Archive - Apr 1, 2014 - Story

Yesterday, we read with some amusement that Goldman has moved Guy Saidenberg, reportedly one of the greater profit centers at the firm - and how could he not be when he always traded against Tom Stolper's recommendations which led to tens of thousands of pips in losses to those who listened to him over the past five years - from head of global foreign-exchange trading to a new role, as co-head of commodities.  Why did Goldman decide to scrap its once uber-profitable FX vertical and redo it from scratch? Simple - the ability to rig and manipulate FX markets, which are now under every global regulator's microscope after the "Cartel" members so foolishly let themselves be exposed to the entire world, is no longer there, as confirmed last night by news that a dozen large investors have filed a joint lawsuit against 12 banks for "allegedly conspiring to rig global foreign-exchange prices." Allegedly? Hasn't everyone read the Cartel chatroom transcripts yet?

Following the big plunge in January, the world's extrapolators have been exuberant over the snap-back from weather-driven anomalies... today, ISM dashed those hopes to some extent as the pace of the v-shaped recovery slowed notably and ISM missed expectations for the 3rd of the last 4 months. While new orders rose, employment fell to its lowest in 9 months. Of course this bad news is just what the doctor ordered and those oh-so-not-front-running algos just lifted stocks to a new all-time record high... imagine if it had missed by even more!!

The 2nd class data point, that quickly became the darling of the algo pumpers when it beat expectations by a record last month, has tumbled back to a less exuberant reality and missed expectations by the most in 7 months. Printing at 55.5 (vs 56.0 exp.) the index is still in expansion mode but factory jobs and factory orders sub-indices both fell...

Japan's economic farce has gotten so bad it is becoming painful to even discuss it: first, every newspaper writes effusive, extended articles about how after nearly two years of consecutive declines in base pay praising Abenomics, and then the next month the "increase" is promptly revised lower in a footnote in some article which gets zero to no prominence, which however continues to reaffirm that Abenomics is an absolute, unmitigated disaster. Sure enough this is what happened today, when last month's bombastic "Japan Base Wages Rise for First Time in Nearly Two Years" can now be retracted and instead replaced with this: "regular pay slipped an annual 0.3 percent in February, falling for a 21st straight month after a 0.2 percent slip the previous month."

Saxo Bank's CEO Lars Seier Christensen has made it abundantly clear in the past that the EUR is a monumentally bad idea; he notes, the huge European bureaucracy and especially the political elite that feed off the EU will do all they can to prevent the EUR’s fall, at least until it becomes inevitable. This will be either due to pressure from voters (even if they are very rarely consulted in this post-democratic political structure) or from the markets, which eventually must reassume their role that has been perverted beyond recognition during the crisis: the true role of allocating capital and pricing money and assets rationally. But, Christensen explains, if we are stuck with this "Currency of Mass Destruction", shouldn’t we at least try to make some money from it?

For those used to smooth, undisturbed, Fed-assisted, no-risk-all-return, sailing, both the month of March and the entire first quarter were quite the wake up call.

First we had Jeab-Claude Juncker saying it's ok to lie to the people, then President Obama's poster-child for Obamacare who later discovered she was unable to get the healthcare she expected and now following Janet Yellen's apparently 'uber-dovish' "jobs are not plentful" sob story spech yesterday we have more governmental factual inaccuracies. As Bloomberg reports, in her first speech as Federal Reserve chair, Janet Yellen told the stories of three people who had trouble finding work to illustrate her concern about the unemployed -- omitting the fact that two had criminal records that might have influenced employers’ decisions on whether to hire them. As we commented yesterday, "it’s troubling when we have to assume that everything we hear from any politician or any central banker is being said for effect, not for the straightforward expression of an honest opinion."

In the middle of 2012, to much yield chasing fanfare, China launched a private-placement market for high-yield bonds focusing on China's small and medium companies, that in a liquidity glutted world promptly found a bevy of willing buyers, mostly using other people's money. Less than two years later, the first of many pipers has come demanding payment, when overnight Xuzhou Zhongsen Tonghao New Board Co., a privately held Chinese building materials company, failed to pay interest on high-yield bonds, according to the 21st Century Business Herald.

• GM enters harsh spotlight as Congress hearings begin (Reuters)
• Facebook's Zuckerberg earns $3.3bn through share options (BBC)
• Sheryl Sandberg has sold more than half her stake in FaceBook (FT)
• Chinese Dragnet Entangles Family of Former Security Chief, Zhou Yongkang (WSJ)
• NHTSA chief: GM did not share critical information with U.S. agency (Reuters)
• Citigroup uncovered rogue trading in Mexico, fired two bond traders (Reuters)
• Corporate America’s overseas cash pile rises to $947bn (FT)
• Thai anti-government protester killed, rekindling political crisis (Reuters)
• China Milk Thirst Hands U.S. Dairies Record 2014 Profits (BBG)
• Caterpillar accused of ‘shifting’ profits (FT)
• New iPhone 6 screens to enter production as early as May (Reuters)

Among the key overnight events was the February Euro area unemployment report, which was unchanged at 11.9%, lower than the 12% median estimate; in Italy it rose to a record 13% while in Germany the locally defined jobless rate for March stayed at the lowest in at least two decades Euro zone PMI held at 53 in February, unchanged from January and matching median estimate in a Bloomberg survey HSBC/Markit’s China PMI fell to 48 in March, the lowest reading since July, from 48.5 in February; a separate PMI from the government, with a larger sample size, was at 50.3 from 50.2 the previous month NATO foreign ministers meet today to discuss their next steps after Putin began withdrawing forces stationed on Ukraine’s border Gazprom raised prices for Ukraine 44% after a discount deal expired, heaping financial pressure on the government in Kiev as it negotiates international bailouts.