Archive - 2014 - Story

As one might have expected the tension during the most recent FOMC meeting was palpable in the minutes as opposing dovish and hawkish less dovish views on the costs and benefits (and non-comprehension of the machinations) of QE were evident.

• *FED OFFICIALS SAW WANING BENEFITS FROM MONTHLY BOND PURCHASES
• *MANY FOMC MEMBERS FAVORED QE TAPERING IN `MEASURED STEPS'
• *MOST FOMC PARTICIPANTS WERE MORE CONFIDENT IN JOB MARKET GAINS
• *FOMC PARTICIPANTS `MOST CONCERNED' ABOUT QE RISKS TO STABILITY

The likely path of tapering seems clear (and mention of extending the reverse repo facility is notable) but how forward guidance will be implemented remains the hottest topics and Eurodollar prices suggest the latter even more so than the former.

Pre-FOMC Minutes: S&P Futs 1832.0, Gold $1225.5, 10Y 2.995%, EURUSD 1.3570, USDJPY 104.95

As the world prepares to comprehend, in their own recency-biased manner, the minutes of the most recent FOMC meeting, we thought it worth a reminder of just how Fed communications have ballooned in the past 20 years. The first statement, issued on Feb. 4, 1994, was a mere 99 words. December's 'most important FOMC statement ever' was a stunning (record) 867 words - and even so Jon Hilsenrath managed to interpret and write on it in 3 minutes. As we noted earlier, the minutes tend to be a platform for even greater 'communication' - and notably are not the actual minutes of the meeting but a prepared annotation of what the Fed wants the public to know about the meeting. Transparency and communications, it would appear, has been transformed from clarifying to endless caveat-ing.

The US may be blanketed in freezing cold, but the UK is already preparing for what should be a hot, dry summer. Either that, or the request of London mayor Boris Johnson to distribute water cannon on the street of the capital may be an indication that at least some major municipal centers are preparing for a jump in civil disobedience and are looking for appropriate, "non-lethal" means to contain it. SkyNews reports that "the London Mayor says the weapons will be used only in "the most extreme circumstances", however, there are fears the cannon could be deployed to break up small-scale legitimate protests. Mr Johnson says the water cannon are necessary in case there is a repeat of the summer riots of 2011." So "just in case."

Yesterday we described how so-called "Progressives" are pimping for the Empire. The same is true of so-called "Conservatives." Conservatives are masters at projecting a preachy devotion to a limited state, democracy, liberty and free enterprise while their support of the Central State undermines every one of these values. Conservatives are like the preacher who issues stern sermons on righteousness every Sunday while skimming big money from pimping sordid, destructive policies Monday through Saturday. "Conservatives" and "Progressives" alike are pimping for the Empire when they support the Central State's essentially unlimited powers.

With the 10 Year When Issued trading comfortably above 3% around the time of today's auction conclusion, it was expected that today we would see the first 10 Year auction, in the face of the WE6 9 Year 10 month reopening, pricing north of 3% for the first time since May 2011. Sure enough, moments ago the Treasury announced that it had sold $21 billion in benchmark paper at 3.009% tailing just slightly to the 3.007% When Issued. But while the yield was notable, the Bid To Cover actually picked up from last month's 2.61 rising to 2.68, almost exactly in line with the TTM average of 2.69, and showing a modestly increase in recent BTCs. The internals were a snoozers, with Dealers getting 39.8%, one percent above the 12 month average, Indirects were allotted 46.6% - below last month's 48.9% but above the 41.8% TTM average, and Directs got the balance, or 13.6% of the final allottment. Largely, a vanilla auction.

Having just missed out of +500% returns in the Caracas stock market last year, the reality of a hyperinflating world continue to cause chaos in the real world of Venezuela. As Bloomberg reports, the bolivar’s 73% decline against the dollar on the black market in 2013 is fueling contraband and worsening shortages of food and consumer goods in a country with the world’s biggest oil reserves, adding pressure on President Nicolas Maduro’s government to devalue. Smuggling to Colombia has exploded as "professional shoppers" traffic in wheat flour, corn flour and milk leaving more than one in five basic goods out of stock at any given time. Regulated foods are just too cheap to stay on the shelves, "you can't get anything in the shops here... it is taken to Colombia like a locust plague."

Much like the rest of peripheral Europe, Greek stocks have been on a rampage in the first few days of the year. Whether this is a global rotation into the junkiest of the junk - betting on the inevitable rescue and intervention to keep everyone safe, or merely front-running an ECB QE effort as inflation tumbles - is unclear but it is worth noting that this is the best start to a year for Greek stocks since 1994!! Remember Greece is not Japan (or Venezuela).

A few days ago it was revealed that numerous European users of Yahoo, as many as two million, had gotten infected with malware from virus-laden ads served by Yahoo's homepage during the period from December 31 to January 3. The company admitted as much when it revealed that "From December 31 to January 3 on our European sites, we served some advertisements that did not meet our editorial guidelines – specifically, they spread malware." Users in North America, Asia Pacific and Latin America weren't affected, Yahoo said. Nor were users of Apple Macs or mobile devices. "We will continue to monitor and block any advertisements being used for this activity," the company added. "We will post more information for our users shortly." What was not clear is just what function the ad virus served. According to the Guardian, the purpose of the most prevalent virus spread by the website was to convert the infected computers into Bitcoin mining slaves.

Today's 6.5bps surge in 10Y Treasury yields is the largest since November 20th as the Dow slides and USD rises on the back of better-than-expected ADP jobs data implying moar taper. With 10Y back to 3.00% (2.9987% to be accurate), mortgage rates are once again on the rise (despite the recent drop in yields); though for now, Treasury yields remain lower in yield on the year.

Just 2 day safter their release, The U.K.’s Royal Mint said it ran out of 2014 Sovereign gold coins “due to exceptional demand.”

*U.K. ROYAL MINT SAYS RUNS OUT OF 2014 SOVEREIGN GOLD COINS
*ROYAL MINT SAYS EXPECTS TO HAVE COIN STOCK AGAIN BY END OF JAN.

The mint added "Since the dip in the price of gold we have seen increased demand for our gold bullion coins from the major coin markets, and this presently shows no sign of abating."

"It's the weather's fault."

Prepare to hear this excuse a lot more in the coming days as one after another expectation of the "any minute now" economic rebound is missed. In today's instance we find that holiday retail sales, on which the punditry placed so much hope to finally show a recovering consumer, rose 2.7%, however offset by a plunge in store foot traffic, which tumbled by a whopping 14.6% according to ShopperTrak and wildly missing expectations of a 1.4% decline, a far cry from 2012's 2.5% increase.

If Americans in particular want to pursue any solution to the threat of globalism or dollar collapse, they are going to have to start with themselves, and the community around them. Online trade is the last thing they should be worried about. Only when neighborhoods, towns, and counties become producers and self suppliers will they be safe from financial instability. Only when those same communities band together for mutual aid and self defense will they be safe from tyrannical political entities. Bitcoin accomplishes nothing in either of these categories, making it possibly the most popular non-solution for liberty to date. Bitcoin is consistently touted as a superior option to precious metals as a way to decouple from central bank fiat. Under examination, though, it appears to me that bitcoin is instead a deliberate distraction away from gold and silver, and other tangible solutions; in other words, we believe it to be a form of controlled opposition.

Retail sales are not currently indicating that the consumer is about to "drop kick" a game winning field goal in the coming year.  While the consumer is definitely "not dead," as evidenced by increased leverage in the recent credit reports, they are also not currently in the position to substantially increase demand five years into an economic recovery. Our perception is that the "struggle through" economy is likely to remain in 2014 which will disappoint the economic bulls.

No surprises here: hours after we reported that youth unemployment in Spain soared to fresh record highs (surpassing the already nosebleeding number of jobless people under 25 in Greece), here comes Gallup with a poll showing the approval rating of the (unelected) EU Leadership across the peripheral countries. And while there was a slight uptick in approval among respondents in Italy - the country that has so far benefited the most from the Italian central banker at the helm of the ECB - the EU's lack of approval just rose to all time highs in the two countries that continue to see their youth employment hopes crushed by the European experiment, with approval in Spain sliding to 27% (from 55% in 2010), while Greece, plunged to only 19%, which makes one wonder: just who has an interest in keeping Greece in Europe?