Archive - Jun 2014 - Story

This morning’s Q1 GDP revision might have been a wake-up call. After all, clocking in a -2.9% - cold winter or no - it was the worst number posted since the dark days of Q1 2009. Well, actually, it was the fourth worst quarterly GDP shrinkage since Ronald Reagan declared it was morning again in American 30 years ago. Stated differently, 116 of the 120 quarterly GDP prints since that time have been better. Even when you adjust for the Q1 inventory “payback” for the bloated GDP figures late last year, real GDP still contracted at a -1.2% annually rate. Still, within minutes of the 8:30AM release, the Wall Street Journal’s news update did not fail to trot out the “do not be troubled” mantra. When the daily narrative is this lame it is no wonder that our happy talk financial system drifts toward the wall. The Cool-Aid drinkers have simply lost touch with reality.

Now that any credibility Barclays, pardon Darklays, may have had in the capital markets has drowned at the bottom of its (soon to be shuttered) dark pool, it is time to start making fun of the bank. To do that we bring our readers the British bank's "Ongoing Commitment to Transparency", and specifiically the "Equities Electronic Order Handling." Curiously, nowhere in said book does it say that the bank will route the vast majority of its trades to the most lucrative predatory HFT algos lurking deep in the bowels of LX, which incidentally is co-located in the Savvis NJ2 Data Center in Weehawken, New Jersey, may it rest in piece now that nobody on the buyside will ever use it again. What it does report are the following creative lies, which we reveal to the general public because after all remember: the biggest defense the HFT lobby makes is that "whatever HFT does it never hurt retail investors." We will let retail investors decide for themselves.

Having had his omnipotence slightly reduced by SCOTUS and Verizon losing out over NSA spying concerns, we can only imagine President Obama's dismay while watching (aboard AF1) the Europeans trump the Americans once again...

It seems that the American investing public needed a desparate morale boost after USA went 1-0 down against Germany in the FIFA World Cup... coincidence or "hand of god"?

As the probe into alleged fraud at Qingdao continues to escalate (with liquidity needs growing more and more evident as Chinese money-market rates surge), Bloomberg reports that China’s chief auditor discovered 94.4 billion yuan ($15.2 billion) of loans backed by falsified gold transactions, in "the first official confirmation of what many people have suspected for a long time - that gold is widely used in Chinese commodity financing deals." As much as 1,000 tons of gold may have been used in lending and leasing deals in China and Goldman reports that up to $80 billion false-loans may involve gold. As one analyst noted, this was unlikely to have a significant impact on the underlying demand for gold in China and as we have pointed out before, any unwind of the Gold CFDs would lead to buying back of 'paper' gold hedges and implicitly a rise in prices.

"Today's SCOTUS decision is encouraging for all who believe in the checks and balances enshrined in our nation's constitution," is Darrell Issa's message following the Supreme Court's unanimous (9-0) decision cutting back the power of the White House to temporarily fill senior government posts when facing partisan opposition in Congress. The White House spokesman said President Obama was "deeply disappointed" and is 'reviewing' the decision. Simply put, President Obama used the recess appointment power to make an end run around a Senate that refused to confirm controversial nominees - thanks to this unanimous SCOTUS decision, that use of the power is all but dead.

Perhaps the reason why the just concluded 7 Year auction priced quite sloppy, if not outright ugly, is because it came at a time when virtually nobody was paying attention, or otherwise bidding. Moments ago the Treasury sold $29 billion in 7 Year paper, which priced at 2.152, a notable 1.2 bps tail to the 2.140% When Issued, indicating not all was well with the internals. Sure enough, the Bid to Cover of 2.435 was well below the TTM average of 2.56, and was the lowest since November. Direct Bidders were not too excited with the paper, and as a result took down only 16.66% of the final allottment, the lowest also since November. And with Indirect taking down a tame 40.62%, this mean Dealers were forced to step up and buy 42.72% of the issue - the highest Dealer allocation since, you guessed it, November. Perhaps the only thing the auction had going is that at 2.15%, the closing yield remains decidedly low (having peaked recently at 2.32 in April), if rising modestly from the 2.01% in May which happened to be the lowest since October.

All sorts of promises, explicit and implicit, were issued to win votes. All the promises are now empty, and we might as deal with this reality head-on... if we can muster up the almost-lost ability to deal with reality rather than rely on fantasy/wishful thinking.

More Hollande 'broken promises' as French joblessness reaches a new record high. Aside from the idiotic month when officials forgot to send text messages, this is the 36th month in a row of worsening employment in France. That must explain why, along with a collapsing PMI, French bond risk remains near record lows...

It was about two months ago when in a shocking development in the otherwise sleepy tax-evasion haven of Lichtenstein, the CEO of local Bank Frick, was murdered in the underground garage of the bank by a disgruntled former client. As readers may recall, the tragic event happened at a time when there was a spike in banker suicides, prompting us to wonder if "with the first open bank CEO murder, one wonders if there will be a change in the pattern." Two months later it appears as if the vector of death is indeed changing when, as Reuters reported, overnight the head of the fourth largest bank in Albania, Credins, was murdered, shot at least five times, as he entered his office in the capital Tirana.

First, it was gold manipulation and now alleged equity market rigging; it seems investors (and customers) have finally had enough. Barclays stock price is down over 8% today and trading back at 18 month lows. Of course, we will hear that this is the kitchen sink quarter etc... "remember the London Whale" but the trail of alleged fraud (and the damning emails) suggests catching this falling knife is anything but a "no brainer"...

With all eyes firmly focused on the dismal Q1 GDP print and summarily dismissing it as 'noise', backward-looking, 'weather', and 'exogenous'; today's worrying spending data has sent the serial extrapolators among the sell-side economist herd scrambling to downgrade over-exuberant Q2 GDP expectations (five so far). One glance at this chart is all one needs to know about the "bounce back" in pent-up demand spending (that is not there). As Bank of Tokyo-Mitsubishi's Chris Rupkey told Bloomberg, "Don’t start betting on those 3% GDP numbers yet." This only trumped Goldman Sachs 'oh-so-embarrassed-again' Jan Hatzius who slashed his exuberant 4% Q2 GDP growth estimate to 3.5% (for now).

Following yesterday's revelations that Barclays was raping its clients, maliciously misrepresenting and lying to them on a daily basis, who could have possibly foreseen the following development:

• BARCLAYS SAID TO LOSE DARK POOL TRADING CUSTOMERS AFTER SUIT
• BARCLAYS SAID TO BE SHUNNED BY BERNSTEIN, VOYA AFTER SUIT

Furthermore, traders are getting notifications that routing to LX is now down, meaning the dark pool is now merely... dark.

It appears Germany has come out swinging ahead of today's FIFA World Cup match:

*GERMANY ENDING VERIZON CONTRACT, CITING NSA: AP

Is this the "boomerang" that Putin warned Obama about?

UPDATE: FIFA bites back and bans Uruguay's Luis Suarez for 4 months

As 12ET rolls around and USA's soccer team prepares to engage zee Germans with the goal of advancing to the FIFA World Cup's knockout stage, Bloomberg undertook an 'economic' face off to see just how the two powerhouse nations stack up. The result - a 4-0 win for Germany does not bode well for the soccer...