• Tim Knight from...
    09/16/2014 - 21:37
    What if it had gone differently? What if, six years ago, in the throes of the financial crisis, the political leaders in D.C. had decided that enough was enough, and they were going to seize the...

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Markets React Violently To China's Stealth QE

From copper to high-yield credit and from stocks to bonds and gold, markets are reacting violently to the headlines from China that they are unleashing another 500bn Yuan "stealth QE"... everything is rallying.. except the USD (biggest drop since May).



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Hilsenrath Front-Runs Fed: Hints "Considerable Time" Language Will Remain

The last week has been dominated by sell-side strategists raising hawkish concerns about this week's FOMC with a focus on the drop of the "considerable time" language describing the period from the end of QE to the start of rate hikes. The Wall Street Journal's Fed-whisperer Jon Hilsenrath just dropped a rather large hint that that the "considerable period" language will remain... Given the economic backdrop, they don’t want to send a signal right now that rate increases are imminent." Here's what the street thinks...



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China Launches CNY500 Billion In "Stealth QE"

It has been a while since the PBOC engaged in some "targeted" QE. So clearly following the biggest drop in the Shanghai Composite in 6 months after some abysmal Chinese economic and flow data in the past several days, it's time for some more. From Bloomberg:

  • CHINA’S PBOC STARTS 500B YUAN SLF TODAY, SINA.COM SAYS
  • PBOC PROVIDES 500B YUAN LIQUIDITY TO CHINA’S TOP 5 BANKS: SINA
  • PBOC PROVIDES 100B YUAN TO EACH BANK TODAY, TOMORROW WITH DURATION OF 3 MONTHS: SINA

Just as expected, the Chinese "derivative" currency, the AUD, goes vertical on the news, and the S&P 500 goes vertical alongside:. As for those confused what the SLF is, here is a reminder, from our February coverage of this "stealth QE" instrument.



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Meanwhile In Ukraine, The Parliament Is Being Stormed, Again - Live Webcast

Yesterday, in the aftermath of the popular anger aimed at Ukraine's president Porohsneko following his "Bohnering" on Ukraine's demands for a free trade agreement with Europe, we said the new president's days are likely numbered. Less than 24 hours later, this has started to play out, and as the live feeds below show, the Kiev parliament is being stormed by what appears to be discontent from the right wing "Right Sector" political group, despite today's ratification of the meaningless EU pact, whose purpose was to offset popular anger at the delay of the trade agreeement. Moments ago from Bloomberg: UKRAINE PROTESTERS ATTEMPT TO ENTER PARLIAMENT BUILDING: UNIAN  Below is a live feed of what may soon be the second political coup in Ukraine in under 1 year.



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'Janus' Yellen And The Great Transition From Risk-On To Risk-Off

In our era of omnipotent central banks worshipped by the Status Quo, we have a goddess of financial transitions--Janus Yellen, the two-faced chair/deity of the Federal Reserve - to usher in the Great Transition from risk-on to risk-off.



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Obama To Send 3,000 Ebola-Fighting Boots-On-The-Ground To Africa; CDC Warns America "Now Is The Time To Prepare"

On the heels of yesterday's almost unbelievable forecasts of the exponential rise in Ebola case counts - and warnings of a 20% chance of Ebola reaching the USA by year-end, WHO officials have confirmed that their previous forecasts of 20,000 cases "does not seem like a lot today." This has, according to Reuters, the United States announced on Tuesday that it would send 3,000 troops to help tackle the Ebola outbreak as part of a ramped-up response including a major deployment in Liberia, the country where the epidemic is spiralling fastest out of control. Perhaps even more worrisome - for those who explained how 'contained' Ebola was - is the CDC's release of an Ebola checklist warning American healthcare workers "now is the time to prepare."



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Stocks Go Vertical (Again), Just Because

In a desperate attempt to keep AAPL above $100 again, US equity markets are deja-vu-ing yesterday afternoon's sudden (and newsless) vertical ramp to run stops this morning. As Rule 575 hits, it appears the new algo plan is just run stops wherever they may hide, because nothing says buying-panic (and selling VIX panic) like the uncertainty of a Fed meeting, Scottish vote, and Alibaba disruptions...



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What A Difference Two Weeks Makes: Spot The Cognitive Dissonance In These Two Headlines

Because what's two weeks between propaganda spewing friends?



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Scotland Prepares For Bank Runs; 'Quietly' Sends Millions Of Banknotes North

As the Scotish independence vote draws near and remains too close to call, some analysts are suggesting Plan B for Scotland may be to choose to opportunistically default. This has done nothing to calm concerns of the aftermath of a "yes" vote - despite US asset managers proclaiming it irrelevant. Nowhere is that more clear than, as The Independent reports, Britain’s banks have been quietly moving millions of banknotes north of the border to cope with any surge in demand by Scots to withdraw cash in the event of a Yes vote in Thursday's independence referendum, it has emerged. Bankers stressed there has been no sign yet of any increase in the amount of withdrawals from deposit accounts or ATMs, but the moves have been taking place over the past week or so in order to make sure ATMs do not run out on Friday in the event of a panic reaction to a “yes” vote.



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Producer Price Increase Lowest In 2014 As Energy Slides

PPI Final Demand was unchanged in August (+0.0% against expectations of +0.0%) making it lowest monthly gain since December 2013 (after revisions moved May's data). Across the board producer prices rose (or didn't) as expected with Final Demand YoY +1.8%. Energy prices fell 1.5% MoM and was the biggest driver of PPI's relative weakness but notably prices for finished goods fell 0.3% - the biggest drop since August 2013.



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Over 1000 US, NATO Troops Begin Military Exercises In Ukraine

Russia could care less whether Ukraine signs meaningless accession agreements with Europe (as it just did) because at the end of the day, Ukraine needs Russia's gas (if only for the next 4-6 years until Hunter Biden develops Ukraine's shale deposits and the Qatar gas pipeline finally crosses Syria). Russia, however, is very angry when NATO gets ever closer to its borders, which it just did when earlier today, more than 1,000 troops from 15 NATO and non-NATO countries, including the US of course, are taking part in a military exercise in Ukraine.



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Frontrunning: September 16

  • Thank you market Chief Risk Officer Bernanke/Yellen: Calpers to Exit Hedge Funds, Divest $4 Billion Stake (BBG)
  • World stocks hit one-month low, caution ahead of Fed (Reuters)
  • U.S. Efforts to Build Coalition Against Islamic State in Iraq, Syria Are Hampered by Sectarian Divide (WSJ)
  • Time to throw away some more good money: Sears Borrows $400 Million From Lampert’s ESL Investments (BBG)
  • Wildfires rage in California drought, hundreds forced to flee (Reuters)
  • United Offers $100,000 Buyouts to Flight Attendants (BBG)
  • Biggest Banks Said to Overhaul FX Trading After Scandals (BBG)
  • You mean you have to pay? Administration threatens to cut off ObamaCare subsidies to 360,000 (The Hill)
  • RBS Said to Dismiss Most of Team Overseeing Central Europe Debt (BBG) they will be hired by the ECB


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China Stocks Tumble Most In Six Months; US Futures Lower As Key Risk Events Loom

If over the weekend we got some terrible economic news out of China, then overnight it was turn for a major disappointment in capital flows, when Chinese Foreign Direct Investment in August crashed by 14%, far below the 0.8% increase expected, attracting just $7.2 billion in FDI, and the lowest in four years. This once again sparked fears of a Chinese hard landing and sent the Shanghai Composite tumbling 1.82%, the biggest drop in six months. In addition to China, there was the German ZEW Survey, which while beating expectations of a 5.0 print, dropped from 8.6 to 6.9 in August, the lowest since 2012. In fact, the gauge has decreased every month since December when it reached a seven-year high. And while there is not much other news today ahead of the blitz assault of data later in the week, including the Fed tomorrow, the TLTRO announcement on Thursday and the Scottish referendum results and the BABA IPO on Friday, we are stunned futures aren't as usual, soaring.



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Why Worry? The Two Scariest Charts In The World

There are plenty of things to worry about these days. However, with enough intelligence, political will, common-sense and perseverance, most challenges we face as a species can be overcome (maybe providing some hope that we can tackle whatever we are facing right now.) So why worry? Well, what will happen if we start losing those qualities and values as a global society? Which is why we believe that the following graphs are the scariest in the world today...



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Happy Birthday Lehman Bankruptcy: Silver +71%, Gold +61%, S&P +58%

"The West is done, it's over! We screwed it all up. Do you want your great-grandchildren speaking Chinese?"



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