Archive - Mar 2014 - Story

Moments ago the BEA reported February personal income and spending which were expected to show a modest pick up following what all economists have classified as the "polar vortex" winter doldrums. While it remains to be seen whether and if spending, and income, will indeed pick up considering the deplorable state of the US household's earnings prospects, both metrics came precisely in line with consensus estimates at 0.3% (if not those of DB's always amusing permabull Joe LaVorgna who expected a 0.6% increase in spending).

SSDD... the overnight ramps are getting weaker and the morning monkey-hammerings of precious metals are not as aggressive but once again, for the benefit of those playing at home, USDJPY is surging in an attempt to drag stocks healthily green and prove that everything is fixed and gold is being dumped to also prove that the status quo rules and barbarous relics are a thing of the risk-strewn past.

While the US and its allies are locked in a war of words which Russia has so far been completely ignoring, things continue to move both literally (along the Russian side of Ukraine's eastern border) and metaphorically. Overnight, ousted President Viktor Yanukovych has called for a national referendum to determine each region's "status within Ukraine". As a reminder, the Kremlin still refuses to accept the current Ukraine government, claiming it got there only after an illegitimate, violent overthrow of Yanukovich. "As a president who is with you with all my thoughts and soul, I urge every sensible citizen of Ukraine: Don't give in to impostors! Demand a referendum on the status of each region within Ukraine." Meanwhile Kiev took a little too much to heart the statement by Schauble that Ukraine has Greece as a role model to look up to, because while it has skipped the entire economic collapse phase (for now), it has jumped straight to the infighting with its ultra-nationalist, far-right "Right Sector" elements, which were certainly one of the main factors for the ascent of the current acting government and the overthrow of the last one.

• Crimea Resolution Backed by U.S. Barely Gets UN Majority (BBG)
• Russian Buildup Stokes Worries (WSJ)
• As reported here first: China’s Developers Face Shakeout as Easy Money Ends (BBG)
• U.S. House Poised to Clear Sanctions Called Putin Warning (BBG)
• Bitcoin Prices Plunge on Report PBOC Orders Accounts Shut (BBG)
• Search for lost Malaysian jet shifts significantly after new lead (Reuters)
• Russian fund taps China and Middle East (FT)
• Long battle looms between U.S. college, athletes seeking to unionize (Reuters)
• Official warns EU-US trade deal at risk over investor cases (FT)
• New iPhone likely out in September, Nikkei daily says (AFP)

By this point, one has to be impressed at the resilience with which algos repeat the same pattern over and over again, hoping for a different outcome. It is now the 6th day in a row that the JPY-carry trade (be it USDJPY, EURJPY or AUDJPY) driven levitation has pushed equity futures smartly up in overnight trading. And by all accounts - in the absence of ugly macro news which in today's sparse data line up (just Personal Income and Spending and UMich consumer condfidence) - the same post early highs fade we have seen every day in the past week will repeat again. The overnight euphoria was driven primarily by Europe where Bloomberg reported 2 Year Spanish yields have traded below those of the UK for the first time since 2009. And since it is obviously not the strong fundamentals, what is continuing to happen, as has been the case since October 2013, is everyone is pricing in the ECB's QE, which even Weidmann is openly talkin about  now, which simply means it will most likely never actually happen, certainly not until it is too late.

Are you thinking of going to college?  If so, please consider that decision very carefully.  You probably have lots of people telling you that an "education" is the key to your future and that you will never be able to get a "good job" unless you go to college.  And it is true that those that go to college do earn more on average than those that do not.  However, there is also a downside. 

Over the past month, we have explained in detail not only how the Chinese credit collapse and massive carry unwind will look like in theory, but shown various instances how, in practice, the world's greatest debt bubble is starting to burst. One thing we have not commented on was how actual trade pathways - far more critical to offshore counterparts than merely credit tremors within the mainland - would be impacted once the nascent liquidity crisis spread. Today, we find the answer courtesy of the WSJ which reports that for the first time in the current Chinese liquidity crunch, Chinese importers, for now just those of soybeans and rubber but soon most other products, "are backing out of deals, adding to a wide range of evidence showing rising financial stress in the world's second-biggest economy."

East Asian work culture is world renowned for its long hours and exhausted laborers. Japanese salary men hustling to catch the last train home, their sleeping bodies stretched out along the seats (sometimes in curiously uncomfortable positions), is an image familiar to many people across the world. Despite having the some of the world’s best-kept records on the subject, however, death from overwork is far from unique to Japan. Instances of it have been known to occur the world over, not least in China, which now reportedly leads the world in work exhaustion-related deaths.

Russian State Duma and Federation Council members are considering the imposition of sanctions on US businesses as discussions are increasingly focused on retaliatory sanctions on the US. "If the US cares little about losing business contacts with Russia through imposing its sanctions," then Duma Deputy Dengin warns of measures to set limits to representative offices of companies in Russia that are owned by US nationals.

UPDATE: *TURKEY'S DAVUTOGLU SAYS LEAK IS 'DECLARATION OF WAR': TURKIYE

As we noted here, Turkish Prime Minister Erdogan had blocked Twitter access to his nation ahead of what was rumored to be a "spectacular" leak before this weekend's elections. Then this morning, amid a mad scramble, he reportedly (despite the nation's court ruling the bans illegal) blocked YouTube access. However, by the magic of the interwebs, we have the 'leaked' clip and it is clear why he wanted it blocked/banned. As the rough translation explains, it purports to be a conversation between key Turkish military and political leaders discussing what appears to be a false flag attack to launch war with Syria.

A few weeks ago, Canadian authorities decide to scrap its controversial 'investor' visa scheme (which had allowed waves of rich Hong Kongers and Mainland Chinese to immigrate and blow the real estate bubble ever bigger). This was met with hollers of derision from the Chinese demanding retribution. What was less well known, until now, is the massive surge in interest from wealthy Chinese in a US program offering 'investors' green cards in exchange for cash. "There is a panic being created in China," warned one immigration lawyer, with Chinese nationals now accounting for more than 80% of visas issued, compared to just 13% a decade ago. It seems the Chinese are in a hurry to get their money out.

When Abe, Kuroda, and their merry men unveiled their latest idea - Abenomics - the world's macro tourists piled in and spent every waking second convincing the rest of the world's suckers that this time was different for Japan. We, along with Kyle Bass and a short list of other realists, warned "be careful what you wish for." It seems tonight's data is the best example yet of the print-and-grow rock and inflate-and-die hard place that Abe finds himself between. Multi-year highs in inflation (pressing on to the BoJ's target) combined with a total collapse in household spending (lowest in 27 months). Abe is cornered; and JPY and the Nikkei are confounded for now.

$20 billion yesterday for a "virtual" reality corporation... but it gets better, as Property Guru reports, Singapore-based game developer Planet Arkadia is offering investments in what is believed to be the world’s first million dollar virtual property. It offers the 'investor' a chance to participate (by spending real money) in the "vibrantly growing economy of Planet Arkadia" - which we note is entirely virtual. Top, much?

If you are not Professor Paul Krugman you probably agree that Washington has left no stone unturned on the Keynesian stimulus front since the crisis of September 2008. By the time the “taper” is over later this year (?) the Fed’s balance sheet will exceed $4.7 trillion - $4 trillion in new central bank liabilities in six years. All conjured out of thin air.  Professor Krugman proposing to “do something”... In short, Krugman wants to double-down on the lunacy we have already accomplished. Unfortunately, we are presently nigh onto “peak debt”; there is no “escape velocity” because the Fed’s credit channel is broken and done. Going forward, the American people will once again be required to live within their means, spending no more than they produce. By contrast, Professor Krugman’s destructive recipes are entirely the product of a countrafactual economic universe that does not actually exist. He wants us to borrow and print even more because our macro-economic bathtub is not yet full. And that part is true. It doesn’t even exist.

The last few years have seen the high-tech darlings spending their freshly printed funny-money currency (shares) on all sorts of money-making (but mostly losing) ideas...