Archive - Aug 7, 2014 - Story

While we assumed everyone knew that correspondence from Nigerian leaders requesting funds were always fradulent, it appears the US government decided the opportunity was worth the risk...

*U.S. FORFEITS OVER $480 MILLION STOLEN BY FORMER NIGERIAN DICTATOR

The DoJ describes it as "the largest forfeiture ever." Oh well - we hear Rwanda is looking to issue some bonds..."We might go for double that or more, up to $1 billion."

While we assume NATO's Rasmussen's appearance in Kiev is not responsible, Kiev is burning once again. As RT reports, activists and police have clashed in the Ukrainian capital’s center after communal workers tried to dismantle an activist camp, following a months-old conflict over the camp with the city administration.

With over 932 dead, the US Centers for Disease Control and Prevention has issued its highest level alert for an all-hands on deck response to the crisis in West Africa (that is spreading across the world). While President Obama proclaimed we are prepared and itis "not easily transmitted," it appears that is not entirely true. Meanwhile, CDC Director Frieden's "deep concerns" have been confirmed as Nigeria’s health minister has declared a health emergency as the deadly Ebola virus gained a foothold in Africa’s most populous nation, according to news reports. Nigerian authorities moved quickly late Wednesday, gathering isolation tents as five more cases of the Ebola Virus were confirmed in Lagos (the world's 4th most populous city with 21 million people). Most international flights from West Africa are also now screening passengers.

It was all fun and games while the grand western "Pariah Putin is evil" alliance was calling the shots, lobbing one sanctions after another, and Russia was quietly sitting there and taking it all. But once Europe realized that suddenly its food exporters are about to see their revenues plunge (and ostensibly lead to even more domestic deflation as all the excess produce floods domestic markets) and lead to gaping trade deficits, suddenly cries that Putin's retaliation is "unfair" have filled the air. What's worse, the moment Russia retaliated, the grand alliance started to crack. Enter Greece which has hundreds of millions in food exports to Russia, and which was the first country to hint that it may splinter from the western "pro-sanctions" alliance.

NATO's Chief Anders Rasmussen is unleashing his latest set of 'back down or else' comments this morning towards Russia:

*RASMUSSEN TELLS RUSSIA 'TO STEP BACK FROM THE BRINK'
*NATO: INTL COMMUNITY TO `REACT DECISIVELY' IF RUSSIA INTERVENES

And ironically Rasmussen proclaims Russia faces further isolation if it continues down this path... by which he means Russia will become even closer to its BRICS allies. The market's reaction to this tone is bad... stocks dropping, gold popping, and Bunds to record low yields...

Outspoken non-status-quo thinker Reserve Bank of India Governor Raghuram Rajan may be set to have his central banker card revoked... for telling too much truth (here in 2012, here in 2013, and most recently here). Having previously noted that "international monetary cooperation has broken down," the WSJ reports that Rajan warned Wednesday that the global economy bears an increasing resemblance to its condition in the 1930s, with advanced economies trying to pull out of the Great Recession at each other’s expense. Simply put, he concludes, "we are taking a greater chance of having another crash at a time when the world is less capable of bearing the cost."

Either Europe is run by a bunch of unelected idiots, or... well, that's about it. After blindly doing the US' bidding over all propaganda matters Ukraine-related, and following just as blindly into round after round of US-inspired sanctions, sanctions to whose retaliation Europe would be on the frontline unlike the largely insulated US, Europe appears to be absolutely shocked and is apoplectic that after several rounds of sanction escalations, Russia finally unleashed its own round of sanctions and yesterday announced a 1 year ban on all European food imports, something which will further push Europe into a triple-dip recession as already hinted by Italy yesterday.

Considering all central bank money is created out of thin air, without actual collateral (unlike money created by commercial banks) and just has the backing of the (diluted) "full faith and credit" of the issuer, the only real use for such money is to be "embezzled" either legally - by banks where it ends up as reserves and is then used to push risk assets higher and make the merely uber richer uberest rich... or illegally. It is the latter shortcut that numerous employees of the central bank of Albania decided to pursue when the central bank discovered that around 713 million lek, or $6.7 million, in cash had been stolen two weeks ago.

Yesterday, the Wall Street Journal published an article highlighting the surge in what it calls “ultralong” bonds, defined as having a maturity of more than 30 years. The findings are simply stunning. In what may seem counterintuitive, bond yields at hundred year plus lows in many countries has led major investment firms to rush into ever riskier and longer duration fixed income securities just to earn some income. This has opened the floodgates to governments and corporations looking to lock in low yields on debt they won’t have to pay back for a generation. Just to name a few, this year we have already seen a 100-year bond sale by Mexico, two separate 50-year bond issuances by Canada, and wait for this one, Spain of all countries is set to try to sell a 50-year bond!

Presented without comment.

After last week's uncomfortable rebound in claims, this week calmed fears. Printing at 289k (down 14k from last week) against expectations of 304k, this dropped the four-week average of jobless claims to the lowest since February 2006. Continuing claims also fel back to near the lowest since May 2006. One thing to bear in mind is that this is practically the peak for historical seasonality as the second half of the year has tended to see claims rise...

Update: And here it is - Draghi just said Russian sanctions could add to the "downside risk." Translation: all Putin's fault

With inflation tumbling, credit creation imploding, core European nations' economies floundering and the periphery re-collapsing, ECB's Draghi decided rates were negative enough and expressed no change in the statement which leaves just the press conference to jawbone the EUR lower, Bund yields even more negative, and explain why Portugal was a one-off... or admit OMT was make-believe.

No surprises from Draghi this time, although judging by the kneejerk reaction in the USDJPY, at least one algo was expected a little something from the former Goldmanite.

• Russia bans all U.S. food, EU fruit and vegetables in sanctions response (Reuters)
• Snowden receives three-year Russian residence permit (Reuters)
• Headline of the day: Europe's Recovery Menaced by Putin as Ukraine Crisis Bites (BBG)
• Americans worry that illegal migrants threaten way of life, economy (Reuters)
• Almost 90% of Uninsured Won't Pay Penalty Under the Affordable Care Act in 2016 (WSJ)
• Germany’s Bond Advance Sends 2-Year Note Yield Below Zero (BBG)
• Gaza War’s Critics in Crosshairs as Israelis Back Offensive (BBG)
• The 1% May Be Richer Than You Think, Research Shows (BBG)
• Bank of America Near $16 Billion to $17 Billion Settlement (WSJ)
• Deep Water Fracking Next Frontier for Offshore Drilling (BBG)

There were some minor fireworks in the overnight session following the worst Australian unemployment data in 12 years reported previously (and which sent the AUD crashing), most notably news that the Japanese Pension Fund would throw more pensioner money away by boosting the allocation to domestic stocks from 12% to 20%, while reducing holdings of JGBs from 60% to 40%. This in turn sent the USDJPY soaring (ironically, following yesterday's mini flash crash) if only briefly before it retraced much of the gains, even as the Pension asset reallocation news now appears to be entirely priced in. It may be all downhill from here for Japanese stocks. It was certainly downhill for Europe where after ugly German factory orders yesterday, it was the turn of Europe's growth dynamo to report just as ugly Industrial Production which missed expectations of a 1.2% print rising only 0.3%. Nonetheless, asset classes have not seen major moves yet, as today's main event is the ECB announcement due out in less than an hour. Consensus expects Draghi to do nothing, however with fresh cyclical lows in European inflation prints, and an economy which is clearly rolling over from Germany to the periphery, the ex-Goldmanite just may surprise watchers.