Archive - Feb 10, 2014 - Story

Fed Chair Janet Yellen will deliver her inaugural monetary policy testimony on February 11 and 13. Her prepared remarks will be released at 8:30amET and the testimony will begin at 10amET. Goldman, unlike the market of the last 3 days, believes that Ms. Yellen is likely to "stick to the script" in her first public remarks since taking over from Bernanke but they look for additional color on the following issues: (1) the recent patch of softer data; (2) the Fed's thinking on EM weakness; (3) the hurdle for stopping the taper; (4) the amount of slack in the labor market; and (5) the future of forward guidance.

It is becoming more uncomfortable to make fun of Dennis Gartman's always incorrect calls (see here and here and here and here) than to watch Richard Simmons Obamacare commercials, but... well - it's just too funny.

East Asia is becoming, in the language of international relations theory, "bipolar." Until recently, Asia was arguably “multipolar” - there was no one state large enough to dominate and many roughly equal states competed for influence. China’s dramatic rise has unbalanced that rough equity. Until recently, China pursued a “peaceful rise” strategy, one of accommodation and mutual adjustment. This approach sought to forestall an anti-Chinese encircling coalition. Since 2009 however, China has increasingly resorted to bullying and threats. All this then sets up a bipolar contest between China and Japan, in the context of China’s rapid rise toward regional dominance and such goals would broadly fit with what we have seen in the behavior of previous hegemons and a potential Sinic Monroe Doctrine.

Despite the yeah-meh-bleh nature of consumer confidence measures, Gallup's more broadly surveyed, and seemingly consistent with the reality of the American workforce, index of economic confidence remains lackluster at best and dismal at worst. However, there is one bright shining beacon of light across the "United" States of America... one state stands proud as the lone state that is economically confident... that state is... drum roll please... D.C.

President Obama’s state of the union pledge to “act with or without Congress” marks a milestone in presidential usurpation of Congressional authority. The concentration of power in the office of the president is yet one more negative consequence of our interventionist foreign policy. Once it became accepted practice for the president to disregard Congress in foreign affairs, it was only a matter of time before presidents would begin usurping Congressional authority in domestic matters...any member of Congress who ignores or facilitates presidential usurpation is being derelict in his Constitutional duty.

The number of Americans that renounced their citizenship was 221 percent higher in 2013 than it was in 2012.  That is a staggering figure, and it is symptomatic of a larger trend.  In recent years, a lot of really good people with very deep roots in this country have made the difficult decision to say goodbye to the United States permanently.  A few actually go to the trouble to renounce their citizenship, and that is mostly done for tax purposes.  But most willingly choose to leave America for other reasons.  Once upon a time, the United States was seen as "the land of opportunity" all over the globe and it seemed like everyone wanted to come here. But now that is all changing.  As we have abandoned the principles that this country was founded upon, our economy has gone steadily downhill.

... or else the following photo just tweeted by Marie-Antoinette Michelle Obama of White House canines dining on fine taxpayer-funded china might have seemed just a little inappropriate.

The chart below is very familiar to anyone who was observing the hourly turmoil in the European bond market in November of 2011, when Italian bonds crashed, when yields soared to record levels, and every downtick of the Euro could have been its last. What the chart may not show are the dramatic transformations in Italy's government that took place just as the Italian bond spread exploded, which saw the resignation of career-politician Sylvio Berlusconi literally days after yields soared, and the instatement of Goldman technocrat Mario Monti as Italy's next Prime Minister. In fact as some, certainly this website, had suggested the blow out in Italian yields was merely a grand plan orchestrated to usher in a new Italian government that would, with the support of yet another Goldman alum, the ECB's then brand new head Mario Draghi, unleash a new era in Italian life, supposedly one of austerity, and which would give the impression that Europe is being fixed all the while preserving the broken European monetary system for at least another year or two. In other words a grand conspiracy theory of a pre-planned bloodless coup.... And so, as lately so often happens, courtesy of the narrative by Alan Friedman of what really happened that summer, this too conspiracy theory has just become conspiracy fact.

Gold has risen 6 of the last 7 days, breaking back over $1,275 and closing at three-month highs as the last 3 days have seen stocks and precious metals bid. Silver is on a 7-day win streak holding above $20 for the last 3 days. Despite fading back from highs today, gold outperformed stocks and bonds (on a flat USD day) and gold remains the best-performing asset (+3.75%) from the December Taper.

"Government often NEEDS war because when the people get angry, they go after government.

In self-defense, government ALWAYS needs to blame some other country or group."

Last year we exposed the reasoning for the extremely predictable cyclicality in US macro-economic surprise data. Each year of the last few, the third quarter has exhibited unusual "strength" surprising 'economists' - thanks to government agencies executing their final budgets to use up all their allotments - only to stabilize in Q4 and the fade rapidly in Q1. 2013 was "different" as we had the government shutdown which threw the seasonal pattern off... but once the agencies were re-opened, the spice did flow and we got what is now clearly not a sustainable 'surprise' in growth but a lagged cyclical bounce. However, the lag introduced by the shutdown is now catching up to us - so it is different this time (2mo. lag) but the same...

"Equities are set to top and roll over," and BofAML's Macneil Curry remains bullish US Treasuries despite today's stability (so far) from recent stock gains. He remains negative on risk assets and believes US equities are posied for another leg lower (with perhaps tomorrow's Yellen testimony the un-taper punchbowl removal catalyst) and warns  bond bears that a break below 2.657% on the 10Y would indicate the downtrend in yields has resumed. Elsewhere Curry adds "gold is coming to life."

"I think Bitcoin will face serious challenges in the long run, although I believe such digital currencies could have a place in the economy in more well thought-through structures with values better linked to real assets."

Just as we predicted it would happen, here it comes:

• OBAMACARE EMPLOYER MANDATE TO BE DELAYED FOR SOME COMPANIES

Specificaly, according Bloomberg, businesses with 50-99 workers have until 2016 before being penalized for not providing health-care coverage to full-time workers, according to final regulations released by Treasury.

US equity markets traded in a narrow range ahead of tomorrow's Yellen testimony with Trannies underperforming and Nasdaq outperforming. Cross-asset-class correlations picked up from their negligible levels on Friday as JPY (and increasingly 5Y bonds) are linked at the hip with stocks. The S&P cash tested almost up to 1,800 (but failed at 1799.94) then faded. Notably from the European close, equity handily outperformed credit markets - which ended closing near their wides of the day. Treasuries ended the day modestly bid (30y -2bps) but T-Bill yields are starting to reflect debt-ceiling concerns. The USD closed unch - drifting lower from overnight strength - but gold and silver rallied on the day (though faded of early highs). Late-day ramp efforts got the S&P green but failed to cross 1,800... and VIX decoupled on the ramp.