Archive - Jun 2013 - Story

Presented with little comment - aside to note the entirely news and fundamentals driven ramp in US equities has an odd correlation with the smash in AUDJPY... (and it's Tuesday and a POMO).  Or maybe it was none of the above, and it was just select Reuters clients reacting to the very early leak of the University of Phoenix Consumer Spying index, which will have just hit a record high when it is released to the broader public in due course...

The Greek recovery (whose GDP recently plunged to year 2000 levels) is progressing as expected, however following the latest news out of the Fourth world country that its national broadcaster ERT, with 2800 employees, will be shut down, it may no longer be televized. There is hope though: following its shutdown, it will be reopened... eventually...  following a substantial downsizing. It is not clear why ERT had to be shutdown just to fire a few hundred people, although union rules are likely implicated. It is also not clear how long until the process is completed. What is clear is that the local workers are unhappy and have already resorted to that favorite Greek pastime: protesting. But at least they have the Euro.

As trade sanctions rise, ghost cities crumble, shadow banking surges, and the PBOC loses control of the most centrally-planned economy in the world amid their own version of 'peak debt', it appears yet another pillar of the China-is-the-world's-growth-engine meme is crumbling. As Manpower recently reported, the belief in a mass 'urbanization' dream is absolutely not occurring. In fact, based on the following charts of various industry employment outlook levels, things are going the other way. How does 'ruralization' play into the 'if we build it' thesis?

One look at the airplane traffic map below should be enough to convey which socialist European country has a just started a 3-day air traffic controller strike. Sure enough, as a result of the French ATC union demands for 'fairness', i.e., an elimination in the "unprecedented" cost-cutting plan, the eastern air border of France now looks like the 405 Freeway during rush hour.

In the last 24 hours, sales of the 'big brother' book 1984 on Amazon.com have soared by almost 7000% as the reality of the surveillance state come to the public's attention. As Liberty Blitzkrieg's Mike Krieger notes, we suppose it makes sense that people would want to get up to speed on the dystopian world being constructed rapidly and secretly around them. 1984 is now the 4th fastest rising sales book and 184th most popular on Amazon!

The first Booz Allen official press release resulting from the Snowden fallout hit just over two hours after the Guardian revealed his identity. Now, Booz Allen has released a follow up press release, this time apparently emphasizing that the employee is now terminated (we guessed as much), and amusingly, that his salary was $122,000. Supposedly this is to discredit the self-reported account that Snowden's salary was $200,000. Frankly, we find it surprising that the NSA has not yet leaked Edward's full confidential dossier, including by what age his bed-wetting habit was successfully contained. Because all is fair in covert ops war and character assassination.

Whether or not this is a direct result of the Snowden whistleblower affair is unclear, but the following BLS job posting just hit the tape. In brief: suddenly the Bureau of [insert favorite L and S words here] is just a little concerned about the "proper security and unauthorized disclosure" of its data and making sure it is not "vulnerable to purposeful denial-of-access or alteration by unauthorized persons." So we wonder: will the next whistleblower to emerge be from the BLS, and just what tidbits of ARIMA-X-12 "seasonal adjustments" will they unleash upon the world? We are confident at least one of our computer savvy, if temporarily unemployed readers, would be delighted to provide their skillset to the BLS.

Just one month after we discussed ArcelorMittal's 'demand' that Europe seek sanctions against China's steel tariffs (following unfair 'tit-for-tat-wine' Chinese trade practices, after EU solar panel tariffs), Reuters reports that the EU is indeed to press the WTO to rule against Chinese duties on imported steel. While history never repeats, it merely rhymes, this episodic collapse in economies, markets, and trade is now showing signs of the same desperation as during the Great Depression as intervention, devaluation, and now protectionism are brought to bear to save the domestic economy at all costs. The EU joins Japan in this rapidly escalating trade war with Beijing as they believe "retaliation by the Chinese is now recognized," something not allowed under WTO rules, "and so they have a good chance to win." This will not help either trade relations with the world's 'growth' engine or the credit-crunched nation's massive glut of commodities (and commodity-backed credit lines).

It appears the cracks in the armor of the central bankers created by an over-enthusiastic BoJ's impact on the quadrillion JPY JGB markets are now rippling through the global market place. While every talking head that dares to speak has proclaimed the weakness in bonds as nirvana for equity bulls, it seems they were wrong, very wrong. As bond market tremors ignite everywhere, so equity markets come a little unglued at the prospect that the Fed, ECB, BoJ, and PBOC may not be so omnipotent after all...

Moments ago, the following headline hit the tape:

ASMUSSEN SAYS ECB HASN'T SEEN NEED TO PUBLISH OMT LEGAL TEXT

That's right: the ECB is trying to get the German Constitutional court to pass the OMT (i.e., On Merkel's Tab) bond purchasing program, and yet there still is no legal term sheet. The photo below captures the reaction by the Karlsruhe Kardinals upon hearing this unmitigated idiocy.

Starting today, and continuing through tomorrow, the German Federal Constitutional Court (FCC) will consider the legality and conformability of the European Stability Mechanism (ESM) and the ECB’s Outright Monetary Transaction programme (OMT) in particular. What does the press expect will be the outcome of the FCC's deliberations (spoiler alert: nobody will dare to threaten Deutsche Bank's towering mountain of derivatives, all $56 trillion of them, but let's pretend it is exciting). Here is a brief recap via Bruegel Think Tank.

Over a week into "Occupy Taksim", the Turkish situation is nowhere near resolution. In fact, judging by the capital markets response to news that hundreds of police stormed Taksim Square this morning using tear gas to disperse protesters, where the lira declined overnight to the weakest level since December 2011, bond yields dropped 29 bps, Turkish CDS rose wider than Russia, and where even the central bank has warned it may start engaging in tightening operations, things are going to get much worse. Finally, a big demonstration is due in a few hours: will Taksim Square June 2013 be the "Waddel and Reed/May 2010" Syntagma Square flash crash equivalent? Find out shortly.

• Citigroup Facing $7 Billion Currency Hit on Dollar, Peabody Says (BBG)
• World has 10 years of shale oil, reports US (FT)
• ECB prepares to defend monetary policy in German court (FT)
• European Stocks Sink to Seven-Week Low as Treasuries Fall (BBG)
• Fitch warns on risks from shadow banking in China (Reuters)
• Obama administration to drop limits on morning-after pill (Reuters)
• ACLU asks spy court to release secret rulings in response to leaks (MSNBC)
• SEC Nets Win in 'Naked Short' Case (WSJ)
• SoftBank Raises Offer for Sprint to $21.6 Billion (WSJ)
• Chinese rocket launch marks giant leap towards space station (FT)

Overnight, following the disappointing BOJ announcement which contained none of the Goldman-expected "buy thesis" elements in it, things started going rapidly out of control, and culminated with the USDJPY plunging from 99 to under 96.50 as of minutes ago, which was the equivalent of a 2.3% jump in the Yen, the currency's biggest surge in over three years. Adding insult to injury was finance ministry official Eisuke Sakakibara who said that further weakening of yen "not likely" at the moment, that the currency will hover around 100 (or surge as the case may be) and that 2% inflation is "a dream." Bottom line, NKY225 futures have had one of their trademark 700 points swing days, and are back knocking on the 12-handle door. Once again, the muppets have been slain. Golf clap Goldman.

UPDATE: Nikkei futures now -500 from US day-session highs

In what must be quite a surprise to Goldman (as we discussed here), the BoJ has decided not to give in to the market's demands:

*BOJ REFRAINS FROM EXPANDING J-REIT, ETF PURCHASES (expected lifting of cap)
*BOJ LEAVES FUNDING TERMS UNCHANGED AFTER JGB YIELD VOLATILITY (expected extension from 1Y to 2Y)

The market's angry reaction... NKY -400 from US day-session highs, USDJPY gapped down 80 pips to 98.00, JGB Futs closed, JGBs unch. Full statement to follow: