Archive - Sep 1, 2015 - Story

“If the freedom of speech be taken away, then dumb and silent we may be led, like sheep to the slaughter.” - George Washington

With indicators from macro-fundamentals (e.g. retail sales, core capex, inventory-to-sales) to market-oriented measures (VIX levels and backwardation, HY credit spreads, commodity prices) all flashing various colors of dead canary in the coal-mine red, we thought today's colossal spike in the Arms (TRIN) Index was a notable addition.

"Worryingly, EM capital flows are already significantly undershooting the projection from the hawkish scenario. The less constructive view is that the Fed balance sheet simply matters far more for EM, with liquidity provided by the ECB and BoJ a poor compensation for the Fed’s retrenchment. The hawkish scenario of Fed stopping reinvestment next year would suggest that EM flows can get weaker, while even a more dovish scenario of a constant Fed balance sheet would not be enough to lift inflows again."

Not a week goes by without the Pentagon carping about an ominous Russian "threat". The Pentagon’s rhetorical games also serve to mask a real high-stakes process; essentially an energy war – centering on the control of oil, natural gas and mineral resources of Russia and Central Asia. Will this wealth be controlled by oligarch frontmen “supervised” by their masters in New York and London, or by Russia and its Central Asian partners? Thus the relentless propaganda war.

Chinese stocks are opening lower: SHANGHAI COMPOSITE INDEX FALLS 4.6% TO 3,020.84 AT OPEN as PBOC fixes Yuan stronger for the 4th day in a row - the most in 5 years.

China credit risk has spiked to 2-year highs as traders increase positions dramatically.

Think about it. We are currently watching global stock markets gyrate toward breakdown trying to anticipate the whims of a cloistered professor who never launched a business, never met a payroll, never shipped a product, and never won an election, yet has been empowered to determine the price of money. What’s even stranger is that people consider this normal. Ask yourself: Why do we wait on pins and needles for Janet Yellen to set interest rates yet laugh at the idea that kings once set the “just price” for a loaf of bread?

Wonder no more... Get back to work Mr. Kuroda...

"One manager at a major fund - part of the 'national team' of investors and brokerages charged with buying stocks to revive prices – said a friend, also an executive at a large fund, was recently summoned for a meeting with regulators, along with all other mutual funds that had engaged in short-selling activity. 'If I don't come back, look after my wife,' his friend told him, handing the manager his home telephone number."

If you find that you are pointing to yourself on 5 or more of the bullet items below... please delete your Twitter account immediately.

"The current secular shift in reserve manager behavior represents the equivalent to Quantitative Tightening, or QT. This force is likely to be a persistent headwind towards developed market central banks’ exit from unconventional policy in coming years, representing an additional source of uncertainty in the global economy. The path to “normalization” will likely remain slow and fraught with difficulty."

A President Trump may be able to make small changes here or there, “But the setting of the bureau’s activities is determined by rules and regulations which are beyond his reach.” Presidents come and go, but the unelected bureaucracy always remains. For all his simpleton bluster, even the mighty Trump is no match for the leviathan.

Last week, the world was introduced to what Deutsche Bank has branded "quantitative tightening" or, in layman’s terms, "reverse QE." We - as well as Citi and SocGen - have endeavored to speculate on what hundreds of billions (if not trillions) in EM FX reserve liquidation may mean for UST yields, but if you’re looking for other ways to trade QT, Deutsche Bank has an idea.

"...don’t worry, even if I evolve into terminator I will still be nice to you, I will keep you warm and safe in my people zoo where I can watch you for old time’s sake."

Saudi Arabia is staring down a current account-fiscal account outcome that makes Brazil look favorable by comparison. With the fiscal budget deficit projected at some 20% of GDP and two proxy wars combined with the necessity of maintaining the status quo for ordinary Saudis serving to make fiscal retrenchment next to impossible, you might be wondering how high oil prices need to climb in order for the Saudis to plug the gap. Deutsche Bank has the answer.