Archive - Jan 2015 - Story

When thousands of cops showed up yesterday to pay their respects to their slain colleague Wenjian Liu who was murdered in cold blood two weekends ago, perhaps the only question on everyone's mind was whether the local police would - once again - turn their back on NYC mayor Bill de Blasio, who as we reported previously, the NYPD is engaged in a cold war with, with arrests and citations plummeting in recent weeks as a result of what has become a police boycott of city hall.  The answer: a resounding yes, and as the AP reports, "thousands of police turned their backs Sunday as Mayor Bill de Blasio eulogized an officer shot dead with his partner, repeating a stinging display of scorn for the mayor despite entreaties to put anger aside."

Having tested the almighty 10,000 level, Germany's DAX is plunging back to pre-FOMC earth levels following the weak CPI print this morning...

Issuing lies and pursuing willful blindness is not leadership: it's failure on a grand scale.

But it can't drop any further? What about all that pent-up demand (and cash on the sidelines)?

With regional CPIs cliff-diving in December relative to November, it is not entirely surprising that broad Consumer Price Inflation for Germany as a whole just printed at a mere +0.2% YoY (missing expectations of +0.3%) - the lowest since October 2009 and was unchanged MoM. The initial reaction in DAX was a modest rise as if the EU's strongest core economy is nearing outright deflation, markets will price-in even more likelihood to the ECB's sovereign QE any minute now. Of course, in the eyes of the Fed this is all transitory and energy-driven but stocks hope that Draghi ignores that.

Anyone who put on a long Shanghai Composite, short Brent trade on January 1, 2014, congratulations: you can now retire. However, since nobody did and instead the groupthink herd of beta-levered momentum chasers known as hedge funds were mostly long the S&P and short Treasurys, it explains why most of them generated negative returns in 2014. Here is how all the other main asset classes did in 2014, denominated both in local currency and in the soaring USD.

• Economists sceptical ECB bond-buying would revive eurozone (FT)
• Indonesia naval captain says may have located missing plane's tail section (Reuters)
• Oil hits five and a half year low under $55 (Reuters)
• Samaras Warns of Euro Exit Risk as Greek Campaign Starts (BBG)
• The death of active investing: Vanguard Sets Record Funds Inflow (WSJ) - thank you Fed
• Oil Downturn Has Many Wondering How Lone Star State Will Weather a Bust (WSJ)
• Hollande Says France Must Exceed 1% Economic Growth to Spur Jobs (BBG)

The new year is not even a week old and already the volatility fireworks are off, as well as the continued commodity derisking. But while for now US stocks continue to be an island oasis in a turbulent global sea where GDP forecasts decline every single day, the same can not be said about either the Euro, which after crashing overnight to a 9 year low, and rebounding briefly, has continued to decline and is now once again flirting with a key support level, this time 1.19, last reached during the May 2010 first Greek bailout. The catalyst, as usual, Greece which may or may not be leaving the Eurozone shortly, as well as ongoing bets on ECB QE following this morning's regional German inflation data which declined once more and now hints at outright deflation in Europe's strongest nation.

"Russia has presented a startling proposal to overcome the tensions with the EU: The EU should renounce the free trade agreement with the United States TTIP and enter into a partnership with the newly established Eurasian Economic Union instead. A free trade zone with the neighbors would make more sense than a deal with the US."

Social media is awash with striking images of #EmptyShelvesInVenezuela (#AnaquelesVaciosEnVenezuela) as the evaporation of basic human staples such as toilet paper has now been hyperinflated to total chaos at warehouses and supermarkets. As President Maduro decries the loss of $100 oil "stability", vowing to return oil prices to their rightful places (and heads to China for help), lines reach for miles for milk and soap... and the people defy governmental bans on photographing empty market shelves... "We couldn't find shampoo, so we washed our hair with soap. Now there's not even soap."

USDJPY tumbles to a 119 handle briefly before Japan opened to its normal JPY-selling spike temporarily lifted the pair 'off the lows'. This drop dragged stock futures lower with Nikkei 225 tumbling over 350 points from its Friday trading highs. Oil prices continue to slide (WTI now with a $51 handle) and EURUSD is bouncing back from its precipitous decline earlier in the evening. S&P futures were down almost 10pts but have recovered about half their losses.

We thought yesterday's absurd story of former hedge fund manager James Crombie, founder of Paron Capital Management, who was arrested after found squatting in a million dollar Maryland house, would be as strange as it gets for hedge fund stories this weekend. We were wrong: moments ago the WSJ reported that Thomas Gilbert, founder of the $200 million Wainscott hedge fund, whose success Gilbert said previously had come from investing in biotech funds, was found dead with a single bullet to the head in his Manhattan apartment this afternoon, allegedly shot by none other than his 30-year-old son.

Having closed the Friday session less than 1 pip above the hugely important 1.2000 level below which there lay many stops, following this weekend's news onslaught which seemed like a deja vu of the newsflow from the fall of 2011, where the main catalyst was the Reuters report that Germany is preparing to let Greece go once and for all (with the subsequent attempts at retraction barely noticed), or maybe just because someone wanted to price in a little more of the more than fully priced in by now ECB QE - which very well may not happen - the moment the EURUSD opened for trading it took out not only the critical 1.2000 stops, but within milliseconds the Euro found itself bidless and crashed to a low of 1.1864, promptly taking out the lows set in May 2010 when the first Greek bailout took place, and tumbled to a level not seen since March of 2006!