Archive - Jan 2014 - Story

You didn't think the US could at first slowly, and then all of a sudden, expropriate retirement accounts and invest them in the "no risk, guaranteed return" MyRA Ponzi scheme introduced by Obama during the State of the Union address without lots of behavior-modifying indoctrination in the "friendly press" first now did you? Sure enough, here is the first major propaganda salvo, coming from none other than the US Treasury Secretary, Jack Lew, which will be published tomorrow across the McClatchy media empire.

The IMF's woeful forecasting record, chronicled extensively before, has just taken yet another hit, following the latest flip flop on emerging markets. Try to spot the common theme of these assessments by the IMF.

Here's the global financial crisis in a nutshell: access to easy credit can solve a temporary liquidity problem, but it can't increase the value of collateral or generate income. Once the liquidity typhoon dies down, the insolvent pigs will plummet back to earth. That's what we're seeing in the periphery economies and shadow banking systems around the world.

Following NY Rep. Michael Grimm's apology yesterday for threatening to break a reporter in half and throw him off a balcony, none other than former NY Rep. Anthony Weiner had some advice for the cantakerous congressman. Wring in the New York Daily News, Weiner began: "First, if you don’t want to talk about a scandal in which you’re embroiled, whatever that scandal may be, maybe it’s best that you don’t do interviews for a while..." but the snark and irony surges from there.

EM is fixed? Fed will un-Taper? Earnings will recover? Money on the sidelines? We've heard it all this morning as why stocks are recovering modestly... the real fun-durr-mental reason, of course, is in the chart below: behold the US&PJPY or, alternatively, USDSPY.

Hardly as memorable as yesterday's historic launch of Floating Rate Notes, today's 5 year auction in which the Treasury sold $35 billion in paper was a snoozer, and despite fears of a blow out following recent concerns about demand in the bucket following recent revulsion to 5 Years, priced at 1.572%, tailing the When Issued  1.57% modestly, however with a lower yield than last month's 1.6. The Bid to Cover also posted a modest increase from December's 2.42 up to 2.59, even if the general BTC trend continues to be one broadly lower. Within the internals the only notable item was the spike in Indirects, which took down 44.6% of the allocation, up from 24.8%, leaving 10.7% to the Directs and 44.7% to Dealers. Overall, nothing to write home about.

Now that Twitter is officially the second coming of Yahoo Finance message boards, the inundation with offers from clueless hacks who have nothing better to do than sell you $29.95 newsletters with guaranteed get rich quick schemes (one has to be so grateful for this boundless supply of noble humanitarians who would rather see you get rich than follow their own advice, and invest with their own capital...), even more guaranteed than Obama's MyRA ponzi scheme, has hit off the charts levels. However, there is some hope this is ending, and the regulators, as usual 3-5 years behind the curve - are finally be cracking down on these self-acclaimed financial Nostradami following an announcement today that the SEC "charged a New York-based money manager and his firm with making false claims through Twitter, newsletters, and other communications about the success of their investment advice and a mutual fund they manage."

The topic of home flipping is not new here ("Flip That House" In These Bubbling Cities, Housing Bubble 2.0 Edition: "25 Markets Where Flipping Homes Is Most Profitable", etc) - indeed that best-known flashback of the last housing bubble is easily one of the best indications just how fragile the current housing bubble truly is as investors gobble up real estate not with the intention of keeping it but merely to sell to the next greater fool, in the process setting marginal prices based purely on the availability of cheap money, money which has now been tapered by $20 billion in the past two months. However, to get the full picture on just how pervasive "house flipping" has become, we go to the source, RealtyTrac, which has just released its 2013 summary of this troubling trend.

Pending Home Sales collapsed 8.7% month-over-month - the worst since May 2010 - missing by the most in over 3 years. This is a 6.1% drop YoY. Sellside consensus (-0.3%) was unaware of the horrible weather in December until 13 minutes ago. Of course, analysts could never have guessed that weather could have an impact (and ths reduce their expectations) but NAR's Larry Yun notes "unusually disruptive weather" prevented buyers from looking. However, he goes on to add that "Home prices rising faster than income is also giving pause to some potential buyers." This unusually honest line from the realtor mouthpiece is notable.

Following yesterday's continued slide to record lows against the Central Bank's currency basket, the Russian Ruble is rallying this morning as Russian Central Bank chief Elvira Nebiullina jawboned the threat of renewed intervention to "smooth out" markets:

*NABIULLINA SAYS FX MKT INTERVENTIONS NEEDED FOR FIN. STABILITY; BANK ROSSII 'SMOOTHING OUT' SHARP RUBLE SWINGS

One can only hope that - despite the bank runs, a plan not to raise rates, and a canceled bond auction - Russia has more success that Turkey is "fixing" the problem of QEasy money flows. The Ruble "basket" has reverted back to pre-Turkey levels.

"BOTTOM LINE: Q4 GDP grew in line with expectations, although the composition was slightly softer than expected. We start our Q1 GDP tracking estimate three-tenths below our prior assumption at 2.7%." - Goldman

Hearing that some Zimbabwean retailers, cellphone airtime vendors & even newspaper hawkers are now refusing to take the South African #rand

— Susan Njanji (@SusanNjanji) January 30, 2014

"Not beating expectations" is the new "killing it" if today's markets are any judge. First, Facebook is up 19% ($150bn market cap). Gold and silver are being monkey-hammered in their new normal "I don't always sell gold, but when I do, I do it all at once in massive size) manner. Bond yields are pressing 3-4bps higher. The USD is surging (as JPY and EUR weakness trumps AUD strength) and that should provide the hint as to what is levitating stocks... JPY carry correlation remains extreme as the USDJPY bounce off 102 holds for now (and NKY is catching up).

Following discussions with Merkel, demands to de-escalate tensions from Barrose, and threats of sanctions from President Obama. Ukraine's President Yanukovych has gone on sick leave from "immense pshcological pressure." Despite his exclamations that he'll do everything for the sake of peace, he blames the opposition for "escalating the situation," which fits, rather ominously with warnings from former presdent Leonid Kravchuk. As The BBC reports, Ukraine's first post-independence president warned the country is on the "brink of civil war". While the Hyrvnia is not collapsing as much as it was (always the silver lining), money is running away from Ukraine stocks stuck at 5-year lows, bond term structure is inverted, and CDS are spiking back to recent highs over 1000bps.

After the blistering final Q3 GDP print of 4.1% (to be revised far lower eventually), the preliminary Q4 GDP number had only one way to go, down - and sure enough it dropped to the expected 3.2% (well below Joe LaVorgna's 4.0% forecast), capping 2013 GDPat 1.9%, down solidly from the 2.8% growth recorded in 2012. "Assume a recovery..."