Archive - Dec 22, 2013 - Story

UPDATE: 7-day repo is now up 220bps at 980bps - as the "liquidity crisis" is worse than any other seasonal effect on record

How do you "fix" a nations' banking system's increasingly desperate need (and dependence upon) for government-provided liquidity without giving in and just providing all the inflation-stoking liquidity the banks demand? Simple - in China - you ban the media from discussing it. As The FT reports, Chinese propaganda officials have ordered financial journalists and some media outlets to tone down their coverage of a liquidity crunch in the interbank market, in a sign of how worried Beijing is that the turmoil will continue. The censors have warned reporters not to "hype" the multiple-sigma spikes in overnight-funding rates and have forbidden the press from using the Chinese words for "cash crunch."

A new report from UBS finds that renewable energy and energy storage are together presenting a “perfect storm” for big utilities. The declining cost of solar, energy efficiency, and electric vehicle technologies threaten to upend centralized electricity generation, putting the utility business model in jeopardy. Grid parity has already been achieved in certain parts of the world where conventional electricity rates are high and renewable resources are plentiful.

Because there is no more impressive way to mourn celebrate the depression recovery, than to get increasingly more hammered at a 10% Year over Year growth pace.

The notion that individual conviction and bravery is a #MassiveFail when compared to a machine gun nest seems obvious and trite to us today. Strangely enough, though, when it comes to prevalent notions of market behavior it feels like we’re still in 1936. What I mean is that there is still a dominant belief in individual decision-making as the most effective route to successful investing, that if we could just learn a little bit more about Company X or Sector Y we will win the day. Is your individual knowledge and conviction level in Company X important for investing success? Absolutely, in exactly the same way that physical and psychological bravery is important for war-fighting success. Still more important, though, is the strength and cohesion of the groups that share your investment philosophy. Not your specific investment opinions, any more than one soldier has the same amount and type of instantiated bravery as another soldier in his unit, but the coherence of investment goals and operational practices across your fellow market participants in a particular market segment.

The last time China's birdflu epidemic dominated the ether, and internet, was in April, when news of numerous casualties led many to believe that the epidemic was on the verge of breaching all local containment measures. And then, suddenly, all media coverage of China's H7N9 story disappeared as if by Department of Truth (and propaganda) magic. Naturally, the quick popular response was to assume that all was again well since the government no longer made it a notable topic - just like the Japanese government did with Fukushima. However, as in the case of Fukushima, it turns out all may not have been well. As Japan's NHK reports, H7N9 bird flu strain is once again spreading in southern China, claiming the 148th victim of the vicious flu virus. Or perhaps instead of "once again" it was simply "constantly."

Unlike stocks, which see rising prices met with apparently rising demand, it appears the natural laws of supply and (lack of) demand have come to weigh on Alan Greenspan's latest un-mea-culpa. As we noted previously, even at a steeply deflationary 40% off, The Map and The Territory seems 'expensive' and for once, the maestro is unable to blow a bubble in this particular "asset's" value.

Just shy of the new year, financial markets continue to be dominated by the extent of monetary accommodation. Especially in major advanced economies, bonds and stocks have shrugged off the summer sell-off and posted gains on the view that low policy rates and large-scale asset purchases would persist longer. Much attention has been given to the hope of a strengthening in the U.S. economy. In Abe Gulkowitz' latest The PunchLine letter, he highlights the key elements from a very slowly improving labor market to the amazing moves in asset markets with 'all the charts you can eat' in between. The unnatural easing stance, though necessary, spurred an aberrant demand for assets in the riskier end of the spectrum. By and large, such assets have so far lived up to their promise. The new year may again challenge that assumption as the likelihood of unlikely events rises.

Massachusetts State police have seized more than 1200 packets of heroin following a traffic stop in the town of Hatfield. CNN reports three people face charges of conspiracy to violate drug laws and possession charges; but in an effort to distinguish their particular 'brand' of addictive chemical, the providers labeled the stash 'Obamacare'. As the police note, "It's just a branding so you can say if this brand is good or bad." - we wonder which?

Presented with absolutely no "be careful what you wish for" comments...

Compare and contrast.

CNN’s Jake Tapper: "I think the American people, honestly, want security over freedom."
Benjamin Franklin: "Any society that would give up a little liberty to gain a little security will deserve neither and lose both."

That right there demonstrates perfectly how far we have fallen culturally.

As we discussed recently, the collapse in the term structure of the US Treasury bond market was/is dramatic to say the least in the last few days. While the world and their asset-gathering mainstream-media strategist 'knows' rates are going higher, BofAML's Macneil Curry warns of the term structure "don't lose sight of the bigger picture" as a break of the rising channel suggests 5s30s could drop dramatically further (and with it all hope of NIM-based levitation to financials).

There was a time in America when retail brawls only broke out around Thanksgiving dinner time (and increasingly earlier with every passing year). It appears that's no longer the case as the recent release of the Air Jordan 11s reveals. USA Today reports that following the release of Jordan 11 Retro Gamma Blue sneakers on Saturday, "the nation just about fell apart." One week ago, a crowd tore down a mall door just to get an advance ticket to buy the $185 Jordans. With the shoes now officially on sale, the world appears to be ending.

That yet another major retailer was hacked, as happened last week when Target announced that as many as 40 million credit and debit cards used from November 27 until December 15 at its stores  (one wonders why it took the retailer three weeks to realize/announce what was happening) had been "compromised", is no surprise. What was a big surprise is the action one major financial company took in response to the mega hack. The company in question was JPMorgan, and what it did was to tell customers whose debit cards had been used at Target stores during the period in question, that it was limiting use of their cards to cash withdrawals of $100 and purchases to $300 per day. However, what is perhaps most surprising is the sheer number of cards with spending caps: The new limit effects roughly 2 million accounts, or roughly 10% of Chase debit card accounts, according to a bank spokeswoman.

Compare and contrast.

CNN’s Jake Tapper: "I think the American people, honestly, want security over freedom."
Benjamin Franklin: "Any society that would give up a little liberty to gain a little security will deserve neither and lose both."

That right there demonstrates perfectly how far we have fallen culturally.