Archive - Dec 2014 - Story

Because nothing says global slowdown, oil crash, HY spread blowout, currency collapse like a (purportedly forward-looking indicator of risk) VIX with an 11 handle...

The Bank of Russia this week made its heaviest currency intervention in more than a month, according to WSJ, to try to stem the escalating trend of Ruble collapse... but it's not working. Chatter of three significant interventions this week (which are quite apparent in the USDRUB chart) have had less and less positive impact on the currency and even with warnings of jail for FX speculators, the post-intervention selling continues. It appears, however, that the main pressure today is in the Russian bond market as 10Y RUB Bonds cracked 80bps higher to 12.04% yield... the pressure mounts on Putin.

While the seasonally-adjusted headline Establishment Survey payroll print reported by the BLS moments ago may be indicative of an economy which the Fed will soon have to temper in an attempt to cool down, a closer read of the November payrolls report shows several other things that were not quite as rosy. First, the Household Survey was nowhere close to confirming the Establishment Survey data, suggesting jobs rose only by 4K from 147,283K to 147,287K, and furthermore, the breakdown was skewed fully in favor of Part-Time jobs, which rose by 77K while Full-Time jobs declined by 150K.

After an initial "good news is bad news" kneejerk lower in stocks, USD strength (and thus JPY weakness) is providing the ammo to 'prove' this is good news, but problematically the bounce is fading (of course, there's a long way and a lot more VIX to sell to manage this narrative green). Oil is up modestly (growth?). Treasury yields are surging (10Y +7bps) and gold and silver and sliding...

If the Fed needed a flashing red light that the time for a first rate hike is overdue, it just got it moments ago when the BLS reported that in November some 321K jobs were added, a 4 sigma beat to the 230K expected, and well above the revised 243K in October. In fact, this was the biggest monthly jobs addition since January 2012!

Between professional economists, CNBC's "Nail The Number", and Twitter #NFPGuesses, the range of today's guesses for payrolls is between 100k and 400k...

The DJ Cyprus Total Market Index is at present down 99.71% from its all time high made in 2007, so we would say it is definitely the most oversold stock market in the world in all of history. From 100 euro invested at the peak, a mere 29 cents are left. Let us briefly ponder the mathematics of this wipe-out: when the market was down by 90%, it fell by another 50% at which point it was down 95% from the high. Thereafter, it fell by another 50%, ending down 97.5% from the high. Then it fell by another 50%, at which point it was down 98.75% from the high. Then it fell by 50% again and was down 99.375%. Surely this was bad enough? Nope…it then fell by yet another 50%, landing at 99.6875% down from its 2007 high.

Last week, Zero Hedge first showed a chart so simple, even a Krugman could get it: at this point (and really ever since USDJPY 110 and higher), any incremental Yen devaluation is destructive for the Japanese economy, leading to an unprecedented surge in defaults. And here is Japan Times confirming what we said, with a report that "Corporate bankruptcies linked to the yen’s slide hit a new record in November, highlighting the strains on small and midsize companies as Prime Minister Shinzo Abe campaigns for re-election on his deflation-busting economic strategy."

• JP Morgan 200K
• Goldman Sachs 220K
• Citigroup 225K
• HSBC 230K
• UBS 230K
• Credit Suisse 235K
• Morgan Stanley 235K
• Deutsche Bank 250K

• Marchers again swarm New York to protest death at hands of police (Reuters)
• N.Y. Police Chokehold Evidence to Stay Secret as Protests Spread (BBG)
• Obama to announce choice of Ash Carter for defense chief Friday: White House (Reuters)
• Boehner vows to avoid government shutdown with help from Democrats (Reuters)
• Brent Heads for 5-Year Low as Saudi Discounts Spur Competition (BBG)
• Will Cheap Oil Lead to Big Mergers? (WSJ)
• Bank of Russia Ramps Up Ruble Support (WSJ)
• China Bad-Loan Level Seen Understated After Economy Slows (BBG)
• Uber Snags $41 Billion Valuation (WSJ)

Confused why in the lack of any horrible economic news (unless of course someone leaked a worse than expected November payrolls print which would put QE4 right back on the table) futures are higher, especially in the aftermath of yesterday's disappointing ECB conference? Then look no further than the Yen which has now lost pretty much all control and is in freeplunge mode, rising some 25 pips moments ago on no news, but merely as wave after wave of momentum ignition algos now make a joke of the Japanese currency, whose redline of 123 (as defined by SocGen)is now just 240 pips away. At this pace, Japan's economy, which as reported yesterday has just seen a record number of corporate bankruptcies due to the plummeting yen, may well be dead some time next week. Which, with Paul Krugman as its new and improved economic advisor, is precisely as expected. RIP Japan.

Having abandoned our mental and emotional slavery and embraced personal sovereignty. Defending our children from the lies of statists and oligarchs is one of the most important things we can do as a parent. However, a healthy concern we have is that we don’t want to merely replace the state. What we mean is we don’t want to eliminate state propaganda and brainwashing and merely replace it with our own equivalent. Our intentions are good as a parent, but we never want to allow my passion and perspective to become the automatic default belief system for our children.

Citi claims gold is a 6000-year-old bubble, perhaps Mr. Buiter has not seen this chart?