Archive - Sep 3, 2014 - Story

The dismaying reality: the only purpose of central bank monetary policy is to keep the bloated, corrupt, inefficient and self-liquidating vested interests of the state-cartel crony capitalism from having to suffer the consequences of real reforms. Japan ably serves as Exhibit #1 of this core dynamic.

It has been a while since Creditex ran a CDS settlement auction of any note for two reasons: CDS no longer is a credible or legitimate method to hedge against default risk (see Greece, Banco Espirito Santo), thus making the stated purpose of CDS irrelevant, and when the default carries with it systematic risk ISDA will simply screw over CDS-holders and change terms whenever it sees fit following a few politically-connected phone calls, at which point good luck collecting on your "insurance." Which is why the just concluded Argentina CDS settlement auction following its bankruptcy last month, was a welcome reminder of what markets looked like in the BC (Before Central-planning) era.

In Citi's Steven Englander's latest note, he notes that every major FX trade in place right now is a carry trade in one form or another, differing only in their scope and in the risk they entail. This has 5 significant implications...

With Samsung stealing the limelight today, and Apple's stock taking a tumble; the decision was made to roll-out the all-new iPhone6 line-of-desperate-consumers, six days (and nights) before product launch...

Last Thursday, as bond yields were cratering and the price on the TYZ4 soaring soaring, we made an explicit cautious observation in "A Bearish Sign For Treasurys?" that the latest incarnation of the immortal muppet-slayer, Tom Stolper, manifesting himself this time as Bank of America's technician MacNeill Curry, decided to go from bearish on the 10 Year as he has been on and off since the start of the year, to bullish. We said that "with the 10Y yield  plunging, BofA's chief technician, which as is widely known is another words for "momentum chaser" who has over the past year been branded as the new coming of the legendary Tom Stolper thanks to the inverse-accuracy of his calls, has changed his tune, to wit: "the trend in yield is lower." If there was something that could make us nervous about being long TSYs, this is it." And almost as if on demand, the 10 Year proceeded to tumble like a downhill rolling bag of bricks in the hours, not days, following this all too obvious top-tick. But even more amusing, moments ago the same MacNeill Curry has flip flopped yet again and in a note, has just announced that BofA has been stopped out of its "long"

France is suspending the delivery of the 1st of 2 hulking Mistral warships to Russia amid security concerns about Moscow's actions in neighboring Ukraine, AP reports President Francois Hollande's office said Wednesday. Hollande's change of mind - as he begs Draghi to devalue the EUR and Schaeuble to lift the deficit limits in Europe - comes at a time when the French economy can hardly cope with losing a few billion (which he previously said was too costly to cancel) but as he explains, Russia's recent actions harm "the foundations of security in Europe." We will see what Hollande got for this... or how he was blackmailed - but for now NATO allies have commented that they "welcome the French Mistral sale suspension."

Superficially, there are two amusing observations to make about a New Normal in which the S&P, courtesy of its Chief Risk Officers Yellen, Draghi and Kuroda, continues to vastly outperform virtually all hedge funds for a 6th year running: the first is that one of the very few funds in our universe which is doing better than the broader market is named Tulip Trend Fund, which in itself speaks volumes, while the other fund that is creating outsized "alpha" is Bill Ackman's Pershing Square, which has made the bulk of its gains on the back of the Allergan deal where he frontran the investing public, knowing full well Valeant would make a hostile bid, a transaction which the SEC better strike as illegal or else the farce of a market will get even more farcical.

NATO has often seemed to lack purpose, and now, as The Guardian explains in this excellent 99-second primer on how we got here; at its summit in Wales this month NATO faces one of its biggest challenges in years – the defense of Europe against Russia...

Consolidating? Or Topping Out? But Ceasefire... But ECB... but Jobs data...

Presented with little comment...

• *EBOLA DEATH TOLL REACHES 1,900; CASES SURPASS 3,500, WHO SAYS
• *EBOLA OUTBREAK HAS MORE DEATHS THAN ALL PAST OUTBREAKS COMBINED

Perhaps, when Doctors-Without-Borders and the World Health Organization start speaking in panicced terms about 'out of control' outbreaks, 'global crisis', 'lethally inadequate' responses; that it's time for the west to start getting involved (as opposed to sending humanitarian advisers to Iraq and Ukraine).

The financial market stimulus chorus is now universal - virtually identical from Hong Kong to London to New York, despite ostensibly deep differences in policy regimes. At the end of the day, however, there is not really a dimes worth of difference between the Bush/Obama/Bernanke model and the economic model employed by the politburo overlords in Beijing. Its all about insensible, contagious, addictive credit expansion, and the phony wealth and temporary prosperity which it breeds. All it takes is just another shot of “stimulus”.

ISIS threats, it would appear, are not limited to President Obama and his American allies. RIA is reporting that Russian leaders are seeking to cut access to an ISIS video posted that threatens Putin (for ties to Assad), and plans to liberate (via Caliphate) Chechnya, and calls the Chechnyan leader, Ramzan Kadyrov, a Putin puppet. The Chechnya leader took to Instagram to respond slamming "these bastards have no relation to Islam," and exclaiming if they try to threaten Russia or Chechnya "you will be destroyed."

While the 'market' has rallied to record highs this morning, "proving" to some talking-heads that this cease-fire is real this time, it appears Ukraine's Prime Minister Arseniy Yatsenyuk isn't buying it...

*YATSENYUK SAYS NO 'TRUST' IN PUTIN'S PEACE PLAN FOR UKRAINE, RUSSIA VIOLATED OR IGNORED ALL PRIOR AGREEMENTS
*PUTIN SEEKING TO RUIN UKRAINE, RESTORE SOVIET UNION: YATSENYUK

So that would be the opposite of what the 'market' is pricing in? Of course, what does Ukraine's PM know... the market is efficient after all, right?

Just in case ISIS, or any of the various weaponized local groups of disconents get any ideas and decide to bring their "terrorism" to China's megacities, here is how the local authorities prepare for just such occasions. The photos below show the Beijing police conducting the appropriately named "One-minute handling" anti-terror drill taking place in one of the city's commercial centers. While in itself it is hardly surprising that the world's most populous country is preparing for Plan B, one does wonder just what the local Politburo may be seeing especially in the aftermath of the images from May which captured the riot police training for a "working class insurrection" making one wonder: just what is considered terrorism in China?