Archive - Jan 2015

Technology is a great enabler. But it can also be a great disabler ... Cyber and technology risk is another reason to own physical bullion - either in your possession or in an allocated and segregated manner, in the safest vaults, in the safest jurisdictions in the world.

For the first time ever, Italy's unemployment rate is more than twice that of its European Union (one region, one monetary policy) neighbor Germany. As Germany's jobless rate fell for the 3rd month in a row to 6.5% (the lowest level in records going back more than two decades), Italian unemployment unexpectedly rose to a record high at 13.4% (well above the euro-region rate of 11.5%). Of course, while these two nations 'economic' state diverges by the most on record, bond yields are at record lows in both - leaving us (and everyone else) questioning, just what it is that ECB QE will do to help Europe's economies?

"We’ve read a lot of silly articles since oil prices started falling about how U.S. shale plays can break-even at whatever the latest, lowest price of oil happens to be. Doesn’t anyone realize that the investment banks that do the research behind these articles have a vested interest in making people believe that the companies they’ve put billions of dollars into won’t go broke because prices have fallen? This is total propaganda."

Is the world's biggest hedge fund going all-in on HFT and Dark Pools? We ask because Ray Dalio's Westport, CT-based Bridgewater, which at last check manages around $160 billion between its Pure Alpha and All Weather fund products, and which according to preliminary data had a solid performance in 2014, has just hired Jose Marques, the former global head of the quant and algo-heavy electronic trading at Deutsche Bank, to become Bridgewater's new head of trading.

Death and taxes are both inevitable, but at least the experience of death does not repeat itself every year...

Just 2 short months ago we warned of the rising voice among the cognoscenti tilting their windmills towards the concept of "helicopter money," as Deutsche bank noted, "perhaps there's an increasing weariness that more QE globally whilst inevitable, is a blunt growth tool and that stopping it will be extremely difficult (let alone reversing it) without a positive growth shock." Committing what Commerzbank calls "the ultimate sin" is now reaching the mainstream as Germany's Der Spiegel notes it is becoming increasingly clear that Draghi and his fellow central bank leaders have exhausted all traditional means for combatting deflation; and many economists are demanding that the European Central Bank hand out money to consumers to stimulate the economy.

While everyone is watching the absolute spread levels of high-yield bonds (or their prices or all-in yields) as the recognition of broad-based default risk (contagiously carried over from bloated and levered energy firms) arrives at the mainstream. However, under the surface of the arcane world of credit derivative indices is 'the basis' - which measures the difference between the index level being traded and the implied level of the index based on the individual components. In English, the basis measures the relative demand for macro risk protection... and it's at its highest since the chaos of Summer 2012...

Yesterday, to much fanfare, the White House blasted that it was Obama's desire to appoint Allan R. Landon, a Hawaiian community banker, to serve on the Board of Governors of the Federal Reserve System. To wit: "President Obama said, “Allan Landon has the proven experience, judgment and deep knowledge of the financial system to serve at the Federal Reserve during this important time for our economy.  He brings decades of leadership and expertise from various roles, particularly as a community banker.” Apparently what he also brings as Bloomberg's Dawn Kopecki reminds us, is the usual near-criminal cronyism and corruption that we have all grown to love and expect from every single Fed governor in recent history. It turns out in 2005 Landon agreed to step down as SFHLB board member due to the "appearance of impropriety" when he "failed to comply with a rule requiring the disclosure of conflicts of interest by a director."

This should be good... On the same day as the administration pushes through 3% down FHA loans for some insane reason, President Obama is in Michigan to discuss the renaissance of the US Autoo industry (or more correctly described- the rebirth of the subprime lending bubble)...

A tragedy is unfolding in Paris at the moment where armed men stormed the Paris offices of French satirical magazine Charlie Hebdo on Wednesday morning, killing “at least 12 people” and injuring more, said a police officer. As a reminder, it was in November 2011 when the Charlie Hebdo’s headquarters were gutted by fire, hours before a special issue of the weekly featuring the Prophet Muhammad appeared on newsstands. Since then, the weekly moved to a new location, which was guarded by police, who were also shot at Wednesday morning. The shooters opened fire inside the magazine’s offices using automatic AK-47 rifles before fleeing, said the officer, cited by the WSJ. The attackers, described as "a commando with Kalasnikov and pump action... they went in there to kill" are believed to still be at large as France is "in shock" according to its president.

Update: Liberation now backtracking on the arrest report, saying this instead: The Interior Ministry denied the arrest of the suspects, but police sources, it was confirmed their location and identification.

Having managed to escape after their murderous rampage at the Charlie Hebdo offices, some were skeptical if the police would be able to catch the shooting suspects, who were identified minutes ago, alive. Moments ago French newspaper Liberation reported that the three suspects have indeed been arrested: google translated

The three suspects have been identified. This is Said K., born in 1980 in Paris, Sherif K., born in 1982 in Paris and Hamyd M., born in 1996. All three are from Gennevilliers (Hauts-de-Seine). They were reportedly arrested but no official confirmation comes in time for the Interior Ministry.

Note there is no official confirmation from French authorities yet so it is not exactly clear where Liberation is getting its information.

Calls for a decoupling between the Fed's balance sheet and the "market" may have been premature: following the latest selloff, the S&P's "strange attractor" is once again a very old and familiar one: the size of the Fed's assets, which - if only for the time being - have stopped growing. Ironically, those calling for a selloff after the end of QE3 were right, if wrong on the asset class: crude is down 40% since the end of QE3!

"In their discussion of financial market developments, participants observed that movements in asset prices over the intermeeting period appeared to have been importantly influenced by concerns about prospects for foreign economic growth and by associated expectations of monetary policy actions in Europe and Japan."

Moments ago, French Le Point revealed the nationality of the three Paris terrorists: via Bloomberg: PARIS ATTACKERS ARE FRENCH-ALGERIAN, LE POINT SAYS

Le Metro added that two of the three men, aged 18, 32 and 34  were actually born in France. And finally, according to French sources, their names: Said Kouachi, Cherif Kouachi and Hamyd Mourad