Archive - Jun 23, 2014 - Story

Just hours after we noted Bloomberg's story of Germany's decision to halt its repatriation of gold from the NY Fed, the gentleman at the center of the story, who Bloomberg quoted as saying his 'Repatriate Our Gold' campaign was "on hold" - Peter Boehringer - has come out swinging... The Bloomberg story is "a 'non-news' article with a wrong headline, strange interviewees, old news, and with a clearly apologetic ideological approach." and that's just the start...

The story of energy and the economy seems to be an obvious common sense one: some sources of energy are becoming scarce or overly polluting, so we need to develop new ones. The new ones may be more expensive, but the world will adapt. Prices will rise and people will learn to do more with less. Everything will work out in the end. It is only a matter of time and a little faith. In fact, the Financial Times published an article recently called “Looking Past the Death of Peak Oil” that pretty much followed this line of reasoning. However, energy common sense doesn’t work because the world is finite.

"The epidemic is totally out of control," warns medical charity Médecins Sans Frontières of the deadly Ebola outbreak in Guinea, Liberia, and Sierra Leone. "There is a real risk of it spreading to other areas...Ebola is no longer a public health issue limited to Guinea: it is affecting the whole of West Africa." As of Friday, the Centers for Disease Control and Prevention put the number of cases at 362 — more than any other outbreak on record. Here's everything you need to know about Ebola...

Moments ago the NAR released its May data, which on first blush was widely lauded as bullish: the topline print came at a 4.9% increase, rising from 4.65MM to 4.89MM, above the 4.74MM expected. Great news... if only on the surface. So what happens when one drills down into the detail? As usual, we focused on the last slide of the NAR breakdown, located at the very end of the supplementary pdf for good reason, because what it shows is hardly as bullish. So how does this "housing recovery" in which the NAR has proclaimed the "sales decline is over" look on a granular basis. The answer is below, and it is even worse than the April data.

"There's something going on in derivatives land," is the warning from ADM's Andy Ash and as Paul Mylchreest notes the relationship between VIX and SKEW suggests the options market is pricing in the possibility of a major market event. The process enables professionals to maintain the illusion of calmness in VIX while hedging their positions (as they attempt to unwind as we have shown). Whether this 'event' is a crash or melt-up is historically unclear but given the taper and the trend of the last few years, we suspect the former more likely that the latter.

For quite some time, we have been predicting that the Russians and Chinese will, at some point, bring an end to the petrodollar system that has virtually guaranteed the US the position of having its currency be the world's default currency. This position has allowed the US, in recent decades, to go on a borrowing and currency-printing spree, the likes of which the world has never seen. But now, the US is broke, and its stature as the biggest boy has begun to wane. The other kids in the schoolyard are playing smart, whilst the US is still playing tough... and it's no longer working... The US is at war with China and Russia. It's an undeclared war, and it's monetary warfare, not military warfare.

John Kerry came, saw and as usual made a horse ass out of himself.

While the "mysterious, indiscriminate" buyer of US stocks has been fully unmasked now, what most likely do not know is that just this is happening at a comparable record pace nowhere else but the place which is mirroring and repeating every single Fed mistake tit for tit. Japan...  “Share buybacks have the effect of supporting the market when it’s weak,” Daiwa Securities Group Inc. quantitative analyst Masahiro Suzuki wrote in a report on June 10.

"The banks still haven't looked under the hood," warns one executive as the probe at Qingdao port (centering around the duplication of warehouse certificates in order to use a metal cargo multiple times to raise financing) begins to spread to the entire Chinese warehousing sector. As Reuters reports, even if banks or their customers have insurance for the metal, some warehouse sources said they might struggle to get paid if fraud is uncovered or their agents are implicated. Though many global firms are involved in the warehouse industry in China, there has been outsourcing to local firms to cut overheads and avoid dealing with complex local regulations. That appears to have back-fired. One thing looks certain, however, banks involved in commodity financing in China are set to charge higher fees: "The cost is certainly going to go up, whether it's going to be from local banks or international."

No one ever thinks about the water.. until they have to. Hours ago, the local gas company in Kiev (Kyivenergo) announced that they would be shutting off the hot water supply to most of the city. While the official reason for the hot water shutoff is that Kyivenergo (the energy supplier to Kiev) owes a debt to the Ukrainian state gas company (Naftogaz) of over $100 million; it’s just a quirky little coincidence that this debt suddenly became materially important only one week after Russia shut off natural gas supplies to Ukraine. Funny thing is that Ukrainian politicians for years had been telling people not to worry about this. Clearly this turned out to be a big fat lie.

After last week's fireworks, we suspect this rare evening hearing will have plenty more as the major Democratic donor (and IRS Commissioner) John Koskinen faces a fresh grilling over the technuical bullshit that led to the IRS destroying subpoena'd hard drives...

The American financial establishment has an incredible ability to celebrate the inconsequential while ignoring the vital. Last week, while the Wall Street Journal pondered how the Fed may set interest rates three to four years in the future (an exercise that David Stockman rightly compared to debating how many angels could dance on the head of a pin), the media almost completely ignored one of the most chilling pieces of financial news that I have ever seen. According to a small story in the Financial Times, some Fed officials would like to require retail owners of bond mutual funds to pay an "exit fee" to liquidate their positions. Come again? That such a policy would even be considered tells us much about the current fragility of our bond market and the collective insanity of layers of unnecessary regulation.

The 'dumb' algos trading off the headlines have dragged Dean Foods stock down 7.5% as the WSJ reports that the company has in recent weeks received a subpoena from criminal authorities ordering the company to produce information, said a person familiar with the matter. Dean Foods stated it will offer "full support" and is also doing its own investigation of the matter. We suspect the stock move is a little much.

Aerial shots, slow-motion explosions, scenes filmed through a rifle’s crosshairs... As France24 reports, you might think this is footage from a new summer blockbuster, but you would be wrong. It is, in fact, a new propaganda video produced by Sunni jihadists from the armed group the Islamic State in Iraq and Syria (ISIS). The extremely violent hour-long film was published online just days before ISIS launched a massive offensive in northern Iraq. The film is called “The Clanging of the Swords IV" because it is part of a series much like other Hollywood blockbusters. Given their funding (via stealing Iraq's central bank's cash), and we pre-suppose from the ISIS annual report that they get generous tax breaks on the production, we await "The Clanging of the Swords V" next summer.

"...On June 28, 1914, a Slavic nationalist in Sarajevo murdered Archduke Franz Ferdinand, heir to the Austrian throne. The battle lines were drawn. Austria positioned itself against Serbia. Russia announced support of Serbia against Austria, Germany backed Austria, and France backed Russia. Military mobilization orders traversed Europe. The national and private finances that had helped build up shipping and weapons arsenals in the last years of the nineteenth century and the early years of the twentieth would spill into deadly battle. Wilson knew exactly whose help he needed. He invited Jack Morgan to a luncheon at the White House. The media erupted with rumors about the encounter. Though Wilson explained this did not signify the start of a series of talks with “men high in the world of finance,” rumors of a closer alliance between the president and Wall Street financiers persisted..." Woodrow Wilson and Jack Morgan’s collaboration to finance the Allies in the early days of the war - aside from its timeliness - provides one of the strongest examples of the intimate cooperation between the presidency and the highest levels of banking to drive American interests.