Archive - Feb 23, 2015

When the German/Eurogroup decision came to throw either their own biggest banks, or the grandmas of a co-member nation of the currency union under the bus, they didn't even hesitate since they have control over the perfect vehicle for such tasks: the ECB (an allegedly neutral institution that in reality peddles political influence in a way that guarantees the poorer countries will always wind up footing the bill). For those of you who don’t want to wake up one day to find their own grandmas crushed under the same bus the Greek yiayia’s are under as we speak, it would be beneficial to ponder how perverse this all is, not just the isolated events but the entire underlying system that produces them. Banks are more important than people, certainly grandmas.

Because when in doubt how to best start a war, lie.

A recent business innovation that has seen wide market acceptance is the bundling of goods and services. The government bundles its products, too. However, unlike private businesses, the government gives us no choice but to purchase its one “mega-bundle”. From the viewpoint of the state, to not purchase its bundle is considered a crime rather than freedom and comes with punishments that can be extreme. Being forced to purchase the government bundle is decidedly not freedom.

We may all be witnessing the beginning of the end of the European Union. For years, experts have stated that it is unsustainable for Greece to stay in the European Union. For years, those experts have been proven wrong.

The political-financial drama Grexit was greenlighted for a 5th season, as new characters and new narratives have reinvigorated a series that was clearly flagging in mid-2014. Given the sleepy subplots that dominated the 2014 series, industry insiders were anticipating a cancellation. Insiders would neither confirm nor deny the rumor, but they promised a "show unlike any other" this season.

CIA and Netanyahu Busted Hyping Nuclear Threat

We have remarked numerous times, thanks in many cases to the detailed analysis of Nanex LLC, that oil markets (among others) are manipulated or rigged. But, just as Michael Lewis was what equity market participants needed to comprehend what was occurring stocks, so WSJ reports today on 'spoofing' in the oil markets. Spoofing is rapid-fire feinting, which as Tabb group's Matt Simon notes, "raises a question now about whether someone is engaging in legitimate market activity or clear market manipulation." Here's how they do it...

The Eurogroup's apparent 'non-negotiation' stance with Greece reflects one main worry we suspect - conceding to Greece would increase rather than reduce political risk, emboldening the resurgent anti-austerity and anti-euor extremist parties across Europe. With Spain and France seeing 'extremist' parties in the lead, the following chart is likely the one that keeps Dijsselbloem up at night...

Fed Chair Yellen's semi-annual testimony to Congress - 24th to 25th of February 2015

So, while the markets have surged to "all-time highs," the majority of Americans who have little, or no, vested interest in the financial markets have a markedly different view. Currently, mainstream analysts and economists keep hoping with each passing year that this will be the year the economy comes roaring back but each passing year has only led to disappointment. Like Humpty Dumpty, all the Fed stimulus and government support has failed to put the broken financial transmission system back together again. Eventually, the current disconnect between the economy and the markets will merge. Our bet is that such a convergence is not likely to be a pleasant one.

UPDATE: *OPEC SAID TO HAVE NO PLANS FOR EMERGENCY MEETING

Crude oil oprices have spiked higher after The FT reports members of OPEC have discussed holding an emergency meeting if crude continues to slide. This would entirely contradict Saudi Arabia's previous statements and, we suspect, means this was more a hope than a statement as the Nigerian Naira collapses... “Almost all OPEC countries, except perhaps the Arab bloc, are very uncomfortable," said Ms Alison-Madueke, adding if the price "slips any further it is highly likely that I will have to call an extraordinary meeting of Opec in the next six weeks or so."

While the tone may not be as vociferous as historic Syriza MEP Manolis Glezos' recent statements over the Greek 'new deal', the rhetoric of Costas Lapavitsas (newly-elected Syriza MP) blog post is clearly questioning the decision-making of his party's leadership. With regards "our commitment to the Greek people, we have deep concerns," he begins, detailing five major questions that must be answered, perhaps most importantly, "What exactly will change in the next four months of 'extension', so that the new negotiation with our partners to become of better places? What will prevent the deterioration of the political, economic and social situation of the country?"

Speaking at AARP headqusrters in Washington, President Obama will announce orders to the Labor Department to write new rules for financial managers who handle retirement accounts for working Americans. As USA Today reports, The White House says the goal is to end "hidden fees that hurt consumers and back-door payments that help Wall Street brokers," deals that costs retirees billions of dollars in savings. White House officials said they want new fiduciary standards that would require financial advisers to put clients' interests ahead of their own... and "buy our bonds."

Recently, the Baker Hughes Rig Count has become all the rage. The problem is that not all rigs are created equal, and what we see is still a “net” number. We see the net number of rigs that are working. The reality is that some new projects continue to come on line and are very high producing wells, and some of what is being taken away, was either old, or projects that hadn’t yet been contributing production. While many have pointed out that the drop in rig count is not changing production, they are quickly learning the lesson of trying to get a few facts to stand in the way of a good meme, but we think they are about to get listened to... while oil has stabilized, the next leg is likely lower.