Archive - Feb 10, 2014 - Story

If we strip away obscuring narratives, we can clearly see that the two employment sectors (healthcare and higher education) that have expanded rain or shine for decades have functioned as gigantic make-work projects. However, that growth has started to slow for the simple reason that they've run out of oxygen: we can no longer afford their expansion or their out-of-control costs. Much cheaper and more effective systems are within reach, if only we look past failed models and politically powerful cartels and fiefdoms.

Now that Bitcoin exchange Mt.Gox has terminally discredited itself following the latest, and likely last, withdrawal halt announced late last week which sent the value of Bitcoin tumbling by 25%, Bitcoin traders are left with just two exchange options on which to transact: BTC-e and Bitstamp. And for those using the former to buy and sell the virtual digital currency, things went from bad to worse a few short hours ago, when Bitcoin had its very own "Waddell and Reed" moment, when the price of Bitcoin cratered by over 80% in the span of seconds, after a modest block of just under 6000 Bitcoins sent the price plunging from over $600 to $102.

The most notable event in this traditionally quiet post-payrolls week is Janet Yellen's Humphrey Hawkins testimony before Congress set for mid-week. In terms of economic data releases, the US retail sales (Exp. 0.05%) is on Thursday and consumer sentiment survey is on Friday (consensus 80.5). We also have IP numbers from Euro Area countries and the US. Most recent external account statistics are released from Japan, China, India and Turkey. It is also interesting to track CPI data in Germany, Spain and India, given the ECB and RBI currently face diverging inflation challenges and may be forced into further action. Finally, we have Q4 GDP data from the Euro Area economies (Friday).

• Yellen's first test (Reuters)
• Let weak banks die, says eurozone super-regulator (FT)
• Yellen, Carney Face Explaining Policy as Benchmarks Near (BBG)
• Commerzbank Said Seeking Debt Buyers in $6.8 Billion Spain Exit (BBG)
• Junk Yield Premiums Soar on China’s Looming First Default (BBG)
• Millions Trapped in Health-Law Coverage Gap (WSJ)
• Mandel Tops Best-Earning Hedge Funds for Clients in 2013 (BBG)
• Swiss Brace for Sour EU Relations After Immigration Vote (BBG)
• Detroit Bankruptcy Talks to Resume (WSJ)

After Friday's surge fest on weaker than expected news - perhaps expecting a tapering of the taper despite everyone screaming from the rooftops the Fed will never adjust monetary policy based on snowfall levels - overnight the carry trade drifted lower and pulled the correlated US equity markets down with it. Why? Who knows - after Friday's choreographed performance it is once again clear there is no connection between newsflow, fundamentals and what various algos decide to do.  So (lack of) reasons aside, following a mainly positive close in Asia which was simply catching up to the US exuberance from Friday, European equities have followed suit and traded higher from the get-go with the consumer goods sector leading the way after being boosted by Nestle and L'Oreal shares who were seen higher after reports that Nestle is looking at ways to reduce its USD 30bln stake in L'Oreal. The tech sector is also seeing outperformance following reports that Nokia and HTC have signed a patent and technology pact; all patent litigation between companies is dismissed. Elsewhere, the utilities sector is being put under pressure after reports that UK Energy Secretary Ed Davey urged industry watchdog Ofgem to examine the profits being made by  the big six energy companies through supplying gas, saying that Centrica's British Gas arm is too profitable.