Archive - Apr 17, 2015

We need to consider the Cyprus “bail-in” and its implications. The reason for this is that this tiny country has provided the world with a template of what is eventually going to be a global phenomenon.

Rig counts fell for a record 19th week in a row. Total rigs dropped 34 to 954 and oil rigs dropped 26 to 374. This means the total rig count drop is now greater than 50% - the fastest drop since 1986. Crude prices had slid into the rig count announcement and popped afterwards.

The severe limitation of human robot jobs is that they rarely offer much opportunity to learn a wide variety of skills--precisely what enables us to create more value with our labor.

Apple's market capitalization of $730 billion may now be more than double that of Exxon Mobil, but when it comes to taxes paid to the US government, it's no contest: the company with record profitability that so many progressive hipsters adore and for whose products they line up with annual regularity is billions of dollars below its "fair" contribution to the US Treasury. Ironically, it is eclipsed by that other company that so many progressives love to hate: Exxon Mobil, which paid $4 billion more in tax than Apple, yet whose valuation has been cut by 15% over the past year as a result of the collapse in oil prices.

President Obama and Italian PM Matteo Renzi have been deep in discussion for minutes... here's the press conference...

Anthrax Was As Important As 9/11 In "Justifying" the War on Terror, the Iraq War, and the Patriot Act

As Grexit contagion spreads so European peripheral bond risk has surged. Portuguese, Italian, and Spanish risk has increased by the most since May 2010. It appears that the hope of "containment" in Europe via Q€ purchases is overwhelmed by the outflows - this was extremely evident in German markets today that saw 'someone' selling both bonds & stocks as Grexit fears rose. European stocks were all battered - the worst week of the year - with Germany worst as European VIX soared 5 to 25.05 - its biggest jump in 4 months.

In order to maintain a grip on market share by pushing U.S. shale producers out of the market, Saudi Arabia (and OPEC) is willing to use up its spare capacity. That could lead to a price spike.

Wall Street turns junk-rated US corporate loans into highly rated yen-denominated bonds. Desperate Japanese pension funds gobble them up. Blame the Bank of Japan.

Sentiment in general remains poor and all the focus is on gold's weakness in dollar terms, despite gold's strong gains in euro terms in 2014 and so far in 2015. Poor sentiment is of course bullish from a contrarian perspective and suggests all the froth has been washed out of the gold market.

"Service has been fully restored. We experienced a combination of hardware and software failures in the network, which caused an excessive volume of network traffic. This led to customer disconnections as a result of the machines being overwhelmed. We discovered the root cause quickly, isolated the faulty hardware, and restarted the software. We are reviewing our multiple redundant systems, which failed to prevent this disruption."

Greek FinMin Varoufakis is meeting sovereign debt lawyer Lee Buchheit today, the ‘fairy godmother to finance ministers in distress’... The big questions concern not just the difference between on the one hand, economic issues and on the other, political ones. Syriza doesn’t have the mandate to take Greece out of the eurozone. That is a huge point. But neither does it have the mandate to give in to the troika’s insistence on pensions cuts. At a certain moment, it may come down to what can be explained to the Greek people, and how well it can be explained. This explanation will almost certainly have to come after the fact, since holding a referendum pre-Grexit would carry far too much potential risk of uncontrolled demolition of the entire Greek economy and banking system.

In 2010, contrary to nearly every pundit, analyst and economist popularly published, I proclaimed ZIRP would starve the banks. Fast forward 5 years and banks are looking famished and things are getting worse 'casue more bailouts are coming before we finish ending the last bailout program (ZIRP) - The Federal Reserve has decided to let U.S. banks make limited use of municipal bonds to meet liquidity requirements

• 2010: The first full year of the recovery was a growth recession with a collapse in inventories (after the restocking was complete), and continued private sector deleveraging.
• 2011: There were a series of events, including the Japanese tsunami, spike in oil prices and US debt downgrade by S&P.
• 2012: The crisis in the Eurozone intensified with concerns over a Greek exit and a breakup of the Eurozone. The policy response abroad was lackluster and there were concerns of another financial crisis.
• 2013: The combination of the sequester, debt ceiling fight and government shutdown created an environment of heightened uncertainty and fiscal restraint.
• 2014: The polar vortex delayed economic activity and led to a permanent loss of growth.
• 2015: Rapid appreciation of the dollar and heightened uncertainty about the winners and losers from plunging oil prices has hurt growth. A small part of the weakness may be related to the weather and the dock strike.

DAX is plunging this morning, hitting news lows for the day, as the last 2 days have been the biggest drop in the Q€-juiced index since mid-December. At the same time, 10Y Bunds are seeing yields collapse to as low as 4.9bps...