Archive - Apr 2013 - Story

The S&P 500 has passed its 10/11/07 high of 1576.09, by a penny (for now)...

For the fourth day in a row, Japanese bond futures markets were halted due to significant (and rapid) price movements. Three of the four halts have been on downside shifts (with the upside surge driven by the BoJ's first attempt at monetization). The daily ranges in longer-dated JGBs are incredible and certainly the last word one would use to describe the quadrillion Yen Japanese bond market since the BoJ's announcement is 'orderly'. As Kyle Bass noted, the volatility in JGBs will be the gauge of the market's qualitative perception that Abenomics can succeed; for now it appears, with longer-dated JGB yields at pre-BoJ levels, having exploded 30-40bps off the lows, and short-dated JGB yields soaring to 11-month highs, things look a little out of control.

Today any lingering doubts that the market is a complete and manipulated farce were put to rest following the epic embarassment that was the early release of FOMC minutes due to what Steve Liesman announced was a leak of the March minutes yesterday to a hundred or so staffers and various lobby organizations, which means the minutes promplty became public knowledge to anyone and everyone connected to Washington, such as all hedge funds, banks, and other financial firms. Everyone, except of course, the general public. Which is why we politely petition the Fed to add us and all of ours readers to the early distribution list for the Minutes and all other releases that are leaked in advance of distribution to the general public. Since we have all given up on any pretense of a "fair and efficient" market, it is only "fair" (at least until such time that Chairman Bernanke decides to finally start throwing €500 and ¥100,000,000,000,000  bills out of helicopters).

We urge readers to make liberal use of the Fed's contact page and request "fair" and equal treatment with those who in the eyes of the Fed are more equal than all others.

Highlights from the pre-leaked minutes, which are along the lines of previous releases, in which there is a hint of an early QE tapering and halt by year end. Here is the key excerpt:

In light of the current review of benefits and costs, one member judged that the pace of purchases should ideally be slowed immediately. A few members felt that the risks and costs of purchases, along with the improved outlook since last fall, would likely make a reduction in the pace of purchases appropriate around midyear, with purchases ending later this year. Several others thought that if the outlook for labor market conditions improved as anticipated, it would probably be appropriate to slow purchases later in the year and to stop them by year-end. Two members indicated that purchases might well continue at the current pace at least through the end of the year.

Algos unsure if this means QE may be ending. The answer, of course, is no. But the Fed is doing everything to gauge market impact to increasingly more ominous and harsh language.

This shocker just hit the tape:

• FED TO RELEASE FOMC MINUTES AT 9 A.M. VS SCHEDULED 2 P.M.
• FED: MINUTES MISTAKENLY SENT EARLY TO CONGRESS, TRADE GROUPS

So the Fed now pre-releases data to US politicians ahead of everyone else. What else does the Fed leak to those for whom frontrunning is still legal? And as if we needed more confirmation, the market is now officially a complete circus.

Ever since Cyprus hit the headlines, Slovenia has been close behind. Another small European nation with a banking system that dwarfs its GDP (though not on the scale of Cyprus). However, as we noted previously, it is not the size that matters, it is the precedent. The European leadership are desperate for the 'template' used in Cyprus - of haircutting all the way through the capital structure - not be used in Slovenia for fear the real world will see through their jawboning facade. Chatter continues that Slovenia can get out of this on their own - in some magical government-guaranteed reacharound - but, just as in Cyprus (where Non-Performing MLoans reaching 30-40% was the trigger for their avalanche), so Slovenia is there now. While the 'average' is around 14% NPLs, the large state-controlled banks had over 30% NPLs at the end of 2012. The need for in excess of EUR1bn in recapitalization alone - though stress test results have been kept secret - and as the FT's op-ed notes, in order to appease global investors' fear that lessons have not been learned, government money (read taxpayer) should not be the first option, creditors should be bailed-in. With Slovenia CDS stuck at six-month wides, it appears the market remains far more nervous either way.

Moments ago BOJ's Kuroda hit the tape with remarks that did not make algos very happy:

• KURODA SAYS BOJ HAS DONE WHAT'S NECESSARY AND POSSIBLE FOR NOW

and yet:

• BOJ'S KURODA PLEDGES ALL NECESSARY STEPS FOR 2% INFLATION
• KURODA SAYS MONETARY POLICY NOT AIMED AT AFFECTING YEN RATE

Algos appear confused: will the BOJ do more to hit the 2% inflation target, or, as the first bullet suggests, is it tapped out? For now, they shoot first and ask questions later, sending the S&P500 carrying USDJPY lower by 60 pips in a matter of milliseconds.

There was a brief period of confusion for a while when Goldman didn't have clear muppet-stomping trades on the book, and those who wished to frontrun the Goldman prop desk (and do the opposite of the muppet flow) were stuck furiously scratching their head. And granted while it's not a "Stolper", tonight we got two gifts (in the parlance of Whitney Tilson) with Goldman first telling its clients to sell gold following Goldman's lowering of its price target for the yellow metal (which as always means the hedge fund known as Goldman is buying what its clients are selling). And then, moments ago, we also learned that Goldman is also selling the 10 Year, which it advise muppets to buy.

• Germany: Europe's... poorest? ECB Survey Puts Southerners on Top in Household Wealth, Germans Near Bottom (WSJ)
• Obama Proposes $3.77 Trillion Budget to Revive Debt Talks (BBG)
• China trade data raise accuracy worries (FT) ... but generates so much laughter
• such as this... China Exports Miss Forecasts as ‘Absurd’ Data Probed (BBG)
• S. Korea Braces for ‘Very High’ Chance of North Missile Test (BBG)
• Slovenia, Spain Warned of ‘Excessive’ Economic Imbalances by EU (BBG)
• G8 foreign ministers meet in London to address Syria, North Korea (Reuters)
• N. Korea Threats Boost First South Korea Rate Cut Odds Since October (BBG)
• China Bird Flu Outbreak May Stem From Numerous Sources (BBG)
• Spain Bailout Less Likely on Lower Funding Costs: Moody’s (BBG)
• BOE’s Haldane: Simplify Bank Rules to Strengthen Them (WSJ)

Now that the 3:30 pm pump has been exposed to the world, and having been priced in and frontran (such as yesterday) it changed to the 3:30 dump, algos are desperately searching for another daily calendar trading opportunity. It appears the opening of Europe and Japan for trading are just these two much needed "fundamental" catalysts. As the charts below show, it appears there is nothing more bullish for the two key carry pairs, the USDJPY and the EURUSD, than Japan opening at 8pm Eastern, and then Europe opening next, at 3:30 am Eastern.

Sometimes you just have to sit back, gaze at some charts, and say WTF...

In the past, I have corresponded with a few survivors of communist despotism, and what I have found is that most if not all immigrants that actually lived in a collectivized state with a disarmed population fight harder to defend the U.S. Constitution than half of the people who were actually born here.  There are a lot of overgrown children in this country today who have NO understanding of the consequences of the path our society has been set on. Some people know.  Some people have lived it.  Some people have experienced the consequences first hand.  And, for anyone with the intelligence to listen, this is what they have to say about gun control and the path to tyranny...

While previous US-offensive campaigns around the world traditionally had a face and pulse, and thus a narrative and an appropriate popular (and populist) reaction, recent years have seen most US military "intervention" devolve to the intangible world of video games: an operator in Nevada controlling predator drones half way around the world with a joystick, and launching bombs and missiles with the push of a button. In the process any aspects of the humanity (or complete lack thereof) of traditional warfare were completely lost, and the US has succeeded in engaging in countless offshore campaigns without a single peep from a population that would otherwise have long since succumbed to war fatigue. Alas, while technological superiority means little risk while imposing Pax Americana (if only in the most underdeveloped defensively nations), it certainly does not mean fewer casualties on the other side. So just to make sure that what is out of sight, is not out of mind, below we present an interactive tracker of all casualties in Pakistani drone strikes since 2004.