It appears Bunga-Bunga boy still has something to offer the international elite. After a lengthy meeting with Germany's Angela Merkel (at a hotel in Milan) where Putin warned of "big transit risks" in delivery of Europe's gas as Ukraine is "starting to siphon off our gas from the export pipeline," and threatening to respond by "reducing flows by the amount stolen;" Putin decided the place to be was 78-year-old Berlusconi's house at 3am. Finally, it is worth noting that Ukraine's President Poroshenko was scheduled to meet with Frau Merkel this morning - we assume to plead his case for why gas transit should flow through his nation (and beg for some more support).
The ECB may not release its minutes to the public (opting instead to keep these secret for 30 years) at least for now, but earlier today a transcript of its internal deliberations was made public by the NYT, which revealed how the ECB governing council once again snubbed its responsibilities, and in January 2013 bailed out a failing Cyprus bank, Cyprus Popular Bank, just months ahead of the now infamous Cypriot "bail-in" i.e., deposit confiscation. The story in a nutshell: following much internal wrangling and posturing by the "northern" states, notably the usual suspects such as Wiedmann and Knot, the Cypriot bank, which the ECB continued to bail out even though it should not have as the bank had obtained an ECB lifeline based on fake financials and glaringly impossible assumptions, the bank ultimately failed. Who was left holding the bag? Why Cyprus' depositors of course.
We suspect the market will be disappointed by this morning's headlines from China. Chinese rate markets are implying a RRR cut is coming soon (as swap rates drop below deposit rates - previously signaled 2 RRR cuts) but the PBOC announced this morning a muich more focused injection of cash to 20 of the nations' largest banks. RRR cuts, are (theoretically) considerably more broadly stimulative to lending than a $32.8 billion cash injection to banks - which are struggling to lend as demand for loans (given high costs of debt for the firms that need the money the most) is weak. One can only imagine the holes in bank balance sheets that exist if the PBOC is forced to do this. Simply put, no matter how much hope there is, as we noted previously, the PBOC will not be providing broad stimulus.
With no mention of the current turmoil in markets - or suggestion of QE99 - Janet Yellen's speech this morning on "Inequality and Opportunity" in America explains how the poor can get rich. After admitting that widening inequality resumed in the recovery (and "greatly concerns" her), as the stock market rebounded (driven by Fed's free money) and cost-conscious share buying-back companies defer wage growth as the healing of the labor market has been slow; she turns her attention to how the poor can beat the vicious cycle. Rather stunningly, she notes the 4 sources of income opportunity in America: The first two are widely recognized as important sources of opportunity: resources available for children and affordable higher education (so more student debt and servitude). The second two may come as more of a surprise: business ownership and inheritances. As she concludes, "this is how individuals and their families can improve their economic circumstances."
September was another month in which US single-family housing starts stagnated, and in fact declined when it comes to permits, only to see a strong rebound in both permits and starts when it comes to multi-family, aka rental housing.
Just wehn you thought it was safe to shower again, NOAA issues their US seasonal drought outlook and crushes dreams of wetter winter helping Californians. Hopes for heavy rain from El Nino will not be enough to change the drought situation for 60% of Californians, as MotherJones reports, NOAA forecasters warn, "While we're predicting at least a 2 in 3 chance that winter precipitation will be near or above normal throughout the state, with such widespread, extreme deficits, recovery will be slow."
For those curious why the Russell 2000 has completely ignored this week's broader market rout and is in fact higher now than last Friday, the answer comes from a recent technical note from Bank of America which says that as of the first week of the month, the "Russell net short positioning largest since 2008 after fifth consecutive week of selling."
While one of the big Ebola updates overnight, in addition to Obama being open to appointing an Ebola czar - because clearly the CDC is unable to handle the epidemic, best to have one on top of it all -is that some schools in Ohio and Texas are closed today after students’ potential exposure to a nurse with Ebola furthered fears of the disease spreading, this is nothing compared to the just released revelation that a health care worker who may have handled a specimen from the Liberian man who died from Ebola in Dallas is on a cruise ship in the Caribbean.
- Obama open to appointing Ebola 'czar', opposes travel ban (Reuters)
- Schools Close as Nurse’s Ebola Infection Ignites Concern (BBG)
- How the World's Top Health Body Allowed Ebola to Spiral Out of Control (BBG)
- European Stocks Rise Amid Growing Pressure for Stimulus (BBG)
- Putin Threatens EU Gas Squeeze Raising Stakes for Ukraine (BBG)
- ECB to Start Asset Purchases Within Days, Says Central Banker Coeuré (WSJ)
- Investors search for signs of end to stock market correction (Reuters)
If the last three days all started with a rout in futures before the US market open only to ramp higher all day, today it may well be the opposite, when shortly after Europe opened it was the ECB's turn to talk stocks higher, when literally within minutes of the European market's open, ECB's Coeure said that:
- COEURE SAYS ECB WILL START WITHIN DAYS TO BUY ASSETS
Which was today's code word for all is clear, and within minutes US futures, which until that moment had languished unchanged, soared by 25 points. So will today be more of the same and whatever early action was directed by the central bankers will be faded into a weekend in which only more bad news can come out of Ebola-land?
Having rotated their attention to the T-bill market in Japan (after demand for the Bank of Japan's cheap loans disappointed policymakers) in an effort to ensure enough freshly printed money was flushed into Japanese markets, the BoJ now has a major problem. For the first time since QQE began, Bloomberg reports the BoJ failed to buy all the bonds they desired. Whether this is investors unwilling to sell (preferring the safe haven than stocks or eu bonds) or that BoJ has soaked up too much of the market (that dealers now call "dead") is unclear. Japanese stocks - led by banks - are sliding as bond-demand sends 5Y yields (13bps) to 18-month lows.
"We have a worst-case scenario, and you don't even want to know," warns Alessandro Vespignani, a researcher creating simulations of infectious disease outbreaks, but there could be as many as two dozen people in the U.S. infected with Ebola by the end of the month. The projections only run through October because it’s too difficult to model what will occur if the pace of the outbreak changes but, as Bloomberg reports, Vespignani warns if the outbreak becomes more widespread in other regions, it "would be like a bad science fiction movie."
“The Census Bureau estimates that 30 percent of all apartments in the quadrant from 49th to 70th Streets between Fifth and Park are vacant at least ten months a year.” There is absolutely nothing healthy about this reality. When such a high percentage of properties are built solely to serve as bank accounts, and not a space to live in, you’ve got a severe case of malinvestment on your hands. If you are an oligarch and you didn’t see this coming, we don’t know what to tell you. The pied-à-terre tax is now on the agenda in New York City.
Apparently under pressure from some members of Japan's parliament (who are likely being screamed at by the firms and people that bought and voted for them) as they question the possibility of JPY dropping to 170 per USD, BoJ Chief Haruhiko Kuroda proclaimed yesterday that "monetary policy can prevent hyperinflation," but don't worry because he "doesn't think Japan will experience hyperinflation." Well that's a relief because all his other predictions about how well Abenomics would work have been utter failures. Perhaps Kuroda should listen to ex-BoJ chief economist Hideo Hakayawa who stunningly suggested, The BOJ should start paring its unprecedented easing soon or risk hurting people, "it’s important to quit while you’re ahead."