Archive - Oct 2014 - Story

In the "land of the rising sun," Citi FX Technicals group warns, the sun also goes down sometimes. The present set up on the monthly and daily charts on USDJPY suggests it is time to be cautious, with real danger that we could be 'on the cusp' of a material correction lower for the first time in this 3-month rally. A move as low as 105.50 is not out of the question and that is terrible news for Japanese stocks and Abe's approval ratings.

As The FT's Capital Markets Editor mockingly retorts, the next financial apocalypse is imminent because...

Another humanitarian catastrophe may be just hours away at Kobani - a Syrian Kurdish town on the border with Turkey that is now surrounded by ISIS tanks and is being pounded day after day by ISIS heavy artillery. Already this lethal phalanx, which fuses 21st century American technology and equipment with 12th century religious fanaticism, has rolled through dozens of Kurdish villages and towns in the region around Kobani, sending 180,000 refugees fleeing for their lives across the border. Self-evidently the lightly armed Kurdish militias desperately holding out in Kobani are fighting the right enemy - that is, the Islamic State. So why has Obama’s grand coalition been unable to relieve the siege?

Whether it is due to the sheer deferred Ebola panic (we warned in June it was only a matter of time before the "world's worst Ebola epidemic" made it to US shores, which promptly got us branded as fearmongers as usual), or the administration's bumbled attempt at damage control with a very confused and mostly pointless press conference on Friday afternoon, but three days ago, a petition was launched on the White House website demanding that the "FAA ban all incoming and outgoing flights to Ebola-stricken countries until the Ebola outbreak is contained." As of this moment, over 4,000 people have already signed it.

The good news - CDC Director Frieden says the Ebola outbreak in Nigeria 'may' be over (but can't yet give "all clear").

The bad news - the US Ebola patient has taken a turn for the worse; Dallas officials are looking for a missing homeless man who may have Ebola contact; and CDC Director Frieden warned that "in theory, a sneeze or cough could spread the virus from someone experiencing Ebola symptoms."

It is amazing how the government manages to continue selling Brooklyn Bridges to a gullible public. Americans buy wars they don’t need and economic recoveries that do not exist. Government in America is focused on something different from a healthy economy and the well being of citizens. We call it democracy, but it’s not.

UPDATE: According to the latest feed from OccupyCentral, protesters are refusing to leave the Lung Wo Road government building blockade...

After a night of 'some' discussions and a re-escalation of violence - which saw police use tear gas and pepper spray (in their words avoiding the use of batons and "reducing injuries"), OccupyCentral protesters have decided to leave the area outside the Hong Kong office of Chief Executive Leung Chun-ying in Mong Kok. Protesters are reportedly moving back towards the Admiralty site where thousands remain ahead of tomorrow's deadline ultimatum from the HK leader. Officials are in full court press PR mode, explaining on every TV channel and media outlet just how significant the disruptions will be on Monday to the general public (notably the older generation as 95% of OccupyCentral protesters are between 15 and 25). Protest leaders have agreed to continue dialog with the government if protest sites are protected and while tomorrow's deadline may see more escalation (in the name of public order), as The Telegraph notes, given the age of the protesters, Hong Kong could face decades of protests.

A very significant and dangerous trend has been accelerating in recent weeks. This trend consists of leaders throughout the globe coming out and blatantly calling for censorship and restrictions on free speech.

I think this is a time where people will look back on us and see it as a period of practically central bank worship. The central bankers – Draghi, Yellen, Bernanke – have become almost celebrities in America. People have invested unreasonable hopes in what these central banks can know, and what they can do. I think that, sooner or later, the investing public will become disillusioned of these ideas.... I dare say that stock prices will not continue to rise uninterrupted at the same pace. That’s not a very interesting prediction, but the stock market is certainly a cyclical thing. I think it’s fair to observe that today’s ultra-low interest rates flatter stock market valuations. Stock prices are partly valued based on a discounted flow of dividend income. To the extent that the discount rate you use to value that stream of dividend income, which depends on interest rates, is artificially low, stock prices are artificially high. I think that the burden of proof is on anyone who would assert that we are in a new age of persistently and steadily rising stock prices.

"Live at home..."

The last two days have seen President Obama will give speeches on the economy. This issue is critical going into the mid-term elections as virtually every poll shows this is a top concern of voters. The question of economic recovery is interesting in the context of where that recovery has occurred.  As we discussed recently in "For 90% Of Americans, There Has Been No Recovery," while the ongoing interventions by the Federal Reserve have inflated asset prices, the only real accomplishment has been a widening of the wealth gap between the top 10% of individuals that have dollars invested in the financial markets and everyone else. Unfortunately, the facts are going to make promoting an "economic success" story rather difficult. Let's review Obama's economic scorecard in terms of the things that truly matter to the average American...

The punchline, and what is by far the scariest, is that rising from 19% to a record 30%, and by far the biggest use of funds, is finance, the one industry that doesn't actually lead to growth but merely finds ways to mask the lack of growth with pro-forma adjustments and stacks leverage upon leverage on ever declining underlying equity and cash flows, until the entire system crashes as it did in 2001, 2008 and, well, soon.

Having tried (unsuccessfully) to break up the pro-democracy protesters in the heart of Hong Kong using local triad gangs (as opposed to the optics of actual police), it appears the Chinese government is rolling back from its "wait-and-see" approach and becoming more aggressive once again. Hong Kong's Chief Executive Leung Chun-ying, as DPA reports, demanded protesters end their blockade of major roads by Monday, or the government will take "all necessary measures to restore social order." Tensions continue to rise, with clashes breaking out sporadically, as the protesters have broken off talks with the government. As fears of another Tiananmen square debacle loom, former Hong Kong governor Chris Patten noted, "I cannot believe it would be so stupid as to do anything like send in the army."

Because nothing says "safety precautions" like rolled-up sleeves on a HazMat suit...

Remember Greece: the country that in 2010 launched Europe's sovereign solvency crisis and the ECB's own helpless attempts at intervention, which later was "saved", only to default shortly thereafter (but without triggering CDS as that would end the Eurozone's amusing monetary experiment and collapse the Deutsche Bank $100 trillion house of derivative cards), which later was again "saved" when every single global central bank made sure Greek bonds became the only yield-generating securities in the world? Well, the country which at last count was doing ok, is about to not be ok. Because according to none other than S&P, at some point over the next 15 months, Greek debt is about to be in default when the country is no longer able to cover its financing needs. In other words, back to square one.