Archive - Mar 13, 2015

"We're not just up a creek without a paddle in California, we're losing the creek too... Right now the state has only about one year of water supply left in its reservoirs, and our strategic backup supply, groundwater, is rapidly disappearing. California has no contingency plan for a persistent drought like this one (let alone a 20-plus-year mega-drought), except, apparently, staying in emergency mode and praying for rain."

It's not cheap to fly Air Force One to Hawaii, but the American taxpayer is always willing to subsidize the trip. 

Today's most under the radar news, just as Citigroup was to Congress, and the swaps push out language, so Boeing, that primary recipients of the generosity of America's Export-Import (Ex-Im) Bank, has been caught red-handed drafting the rules of none other than the Ex-Im bank itself! According to the WSJ: "when the Export-Import Bank sought to respond to critics with tighter rules for aircraft sales, it reached out to a company with a vested interest in the outcome: Boeing Co., the biggest beneficiary of the bank’s assistance." Or nothing more than a criminal conflict of interest, which, once again, is at the expense of America's infinite bailout piggybank: it's taxpayers.

And so, a little over a year after the last debt ceiling melodrama, in which the US kicked the can on its maximum borrowing capacity to this Sunday, March 15, in the meantime raking up total US public debt to $18.149 trillion the soap opera with the self-imposed borrowing ceiling on America's "credit card" is back, and the US is once again faced with sad reality of its debt ceiling (now at well over 100% of America's upward revised GDP of $17.7 trillion). Tthe reason: two days from today Congress’s temporary suspension of the debt ceiling, which was approved in February 2014, ends.

The inevitable death of the dollar may have been delayed. The reason is simply that the other three big economies of the world - Japan, China and Europe - are in even more disastrous condition. Worse still, their governments and central banks are actually more clueless than Washington, and are conducting policies that are flat out lunatic - meaning that their faltering economies will be facing even more destructive punishment from policy makers in the days ahead. The current malignant monetary regime does not merely imply that the Wall Street casino is a dangerous place for your money. No, it screams get out of harms’ way. Now!

When the chairman of your company comes on CNBC to defend its reputation and the stock drops 11%... perhaps it's time to reconsider the strategy. Lumber liquidators is plunging lemming-like and Lumber futures are being liquidated at the fastest rate in over a year...

The UK has announced it’s joining the Asian Infrastructure Investment Bank, China’s answer to the Asian Development Bank over which Beijing feels the US has undue influence. US wonders aloud if "constant accommodation" is the best way to engage a "rising power".

For the 14th week in a row, the US rig count fell 67 rigs to 1125, (a 5.6% drop to 41.4%, bigger than March 09's previous record 14-week decline of 41%). The decline in rigs contionues to tyrack the lagged oil price perfectly but has shown absolutely no impact on production levels as firms push for cashflows in a race to the bottom. As one analyst rightly noted, while rig counts continue to drop, companies are high-grading (shifting to more efficient wells), "the real thing that needs to change is U.S. production and that is not happening at the moment." April WTI Crude tested $45.01 before the data and bounced very modestly on the data.

And so the first week of Draghi Open Market Operations (DOMO) ends and while yields have been pushed lower, the benefits of massive money printing are very much skewed to The North and not The South. Spanish sovereign bond risk ended the week unchanged (not exactly the exuberance Draghi hoped for) and Italy only 2bps lower. In equity land, the divergenes were enormous - German stocks soared to new record highs (up 3% this week and 21% year-to-date) as the rest of the majors rose less than 1%. Spanish stocks fell 0.6% but Greek stocks cratered over 9% on the week. Inflation breakevens also fell 6bps on the week...and Europe's VIX rose 0.3 to 18.85... oops.

Central banks' ability to distort markets, inhibit price discovery, and create systemic risk is alive and well as ECB asset purchases ripple through euro money markets. "The ECB’s liquidity bazooka will likely create the conditions for all rates money markets to stay in negative territory. This would represent a very challenging environment for investors, especially those focusing on the euro money markets, whose resilience to negative rates has not fully tested yet," Barclays warns.

The Greek media is ablaze with just what Europe's proposed solution to this issue may be. As Protothema and Capital report, the Troika proposed that Athens halt the payment of salaries and pensions for one to two months. This, according to Europe, would promptly tackle the problem of liquidity and find a solution to Greek problem of how to pay back bailout loan tranches to creditors when suffering from liquidity problems.

Well that escalated quickly...EURUSD has broken the key 1.05 trendline level; and having rallied yesterday on the worst data since Lehman, today it appears some sense of resignation to the fact that The Fed is boxed in to a rate hike no matter what is setting in... and that the exuberant hockey-stick expectations of earnings growth is spiralling the toilet of near cycle lows oil prices. US equity prices have roundtripped most of yesterday's dead-cat-bounce spike with Nasdaq leading the drop and The Dow and S&P are back in the red year-to-date.

"I am not a kook..."