Archive - Jan 7, 2014 - Story

Despite the best day in the S&P (+0.6%) since the Taper (12/18), this remains the worst start to a year since 2005. The Dow stands out as the best of the bad bunch ( down only 0.25% from 2013 close highs) while Trannies remain the worst. Homebuilders tumbled back to recouple with Financials post-Taper. Treasuries decided to ignore the equity strength and rallied once again (with 10Y now -10bps on the year) even as the USD was well bid back to unch on the week (once again all the vol in the US open to EU close period) with notable CAD weakness to its lowest since May 2010. USDJPY was on-and-off in charge with stocks staying in sync until the EU close, reconnecting briefly in the afternoon, then taking off again. VIX dropped back under 13% (but stocks were relatively outperforming). Precious metals remained in the headlines, this time with weakness, but from the early spike down, they recovered half the losses.

Yesterday's chart of the day was the stunning prevalence of poverty in Greece, which soaring to 44%, up from 14% a year ago, was too mindboggling to even comment on. Today, courtesy of the Census Bureau, we get a glance at a just as disturbing aspect of poverty not in some country in depressed Europe, but in the US itself. The bad news: in the period from 2009 to 2011, 31.6% of Americans were in poverty for at least two months, "a 4.5 percentage point increase over the prerecession period of 2005 to 2007.

The economist Herbert Stein once said that if something can't go on forever, it will stop. The pattern of the last few decades, in which higher education costs grew much faster than incomes, with the difference made up by borrowing, can't go on forever... There is no point in trying to preserve the old regime as "working your way through college" is now impossible. For an 18-year-old, investing such a six-figure sum in an education without a payoff makes no more sense than buying a Ferrari on credit.

On a satellite interview from Pyongyang, North Korea, former NBA player Dennis Rodman 'lost it' this morning with the anchor from CNN's "New Day" show. Describing his (and his team's) visit to North Korea as a "great trip for the world," Rodman started to get frustrated when questioned about whether he will use the opportunity to speak about Kenneth Bae, an American citizen who has been held in North Korea. "Do you understand what he did?" Rodman exclaimed, "You tell me! You tell me! Why is he held captive?" Having described Kim Jong Un as a "friend for life," Rodman went on to tell the CNN anchor, "I don't give a rat's ass what you think." Ah, the new normal diplomacy. We wonder if Kim's uncle also described him as a 'friend for life.'? As WaPo reports, The White House is not happy.

The central illusion of both Left (so-called Progressives) and Right (so-called conservatives) is that the Central State's essentially unlimited powers can be narrowly directed to further their agenda. Supporting the central state to protect your favored cartels and protect your political power over the state's tax revenues is simply pimping for the Empire. You can call it "progressive," but it's still pimping for the Empire.

Back in September, just before the FOMC announcement in which Bernanke shocked everyone by not announcing a Taper, the 3 Year priced in the early part of the month at a yield of 0.913%: the highest since May 2011. After that, following the delay of the taper, yields dipped, but are once again rising higher, and moments ago the $30 billion 3 Year auction priced - in the first post-taper auction - at a high yield of 0.799%, a jump from the December 0.631%, and a tiny tail to the When Issued stopping at 0.797%, but still shy of the September wides.

Of all the case studies in our "it is easier to get into Harvard than to get a job at X" series (flight attendants, Goldman summer interns, McDonalds, etc), this one may be our favorite because it captures at its core, just how "strong" the US economic "recovery" truly is for all those who don't have a spare million or two in financial assets to throw at the levitating, centrally-planned markets. As the WaPo reports, when a Maryland ice cream plant, shut down in 2011 and subsequnetly was brought back to life when a Co-op of dairy farmers purchased it in the summer of 2013 to process milk and icream, sent out "jobs wanted" notices to fill some three dozen open job positions, it got a surprise: 1,600 applicants (and counting) "a deluge" - 44 applicants for every position - or nearly three times more difficult than getting into Harvard to get a simple job... To make ice cream!

After ruling as unconstitutional Chicago ordinances that aim to reduce gun violence by banning their sale within the city’s limits, U.S. District Judge Edmond E. Chang said Monday that while the government has a duty to protect its citizens, it’s also obligated to protect constitutional rights, including the right to keep and bear arms for self-defense. As AP reports, the decision is just the latest to attack what were some of the toughest gun-control laws in the nation; with the NRA noting it "shows how out of step and outrageous Chicago’s ordinances really are." Despite the city's ban "to protect its citizens," Chicago last year had more homicides than any city in the nation.

Moments ago shots were fired when a (French) bank broke the unspoken Omerta code among sellside bankers: it downgraded another bank in a time when the S&P is just shy its all time highs (downgrading banks when the market is tumbling is usually a-ok). The note came from SocGen's Andrew Lim, whse thesis is rather simple: "Valuation too expensive in light of regulatory and revenue challenges."

With 1.3 million Americans having lost (or about to lose) their emergency unemployment benefits, President Obama is back from vacation and ready to re-start the blame-and-shame game (supported with the now ubiquitous crowd of needy entitled onlookers, ready to faint on command). As he explains, "this is money that helps pay the bills while folks work hard to find their next job..." as long as it's well-paying and not at McDonalds. Of course, the uncomfortable truth is...

*BOEHNER SAYS EXTENSION OF UNEMPLOYMENT AID MUST BE PAID FOR

But that's what the rich are for, right?

Much has been writtien about the latest straight to YouTube humanitarian conflict (France involvement comment and then the US ) this time not in the middle east but in Africa, specifically the Central African Republic, which has so far pitted French troops and US drones against... it is unclear whom exactly, but supposedly the perpetual strawman, Al Qaeda, is once again involved. So instead of more talking, here is a simple infographic that lays out who is who in the latest hot bed set to escalate, especially if China, as some expect, gets involved.

That didn't take long. On December 2, in its fourth Top Trade recommendation of the year, Goldman urged its clients to go "Long China Stocks, Short Copper." This is how we decribed the trade: "Goldman is selling China equities (via the HSCWI Index), while buying copper (via Dec 2014 futs), or at least advising its flow clients to do the opposite while admitting that "for the long China equity/short commodity pair trade to “work” best, these two assets, which are usually positively correlated, will have to move in opposite directions." For that and many other reasons why betting on a divergence of two very closely correlating assets will lead to suffering, read on. Finally - do as Goldman says, or as it does? That is the eternal question, one whose answer is a tad more problematic since the author in this case is not Tom Stolper but Noah Weisberger." One week into the new year we have the answer. Yesterday, less than one week into the new year, Goldman closed this "Top Trade for 2014" following a loss of 13.5%.

Nearly a month after American authorities arrested India’s deputy consul general in New York, Devyani Khobragade, outside her children’s school and charged her with paying her Indian domestic worker a salary below the minimum wage, bilateral relations remain tense. India’s government has reacted with fury to the mistreatment of an official enjoying diplomatic immunity, and public indignation has been widespread and nearly unanimous. So, has an era of steadily improving ties between the two countries come to an end? Until the US displays appropriate deference to the sensitivities, pride, and honor of other peoples and cultures, it will continue to be resented around the world.

With record high unemployment at 12.3%, a banking system on life support, and a teetering-on-the-brink-of-recession GDP print; it only makes sense that on the heels of this morning's trip to the capital markets by Ireland, the other peripheral bond markets in Europe are well bid. But in context, at 99.6bps, Italian 2Y yields are now at all-time record lows - is everyone in the world front-running an ECB QE? EURUSD is back under 1.3600 and even Turkish 2Y notes tumble to a mere 10.02%.

The latest example of French labor relations has ended after two days with police rescuing the two executives from Goodyear Tire from the French factory...

• *GOODYEAR MANAGERS FREED UNDER FRENCH POLICE PROTECTION: AP
• *GOODYEAR MANAGERS FREED AFTER 2 DAYS CAPTIVITY BY WORKERS:AP
• *GOODYEAR MANAGERS HAD BEEN HELD HOSTAGE BY UNION
• *GOODYEAR MANAGERS' LIBERATION CONFIRMED BY LOCAL OFFICIALS

We are sure management will be much more open-minded and flexible after this fracas. We await Maurice Taylor's next exortation on the "stupidity" of hiring in France.