Archive - Jun 2015 - Story

Just like yesterday, when the 3Y auction issued $24 billion in paper on substantially better terms than many feared, so today's 10 year auction was even stronger, pricing at 2.461%, 1.3 bps through the When Issued of 2.474%, at a 2.461 Bid to Cover, far better than last month's 2.2370 and the highest since December 2014. Why the strong auction? Same reason why yesterday's 3Y was also strong. Same reason why every other auction coming on days when there is a substantial short overhang into the auction is strong: shorts were squeezed.

Surprise! Germany has begun to talk back their exuberant headlines over a Greek compromise. As Reuters reports, Germany will only accept a cash-for-reform deal between Greece and its international creditors that has the approval of all three lending instutions, a government spokesman said in response to reports that Berlin was considering easier terms, "all else is pure invention."   EURUSD has faded back all of the headline gains... but for now US equity futures remain convinced.

"These record profits that companies are reporting are not all they're cracked up to be."

Mark Carney: "Real markets are essential to guarantee prosperity. Not markets that collapse when there is a shock from abroad. Not markets where transactions occur in chat rooms. Not markets where no one appears accountable for anything."  So... not markets which are artificially rigged by $22 trillion in central bank liquidity and which collapse every time the "threat" that any of this preciously liquidity may be taken away?

Bank of Japan Governor Kuroda has managed to do it again. In his now daily missives on "deflation mindset being over", "economy is on the right track", "QQE is working", and his best yet "BoJ has no plan to finance government debt", Kuroda unleashed the ultimate idiocy last night when he proclaimed "it is desirable for FX to move in a stable manner." USDJPY has fallen over 2 handles for the biggest surge in JPY strength in 6 months... to which Amari noted "Kuroda didn't intend to move market with his remarks." Irony indeed.

While we await for Germany to deny the latest "Greece is fixed" report, below is a quick update of what is going on with Greek bank liquidity. It is not good.

“We have a significant population gap among African American males because so many of them have spent time in jail and, as such, we can’t hire them."

While we are well aware of the decay-ridden denigration of VXX (the VIX ETF), today's plunge (on heavy volume) nears a new record low for the NYFed's best friend. With 51.695 million shares short (and just 60.5 million shares oustanding) according to Bloomberg data, one can only imagine what happens if we get a true 'event' that is allowed to happen.

After all the sound and fury from Schaeuble, we are now to believe he is ready to back down...

*GERMANY SAID TO CONSIDER SETTLING FOR ONE GREEK REFORM UP FRONT, OFFERING GREECE STAGGERED DEAL ON AID

Stocks and the Euro have resurged on the news. We await Germany's denial within the next 30 minutes (and the subsequent FBI investigation)

While the Greek government has wasted the past 4 months experiment with game (and hope) theory-based negotiations with the Troika, debating what reforms it should implement, what the budget surplus should be, and how much of a pension and wage haircut the local workforce should undergo just to keep the trickle of European money flowing and "allow" the IMF to repay Greek IMF obligations and the ESM to repay the ECB, the Greek economy has slammed into a brick wall because according to Greece's retailers association, about 59 businesses close down and some 613 jobs are being lost each day.

Following API's considerably larger than expeted inventory draw last night, DOE reported a huge 6.81 million barrel draw (against expectations of a 3.46mm barrel draw). This is the biggest inventory draw in 11 months. In addition production rose once again (up 0.25%) to new record highs at 9.61mm bbl/day. Crude prices are holding gains after this.

One of these is an irrational bubble created by millions of uneducated investors piling into markets because they are convinced there is just one more greater fool.. and the other is Chinese Stocks...

Just a day after Canadian Prime Minister Harper confirmed his nation's desire for stronger economic ties to Poland, two Russian warships came within 7 miles of the Frigate carrying the Prime Minister across The Baltic Sea. The Frigate's captain said the Russian ships "posed no threat," but the coincidence is unmistakable just hours after Harper slammed Putin (and Russia), demanding further sanctions.

It just blows our mind, that in the face of almost every indicator having collapsed over the first 6 months of this year, market ‘pros’ just act as though it isn’t happening!  It’s impressive to watch the insanity, the denial, the delusion, that has become the basis of the steady state market. What is continuing is us extending ourselves again on the very assumption that the American Consumer will rebound to its peak strength.  Because there are those few all powerful economic cannibals that profit on policy rather than economics, we will continue down this flawed path until the legend of the Almighty American Consumer succumbs to reality.  And that day my friends will be an ugly one for the record books.