Archive - Jun 19, 2014 - Story

The headlines are all about Philly Fed's rise to 9-month highs - just shy of the cycle's highs last September. Employment is up, and orders are improving... all good (buy, buy, buy)... But... the 'outlook' or hope index has exploded in the last 2 months by the most since 2009 rebounding from the winter doldrums. Perhaps most worrisome - though we are sure Yellen will dismiss it as "noise", Prices Paid are surging - up most in the last 2 months since June 2009. This is the biggest surge since the Fed started printing money... furthermore, prices received are down notably (ending the margin expansions dream).

It appears Russia 'retaliation' continues for the 'costs' imposed by the West on Putin and his people (Russia +28%, S&P +6% since sanctions). Putin looks set to take on both EU and US as RT reports that Russian MPs are preparing a bill to ban the use of US consulting companies in Russia; and then Ukraine's Naftogaz says Russia's Gazprom seeks to end its accord on daily gas transit - a move which could threaten EU gas supplies. The US put its best man forward to respond and Treasury Secretary Jack Lew thretatened "US is ready to act" on Russia if Ukraine escalates...

Argentina's attempt to work around SCOTUS decision in favor of the 'holdouts' was rejected (under anti-evasion orders) last night leaving Argentina no alternative but to threaten to default on its debt. The government called it "impossible" to pay bond service due on June 30, because payment to holders of restructured bonds could not be made unless the 'holdouts' were paid $1.33 billion at the same time (and Argentina's economy minister argues could be up to $15 bn) which the distressed country clearly does not have. For the first time in 12 years, Argentina has agreed to negotiate with the 'holdouts' (has renegged on that negotiation) who refused to participate in two restructurings that followed Argentina's 2002 default but it seems increasingly likely that an even of default looms for Argentina.  One good thing may come from the victory of the 'hold-outs': the government will find it difficult to rack up more debt.

It took all of "several seconds", in the NYT's own words, for the latest proposal for a ceasefire, issued by Ukraine's new president Petro Poroshenko, to be "rejected."

Initial claims very slightly missed expectations (312 vs 311.9 exp) for the 3rd week in a row but the signal is no worse and no better as it sits near cycle lows. Continuing claims continue to drop; at 2.56 million, this is the lowest continuing claims since Nov 2007 - the last 4 months have seen continuing claims drop at the fastest rate in over 4 years. The bottom line is 'this is as good as it gets'...

Presented with little comment aside to note the surge in gold since Yellen gave markets the all-clear yesterday. It seems someone decided the open this morning was an opportune time to take on half a billion dollars of gold exposure...

It was two days ago when we reported that America's third crusade in Iraq "Is Not Going As Planned: Iraq Prime Minister Defies US, Accuses Saudi Arabia Of "Genocide"."Sure enough, here comes America's wrath: "the Obama administration is signaling that it wants a new government in Iraq without Prime Minister Nouri al-Maliki, convinced the Shiite leader is unable to reconcile with the nation's Sunni minority and stabilize a volatile political landscape. The U.S. administration is indicating it wants Iraq's political parties to form a new government without Mr. Maliki as he tries to assemble a ruling coalition following elections this past April, U.S. officials say."... The chairwoman of the Senate Intelligence Committee, Sen. Dianne Feinstein (D., Calif.) told a congressional hearing Wednesday: "The Maliki government, candidly, has got to go if you want any reconciliation."

• Currency Probe Widens as U.S. Said to Target Markups (BBG)
• Battle for Iraq refinery as U.S. hesitates to strike (Reuters)
• Ukraine forces battle separatists after truce 'refused' (Reuters)
• Fed Dots Ignored as Investors Focus on Yellen’s Message (BBG)
• Retirees Suffer as $300 Billion 401(k) Rollover Boom Enriches Brokers (BBG)
• American Apparel ousts CEO; source says Dov Charney 'will fight like hell' (LA Times)
• House Panel Is Subpoenaed as Trading Probe Heats Up (WSJ)
• GM Officials Ignored Alert on Car Stalling (WSJ)
• Russia’s $20 Billion Bond Void Filled by China to Mexico (BBG)

She came, she spoke, and she sent stocks to a new all time high. That is perhaps the simplest summary of what Janet Yellen did yesterday when, as a result of her droning monotone, she managed to put the VIX literally to sleep, which closed at the lowest since 2007 and the resulting surge in the S&P was a fresh record high, because despite the "concerns" Fed member have about record high complacency, all they are doing is adding to it. And now that apparently the Fed has a market "valuation" department, and Yellen can issue fairness opinions on whether the S&P is overvalued, the only question is whether today, as a follow through to yesterday's "buy everything, preferably on leverage, sincerely - the Fed" ramp, the VIX will drop to single digits today.