Archive - Mar 7, 2014 - Story

While the volatility of Bitcoin has been considerable, perhaps merely reflective of the early days of a revolution, the fact that the "value experts" at the Fed have pronounced:

• *DUDLEY SAYS BITCOIN 'IS NOT VERY GOOD STORE OF VALUE'
• *DUDLEY SAYS 'U.S. DOLLAR WINS' OVER BITCOIN ACROSS MANY METRICS

..raised an eyebrow or two on our furrowed brows. We thought a look at the following two charts since the inception of Bitcoin and the inception of the Fed would help clarify "value" stability...

Another month down, another month in which US consumers deleveraged by paying down their credit cards. Although that is not exactly correct: as we showed recently, the New Normal source of credit has nothing to do with revolving debt, or credit cards, or any other old normal notions, and everything to do with student debt, which is used for everything except paying for tuition. That, and car loans of course. Sure enough, in February, of the $13.7 billion in new loans created, $13.9 billion, or 102% of all, was there to fund student and car loans. And looking further back at the data over the past year, of the $172 billion in new consumer debt, a stunning 96% has gone to new student and car loans.

Geopolitical crises in Eastern Europe have been met with calls in the United States to use energy as a foreign policy tool. With U.S. Energy Secretary Ernest Moniz asking the industry to make a stronger case, however, it's domestic policies that may inhibit energy hegemony.

Despite warnings from various members of the Fed that Student Loans are becoming troublesome, we suspect President Obama's address this afternoon on expanding opportunities to go to college will be nothing but more pumping free money into a hyper-inflating (and increasingly worthless) higher education system...

BREAKING: Crimea TV reporting that Russians have begun storming Ukraine air-force base on the peninsula, ramming the gates with a truck

— Simon Shuster (@shustry) March 7, 2014

Hiding behind the big boys (literally) appears to be the m.o. of France's President Hollande who declared today that "there will be no referendum in Crimea without Ukraine's agreement," and added that it is a necessity for Russia to "accept the solution." We suspect Vladimir Putin will have something to say about that but who is going to argue with Hollande given the following image...

With chatter of overnight invasions increasing and rhetoric surging among the non-Russian-allied nations of the world, Russian foreign Miniister Lavrov has some serious words of warning for the West:

U.S. SANCTIONS AGAINST MOSCOW WOULD "HIT THE UNITED STATES LIKE A BOOMERANG"

Lavrov added that "hasty and reckless steps" would harm Russian-American relations (and bear in mind Russian lawmakers are already drawing up a bill to confiscate western assets).

Greek President Karolos Papoulias raised the issue of World War II reparations to his German counterpart Joachim Gauck currently on a 3-day official visit to Athens. But as expected, Gauck repeated the official legal position of Berlin. Karolos Papoulias told Gauck that Greece has not dropped its compensation claim over the Nazi atrocities and the enforced loan by the Nazi occupiers during the World War II. “I want to point out that Greece has never given up its claim of German reparations, ” Papoulias reportedly told Gauch at a private meeting in Presidential Manson adding “it is necessary to solve the problem with the earliest possible start of negotiations.”

As we reported yesterday, after getting permission to cross the Bosphorus, the guided-missile destroyer USS Truxtun departed the Greek port of Souda Bay on its way to the Black Sea. As of a few hours ago, it is already there. Sky News reports that the USS Truxtun passed the Dardanelles strait earlier today on its way to the Black Sea amid heightened tension over the crisis in Ukraine and reports that Russia has now 30,000 troops in Crimea.

European bond markets, simply put, did not blink at anything this week (and Portugal spreads actually rallied) as the insanity of that segment of the market remains. Europe's high-yield credit market moves to near record low spreads (on rumors of an aggressive hedge fund squeeze). But all of this beggars belief as we see European stocks giving up their post-Putin gains and collapsing today on the good-news-is-bad-news from the US but much more critically the Gazprom threats (which smashed Germany's DAX red for 2014 and down around 2% today).

Following last week's discovery that Mohamed El-Erian was "sick of cleaning up [Bill Gross's] shit" as tensions soared at PIMCO, the "bond king" has struck back blasting to Reuters that he's "so sick of Mohamed trying to undermine me," claiming El-Erian wrote the damaging WSJ article. Furthermore, the somewhat paranoid-sounding Gross indicated that he had been monitoring El-Erian's phone calls but when questioned by Reuters for evidence of El-Erian's undermining, Gross responded "you're on his side. Great, he's got you, too, wrapped around his charming right finger." As one analyst noted, "I've never seen Bill and Pimco scrutinized like this before... a couple of high-profile stumbles and mediocre showings, coupled with some outflows clearly has some investors on edge."

One of the critical steps in President Obama's "off-ramp" de-escalation plan for the crisis in Ukraine was a so-called 'observer mission' by the Organisation for Security and Co-operation in Europe (OSCE) to ensure that all citizens were being treated fairly. That 'plan' has hit a wall this morning as PTI reports that pro-Kremlin gunmen blocked the obersver entry. Seems like another red line just got crossed.

We have long been pounding the table (certainly since mid-2012) that the US labor market has become a place where mostly older workers - those 55 and over - are hirable - something which has nothing to do with demographics, and everything to do with excess worker slack, and an employer's market to pick and chose those workers that are most qualified for a job since older workers have the same wage leverage as younger ones: none. February was merely the latest confirmation of just this.

We noted last night that Iron Ore futures prices were in free-fall as the vicious circle of China's commodity-collateral-backed shadow banking system unwind hits home amid fears of contagion from the Chaori Solar default. The first domestic Chinese corporate bond default has retail investors running scared as surprise spreads that the local government did not come to the rescue. The deleveraging is now spreading to copper prices (remember the massive cash-for-copper schemes of last year) as borrowers are forced to sell to meet cash calls which in turn drops copper prices, reducing collateral values and tightening credit conditions even more. This is the biggest copper price drop since Dec 2011...