Archive - Apr 10, 2015

"A small bubble is something that can be contained. If recent stock gains are signs of a mini-bubble, this is something I would welcome," Japan's Economics Minister says, just as the Nikkei touches fresh highs. And while we thought bubbles were inherently dangerous in any size, we also mistakenly thought the BoJ's multi-trillion yen ETF portfolio could fairly be classified as "large".

While the deal to discuss the deal that may or may not become a deal in June is still lingering in the news cycle, it seems Iran (fresh from its demands for complete sanctions lifting) is comfortable with some sabre-rattling. As the Washington Times reports, citing U.S. Army analysis, Iran’s army is creating military explosive-mounted killer drones, increasing the risk for Israeli and U.S. ships in the Gulf. So while all eyes are firmly focused on the threat of nukes, the US military reports states that "no aspect of Iran’s overt military program has seen as much development over the past decade as Iranian unmanned aerial vehicles.. promises to make American operations in both the Persian Gulf and Gulf Aden [at the Red Sea] more complicated."

For years now we’ve been listening to market cheerleaders like Steve Liesman, Tom Lee and Brian Belski give us their rendition of Little Orphan Annie’s “Tomorrow, tomorrow, the sun will come out tomorrow” but at a certain point the financial engineering runs out of time. But what if it didn't? Today, whether you look at the consumer, the producer, the worker or the borrower - they are all getting sicker.

Having demanded EUR 278.7 billion from Germany for WWII reparations, which was quickly eschewed by Germany, Greece has decided to up the ante. As KeepTalkingGreece reports, Greek Defense Ministry has published a video with rare footage from the occupation of Greece by the Nazis during the World War II. Among others, the footage shows children suffering from malnutrition and emaciated adults, victims of the Great Famine during the Nazi occupation. The video is designed to provide context for the huge claim and the video voice-over states that the Enforced Loan by the Nazis was to blame for the mass starvation of estimated 300,000 people in Athens alone, “Greece lost 13% of its population during the WWII. One part was lost in the battlefield, but the largest part due to Famine and the Nazis’ atrocities.”

Everything is awesome and volatility-less... VIX has broken back below the crucial 13 level (trading 12.94) as US equities v-shaped-recover from opening weakness leaving The Dow up 450 points (topping 18,000) from the post-payrolls pessimism... as we overheard on CNBC this morning, "the worst earnings season in 6 years is a buying opportunity."

When You See It ...

In a note today, Bank of America economists (after looking at weather data) admit their finding "puts us in an awkward spot today." What did it find? Namely that all those who reran that 2014 playbook, Ethan Harris and other Bank of America economists included, and decided to blame the weather for Q1 GDP crashing from over 3% to under 1%, are wrong or simply lying.

We've heard from uber-dove 'good cop' Kocherlakota (demanding moar QE), Dudley's admission of Dow-data-dependence, and now its Jeff 'bad cop' Lacker's turn to stir things up. Speaking to reporters this morning, lacker explained that recent economic weakness is "transitory" due to weather, and that the FOMC Minutes, despite economists' spin, show substantial support for a June rate hike. Markets are unmoved (for now).

Centrally issued money centralizes wealth and generates systemic inequality. This is equally true of all centrally issued currencies.  But the inequity that is intrinsic to this system is politically, socially and financially destabilizing, and so this system is unsustainable.

“If a guy runs, officers will chase him. But you can’t just shoot a guy"...

Historically, both times stocks registered similar readings, the markets plunged 50%-90% in the next two years.

Back in April 2013, Apple shocked the world when in a dramatic U-turn to Steve Jobs beliefs, it announced what was "the largest single share repurchase authorization in history" when it boosted its share repurchase authorization to $60 billion from $10 billion. Today, GE did its best to match this number, when it reported that as part of a massive business restructuring, it announced a "new Board authorization of up to $50B buyback." This is how it will fund it.

The monetary gun is shot and the Fed is out of ammo with little options should we have a new recession or a new financial crisis - both of which seem increasingly likely.

Gold prices jumped overnight on initial rumors and again in the last hour as Indian officials note that March Gold imports surged to 125 tons (more than double last March's 60 tons). As Reuters reports, Gold imports in the fiscal year 2014/15 ended March 31 jumped to 900 tonnes, up 36% from a year ago. Surging imports are helped by a falling price since the beginning of the year combined with the relaxation of government (capital control) import restrictions, and despite further efforts by the government to "monetize gold."