Archive - Apr 23, 2014 - Story

The chart below, which summarizes 5 years of Fed "forward guidance" on that most critical of variables - the Fed Funds rate - proves two things:i) there is nothing worse in this world than being a Fed Funds, or Eurodollar, trader, considering 5 years of forecasts have been systematically destroyed by a Fed which has failed time and time and time again to stimulate the economy enough to push it away from ZIRP (and why any hope for the first rate hike in mid-2015 are idiotic), and ii) when it comes to central planning, the economists that now openly control the bond and stock market and increasingly more of global capital flows, have absolutely no idea what tomorrow brings perversely, since it is their actions that have made the required outcome - a self-sustaining, economic recovery - impossible.

• Ukraine's leaders say have U.S. backing to take on 'aggressors' (Reuters)
• Goldman Sachs Stands Firm as Banks Exit Commodity Trading (BBG)
• Obama reassures Japan, other allies on China as Asia trip begins (Reuters)
• China Challenges Obama’s Asia Pivot With Rapid Military Buildup (BBG)
• Google’s Stake in $2 Billion Apple-Samsung Trial Revealed (BBG)
• No bubble here: Numericable Set to Issue Record Junk Bond (WSJ)
• 'Bridgegate' scandal threatens next World Trade Center tower (Reuters)
• Supreme Court Conflicted on Legality of Aereo Online Video Service (WSJ)
• Barclays May Cut 7,500 at Investment Bank, Bernstein Says (BBG)

It has been exactly six days in which algos, reversing the most recent drop in the S&P with buying sparked by a casual Nikkei leak that the BOJ may, wink wink, boost its QE (subsequently denied until such time as that rumor has to be used again), have pushed the market higher in the longest buying streak since September, ignoring virtually every adverse macroeconomic news, and certainly ignoring an earnings season that is set to be the worst since 2012. Today, the buying streak may finally end on rumors even the vacuum tubes are scratching their glassy heads if more buying on bad or no news makes any sense now that even the likes of David Einhorn is openly saying the second tech bubble has arrived. Keep an eye on the USDJPY which has had seen some rather acute "trapdoor" action in early trading and is approaching 102 after breaching its 55-DMA technical support of 102.38. If the support is broken here we go again on the downside. Keep an eye on biotechs and GILD in particular - if the early strength reverts into more selling again (after the two best days for the biotech space in 30 months), the most recent euphoria phase is now over.

Ask any European why their standard of living is so atrocious (after years of freeflowing debt-funded largesse) and the answer is well-known: austerity.Also ask any European if austerity means public debt should go up or down and the answer is also as clear: down. Which is why most Europeans will likely be confused to very confused when presented with the latest Eurostat data according to which not only did Eurozone debt rose remain just shy of all time record highs and certainly increasing from a year ago, but those PIIGS nations which are the first to blame austerity for everything, such as Greece (net of the debt wiped out as part of its 2012 bankruptcy of course), Portugal, Spain and Italy, all saw their public debt hit all time highs.

It took Joe Biden just a day after his arrival in Kiev to kill and bury the last remaining hope that last week's latest attempt at diplomatic de-escalation in Geneva would actually be anything more than a joke. A few hours ago, in a statement posted on the parliament website, Ukraine acting President Oleksandr Turchynov said that pro-Russian separatists have "crossed line" adding that East Ukraine is currently controlled by “terrorists” supported by Russia. In other words, the same old song and dance. Which is why this time Russia made it quite clear to issue a warning that the next time there is a provocation against its soldiers or, more importantly, against its people, those in East Ukraine to be specific, it would retaliate. Once again, Obama's "costs" message is lost on Putin...

There is a reason why while Germany has been delighted to keep the Euro as its currency, in the process keeping a substantial discount to where the Deutsche Mark would be trading if it weren't for the implicit FX subsidies by ther Eurozone members, France has been increasingly more panicked and vocal about the soaring EUR. That reason became apparent this morning when Markit reported that France PMI for April both declined from the March print of 52.1, and missed expectations of 51.9, printing at 50.9. Same thing for the Services PMI which at 50.3, both missed expectations of 51.3, and dropped from 51.5. France's loss however was Germany's gain, which beat expetations across the board.