Archive - Jan 29, 2014 - Story

With the (emerging) world suddenly collapsing, appropriately enough on the Chairsatan's last FOMC conference, here is an amusing update from Denmark where apparently the locals are less than excited about giving away their DONG (that would be Danish Oil & Natural Gas for the perverts) to Goldman Sachs. Specifically, over the past several days, a whopping 186,000 Danes have signed a petition to stop the sale of a 19% stake with extraordinary minority stakeholder rights in DONG to Goldman Sachs. Then again, every DONG has its price...

"We take profit on our TRY/ZAR trade recommendation which we entered last night at a level of 4.92. At the time of writing, the level is 4.968 resulting in a gain of 1.0% before carry. The short-lived relief rally in the TRY was swiftly interrupted by a shift in market sentiment, with the updated policy implementation failing to deliver the intended improvements in clarity. On the other hand, an unimpressive 50bp hike from SARB on the heels of CBRT’s punchier response fell short of expectations. Overall, the market continues to trade in a panic mode, notwithstanding the monetary policy responses spreading fast across EM, as real policy rates come increasingly under scrutiny." - SocGen

The Central State and its core directives, central planning and ever-widening control of every aspect of life, is eroding the human essential: community. Rather than the rah-rah phoniness of the President's State of the Union speech, which was predictably filled with Soaring Rhetoric (tm) and promises of more central planning and state expansion, let's consider the real state of the union.

For the first time since mid-October, "no brainer" investment AAPL has dropped below the maginot line of $500. We are sure Carl Icahn will be buying another $500 million worth of shares today... AAPL is now down over 13% from its December highs.

First MyRA, now this:

• OBAMA SAYS HE'S PREPARED TO ACT WITHOUT CONGRESS ON ECONOMY
• OBAMA SAYS WASHINGTON CAN EITHER HELP OR HINDER ECONOMIC GROWTH

So how long until the Economist-In-Chief extends presidential term limits with executive order.

On January 2, the Institute for Supply Management announced the December Manufacturing ISM print: at 57.0, it was a beat of expectations of 56.8, and resulted in an expected boost to markets. Moments ago, the 57.0 print was quietly revised to 56.5. Which means the beat of consensus expectations quietly became a miss. But please don't say anything, because all that pro-cyclical, bullish media spin that was fabulated on the basis of a data point which subsequently was revised to a disappointment, would have to be revised...

After the epic fail of Pershing Square's Herbalife short, aka the stock we predicted, correctly, in January 2013 has Volkwagen-like short squeeze potential, it was only a matter of time before the analyst responsible for the trade got the boot, politely of course.

From this morning: '... we have to remain bullish of shares generally… and certainly we cannot and we will not adopt a bearish perspective until that trend line clearly has been broken from above."

After tagging the stops above 1,800 overnight following the Turkish rate hike, S&P futures have collapsed over 30 points and are hovering back at pre-Taper levels from 6 weeks ago. For now USDJPY 102 is critical support for stocks. 10Y bond yields have slammed lower testing 2.70 and the lowest levels in 2 months.

As South Africa hiked rates this morning (whose effect on the Rand was promptly overwhelmed by the Lira collapsing back to weaker than pre-rate-hike) stock markets around the world are rapidly deteriorating and the safety of bonds and bullion is being sought aggressively. S&P futures are -10 from pre-Turkey; Dow -100; Nikkei -30; and EEM swung from up over 2% to down almost 1% in the pre-open. Treasuries are 6bps tighter than post-Turkey and gold (and silver) are rallying smartly back up to $1268 (+$20 from post-Turkey lows). It would seem EM turmoil is un-fixed. Turkish stocks are collapsing and the Hungarian Forint is collapsing. We can't help but see the irony of this tumult and the possibility of a global financial meltdown occurring on the day of Bernanke's last FOMC meeting...

Update: Full Meltdown Mode: engage

Yesterday, the moment when the Turkish Central Bank intervention was jinxed was clearly marked by SocGen's fawning Benoit Anne, who said "In any case, I definitely feel much better about the TRY, at least on a tactical basis. Hence we just entered a long TRY/ZAR targeting a tactical move to 5.10. The TRY crisis is over." To which we responded: "As for the "TRY crisis being over" let's wait to see what the "popular" response is to this epic rate hike first thing tomorrow when Turkey awakes, shall we, and let's revisit the TRY crisis in 2-3 weeks when the country's housing market crumbles, when the economy grinds to a halt and the political crisis goes from worse to worse-est." We didn't have to wait more than 12 hours. As of this moment, the entire Central Bank move has been faded.

First it was Turkey defending itself tooth and nail against Bernanke's tapering, now it is South Africa, just as we predicted less than an hour ago.

• SOUTH AFRICA RAISES BENCHMARK RATE TO 5.50% FROM 5.00%; EXPECTATION WAS FOR UNCHANGED
• SOUTH AFRICA CENTRAL BANK RAISES BENCHMARK RATE
• RAND STRENGTHENS AS CENTRAL BANK UNEXPECTEDLY RAISES REPO RATE
• S. AFRICA'S MARCUS SAYS MOVE NOT INTENDED TO AFFECT RAND
• S. AFRICA'S MARCUS SAYS HAVE A FLEXIBLE EXCHANGE RATE

Naturally, the ZAR surges... for about 10 milliseconds, after which it promptly drops to a level weaker than pre-announcement!

It took about 10 seconds for our collective brains to spot what is wrong with this picture, courtesy of the Bloomberg media empire...

• Obama warns divided Congress that he will act alone (Reuters)
• Fed Decision Day Guide From Emerging Markets to FOMC Voter Shift (BBG)
• Fed poised for $10 billion taper as Bernanke bids adieu (Reuters)
• Bernanke’s Unprecedented Rescue Unlikely to Be Repeated (BBG)
• Argentina Spends $115 Million to Steady Peso (WSJ)
• Billionaires Fuming Over Market Selloff That Sinks Magnit (BBG)
• SAC’s Counsel Testifies at Insider Trading Trial in Unexpected Move by the Defense (NYT)
• Automakers Fuel Japan’s Longest Profit Growth Streak Since 2007 (BBG)
• Turkey Crisis Puts Jailed Millionaire at Heart of Gold Trail (BBG)
• Ukraine expects $2 billion tranche of Russian aid soon (Reuters)

The Fed tightens by a little (sorry, tapering - flow - is and always will be tightening): markets soar; Turkey tightens by a lot: markets soar. If only it was that easy everyone would tighten. Only it never is. Which is why as we just reported, the initial euphoria in Turkey is long gone and the Turkish Lira is basically at pre-announcement levels, only now the government has a furious, and loan-challenged population to deal with, not to mention an economy which has just ground to a halt. Anyway, good luck - other EMs already faded, including the ZAR which many are speculating could be the next Turkey, and certainly the USDJPY which sent futures soaring last night, only to fade all gains as well and bring equities down with it.