Archive - 2015

Despite stressing time and again that the ECB cannot dictate policy within individual nation states in Europe, Reuters reports Draghi's henchmen are playing 'bad cop' to Germany's 'good cop' for now as they threaten the withdrawal of Greek financial system funding if reforms are not carried out post election. Greek stocks are falling once again (led by the banks) and default risk has soared, with 5Y CDS +250bps at 1555bps.

• French policewoman killed in shoot-out, hunt deepens for militant killers (Reuters)
• The Bold Charlie Hebdo Covers the Satirical Magazine Was Not Afraid to Run (BBG)
• Evans Says Fed Shouldn’t Rush Rate Rise as Inflation Undershoots (BBG)
• Oil holds above $51 as traders search for floor (Reuters)
• Gross Helps Fuel New Fund With His Own Cash (WSJ)
• ECB warns Greek funding access hinges on keeping bailout (Reuters)
• Greece Jolts QE Juggernaut as ECB Gauges Deflation Risk (BBG)
• Analysts Say There's No Telling How Low Oil Prices Could Go (BBG)
• Scientists find antibiotic that kills bugs without resistance (Reuters)

Following yesterday's shocking murder of 12 people at the Charlie Hebdo headquarters, there has been much confusion and many rapidly moving parts in the hours that followed as authorities try to catch the two remaining killers, the 32 and 34-year old Kouachi brothers, after earlier the youngest of three French suspects turned himself in to police after, as BFM TV reported, he saw his in social media. The arrest was confirmed by an official at the Paris prosecutor's office said. Several people linked to two other suspected attackers were also in custody, the news agency AFP reported. The manhunt for the two remaining suspects goes on.

After subdued trading in the overnight session until a little after 8pm Eastern, algos went into overdrive just around the time the Fed's 2015 voting member and uberdove Charlie Evans told reporters that "raising rates would be a catastrophe", hinting that the first rate hike would likely be - as usual - pushed back from market expectations of a mid-2015 liftoff cycle into 2016 or beyond (but don't blame the US, it is the "international situation's" fault), in the process punking the latest generation of Eurodollar traders yet again. Whatever the thinking, S&P futures soared on the comments and were higher by just under 20 points at last check even as Crude has failed to pick up and the 10Y is barely changed at 2.00%.

Cry if you want to, but the dollar is stronger.  Deny it if you want to, but the US economy is more vibrant now than the Europe or Japan.   This is what is shaping the investment climate, if you are interested. 

On Sunday, a private company that drills in Texas, WBH Energy LP, and its partners, filed for bankruptcy protection, saying a lender refused to advance more money. There are many more to come.

The structure of history is held together by two essential and distinct kinds of links, two moments in time to which no one is immune: moments of epiphany, and moments of catastrophe. Sometimes, both elements intermingle at the birth of a singular epoch. Men often awaken to understanding in the midst of great crisis; and, invariably, great crises can erupt when men awaken. These are the moments when social gravity vanishes, when the kinetic glue of normalcy melts away, and we begin to see the true foundations of our world, if a foundation exists at all. That time is now...

"If your mother goes to a government-subsidized supermarket and buys two pounds of sugar and three pounds of meat, how many pounds does she have?"

The 114th Congress formally convened yesterday. In what follows, Goldman Sachs presents its views on some of the central questions regarding the political and policy outlook for the coming year. In general, Goldman expects most of the deadlines Congress faces over the coming year to result in only limited uncertainty, though the debt limit increase that will be necessary later in 2015 is the main potential exception. Additionally, they expect legislation to "audit" Fed monetary policy decisions is likely to pass the House again in 2015, but enactment looks less likely.

Chicago Fed's Charlie Evans appears to have decided to flex his voting member status, Bullard-ness this evening. Speaking during a forum in Chicago, after The FOMC Minutes showed data-dependence was the thing... Evans exclaimed "raising rates would be a catastrophe," and that "housing hasn't shown the strength he'd like to see," prompting S&P futures - with the help of USDJPY - to suddenly surge 16 points (and drag WTI Crude futures above $49.50 for fun). Nikkei futures enjoyed the ride ramping 200 points as USDJPY hit 119.70. But, much to the chagrin of the millions of freshly minted retail investors there, Chinese stocks plunged 2.2%... "we love the smell of stability in the Asian morning"

History literally appears to be repeating. The mainstream media and our politicians are promising Americans that everything is going to be okay somehow, and that seems to be good enough for most people. But the signs that another massive financial crisis is on the horizon are everywhere.

Mainstream Media in the US seem to emphasize the positive aspects of the drop in prices. If our only problem were high oil prices, then low oil prices would seem to be a solution. Unfortunately, the problem we are encountering now is extremely low prices. If prices continue at this low level, or go even lower, we are in deep trouble with respect to future oil extraction. The situation is much more worrisome than most people would expect. Even if there are some temporary good effects, they will be more than offset by bad effects, some of which could be very bad indeed. We may be reaching limits of a finite world.

Technology is a great enabler. But it can also be a great disabler ... Cyber and technology risk is another reason to own physical bullion - either in your possession or in an allocated and segregated manner, in the safest vaults, in the safest jurisdictions in the world.

For the first time ever, Italy's unemployment rate is more than twice that of its European Union (one region, one monetary policy) neighbor Germany. As Germany's jobless rate fell for the 3rd month in a row to 6.5% (the lowest level in records going back more than two decades), Italian unemployment unexpectedly rose to a record high at 13.4% (well above the euro-region rate of 11.5%). Of course, while these two nations 'economic' state diverges by the most on record, bond yields are at record lows in both - leaving us (and everyone else) questioning, just what it is that ECB QE will do to help Europe's economies?

"We’ve read a lot of silly articles since oil prices started falling about how U.S. shale plays can break-even at whatever the latest, lowest price of oil happens to be. Doesn’t anyone realize that the investment banks that do the research behind these articles have a vested interest in making people believe that the companies they’ve put billions of dollars into won’t go broke because prices have fallen? This is total propaganda."