oil prices will rebound back to normal soon."

USDCAD breaks 1.23 - weakest since April 2009

Unexpected to most, The Bank of Canada cut its benchmark interest rate to 0.75% citing financial stability risks and worried about downside inflation risks. The press release is extremely negative... *MAGNITUDE OF OIL SHOCK CREATES EXCEPTIONAL UNCERTAINTY: BOC

Following the initial kneejerk reaction lower in the EURUSD, much as expected, the market appears to have actually given a second thought to the ECB's trial balloon leak, which had zero details on risk-mutualization or burden-sharing, and most importantly about the size of the announcement, which at €50 billion per month is well below the €1 trillion annual run rate which was the high-side whisper number, and then the kneejerk reaction promptly reverse. What happened next is a deja vu from last week, when as the epic surge in EURUSD volume, both in spot and futures, showed that at least one, and likely more, macro hedge funds were just stopped out of EURUSD shorts, as the reveral pounded anyone short the European currency with less than an infinite balance sheet.

It would appear the housing data was not the growth-inspiring 'everything is awesome' facts that we were told about last night. US Treasury 30Y yields have just broken to a new record low 2.3500% handle...  The yield curve (2s30s) has cracked lower to its flattest since 2008. As we explained here, this is not unexpected as anticipation of ECB QE means duration scarcity rules.

This year's theme: Canceled NWO

With the western world facing high terror alerts, the biggest meeting of top CEOs and world leaders comes at a delicate time. As Bloomberg's Tom Gibson exclaims in this brief clip, "it feels like half the Swiss army is here," but officials play down the security presence as 'business as usual'. With a special no-fly-zone and snipers overhead, Davos is protected by 3,000 military personnel for these few days... no wonder the billionaires aren't worried about leaving their private jets unlocked on the Davis runways.

Having proclaimed it is not Zimbabwe, Nigeria's currency is starting to look a lot like a hyper-inflating mess. After devaluing to a 168 peg in November, the Naira has crashed to 200 / USD today - smashing above the upper peg band of 176 as it appears Nigeria is losing control. The collapse of Oil Producer currencies had abated for a week or two but the last 2 days have seen the Ruble and Naira tumble (even as The USDollar weakens modestly ahead of the ECB QE tomorrow).

Will the ECB deliver the right message?

As reported yesterday, Yemen became the latest foreign policy "success" story of the US after the local minority of Iran-friendly Shi'ite Houthi militiamen stormed, and captured, the presidential palane. At the same the whereabouts of Yemen's US-backed president Abed Rabbo Mansour Hadi were unknown. Moments ago we learned about his current location: according to AP, "two Yemeni presidential advisers say the Shiite rebels who are on a power grab campaign in the capital, Sanaa, are holding the president "captive" at his home, a day after seizing the presidential palace." 

For the 2nd month in a row, Building Permits dropped and missed expectations. The 1.9% MoM drop in December was a notable miss against expectations of a 0.6% rise and left YoY Permits at a mere +1.0% - hovering at the weakest growth since mid 2011. The long-heralded savior of permits - multi-family - tumbled to their lowest since June; with overall permits lower in all regions aside from the "weather-affected" Midwest. Housing Starts rose back near cycle highs (just don't tell KB Homes) beating expectations for the 4th month in a row.

Gold's 12-day swing of around 12% is the best since just before the Swiss capped the Franc in 2011 and the precious metal has topped 1,300 for the first time in 5 months this morning as, despite exuberance in Chinese stocks, it appears anxiety is setting in that tomorrow may not be all it's cracked up to be from Draghi. Bond yields are re-tumbling with 30Y pressing to 2.36% record lows (and 2s30s at new 6 year lows). US equities have given back about half yesterday afternoon's rampfest...