Archive - Mar 2015

UPDATE: *PRESIDENT OF YEMEN SAID TO HAVE LEFT THE COUNTRY ON BOAT FROM ADEN, AP SAYS

The countdown for yet another proxy war, this time involving Iran and Saudi Arabia, has begun.

Presented with no comment...

Four and a half years after Brazil's FinMin Guido Mantega first re-introduced the world to the term "currency wars," it appears the Brazilians have admitted defeat. Amid what Goldman calls a sharp decline in consumer confidence - to the lowest level in series history - which could also extend the ongoing macroeconomic adjustment processes and therefore delay the recovery of the economy; Brazil's central bank has announced that it will no longer intervene to support the Real via its Dollar-Swap program. In a SNB2.0-esque move, though somewhat anticipated by the market, Brazil enables the devaluation that has occurred to perhaps extend (improving competitiveness) and removing what was becoming a notable fiscal drag. Implicitly, Brazil just followed the Swiss and admitted defeat in the global currency war...

“Government can have no more than two legitimate purposes,” wrote the 18th-century English political philosopher William Godwin, “the suppression of injustice against individuals within the community and the common defense against external invasion.” But the US system of government – nourished by the almost unlimited credit that its money gives it – has swelled to a shape that would have been grotesque and unrecognizable to Godwin. To those who still maintain some romantic attachment to the ideals of the American Revolution, it is merely repulsive.

With The ECB banning Greek banks from continuing the GGB-buying ponzi scheme, the banking system in deposit outflow panic, cash running extremely dry, food shortages building, and bond/loan payments looming, Greek celebrations of Independence Day today are likely tempered by European officials coin-tossing over the nation's future (in or out of the EU). 196 years after winning their sovereignty from The Ottoman Empire, one wonders if The Greeks have the ability to fight their sovereignty back from "The Institutions." Perhaps, in the future, The Greeks will mourn "In Dependence" Day as opposed to celebrating "Independence" Day...

Correlation is not causation but the plunge began just as The SEC voted in favor of high-speed trading firms being registered with FINRA...

Fifth ramp in 5 days takes WTI crude back above $49 for the first time in 2 weeks... on the heels of record production, record streak of inventory builds, and record inventory at Cushing. The 1Y spread has compressed to 2-month lows...

Does it really take purportedly intelligent people six years to see that the macros are not responding? Better still, isn’t it time for the Fed to explain the exact channel by which its interest rate pegging and forward guidance is supposed to be transmitted to the main street economy? After all, if these channels are blocked or ineffective - then its flood of liquidity never leaves the canyons of Wall Street. In that event, the central bank actually functions as a financial doomsday machine, inflating the next financial bubble until it bursts. Then, apparently, its job is to rinse and repeat.

And how it works...

Back in 2010, a panel of Financial Times "experts" was asked to rank Europe's finance ministers. Nineteen European finance ministers were judged. Greece's then finance minister George Papaconstantinou was found to have the best political skills among the 19 EU ministers and got an over 8th rank overall. Specifically, as Keep Talking Greece reported then, the FT said Papaconstantinou  had "the best political skills after displaying “panache” in his handling of the country’s economic crisis." That was then, this is now: Yesterday a special court found him guilty of fabricating a Swiss bank account document and  handed him a one-year suspended prison sentence.

From almost 2.5% GDP growth expectations in February, The Atlanta Fed's GDPNow model has now collapsed its estimates of Q1 GDP growth to just 0.2% - plunging from +1.4% just 2 weeks ago. The reality of plunging capex and no decoupling is starting to rear its ugly head in the hard data and as the sun warms things up, weather will start to lose its ability to sway sentiment. While sell-side consensus has dropped (Goldman, Morgan Stanley, and Barclays all cut today following Durable goods), it remains unable to quite accept the reality of massively weaker than expected macro data evident everywhere (except in the soft-survey PMI data).

The markets are primed for a very serious correction… possibly even a Crash.

Banks have reclassified a quarter trillion in assets in order to avoid the negative effects of an impending rate hike cycle. In the end, investors would be wise to remember that something is only worth what someone is willing to pay you for it. 

Dollar dumpage is trumping fun-durr-mentals once again as WTI crude surges back to the highs of the day after its post-inventories plunge... The Algo correlation trades are all breaking down as carry comes undone...