Archive - May 2014 - Story

$35 Million - that's what the Chevy Cobalt "ignition switch recall" probe fines cost GM based on The Department of Transport's maximum penalty... or 0.02% of their last 12 months revenues:

• GM TO PAY UP TO $35M PENALTY ON COBALT PROBE, DOT SAYS
• DOT:CONSENT ORDER REQUIRE GM TO SUBMIT REPORTS, MEET W/ NHTSA
• DOT SAYS GM TO MAKE INTERNAL CHANGES TO REVIEW OF ISSUES

So the tax-payer bailed-out firm is paying the government a de minimus fine for killing taxpayers? (and the DoT now urges Congress to raise the maximum penalty to $300 million) Full statement below

Deutsche Bank, which most recently has been in the spotlight for hightailing it out of the silver and gold fix (because it is clearly innocent of any precious metals manipulation as an "independent, impartial and extensive" inquiry by the Bank of England will surely prove), has a message for its traders: stop bloody swearing.

After April's confidence-inspiring reflexive rebound (thanks to hope for the future more than current perceptions) back near post-crisis highs, it seems the less-than-frigid-weather and record-er highs in stocks were not enough to maintain the status quo enhancing exuberance. UMich confidence dropped and missed expectations by the most since June 2006. Maybe its fears of El Nino? Maybe its concerns at the bond market signals? Or maybe - the reality is that the average joe is not as cock-a-hoop as the man-on-the-TV says he should be. Economic conditions dropped to their lowest since November. Higher highs in stocks and lower highs in confidence - not what the Fed wants.

Bernanke's legacy: a deceptive case for a failed policy.

Sophistry: the use of fallacious arguments, especially with the intention of deceiving. The Federal Reserve's core policy of quantitative easing (QE) is based on a deceptive but appealing argument voiced by former Fed Chair Ben Bernanke.

The blue line is conventional, single-family housing starts and/or permits.

The red line is "New Normal", "Blackstone is America's landlord" multi-family (i.e. rental) housing starts and/or permits.

Go.

The serial extrapolators will be pleased... and the talking heads will now proclaim this as clear evidence that the cold-weather dysphoria has abated and its blue skies for real estate from here... Housing Permits back over 1 million homes SAAR (and biggest jump in a year) to new 6 year highs and Housing Starts back above 1 million SAAR near last year's highs. However, there is one major caveat - almost the entire surge was led by an almost 40% spike in multi-family units as the 'rental nation' grows ever stronger. Multi-family accounted for almost 30% of all starts - the highest in over 4 years as single-family starts rose a dismal 0.8%. Not exactly the "but housing inventories are so low and they must builder more homes" kind of growth that the headlines will crow about...

We have previously profiled the "holy grail" gas deal between Russia and China on several occasions, and with its announcement scheduled for next week (barring some unmitigated disaster) during Putin's first visit to China since Xi's appointment as president last March, it is time to do a status update on where it stands even if according to SCMP, at this point finding the "holy grail" is merely a formality.  "Russian Deputy Energy Minister Anatoly Yanovsky said on Monday that the deal was "98 per cent ready". Supply would begin no later than the end of 2018."

Congress party President Sonia Gandhi concedes defeat after coalition led by Narendra Modi’s opposition Bharatiya Janata Party sweeps Indian election.
BJP bloc leads in 335 seats and Congress-led bloc in 59, according to NDTV tally of count as of 4:39 p.m. in Mumbai.
BJP alone set to cross majority mark of 272 seats from 543 up for grabs: Election Commission data
“India has won,” Modi says on Twitter
BJP poised for biggest victory for any single Indian party in 30 years on pledge to revive growth, improve governance
Congress heading for wost-ever performance after graft scandals, economic slowdown, elevated inflation

• Bank of England sees 'no housing bubble' (Independent)
• ‘If the euro falls, Europe falls’ (FT)
• India's pro-business Modi storms to historic election win (Reuters)
• Global Growth Worries Climb (WSJ)
• Bitcoin Foundation hit by resignations over new director (Reuters)
• Blackstone Goes All In After the Flop (WSJ)
• SAC's Steinberg loses bid for insider trading acquittal (Reuters)
• Beats Satan: Republicans Paint Reid as Bogeyman in 2014 Senate Races (BBG)
• Tech Firms, Small Startups Object to Paying for Internet 'Fast Lanes' (WSJ) - but they just provide liquidity
• U.S. Warns Russia of Sanctions as Ukraine Troops Advance (BBG)
• Major U.S. hedge funds sold 'momentum' Internet names in first-quarter (Reuters)

The perfectly expected if completely irrational overnight ramp in various Yen carry pairs tried, and failed, and both the USDJPY and EURJPY were tumbling to overnight lows as we go to print. This is happening despite a rout in India in which Narendra Modi's opposition block is poised for the biggest Indian election win in 30 years, with his BJP party currently leading in 332 of 543 seat - an outcome that is seen as very pro business (and seemingly pro asset bubbles: the INR soared and the Sensex was up as much as 6% in intraday trading before paring virtually all gains following what many say was RBI intervention). And while the Nikkei (down 200 points) did not help the mood this move was mostly in response to yesterday's US selling, which means as usual the culprit for lack of algo risk-taking overnight has been the Yen carry, which moments ago hit intraday lows, and is increasingly flirting with the 101 level (after which double digits, and Abe's second resignation, come very quickly).

China's at it again! On Thursday the Philippines released photos to validate its claim that China is building structures and a possible airstrip on the disputed Johnson Reef.

Who could have seen this coming? USA Today reports deputies have charged an 18-year-old South Carolina woman with the fatal shooting of a male friend who had donned a bulletproof vest and allegedly asked her to "shoot me."

Treasuries are still cheap. The FOMC statement says that “even after employment and inflation are near mandate-consistent levels” the committee may keep “the target federal funds rate below levels” viewed as normal in the longer run. Whenever we read this, we think of Desi Arnaz screaming, “Lucy! You got some ‘splainin’ to do!” Treasury prices do not care if Q4 is around 4%. Economic data matters little for the time being. Prices are being driven more by positions, relative value, and future Fed policy. Markets know the Fed is ending QE. What it really wants to know is the terminal Fed Funds level in the new ‘world order’. In the meantime, stay long.

Once upon a time Wall Street Journal reporters were economically literate. Now, apparently, when they muster-in for the job they get a Keynesian chip implant while signing their HR forms. Otherwise, how can you explain the bullshit penned this morning by Brian Blackstone on the EU’s “disappointing” Q1 GDP report. He didn’t say Keynesian economists say you need more inflation to get jobs and growth. He just declared it!