Archive - 2014 - Story

But what about the massive cajillion-dollar tax cut for American manufacturers from the oil-drop? US Manufacturing PMI collapsed to 53.7 in December, missing expectations of a rebound to 55.2 by the most on record and falling to its lowest since January 2014 - the middle of the Polar Vortex. This is the 4th monthly drop in a row off the mid-year "yay recovery is here" record highs and 4th miss in a row as economists continue to 'price in' the hockey-stick. The employment sub-index dropped to its lowest since July and new orders collapsed to its lowest since January. This comes on the heels of Germany's 18-month lows for its Manufacturing PMI. No decoupling after all. As Markit noted about Germany, "the data are consistent with only marginal GDP growth in the fourth quarter at best," and we suspect the same is coming for USA soon, as they add "a cooling in the pace of expansion from unusually strong rates earlier in the year."

Dubai's Financial Market General Index is now down 40% since the peak in oil prices in June this year. For now, only Qatar is clinging to gains year-to-date as the rest of the Middle Eastern equity markets give up 30-60% gains from mid-year and tumble to negative. Dubai and Abu Dhabi alone are down over 8% since Friday. Saudi Arabia is down 7.3% today - the biggest drop in 6 years.

And bank dealers thought bid/ask spreads on CDS were wide.

After the entire world learned that young trading whiz-kid Mohammed Islam had "made" $72 million, certainly including the IRS which would promptly come looking for the $36 or so million it was due, the alleged megatrader, who got just the wrong 15 minutes of fame, scrambled to set the record straight, and explained the instead of making money, he actually made nothing, he just made it all up: to wit: "Is there ANY figure? Have you invested and made returns at all? No. So it’s total fiction? Yes. I run an investment club at Stuy High which does only simulated trades."

There goes another pillar of the sustainable growth meme. Housing Permits tumbled 5.2% MoM - the biggest drop since January (amid the Polar Vortex) to 1.035mm SAAR. Permits dropped in all regions except the Northeast. Housing Starts dropped 1.6% MoM to 1.028mm SAAR. The South was the only region with a rise in completions as the Northeast was cut in half and both single- and multi-family residences slid.

For those wondering if the CBR's intervention in the Russian FX market with its shocking emergency rate hike to 17% overnight calmed things, the answer is yes... for about two minutes. The USDRUB indeed tumbled nearly 10% to 59 and then promptly blew right back out, the Ruble crashing in panic selling and seemingly without any CBR market interventions, and at last check was freefalling through 72 74 76, and sending the Russian stock market plummeting by over 15%.

Always happy to look to the silver lining in markets, amid the total and utter carnage across global FX, commodity, and equity markets, there are a few markets benefiting from the scramble for a safe-haven. Gold (and Silver) prices, after dropping yesterday, has retraced all those losses and is up over $20 to $1215. Even more impressively, 10Y Treasury yields traded with a 2.00% handle (down 8-9bps today alone). Notably ultra-short-term US T-Bill yields have collapsed to zero with the Feb 2015s trading -0.5bps. Bunds are also bid (down 5bps) at fresh record-low yields of 56.6bps! While not a 'safe-haven" per se, JPY is aggressively bid also as leverage and risk unwinds carry trades and squeezes USDJPY lower (briefly touching 115.50).

Paging Waddell & Reed... Even for this early in the US session, liquidity in the most-liquid financial instrument in the world is - in the words of Nanex's Eric Hunsader, "abysmal."

• Ruble Sinks to 80 a Dollar Defying Surprise Russia Rate Increase (BBG)
• Oil slumps near $59 for first time since 2009 on oversupply (Reuters)
• Oil sinks, Russian moves fail to quell nerves (Reuters)
• Fed Seen Looking Past Low Inflation to Drop ‘Considerable Time (BBG)
• Students Among Dead as Pakistan Gunmen Kill 126 at Army School (BBG)
• Repsol to buy Talisman Energy for $13 billion (Reuters)
• Indonesia’s Rupiah Erases Decline After Central Bank Intervenes (BBG)
• Anti-Islam Rally Grows as Immigrant Backlash Hits Europe (BBG)
• Saudi Arabia is playing chicken with its oil (Reuters)

A few short hours ago Russia shocked everyone with an unprecedented rate hike sending the nation's various interest rates some 650 bps higher. Well, according to the initial sellside responses from Citi and JPMorgan, as shocking as the move was, it is not nearly enough. Goldman is more positive, suggesting this move removes key uncertainty about CBR's willingness to stabilize RUB volatility.

Those who voted for the omnibus to avoid a shutdown fail to grasp that the consequences of blindly expanding government are far worse than the consequences of a temporary government shutdown. A short or even long-term government shutdown is a small price to pay to avoid an economic calamity caused by Congress’ failure to reduce spending and debt.

...as the Treasury waited for news, fear began to spread, "we waited minute by minute on updates from the market and then we learned that the billion or so [of taxpayer money] we had put aside Tuesday to defend the pound up to the weekend had gone in a few minutes on Wednesday morning," shattering the myth of government omnipotence.

Following the biggest rout to the Ruble in ages, Russia - unlike Mario Draghi - instead of talking the talk decided to walk the bazooka walk and shocked all those long the USDRUB by unleashing an emergency rate hike (at 1 am in the morning) from the recently raised interest rate of 10.50% to... hold on to your hats... 17.00%, a 650 bps increase!

In our dire era of increasing economic inequality, we need a symbol for the oppression of the masses. Now is time for a new revolution. All the talk of the American entrepreneur is bullcockey. Warnings about human complexity and the need for peaceful cooperation is just a smokescreen for tyranny. Our freedom lies in tearing down those better and more well-off than us. We are the glorious heirs to the brave candlemakers who sought to block out the sun. Where our French brethren fought for freedom from natural competition, we fight for the liberty of not feeling inadequate next to an adorable feline. It is the most noble of causes. For if inequality is a crime, then Tarder “Grumpy Cat” Sauce is hostis humani generis.