Archive - Jun 2014 - Story

Following the initial de-dollarization meeting, there has been a slew of anti-dollar moves around the world (including Gazprom's shift of 90% of its clients to non-dollar payments). However, on the heels of the "anti-dollar alliance" discussions yesterday, DW reports that China would start direct trade between the renminbi and the British pound on Thursday. China's Foreign Exchange Trade System (CFETS) confirmed Sterling and yuan would be directly swapped without using the US dollar as an intermediary.

War, famine, mass extinctions and devastating plagues - all of these are coming unless some kind of miraculous solution is found to the world's rapidly growing water crisis. By the year 2030, the global demand for water will exceed the global supply of water by an astounding 40 percent according to one very disturbing U.S. government report.

"It's for your own good, remember." As Bloomberg reports, based on a study showing the "stunning effectiveness of kill switches," Google and Microsoft have agreed to NY AG Schneidermann's calls that such 'security measures' be incorporated in all new Android and Windows phones (following Apple's inclusion in September). With Android phones making up 80.2% of global shipments this year, "control" will be pleased...

The multitudes of people, especially Americans, who view U.S. government activity in a negative light often make the mistake of attributing all corruption to some covert battle for global oil fields. In fact, the average leftist seems to believe that everything the establishment does somehow revolves around oil. This is a very simplistic and naïve view. A very real danger within energy markets is the undeniable threat that the U.S. dollar may soon lose its petrodollar status and, thus, Americans may lose the advantage of relatively low gas prices they have come to expect.  That is to say, the coming market crisis will have far more to do with the health of the dollar than the readiness of oil supply.

Having spent a week in surprisingly bright and sunny London, ConvergEx's Nick Colas reports that the consensus opinion in this global financial hub is that equities are where the sun shines the brightest. Public companies are intent on tapping those better days with more aggressive global investor outreach, and asset managers/brokers of all stripes feel that the developed economy bull market has a few more years to run. At the same time, everyone agrees that the near term feels a bit damp and acknowledges that the low levels of actual volatility are worrisome for their artificial “Keep calm and carry on” sentiment. Other heard/seen observations: London is no longer a British city, the surge in foreign buyers is creating a world-class property bubble. His conclusion, as long as humans are humans there will always be financial bubbles, either due to groupthink over real estate prices or financial assets. Just as surely as there will always be an England.

While Janet Yellen yesterday explained that low levels of realized and expected volatility in financials were not a signal of complacency; we suspect, like The Fed's Bill Dudley, some are concerned she is talking out of her academic ass... As JPMorgan warned, volatility currently is entirely dislocated from fundamentals, and the day of realization is approaching...

Is the Fed trying to start the very bond run it is allegedly attempting to prevent? Read the following, then decide.

We would hazard a guess that most people in the developed world are now aware of what hydraulic fracturing, or “fracking,” is. Fracking has had profound effects on the energy industry, so far mostly in the U.S., where it has created oil and gas booms in non-traditional places, moved the country closer to energy independence, and resulted in a huge reduction in the cost of energy, particularly natural gas. It is, however, not without controversy. Here are 5 things that you may not know about fracking.

It feels like it was only yesterday when we wrote about the plight of what was once supposed to be the ultramodern east-coast competitor to the glitzy kitsch of Las Vegas: Atlantic City's Revel casino which back in February 2013 "filed for bankruptcy ten months after opening." Well, a short 16 months later it is time for an update because Revel, which was supposed to have a viable balance sheet upon emergence from its first Chapter 11 filing, just filed for bankruptcy for a second, and most likely final time: the dreaded "Chapter 22." And not only did the company admit its business model is not viable not due to its overlevered balance sheet, but because of the sad state of the economy and the AC gambling market, it also warned it may shut down permanently if it can't find a buyer in bankruptcy court.

Moments ago, president Obama announced what was informally known for days but only today was officially disclose to the public: namely that he’s sending up to 300 American troops to Iraq in the wake of escalating chaos in that nation. Actually: correction, make that "military advisors." Please don't call them troops because otherwise the US public may realize that Obama has just become only the third president in as many decades to launch his own private Iraq war. As Politico succinctly summarizes, "It’s a politically uncomfortable move for a president who won election in large part due to his opposition to the Iraq War and who has touted the withdrawal of U.S. combat forces from Iraq in 2011 as one of the key achievements of his presidency."

We already know that Wall Street manipulates everything (not conspiracy theory, but now open conspiracy fact), but Reuters' Jamie McGeever exposes the ugly chatroom realities of just how FX traders shared orders, split trades, front-ran clients in million of electronic messages providing fresh evidence of collusion among top currency traders. Traders pooled order details and discussed the 'spread' they would offer, "I don't like this guy...I'd show 6 to good guys but guys like that I'm going to show 7 in future," the trader added. Unrigged?

Currently there is a great debate within the financial media on the who’s right – who’s wrong, as both sides stare at a financial market that seems to go ever higher with every morning bell. In actuality, it’s both, and neither. Currently the macro economy is being expressed via circumstances resulting from a myopic view of participation. i.e., The financial markets. All of those fundamental based principles have been annexed to what one solitary person will do – then say. That person was Ben Bernanke. Now it’s been codified via the markets recent reactions to Janet Yellen. All of those fundamental based principles have been annexed to what one solitary person will do – then say. That person was Ben Bernanke. Now it’s been codified via the markets recent reactions to Janet Yellen.

But, but, but... Janet Yellen didn't say precious metal valuations were within historical norms? Gold and Silver are surging today (and have done since the FOMC press conference all-clear) with the latter having its best day in months and back at 3-month highs... Intriguingly, just as we warned, gold and silver have been on a significant tear since the Qingdao CCFD probe began (as synthetic hedges are unwound - which dominate pricing in PMs) while copper and iron ore and so on have all fallen (as the reality of no real demand leaks into these commodities).

Moments ago Oracle reported that it missed on both the top line ($11.33 billion vs Exp. $11.48 billion), and the bottom line (EPS $0.92 billion, Exp. $0.95). The company didn't blame snow (blaming Snowden would be more appropriate), and yet despite the 6% tumble in the stock price, the miss in operating results was not the most surprising aspect of the company's Q4 earnings release. What was? The following chart breaking down Oracle's quarterly spending on stock buybacks versus capital expenditures.

US equity markets were unable to maintain any of the kneejerk, VIX-smashing jerk higher post-FOMC momentum from yesterday and closed unch to slightly red (after some US open exuberance ran all-time-high stops once again). Equities did catch some bid late on as rumors of AAPL iWatch spread. VIX hung very stable at around 10.6 providing some support for stocks. Away from stocks flatness, Treasuries had a violent day. Early strength following Yellen yesterday began to fade as US equity markets opened and yields pushed higher, then when the 30Y TIPS auction tailed, longer-dated bonds slammed higher in yield. There was a mild pullback rally into the close but 10Y ended +4.5bps (30Y +7bps, 3Y unch). The big news of the day - given how flat USD was - is the huge spike higher in gold (+3%) and silver (+4.4%) - the biggest jump in 9 months. Gold and Silver are back at 3-month highs (breaking back above $1300 and $20 respectively). Once again JPY carry entirely decoupled from stocks but a late-day modest melt-up dragged all the major indices (except Nasdaq) just into green for the day) but leaves the S&P lagging gold and silver year-to-date again. S&P 500 closes at another all-time high.