• Monetary Metals
    01/28/2015 - 00:28
    It’s terrifying how fast the whole Swiss yield curve sank under the waterline of zero. Now even the 15-year bond has negative interest. The franc has reached the end.

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Deutsche Bank: "If The Fed Stick To Their Script Then The Market Could Be In For A Small Shock"

If the Fed stick to their script then the market could be in for a small shock. Market-based measures of the first Fed hike place it at around the October meeting. This is already one meeting later than was being priced in at the start of the year. After this the second hike is priced in for around March 2016, whilst we entered the year pricing in the second hike for December 2015. So there is room here for volatility as we approach the summer FOMC meetings if the Fed’s message remains unchanged. It has long been our view that the Fed will struggle to hike as soon as it wants to given global growth and inflation issues, however there's no doubt they are keen to pull the trigger so something will have to give at some point. So any evidence either way today will be interesting.



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Frontrunning: January 28

  • Fed seen remaining patient with rate guidance amid global turmoil (Reuters)
  • National Weather Service apologizes for blizzard forecast miss (CBS)
  • Greek PM Tsipras pushes on with radical change, markets tumble (Reuters)
  • Obama Drops Plan to Raise Taxes on ‘529’ College Savings Accounts (WSJ)
  • Hard Choices on Easy Money Lie Ahead for Fed Chief (Hilsenrath)
  • Debt That Once Boosted Its Cities Now Burdens China (WSJ)
  • Skymark Said to File for Bankruptcy After Airbus Deal Flops (BBG)
  • Heavy Fighting Drains Ukraine Government’s Options and Finances (WSJ)


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Market Wrap: All Eyes On Yellen Who Better Not Disappoint

While all the algos are programmed and set to scan today's FOMC statement for whether both "patient" and "considerable time" are still there (as it did last time when it supposedly sent a pseudo-hawkish message while telling Virtu and Getco to buy, buy, buy), the market is torn between the trends observed in recent days: on one hand finally succumbing to the adverse impact of USD strength, which overnight also saw the Singapore Dollar admit defeat in the ongoing currency wars, is crushing both revenues and EPS, as well as outlooks, for the bulk of US companies, even as millennials - long since given up on buying a house - allocate their meager savings to the annual incarnation of Apple's flagship product as seen in yesterday's record, blowout numbers by AAPL which is up 8% in the premarket and sending Nasdaq futures soaring compared to the stagnant DJIA or S&P. And then there is Europe where the mood is decidedly sour this morning, with Greece imploding on fears Tsipras really means business and concerns the Greek "virus" may spread to other peripheral nations whose bonds have also seen a lack of a bond bid this morning.



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Greek Stocks Crash, Bonds Plummet, Banks Have Worst Day Ever

In the two days after Syriza's dramatic victory in the local Greek election, global investors assumed this loud cry against European policies would mean... more of the same, and as a result not much changed in the risk assessment of Greek assets. Then, overnight, following the previous report that not only does Syriza mean business but it is actively pivoting away from Europe (and toward Russia?), and everyone started paying attention, with a waterfall of selling engulfing not only the Greek stock market but also its bonds, which are crashing in the process sending the 3 Year yield to 16.4%, the highest since the restructuring, and the 10 Year either below or above 10%, depending on which data source is used (Bloomberg has them slightly below, others reporting 10-year bond yields up 50 basis points at 10.30%).



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Greece Begins The Great Pivot Toward Russia

"Foreign Minister Nikos Kotzias is due in Brussels on Thursday to discuss possible additional sanctions on Russia over the conflict in Ukraine. Before the cabinet even meets for the first time tomorrow, the Greek government said that it disagreed with an EU statement in which President Donald Tusk raised the prospect of “further restrictive measures” on Russia." The punchline: In recent months, Kotzias wrote on Twitter that sanctions against Russia weren’t in Greece’s interests. He said in a blog that a new foreign policy for Greece should be focused on stopping the ongoing transformation of the EU “into an idiosyncratic empire, under the rule of Germany.” And when it comes to the natural adversary of any German imperial ambitions in recent history, Europe has been able to produce only one answer...



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Failing Stimulus And The IMF's New 'Multilateral' World Order

2015 will be a year of shattered illusions; social, political, as well as economic. The common claim today is that the QE of Japan and now the ECB are meant to take up the slack left behind in the manipulation of markets by the Fed. I disagree. As I have been saying since the announcement of the taper, stimulus measures have a shelf life, and central banks are not capable of propping up markets for much longer, even if that is their intention (which it is not). Why? Because even though market fundamentals have been obscured by a fog of manipulation, they unquestionably still apply. Real supply and demand will ALWAYS matter – they are like gravity, and we are forced to deal with them eventually. The elites hope that this will be enough to condition the public to support centralized financial control as the only option for survival... It is hard to say what kind of Black Swans and false flags will be conjured in the meantime, but I highly doubt the shift away from the US Dollar will take place without considerable geopolitical turmoil.



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"New Normal" Fundamentals Hit Chinese Stocks

Fun-durr-mentals...



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Is China Starting To Crackdown On Alibaba's "Illegal Operations"?

It appears the Chinese government has decided it is time to remind the nation's richest man (and millions of retail investors in America) who is in charge. According to a report released by the Chinese government - citing closed-door meetings in July 2014 that were kept quiet so as not to affect the September IPO - there are at least 19 problems with Alibaba's various platforms. As Bloomberg reports, Alibaba failed to properly oversee merchants and allowed the sale of counterfeit products on its e-commerce platforms, according to a Chinese government report. The report concludes, rather ominously, "Alibaba not only faces the biggest credibility crisis since its establishment, it also casts a bad influence for other Internet operators trying to operate legally." While Alibaba has tried to clean-up its image, the report cites issues with counterfeit goods, merchant screening, false advertising, and lax controls.



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"Equities Will Be Devastated" Crispin Odey Warns, Looming Recession Will Be "Remembered For 100 Years"

"I think equity markets will get devastated," warns famed $12bn AUM hedge fund manager Crispin Odey in his latest letter to investors. Having been one of the biggest bulls of this particular central bank artificial-bull cycle, his dramatic bearish tilt (as we discussed what he thinks are the biggest risks underpriced by the market previously), is notable. Finally, Odey fears major economies are entering a recession that will be "remembered in a hundred years," adding that the "bearish opportunity" to short stocks looks as great as it was in 2007-2009.



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Fear And Dread Of Deflation - The Keynesian Big Lie At Work

The fear of deflation has become the cornerstone of Keynesian economic thought. However, it is the height of hypocrisy that Keynesians use the specter of deflation to frighten us into believing we need to endlessly dilute the value of our currencies and take the rate on our savings to zero percent; but then, at the same time, take every data point that points to falling prices as another reason to be bullish on markets and the economy. Their mantras are: Lower commodity prices–a boost to the consumer, plunging interest rates–an increase in mortgage refinancing. How can Keynesians celebrate deflation, while at the same time use it to scare us into accepting ZIRP forever? The easy answer would be, they are, by definition, cheerleaders for the stock market...



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How Much More GDP "Growth" Will Be Due To Obamacare?

Now that the soaring dollar and plunging crude are sure to punish the Q4 2014 and Q1 2015 GDP growth rate by more than half, with estimate now sliding to the mid to low-2% area, what "benefits" to the US economy can one expect from the tax that is Obamacare? As the following chart courtesy of Goldman shows, thanks to contributions from Medicaid and Medicare and, drumroll, Exchange subsidies, the "benefits" from Obamacare will be with us, well, maybe not "us", but certainly with the way GDP is calculate for a long, long time, as the recent health spending ramp is only just getting started.



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Caption Contest: When Barry Met Sally

Having cut his visit short with his other best friend - India's Narendra Modi - President Barack Obama (escorted by his wife Michelle) hopped Air Force One over to Saudi Arabia to pay respects to the dead King and meet-and-greet the new King Salman. The meeting full of pomp and circumstance was, however, not without controversy - with videos circling social media showing Michelle Obama's image blurred out and claims that she was snubbed by King Salman - all apparently untrue.



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New Gold Rush? 10 Ounces Of "Historic Nuggets" Stolen From San Francisco Museum

Three masked men smashed an SUV into the front-windows of The Wells Fargo Museum in San Francisco's financial district at around 230am Tuesday, making off with 10 ounces of "historic gold nuggets." As AP reports, robbers in Northern California have targeted precious metals in museum displays before and the tactics of the heist have marked other recent robberies in the area. The men escaped in a second vehicle, according to KGO, and the vehicle reportedly headed east across the Bay Bridge. Local coin dealers said the robbers may have difficulty selling the nuggets unless they melt them down. No dollar bills, Euros, or Japanese Yen notes were stolen during the robbery.



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Singapore Enters The Currency Wars: Weakens SGD By Most In 3 Years

Today's rambunctiousness in US equity markets as every company (even AAPL admitted this quarter would be more problematic from an FX perspective) rotates from 'weather' excuses to 'currency' excuses is not going to get any better as tonight, yet another world nation entered the 'devalue-or-die' brigade. Singapore's MAS announced a surprise shift in the slope of their policy band - implicitly loosening policy and so the Singapore Dollar dumped over 160 pips against the USD, the biggest drop in almost 3 years, tumbling to its weakest since Mid 2010. Interestingly, against the Japanese Yen this move merely roundtrips SGD strength from yesterday as one wonders who the real enemy in the competitive devaluation game is...



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