Archive - May 2015

As Japanese markets re-open after Golden Week, the bond market is extremely active (which in itself is unusual given its total lack of liquidity). Playing catch up to the rest of the world's igniting bond markets, 10Y JGB yields are up over 6bps (and even the 20Y is trading). The last few days have seen yields spike from 28bps to 43bps - a colossal move only seen before in May 2013 (after the initial euphoria of QQE).

"If you want to hear the details of the Trans-Pacific Partnership trade deal the Obama administration is hoping to pass, you’ve got to be a member of Congress, and you’ve got to go to classified briefings and leave your staff and cellphone at the door. If you’re a member who wants to read the text, you’ve got to go to a room in the basement of the Capitol Visitor Center and be handed it one section at a time, watched over as you read, and forced to hand over any notes you make before leaving. And no matter what, you can’t discuss the details of what you’ve read."

As a result of constant jawboning that the PBOC may not only cut rates even more but proceed to launch QE (which it will ultimately, just not for a while), both the Shanghai Composite has been trading at multi-year highs and oil has found a bid strong enough that in the past two months it has surged by some 50% on hopes that Chinese demand will finally come back once the local economy is so weak it leaves the PBOC no other choice. However, two things suggest that the great "reflation" trade is ending.

Since 2012, there’s been an unprecedented call from foreign nations to repatriate their gold from Federal Reserve vaults in the U.S. This is an incredible development given many countries’ 71-year reliance on the Fed as a custodian for their bullion. Something huge must of happened in the last few years to prompt such action. That something may be a break in foreign gold holders’ trust in the Fed as a custodian of their precious metals.

The FBI provided "aerial support" to the Baltimore Police Department during last month's riots, The Washington Post reports. The operation, uncovered accidentally by a man sitting in his backyard and one of his Twitter followers, involved two small planes flying "precise formations" over West Baltimore over the course of three nights. Did Ohio-based Persistent Surveillance Systems provide the 'eye in the sky'?

The U.S. Commodity Futures Trading Commission (CFTC) today announced the filing of a civil enforcement action in the U.S. District Court for the Southern District of New York against Heet Khara and Nasim Salim, residents of the United Arab Emirates.  According to the CFTC’s Complaint, Defendants engaged in unlawful disruptive trading practices known as “spoofing” in the gold and silver futures markets by placing bids and offers with the intent to cancel them before execution.

By going after Ripple (a major player in the industry), FinCEN is trying to scare all the smaller players into ratting out their customers. You don’t see rich, stable countries doing this sort of thing. In fact, the exact opposite. An official from HK Treasury recently stated that: “the Government does not consider it necessary to introduce at the moment new legislation to regulate trading in such virtual commodities or prohibit people from participating in such activities.”

While The Fed and its apologists (except for Jim Bullard) remain firmly attached to the idea that it is the 'stock' (or absolute level) of Fed Assets that represents the amount of policy-easement and not the 'flow' (rate of change), we have explained numerous times that this is complete rubbish. With the Federal Reserve balance sheet hitting 6-month lows this week, we thought the following 4 pictures would paint more than a thousand words on why The Fed will need to restart the flow soon... or the game is up.

There is a practical benefit to shifting our attention away from the stock market. Any market that can yo-yo 10% within a day for no apparent reason, or undergo multiple booms and busts in a 20 year period should not be given too much credibility. The wealth-effect on the way up always turns into the wealth-destruction effect on the way down.

The Intelligence Apparatus No Longer Protects Our Country From Terrorism … We Need Fresh Legs

"Austerity is broken and has failed... Moreover, today’s short-term crisis management, which merely moves from one payment to the next, needs to stop... Future reforms should no longer target ordinary citizens, but above all the wealthy and the profiteers of 'nepotism'."

While many hoped that Lockhart would play good cop to Yellen's bad cop, he didn't:

*LOCKHART SAYS MARKET'S VIEW FOR SEPTEMBER HIKE 'REASONABLE'

Which has sent stocks reeling back to the levels pre-payrolls in April.

Twitter had a very bad last week when its stock tanked ~ 27% in 5 trading days.