Archive - 2013 - Story

While the good times are about to end for the Japanese Bond Market (as shown in yesterday in Counting Down To Japan's D-Day In Two Charts), the reality is that anyone who bet on an surge in Japanese bond yields in the past few years has been carted out feet first. Which is also why shorting the Japanese bond market has been widely known as the "Widowmaker" trade in the investing community. However, according to Charles Gave, another "Widowmaker" has emerged in the past year: "It looks like the euro is competing to grab title for itself. Many traders have been shorting the currency, with poor results so far."

Instead of kicking the can and maintaining the zombie nation, Iceland ripped its over-levered bank-based-debacle band-aid off and has slowly but surely emerged from its own crisis (notwithstanding capital controls and pain for many) unlike the rest of the Western world which has reverted to the mean of ignorance and status quo. Now, however, The Guardian reports Iceland has one more lesson to teach the world - an Icelandic court has sentenced four former Kaupthing bankers to jail for market abuses. Instead of fining the banks (in nothing more than a cost-of-doing-business line item), there are real consequences for the actors involved...

In the aftermath of a series of "better than expected", and thus "taper on" economic data, there is just one wildcard remaining for the Fed: inflation, or rather the lack thereof. And while next week's CPI report will be very closely watched in this regard, producer prices also provide a glimpse into pricing pressures and resource slack. And judging by the just announced -0.1% drop in finished goods producer prices in the month of November, below the 0.0% expected if up from last month's -0.2%, which happens to be the third consecutive decline in overall PPI, a first in the past year, the Fed's December taper decision just got even more complicated. Looking into the components, core PPI rose by the tiniest possible fraction, or 0.1%, in line with expectations, while it was energy prices that dipped 0.4%, pulling the overall number lower with the BLS noting that home heating oil's 5.7% decline was among the key culprits for the drop. Food producer prices were unchanged for the month, with higher prices for pork offset by lower prices for processed young chickens.

Presented with no comment (because, quite frankly, none is needed...)

• Presidential Task Force Recommends Overhaul of NSA Surveillance Tactics (WSJ)
• Monte Paschi's Largest Shareholder Says It Will Vote Against $4.1 Billion Capital Increase (WSJ)
• SAC Reconsiders Industry Relationships—and Its Name (WSJ)
• Icahn’s Apple Push Criticized by Calpers as ‘Johnny Come Lately’  (BBG)
• In Yemen, al Qaeda gains sympathy amid U.S. drone strikes (Reuters)
• Missing American in Iran was on unapproved mission (AP)
• In China, Western Companies Cut Jobs as Growth Ebbs (WSJ)
• U.S. lays out steps to smooth Obamacare coverage for January (Reuters)
• Las Vegas Sands Said to Drop $35 Billion Spanish Casino Proposal (BBG)
• Twitter Reverts Changes To Blocking Functionality After Strong Negative User Feedback (TechCrunch)

While the generic overnight futures meltup is present this morning, it is nothing compared to what the epic surge in the EURJPY early in the overnight session suggested it would be, and in fact the levitation in US equities driven as usual by Yen carry trades (just what is the P/E or PEG on the USDJPY, or the EURUSD for that matter?) is far more muted than seen in recent days. The main reason for the easing of the carry-risk signal pair is the increasing confusion over what may happen next week when increasingly more are convinced Bernanke will announce a Taper, and since everyone remembers the summer very vividly, the last thing anyone wants is to be the last Kool-aid drinker at the centrally-planned party.

The IMF just dropped another bombshell. After it recently suggested a “one-off capital levy” – a one-time tax on private wealth as an exceptional measure to restore debt sustainability across insolvent countries – it has now called for “revenue-maximizing top income tax rates”. The IMF’s team of monkeys has been working around the clock on this one, figuring that developed nations can increase their overall tax revenue by increasing tax rates. They’ve singled out the US, suggesting that the US government could maximize its tax revenue by increasing tax brackets to as high as 71%.

Meet Mike Caldwell. He is the maker of what seems to be the most popular physical bitcoins on the market, the Casascius coin. All Mr. Caldwell does is have people who want the coins produced send him a certain quantity of bitcoin and then for a $50 fee he puts the private key on a physical coin and sends them back. For this horrible crime of ingenuity and creativity, the U.S. government naturally, has decided to target him. Because they are too busy ignoring the real financial crimes happening out out there…

Perhaps not so United States?

Economic history is pockmarked with policies instigated with the full intention of improving economic performance which have eventually turned out to do real damage. From the Napoleonic Wars to Weimar and up to the present day gold standards and Keynesianism, Deutsche's Jim Reid notes all too often economic institutions allow themselves to be stuck in intellectual cul-de-sacs at their peril. Such a risk appears alive and well today in the halls of the Federal Reserve. The outlook for tapering is mired in a continuing war between an institutional framework which sees QE as an emergency measure that has gone on far longer then was desired and an economy whose self-sustaining momentum is far from secure. The following statements from the FOMC members shows the tight-rope of uncertainty they are treading...

Thanks to the "pulling forward" of future production in the channel-stuffing-based inventory build of Q3, consensus estimates for the growth of the US GDP in Q4 2013 has collapsed to new lows for this cycle at a mere 1.5%. However, the "escape-velocity" recovery remains just around the corner as estimates for Q1 and Q2 2014 remain unimpacted by such nuance as reality...

Of the nine passengers aboard the small Makani Kai Air plane flight that crashed off the shore of Molokai Wednesday night, eight survived. The lone fatality was Loretta Fuddy, infamous for her "I have seen the original records" confirmation of the long-form birth certificate of the US President in 2011. Fuddy, who was 65 years old and had served as Hawaii's state health director since January 2011, is described as "selfless, utterly dedicated, and committed" is a "terrible loss for the state".

Last month, we offered a plain language translation of the Warsh op-ed, because we thought it was too carefully worded and left readers wondering what he really wanted to say. Translation wasn’t necessary for Fisher’s speech, which contained a clear no-confidence vote in the Fed’s QE program. Now William Poole is more or less saying that we have no idea what’s truly behind the Fed’s decisions. But he doesn’t stop there. He’s willing to make a prediction that you wouldn’t expect from an establishment economist... Poole’s refreshingly honest take on the Fed’s inner workings – from someone who truly knows what goes on behind the curtains – is more than welcome.