Archive - Mar 2015 - Story

As QE kicks off in Europe, ECB has no plan to account for losses on negative yielding assets.

Having specifically aimed his call for a unified European Army at "reacting credibly to show Russia that Europe is serious about defending its values," it is no surprise that Russia has responded to Jean-Claude Juncker's statements. As TASS reports, first deputy chairman of the United Russia faction in the State Duma, Frants Klintsevich, told the media on Sunday that "in the nuclear age extra armies do not provide any additional security. But they surely can play a provocative role," adding it was regrettable that such ideas had already met with some support.

To some (mostly those in the 1-10% wealth bucket) the main event today is the iWatch unveiling. To others (mostly those not in the 1-10% wealth bucket) it is the Eurogroup meeting in which the fate of Greece will be discussed and perhaps decided. One thing is certain: virtually nobody will care when the Fed's Mester and Kocherlakota speak later today as the Fed is now - supposedly - set to hike no matter what. Here is what the other main events are for the balance of the week.

While the debate rages just what is causing the persistent weakness in McDonalds same store sales now stretching into its second year, there is no debate that whatever the reason may be, the once-iconic fast food chain is hurting. Because after staging a modest year end comeback and almost rising back to flat in December when it almost broke even, dropping "only" 0.1%, since then global sales have once again slowed down markedly, and have dropped by 1.8% and 1.7% in January and February respectively.

Presented with little comment.. more of a shoulder shrug...

As if the stream of nonsense from European (elected and unelected) officials was not already at 11 on the Spinal Tap amplifier of insanity, French Finance Minister Sapin just uttered the following:

*FRANCE'S SAPIN SEES NO RISK OF GREEK BANKRUPTCY

The credit markets - which are once again pushing higher in yield, and wider in spread today - remain on edge, entirely disagreeing with Sapin's statement of total falsehood. It appears he has taken a page from Juncker's playbook - "when it's serious, you have to lie"

As we noted over the weekend when we showed a simple contango math calculation by SocGen according to which storage costs imply another 20% drop in Brent prices, now none other than Goldman - which has been oddly bearish on oil over the past few weeks - says that its Brent forecast remains at $40/bbl for two simple reasons: i) the global inventory glut is set to resume and ii) it's the weather's fault there has been a slowdown in the crude build-up.

Doubting if the growth ahead of GM is now over, and the great post-bankruptcy "success story" is rapidly fading as the company has been pushed to resort to the kind of financial engineering which has pushed the S&P higher for all of 2014, and follows a record month of stock buyback announcements? Then doubt no more: moments ago GM announced it is authorizing an immediate $5 billion stock buyback, and plans to return all cash above a $20 billion floor to shareholders.

• ECB Starts Buying German, Italian Government Bonds Under QE Plan (BBG)
• Creditors Reject Greece's Reform Proposals (BBG)
• Is Apple Watch the Timex digital watch of the Internet era? (Reuters)
• Tesla shedding jobs in China as sales target missed (Reuters)
• Malaysia Airlines says expired battery on MH370 did not hinder search (Reuters)
• Gunmen kill more than 12 Islamic State militants in eastern Syria (Reuters)
• GM Plans Share Buyback, Averting Proxy Fight (WSJ)
• Wisconsin capital marked by third day of protests after police shooting (Reuters)

It was not all smiles and jokes as Mario Draghi's European QE officially launched in Europe, with Greece leaving the proverbial turd in the monetary punch bowl.

Austria’s decision to wind down Heta Asset Resolution AG sent ripples through the financial system, causing credit rating downgrades in Austria and bank losses in Germany: "It’s a mini-Greece going off in the heartlands of Europe." Here are some of the consequences, and delightful ironies, of a completely unexpected black swan landing in the south of Austria.

Something curious has emerged as a result of the divergent "Fed-vs-Everyone-Else" central bank policy: as JPM observed over the weekend while looking at the dollar fx basis, the dollar funding shortage is back with a vengeance, and is accelerating at pace not seen since the Lehman collapse.

Why are negative interest rates now making an appearance? They are a natural consequence of the rampant money creation undertaken by central banks in response to the global financial crisis as there is a lot more newly-created money floating around the financial system than there are safe places to put it. With the increasingly globalized world of international finance a bank run or financial panic anywhere can easily become a bank run or financial panic everywhere, it might be a good time to give your mattress a bit of extra padding.

Blackstone, who already may be your landlord, is reportedly close to buying the nation's second largest skyscraper in a $1.5 billion deal. 

Because we are all deep-undercover Greek tax collectors now.