Archive - Aug 14, 2015 - Story

Around 1030ET, The US Dollar suddenly went bid, driving broad-based commodity weakness. Silver had been creeping higher all morning but it appears someone wanted to keep it below its 50-day moving average and has thrown 1000s of contracts short at it, slamming the precious metal to the lows of the day... Gold also saw a sudden heavy volume monkey-hammering...

When do we finally accept the hopelessness of reforming a self-serving machine bent on destruction?

Characterizing the upward transfer of virtually all American wealth to a handful of oligarchs a “recovery,” represents a grotesque insult to the english language as well as common sense. The writing was on the wall from the very beginning. We knew as soon as TARP passed that we as society would regret the day we bailed out the bankers who destroyed the world economy. It didn’t take long.

Putting what China has just done in very simple context: China announces an increase in its gold holdings of over 58% (June and July)... and then it devalues its currency by nearly 5% in one week. Even the most brainwashed Keynesians should be able to see what is going on here by now.

It appears the US Consumer is losing faith. August preliminary UMich Consumer Sentiment slipped from July's 93.1 and missed expectations. This is the 2nd weakest print since November. Longer-term inflation expectations fell back to 2.7% and expectations for household income growth slipped to just 1.6%, but the collapse in business expectations to 11-month lows is the most crucial aspect.

Whatever action we take has a consequence. It is impossible to manipulate markets and the economy for there will always be unintended collateral damage. We are living in the era that will bring about a collapse of socialism precisely as took place in communism. Government is incapable of ever managing society for they cannot escape the inter-connectivity.

Thanks to some considerable negative downward revisions, Industrial Production In July rose 0.6% (double expectations of a 0.3% rise) - the biggest MoM rise since November. However, year-over-year IP growth is flat at 1.3% - hovering at its weakest since the last recession. We previously noted the surge in auto inventories-to-sales (Motor Vehicle IP rose 10.6% MoM), which likely spurred this false dawn in IP, however, it is the rise in oil drilling - the first time since September - that raises an eyebrow as entirely unsustainable amid collapsing prices.

Earlier today, one of the biggest farces of 2015 was remedied when a UK judge granted Sarao a bail reduction from £5m to £50,000 and was allowed to leave prison as soon as today. As profiled before, Sarao had been at the infamous Wandsworth prison - Britain's worst - since his arrest. As the FT reports, at a court hearing at Westminster Magistrates Court in London today, a lawyer for the US said he would not oppose the bail reduction.

Across the board, Producer Prices printed hotter than expected. PPI ex food and energy rose 0.3% MoM - the biggest jump since November, however, Final Demand PPI YoY remains negative for the 7th month in a row. Most notably, over 40% of the July increase in the index for final demand services is attributable to prices for guestroom rental, which jumped 9.9%. The bottom line - there is enough here for the doves and the hawks, though the headline data definitely gives The Fed ammo to hike in September.

When China went the "nuclear" devaluation route earlier this week, everyone knew things were about to get a whole lot worse for an EM currency basket that was already reeling from plunging commodity prices, slumping Chinese demand, and the threat of an imminent Fed hike. With some Asian currencies already falling to levels last seen 17 years ago, some analysts fear that an Asian Financial Crisis 2.0 may be just around the corner. That rather dire prediction may have been validated on Friday when Malaysia’s ringgit registered its largest one-day loss in almost two decades, as stocks plunged and bond yields rose.

China "can't determine" what chemicals were warehoused in an industrial zone that exploded on Wednesday, leading local residents to question whether the air is safe to breathe. Meanwhile, Greenpeace suggests a hard rain risks driving air borne pollutants into the groundwater even as Beijing swears there's no evidece of chemicals in seawater.

After a week of relentless FX volatility, spilling over out of China and into all other countries, and asset products, it was as if the market decided to take a time-out overnight, assisted by the PBOC which after three days of record devaluations finally revalued the Yuan stronger fractionally by 0.05% to 6.3975. And then, as a parting gift perhaps, just as the market was about to close again, the Chinese central bank intervened sending the Onshore Yuan, spiking to a level of 6.3912 as of this writing, notably stronger than the official fixing for the second day in a row. In fact the biggest news out of China overnight is that contrary to expectations, the PBOC once again "added" to its gold holdings, boosting its official gold by 610,000 ounces, or 19 tons, to 1,677 tones.

Define irony: in a quarter in which Greece was supposed to have been near death (at least according to the worst PMI print in history and of course, judging by the bank lines in front of the capital controlled institutions), yesterday we learned that Greek GDP surged relative to expectations rising by 0.8%, which was what analysts had expected but with a minus sign in front of it. Then overnight, we got the rest of European GDP, including the big three: Germany, France and Italy. The results were nothing short of a big disappointment. At the Euroarea level, the result was also a big negative surprise with Q3 GDP rising 0.3%, down from 0.4%, and below expectations. This was the worst GDP print since Q3 2014.

Moments ago the Greek parliament, after a dramatic, most likely on purpose, overnight session - because when you are a puppet government of Belgium/Brussels you have to put in extra effort to prove you are "independent" - gave its approval for the third Greek bailout when Tsipras secured votes of more than 151 lawmakers in country’s 300-seat parliament. As on previous cases, the vote passed with substantial opposition support. In terms of numbers, the rebel faction within Syriza is now up to 42, with 43 being seen as the threshold beyond which Tsipras has no choice but to call elections. In other words the Tsipras government now hangs in the fate of just one person.