Archive - Feb 2015

Earlier this evening, shortly after take-off from the Taiwanese capital of Taipei, a commercial aircraft with 58 people on board clipped a bridge and crashed into a river. As AP reports, the death count is either 2 (aviation authority) or 3 (Central News Agency) which is simply stunning considering the following unbelievable clip...

Switzerland`s 10-Year Bond Yield is now negative 15 basis points.  Yes even neutral Switzerland`s bond market has been broken...

UPDATE: You know it's getting bad when Abe and Kuroda double-team the confidence-inspiring headlines: KURODA: BOJ'S BOND PURCHASES HAVEN'T FACED PROBLEMS, DON'T THINK JGB LIQUIDITY HAS PARTICULARLY FALLEN

Japanese government bond yields continue to surge. The last 7 days have seen yields on long-dated JGBs soar at the fastest pace since 2003 - accelerating after the most recent (weakest bid-to-cover in 19 months) bond auction. Following the 18th month in a row of negative YoY real cash earnings (1 short of the record 19 months in a row from 2008/9), Japanese bond yields are surging to their highest since early December. Is The BoJ losing control?

Despite having Goldman Sachs CEO Lloyd Blankfein as an investor and being Bill and Hillary Clinton's son-in-law, Marc Mezvinsky (and two former colleagues from Goldman Sachs who manage Eaglevale Partners hedge fund) told investors in a letter sent last week they had been "incorrect" on Greece, helping produce losses for the firm’s main fund during two of the past three years. By 'incorrect' Chelsea Clinton's husband means the Eaglevale fund focused on Greece lost a stunning 48% last year and, as The Wall Street Journal reports, is impacting the overall returns of the roughly $400 million fund which has spent 27 of its 34 months in operation below its "high-water mark."

A new group of soldiers, referred to as "Facebook Warriors" will "wage complex and covert information and subversion campaigns," according to The FT. The 1,500-person troop using Twitter and Facebook as a means to spread disinformation, real war truths, and “false flag” incidents as well as just general intelligence gathering. The 77th battalion will reportedly begin operations in April.

The "big" move in the USD we have witnessed over the last 6 months is only just the start of a major move

On the one hand there is the (self-admitted) persistently over-optimistic Fed saying it's not a big deal:

BULLARD SAYS DOLLAR NOT A HUGE FACTOR FOR U.S. ECONOMY

And on the other hand, this is what actual CEOs are saying...

You know Merkel, Draghi, Dijsselbloem et al. have a problem when... More than one in three Greeks (35%) in 2014 approved of Russia's leadership, while fewer than one in four (23%) approved of the EU's leadership.

The US, like western Europe, is in the midst of a massive failure of its brand of capitalism. There are no free markets, no price discovery, there are asset bubbles being blown with money that belongs to our grandchildren as people are thrown into despair, while others attain unparalleled riches, and the whole grossly distorted movie is fed to everyone by a well-oiled spin machine. Yes, 40 million Americans are on food stamps, 100 million are not even officially in the labor force, and perhaps as much as most Americans are receiving some sort of government assistance, but that doesn’t make it socialism. It makes it a failed capitalist system. Socialism is supposed to be about a society that cares, and that’s not what those US government handouts are about. They’re about keeping people quiet in a failed system.

Two weeks ago we reported that "the next victim of crashing oil prices has been identified: housing", particularly non-residential construction among the energy producing regions, where the capex collapse reality is already being felt far and wide. Eventually, once the overall economy of these same oil producing regions is impacted sufficiently, the pain would spread to residential housing as well, as the energy boom that kept the local economies humming for years, turns to a bust. But while the US patiently, and nervously, awaits the outcome of the crude crash, one place is already starting to suffer the consequences of the price collapse is Canada's energy Mecca, Calgary, where as the Financial Post reports, "the stage has been set for a massive correction in the oilpatch."

"The price plunge is new, but if it is not reversed relatively quickly, it could make the apparently strong economic numbers in the U.S. in recent months seem like a lost warm memory by the middle of 2015. The problem, of course, is that the absence of pro-growth economic policies in the developed world (aside from monetary extremism) places a large premium on any industry that is actually growing and providing jobs and GDP. Given the fragility of both the global financial system and the economy, the plummet in the oil price is coming into a world in which any disruption can be harmful, even one resulting from a fall in prices of a major global input into the economic engine."

"There’s no other way to say this. The official unemployment rate, which cruelly overlooks the suffering of the long-term and often permanently unemployed as well as the depressingly underemployed, amounts to a Big Lie. And it’s a lie that has consequences, because the great American dream is to have a good job, and in recent years, America has failed to deliver that dream more than it has at any time in recent memory. I hear all the time that “unemployment is greatly reduced, but the people aren’t feeling it.” When the media, talking heads, the White House and Wall Street start reporting the truth -- the percent of Americans in good jobs; jobs that are full time and real -- then we will quit wondering why Americans aren’t “feeling” something that doesn’t remotely reflect the reality in their lives. And we will also quit wondering what hollowed out the middle class." -  CEO of Gallup

Two weeks ago, rail freight transportation company CSX's CEO Michael Ward stated 'unequivocally' that as far as the movement of crude by rail he has "not seen any changes," suggesting everything's fine down to $30-35 oil and "expected no impact on crude shipments." It appears he may have been somewhat careful with the truth as Reuters reports, while overall oil-train traffic remains near record highs, the shadowy industry that deals in the specialized 87-tonne crude carriers has seen monthly lease rates plunge to $1,300 late last month from a high of $2,450 about year earlier with the rates at their lowest in about three years. Even worse, railcar construction has surged amid the mal-investment boom exaggerating the over-supply, with one trader noting brokers were offering cars at spot rates of as little as $500 a month compared with $4,000 a year ago.

The following chart from Deutsche Bank illustrates the difference between life under the Classical Gold Standard and today’s “modern” forms of money. For the first four hundred years depicted here, money was gold and silver - the quantity of which rose at roughly the same rate as the human population. Prices during that time fluctuated, but only modestly by today’s standards, and they always returned to more-or-less the same level. In other words, money held its value for not just years but centuries. It was a fixed aspect of the financial environment and was therefore not a tool of economic policy. Governments and individuals had to adapt to unchanging money rather than forcing money to adapt to political circumstances. A phase change occurs in the 20th century when the US created the Federal Reserve and World Wars I and II placed survival above monetary stability for most of Europe and Asia.