Archive - May 2014 - Story

• AEROSPACE DEFENSE FORCES SUCCESSFULLY REBUFFED SIMULATED MASSIVE NUCLEAR MISSILE STRIKE DURING DRILLS - RUSSIAN DEFENSE MINISTRY
• NORTHERN, PACIFIC OCEAN FLEET'S STRATEGIC SUBMARINES LAUNCH TWO BALLISTIC MISSILES AS PART OF ROUTINE TRAINING - DEFENSE MINISTRY
• RUSSIA LAUNCHES TOPOL ICBM, HITS KAMCHATKA TARGET
• RUSSIAN STRATEGIC OFFENSIVE, DEFENSIVE FORCES IN HIGH READINESS - PUTIN
• RUSSIAN DEFENSE MINISTER STATES PERMANENT READINESS OF NUCLEAR TRIAD

The economy is changing in structural ways that affect not just the job market but the nature of work itself.

One of these markets has been confirmed as "not rigged" by the SEC... the others - have all been proved to be manipulated by various bankers over time... who's right?

Confused by the market? You are not alone with irrational and "Fear of Missing Out" momentum trades and (not so great) sector re(un)rotation all that matters (as has been the case for years with fundamentals not relevant for about 24 months now), so here are some tips from Scotiabank's Guy Haselmann who believes "market noise can be simplified into the following: QE= risk on, End of QE=risk off. QE is now half way toward ending, so now is the time to adjust. The fact that…… EM central banks are hiking, China is attacking its credit bubble, and Japan hiked its VAT tax while the “third arrow” is M.I.A., are also reasons to de-risk. If sanctions on Russia expand to products or industries, then real problems to EU growth will arise. This is something to watch carefully."

Confirming and continuing a trend we first described a year ago, overnight RealtyTrac reported, as part of its Q1 institutional investor and cash sales report, that the percentage of all-cash buyers has soared in the past year with "42.7% of all U.S. residential property sales in the first quarter were all-cash purchases, up from 37.8% in the previous quarter and up from 19.1% in the first quarter of 2013 to the highest level since RealtyTrac began tracking all-cash purchases in the first quarter of 2011."

Despite JPY and bonds not playing along, US equities (courtesy of the squeeze of the "most shorted") had rallied mightily this morning. Then, all of a sudden - reality hit with some rather ominous-sounding threats from Russia:

• *RUSSIA SAYS WILL RESPOND TO BROADER U.S., CANADA SANCTIONS
• *RUSSIA SAYS FORCED TO RESPOND TO 'UNFRIENDLY ACTIONS'
• *RUSSIA SAYS SANCTIONS 'NOT OUR METHOD'

So if 'sanctions' are not their method? Then what is? It seems that uncertainty was enough to spook bonds (yields plunged) and JPY (strength) and take the shine modestly off of VIX/Stocks.

Looking for a reason? Don't bother... having disconnected from JPY carry thanks to Draghi's injection of volatility, it was left up to the VIX-slammers to push stocks back up near record highs once again.

In case US destroyers operating in the Black Sea was not sufficiently clear of the western approach to containing Russia, the latest naval news will hardly boost the de-escalation theme. Reuters reports that earlier today Britain had deployed a destroyer to track a Russian aircraft carrier sailing close to its coastal waters, "the latest in a series of such incidents and a reminder of underlying tensions between London and Moscow."

While most mainstream media is focused on villainizing Putin and the ongoing 'diplomacy' in Ukraine, we warned Monday of the dramatically escalating tensions between Vietnam and China over oil-drilling in disputed waters. The initial verbal to and fro - Vietnam angry at the move and China shunning them - was followed by physical interactions (multiple rammings and water-cannon use) and the US then got involved (laying the blame firmly at China's foot calling the move "provocative"). The capital markets appear a little more concerned about where this 'tension' leads as the Vietnamese stock market crashed almost 6% - its largest drop in 13 years.

Reflecting proudly on how her words were received (surprise!) dovishly yesterday during her congressional hearing (and stocks closed green), we are sure Fed Chairmanwoman Janet Yellen will be brimming with "nothing can stop me now" confidence as she heads into the ring with the Senate Budget Committee. The big headline from yesterday's Q&A that "the recent flattening out in housing activity could prove more protracted than currently expected," will we are sure be caveated with excess hope and exuberance today as yet another set of politicians attempt to pin her back down to 6 months. The biggest thing to watch, we suspect, if she reiterates her "sell small caps" recommendation...

Yesterday we correctly predicted that while the world is distracted by this and that, the next real short-term catalyst is the east Ukraine referendum vote on Sunday, whose results would be available as soon as May 11, indicating that, almost with 100% certainty, the Ukraine region would vote to become independent.  This was promptly followed by a skillful diplomatic gambit by Putin who, knowing full well Donetsk would just say no, suggested the referendum be postponed thus giving himself cover when the western press attacked him for using Crimean tactics for the second time in two months. The irony is that as we also explained yesterday, the Crimea scenario is fully in play once more. Confirming precisely that was news from News of Donbass which reported moments ago that in the aftermath of the new certain May 11 referendum, a week later east Ukraine will formalize the Russia annexation process and on May 18 there will be a "sceond round of the referendum where you will be asked to support accession to the Donestk region of Russia."

Having voiced his "serious concern" about a strong foreign exchange rate and low inflation, Mario Draghi came over the top with yet another resounding promise of action...

• *DRAGHI SAYS ECB IS COMFORTABLE WITH ACTING IN JUNE IF NEEDED

This was enough to send the EUR tumbling down from near 1.40 levels (which it hit as traders saw no actual actions) and spark a renaissance in risk-on assets... always the promises... The question - of course - is how long the half-life of this jawbone lasts?

The total number of people claiming benefits in all programs for the week ending April 19 was 2,832,693, an increase of 10,353 from the previous week (on an unadjusted basis) but the headlines will gloat of the drop in initial claims after last week's rather disturbing spike (which temporarily destroyed the pent-up demand post-weather meme). Initial claims dropped 26k to 319k, beating expectations. New York and Massachusetts saw the largest increase in claims while Michigan and New Jersey the largest drop.

The looming threat of a non-inflationary scenario for a group of nations that now have more debt-to-GDP leverage than ever before, more unemployed people that ever before, and more delinquent loans than ever before is indeed a worry for the ex-Goldman Sachs banker, but - so far - Draghi has been "all mouth and no trousers" in the local vernacular. Will he re-promise QE? Negative rates? OMT? Jawbone the EUR down as yet another set of algos buying his bullshit? We'll see...

As The Fed tapers and shifts its decision-making process away from rules-based, model-backed strategies in favor of "we'll know when to tighten when we see it" qualitative hand-waving, it seems the need to maintain teams of PhDs - to mutually masturbate over the historical back-fitted effectiveness of their models - is lacking. As The Boston Globe reports, The Federal Reserve Bank of Boston will cut nearly 15% of its workforce - around 160 jobs - in the largest layoff in over a decade... “It’s obviously a tough decision for us and the folks who are here,” Lavelle said. “It’s really about cost and efficiency.” Austerity strikes... (as it turns out the job cuts are due to losing a key customer - The US Treasury!)