• Sprott Money
    03/01/2015 - 23:51
    Clearly if Western governments were ‘merely’ drowning in debt-to-GDP ratios of roughly 100%, then theycould still argue that attempting to manage these debt-loads was legitimate rather than...

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Getting Richer By Getting Poorer - Japan's FX-Bond-Stock Trilemma

JPY could fall a lot further because weak JPY has been the most effective tool to create equity market wealth and spur Japanese demand. Moreover, Citi's Steven Englander notes, Japanese policymakers do not have many other options. If JPY is ticket for the Nikkei to regains ground lost versus other equity markets, USDJPY would have to go into three digits. By implication JPY would have to weaken a lot more. The loss of market share in part reflects long-term structural issues but Japanese governments (like others) are more mindful of incurring the anger of domestic political constituencies by making tough structural reforms than of G20 counterparts by weakening the exchange rate. From a political perspective, the Nikkei-JPY relationship is too much a good thing for Japanese policymakers to give up - but divergences are abundant at the short- and long-end of the JGB curve - and too much of a good thing in this case is a disaster.



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ECB Enters Currency Wars Backward As Weidmann Talks Euro... Up?

Update: Just as predicted, and right on schedule a few hours after this hit the tape, here come the French: EURO GROUP MUST WATCH RISING EURO'S IMPACT ON GROWTH: MOSCOVICI

* * *

The jawboning continues - but this time it's different. During a speech this morning, the ECB's Weidmann made it clear that the optics of EUR strength are critical to the union's survival (and Germany's balance of power vs the French):

  • *WEIDMANN SAYS ECB CANNOT SOLVE CRISIS, GOVERNMENTS MUST
  • *WEIDMANN: DEVALUATION HISTORICALLY DOESN'T HELP COMPETITIVENESS
  • *WEIDMANN: IF MANY NATIONS DEPRESS FX, CAN ONLY END IN FAILURE
  • *ECB'S WEIDMANN SAYS EURO ISN'T SERIOUSLY OVERVALUED
  • *WEIDMANN WARNS POLICY MAKERS AGAINST TRYING TO WEAKEN THE EURO

Of course, as we head towards the G-20, everyone wants to talk their book - but in this case, Weidmann is talking the EUR up. As we have been saying, Weidmann is scared of what happens when the EUR downward slide accelerates and implicitly results in a blow up of peripheral yields leading to even faster EUR collapse, and ultimately fears of EUR redenomination. This has been the case every year; as the ECB had to step in and prop the EUR up - just the opposite of what every other central bank does.



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Italian Stocks Slump As Berlusconi Proclaims Himself Poll Leader

With Italy's stock market down almost 9% (and falling again today), and Italian bond yields surging (2Y +35bps to 1.67%) in the last two weeks, it truly seems as though the two scariest words in global investing are not 'Iran-Israel', or 'Federal Reserve', but 'Silvio Berlusconi'. With the polls blacked out now until the election in just under two weeks, the posturing has begun and the media mogul is not backing down. As ANSA.It reports, Berlusconi has proclaimed "I believe that we have overtaken them... they are now (trailing) behind us," as we have been noting the convergence of the two parties poll results recently. Of course, he is still the lecherous old bastard he always was - which seems only to endear him to the Italian people (oh, and his promise of bread and circuses for all) - as ANSA notes, he is defending himself on Sunday, after Berlusconi asked a female solar power technician during a company visit if she made house calls, if she "comes to homes" and how many times she is willing "to come". Is debauchery the opposite of austerity? Never mind, the key for now is psychological as the opposition sparring will need to begin to avoid the "don't vote for the loser" bias.



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The Pope Quits: Now What?

While Dan Brown fans are intimately familiar with the details of Conclave, there are those who have not studied Robert Langdon's every clue-busting eureka moment under a microscope. For them, the AP has this handy step-by-step guide for how a new pope is chosen. Traditionally, this flowchart if followed upon the death of the Pontiff, but following today's first papal resignation since 1415, it is time to apply a little of the "New Normal" to the Catholic church as well. The only unknown after reading the below flowchart should be how Diebold will rig the Cardinal vote so that a Goldman partner is elected.



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Ron Paul: “6,000 Years of History, Gold Is Always Money, Paper Money Fails”

Ron Paul spoke with Bloomberg television and said that we are in a currency war and we have been for decades. He noted that governments have always competed against each other’s currencies even under Bretton Woods. It has always been a form or protectionism and will make people want to export more. Dr. Paul said don’t blame countries like China and Japan just look at the debt the U.S. is buying. There will always be currency wars. The Bank of Japan claims it has to defend itself against deflation and decades of slow growth. Ron Paul noted that the Bank of Japan’s yen devaluations will eventually lead to further price inflations that are to come. Investors and citizens will eventually reject the yen and switch to other currencies like dollars or Swiss francs.  Then eventually people will move to hard assets altogether as they are losing confidence in paper assets.  Dr. Paul was asked, “Do you think protectionism will lead to a crash in the international monetary system? He replied, “Nothing good can come of it. Even short run trade benefits leads to a weaker economy and higher prices. It doesn't solve the problem they won't face the truth. That is that all governments spend too much money, there is too much debt and they get away with it by taxing people”.



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Art Cashin Rolls His 'Snake' Eyes At The Bull Market

As most of Asia is on vacation for the lunar new year, UBS' Art Cashin is growing more and more concerned with the excessively bullish tone. While not screaming for an outright short, the venerable volatility-handler fears many factors he sees in the market currently from sentiment to vauation, and a lack of 'rotation', and while the January Effect and the Super-Bowl are in the bulls favor, he gently reminds that the 'Year of the Snake' has typically not been a good one for markets or man...



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Weak Jobs Report? Blame It On Snow In The Winter

As we said a week ago in "Scapegoating Nemo", it was only a matter of time before Wall Street's heroic band of permabullish lemmings used a snow storm in the middle of, gasp, winter, as a "valid" excuse to justify why an economy priced to central planning-perfection may deviate slightly from a path that has missed every major upside inflection point in the past four years (but... but, there is always a reason... if only for the Fed to print). And appropriately enough, the first such excuse comes from none other than Groundhog Phil's nemesis Joe LaVorgna who just cut his Non-farm payroll forecast to 125K due to "inclement winter weather." Truly odd how there is never an exogenous reason for "better than expected" data. Ever. Next, and as always, rain in the spring will be blamed for a Durable Goods plunge in April, sun and balmy warm weather in the summer will be the cause of a collapse in retail spending in July, and finally, a gust of wind in the fall will lead to a double dip depression.



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Too Much European Integration? Romanian Donkey Meat In UK "Beef" Burgers

Thanks to a law banning horses from Romanian roads, the ever-enterprising and integrated European Union workers have apparently found a use for the millions of horses and donkeys that were slaughtered. In a bizarre report from The Independent, it appears 'donkey meat' has turned up on the shelves of British, French, and Swedish supermarket shelves (and no it doesn't taste like chicken or ass). The unintended consequence of the Romanian horse (and donkey) ban appears to follow a truly remarkable path from abattoirs in Romania (who must be busy) to a dealer in Cyprus (subcontracting for a Dutch dealer) to a meat plant in France which sold its frozen 'meat' onto a distributor in Luxembourg. French and British governments have forced the removal of the 'fake' beef from supermarket shelves as "a case of fraud and conspiracy against the public." Given last week's incredible footage from Greece, we suspect more than a few are willing to choke it down, as for now the British are pushing to ban meat imports.



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9 Killed When Car With Syrian Plates Explodes At Turkish-Syria Border Crossing

It appears the tensions between Turkey and Syria are far from easing, as evidenced by the just reported car bomb explosion at the Turkish-Syria border where at least 9 people have been killed according to TV24. According to AA, the blast happened in a vehicle with a Syrian license plate, which is certain to inflame tensions between the two countries even more. Keep an eye on the already soaring Brent-WTI spread.



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Gold, Silver Plunge In Sympathy With Popexit

The precious metals market appears to have found a size seller this morning. Despite record breaking demand for physical coins from the Mint, gold and silver prices hit an air pocket around 8amET but had been sold all day in Europe. We humbly suggest that his Holiness spread out his retirement selling... of course we saw a similar gap last Tuesday and Thursday as Europe's risk-asset markets continue to slide (and perhaps collateral margin calls come due). Of course, the more important questions remain: which TBTF bank will the pope end up as vice-chairman in, and which ex-Goldman Managing Director/Partner will be the next head of the Vatican bank... and incidentally Catholic Church (it appears a Canadian is front-runner, rather coincidental given Carney's recent appointment).



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Households On Foodstamps Rise To New Record

While hardly presented by the mainstream media with the same panache dedicated to the monthly ARIMA-X-12 seasonally-adjusted, climate-affected, goal-seek devised non-farm payroll data, the three month delayed Foodstamp number is according to many a far greater attestation to the "effectiveness" of the Obama administration to turn the economy around. And far greater it is: since his inauguration, the US has generated just 841,000 jobs through November 2012, a number is more than dwarfed by the 17.3 million new foodstamps and disability recipients added to the rolls in the past 4 years. And since the start of the depression in December 2007, America has seen those on foodstamps and disability increase by 21.8 million, while losing 3.6 million jobs. End result: total number of foodstamp recipients as of November: 47.7 million, an increase of 141,000 from the prior month, and reversing the brief downturn in October, while total US households on foodstamps just hit an all time record of 23,017,768, an increase of 73,952 from the prior month. The cost to the government to keep these 23 million households content and not rising up? $281.21 per month per household.



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Frontrunning: February 11

  • Pope steps down, citing frailty (Reuters)
  • Japan’s economic minister wants Nikkei to surge 17% to 13,000 by March (Japan Times)
  • Venezuelan devaluation sparks panic (FT)
  • Rajoy releases tax returns, but fails to clear up doubts over Aznar years (El Pais)
  • Companies Fret Over Uncertain Outlook (WSJ)
  • Home Depot Dumps BlackBerry for iPhone (ATD)
  • Kuroda favors Abe's inflation target, mum about BOJ role (Kyodo)
  • A Cliff Congress May Go Over (WSJ)
  • U.S., Europe Seek to Cool Currency Jitters (WSJ)
  • Radical rescue proposed for Cyprus (FT)
  • Franc Is Still Overvalued, SNB’s Zurbruegg Tells Aargauer (BBG)
  • Northeast Crawls Back to Life After Crippling Blizzard (WSJ)


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Quiet Start To G-20 "Currency Warfare Conference" Week

In what has been a quiet start to week dominated by the G-20 meeting whose only purpose is to put Japan and its upstart currency destruction in its place, many are expecting a formal G-7 statement on currencies and what is and isn't allowed in currency warfare according to the "New Normal" non-Geneva convention. Because while there may not have been much overnight news, both the EURUSD and USDJPY just waited for Europe to open, to surge right out of the gates, and while the former has been somewhat subdued in the aftermath of the ECB's surprising entry into currency wars last week, it was the latter that was helped by statements from Haruhiko Kuroda (not to be confused with a Yankee's pitcher) who many believe will be the next head of the BOJ, who said that additional BOJ easing can be justified for 2013. He didn't add if that would happen only if he is elected. Expect much more volatility in various FX pairs as the topic of global thermonuclear currency war dominates the airwaves in the coming days.



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RANsquawk EU Market Re-Cap - 11th February 2013



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Pope Benedict XVI Announces Resignation At End Of Month

Dear Brothers,

I have convoked you to this Consistory, not only for the three canonizations, but also to communicate to you a decision of great importance for the life of the Church. After having repeatedly examined my conscience before God, I have come to the certainty that my strengths, due to an advanced age, are no longer suited to an adequate exercise of the Petrine ministry. I am well aware that this ministry, due to its essential spiritual nature, must be carried out not only with words and deeds, but no less with prayer and suffering. However, in today’s world, subject to so many rapid changes and shaken by questions of deep relevance for the life of faith, in order to govern the bark of Saint Peter and proclaim the Gospel, both strength of mind and body are necessary, strength which in the last few months, has deteriorated in me to the extent that I have had to recognize my incapacity to adequately fulfill the ministry entrusted to me. For this reason, and well aware of the seriousness of this act, with full freedom I declare that I renounce the ministry of Bishop of Rome, Successor of Saint Peter, entrusted to me by the Cardinals on 19 April 2005, in such a way, that as from 28 February 2013, at 20:00 hours, the See of Rome, the See of Saint Peter, will be vacant and a Conclave to elect the new Supreme Pontiff will have to be convoked by those whose competence it is.



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