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Frontrunning: January 29

  • Who Doubts Yellen's Policies? Summers for One (BBG)
  • Samsung, Apple Back in Dead Heat for Global Smartphone Dominance (WSJ)
  • Islamic State purportedly sets new deadline for hostage swap (Reuters)
  • Turkey's $7.9 Billion Mystery Money That's Simply Vanished (BBG)
  • How a Two-Tier Economy Is Reshaping the U.S. Marketplace (WSJ)
  • U.S. Prisons Grapple With Aging Population (WSJ)
  • Hasenstab Sees $3 Billion Vanish in Ukraine as One Big Bet Sours (BBG) - maybe he should BTFD, pardon, "invest" in Belarus next?
  • Belarus May Seek Debt Restructuring in 2015, President Says (BBG)


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Markets Drift Without Direction As Zombified BTFDers Unable To Frontrun Hawkish Fed

The bottom line is that unfortunately for the BTFDers, with the Fed no longer giving explicit buy signals with the "considerable time" language struck, and with an implicit economic upgrade suggesting a rate hike is still on the table, it is becoming increasingly more difficult to frontrun the Fed's "wealth creation" intentions.

 



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The New Greek Government Arrives In Its Residence: Finds No Power, No Wifi Password And No Toilet Soap

Things in Greece are bad. So bad, that the outgoing government of Antonis Samaras decided to not only leave the new inhabitants of the official residence of the Greek prime minister, the Maximos Mansion, without power, and without the WiFi password, but they decided to "borrow" all the soap in the toilet as well.



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Ron Paul On Gold & The Fed's Failed 'Utopian Dream'

Over the last 100 years the Fed has had many mandates and policy changes in its pursuit of becoming the chief central economic planner for the US. Not only has it pursued this utopian dream of planning the US economy and financing every boondoggle conceivable in the welfare/warfare state, it has become the manipulator of the premier world reserve currency. All this effort by thousands of planners in the Federal Reserve, Congress, and the bureaucracy to achieve a stable financial system and healthy economic growth has failed. It must be the case that it has all been misdirected. And just maybe a free market and a limited government philosophy are the answers for sorting it all out without the economic planners setting interest and CPI rate increases. A simpler solution to achieving a healthy economy would be to concentrate on providing a “SOUND DOLLAR” as the Founders of the country suggested.



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Teachers' Retirement Funds Are Piling Into Manhattan Real Estate At Record High Prices

Wondering who the greater fool is, wonder no longer. TIAA-CREF (Teachers Insurance and Annuity Association – College Retirement Equities Fund) essentially manages the investments of people who know the least about investing, i.e., muppets. As such, it came as no surprise that TIAA-CREF might serve as an important bag-holding vehicle for bubble assets just before a fall (when the latest Central Bank bubble pops), tempted by juicy 4% yields... in other words, teachers and nurses are shattering property records to fund their retirement.



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Norway Regulator Fears Housing Bubble "Isn't Sustainable"

Amid the collapse in crude oil prices, the Norwegian central bank cut rates in December (after 1000 days on hold) and is likely to cut again as economic growth stalls. However, the country's financial regulator is warning falling interest rates risk pushing the Norwegian housing market beyond its breaking point into a "self-augmenting spiral." With prices up 8.1% YoY, and up 85% nationwide in the last decade, even Robert Shiller warned of Norway's housing bubble in 2012 - and since then household debt (and home prices) have surged. As Bloomberg reports, Morten Baltzersen, head of Norway’s Financial Supervisory Authority stressed "continued rapid growth in debt and house prices isn’t sustainable." Unintended consequences?



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Jeff Gundlach Warns "The Fed Is About To Make A Big Mistake" (& That's Why Bond Yields Are Crashing)

Since The FOMC's "hawkish" statement, bond yields have utterly cratered as near-record speculative short positioning in bonds unwind the long-end (and worries about international problems - "and readings on financial and international developments"). However, fundamentally speaking, DoubleLine's Jeff Gundlach explains, the Federal Reserve is on the brink of making a big mistake simply put, "if Fed Chair Janet Yellen goes ahead with this plan (to raise rates for 'philosophical reasons'), she runs the risk of having to quickly reverse course and cut interest rates."



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Lies And Deception In Ukraine’s Energy Sector

The Ukrainian government has repeatedly claimed it is doing its best to improve the oil and gas investment climate, but official statements are the opposite of the reality, as Prime Minister Arseniy Yatsenyuk is leading the great deception.



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The Homebuilder Hope Trade Deja Vu

We warned recently that the most highly correlated commodity to economic data was flashing red, but today we note that Lumber and Homebuilders are diverging in a dreadfully deja-vu-ic manner (just as they did in 2005, marking the top). While the relationship is 'loose' it seldom diverges for long...



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Chinese Stocks Drop 3rd Day In A Row On Margin Crackdown As Yuan Tumbles To Record Discount Versus Fix

Chinese stocks are trading lower again (on margin crackdowns) - the first 3-day drop in 3 weeks - back into the red year-to-date. Despite weakening the fix this evening, the 'market price' for USDCNY is trading at a record 1.93% discount to the official rate - inching ever closer to the 2% peg limit. At 6.2522, the market is just 40 pips away from forcing policy makes to intervene (selling the USD and and buying Yuan) - which realistically is perhaps a positive for the Chinese to unload some USD reserves. This move comes as China’s currency overtook Canada’s dollar to rank fifth for global payments last month with a record market share of 2.17% and HSBC this evening forecast the Yuan will overtake the Japanese Yen as Asia's most-used Global FX in Q2. De-dollarization continues...



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"Monetary Policy Has Lost Any Semblance Of Discipline," Stephen Roach Slams "QE Lemmings

In the QE era, monetary policy has lost any semblance of discipline and coherence. As Draghi attempts to deliver on his nearly two-and-a-half-year-old commitment, the limits of his promise – like comparable assurances by the Fed and the BOJ – could become glaringly apparent. Like lemmings at the cliff’s edge, central banks seem steeped in denial of the risks they face.



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Crude Contagion: California's Kern County Declares Fiscal Emergency Due To Plunging Oil Price

At this point only an act of god, or a sudden Saudi change of heart to cut crude production by 50% (unclear which is more probable) can prevent a recession in Texas. However, one state that few thought would be impaired as a result of the crude plunge, is California. Yet as the LA Times reports, it is precisely California, and specifically Kern County located in the middle of the state and containing the farmer town of Bakersfield and countless oil rigs, that yesterday declared a state of fiscal emergency during the weekly supervisors' meeting on Tuesday. The reason: predictions of a massive shortfall in property tax revenues because of tanking oil prices.



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Why The U.S. Shale Boom May Come To Abrupt End

U.S tight oil production from shale plays will fall more quickly than most assume. Why? High decline rates from shale reservoirs is given. The more interesting reasons are the compounding effects of pad drilling on rig count and poorer average well performance with time.



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Another Ex-Central Planner Speaks Up: Currency War Policy "Risks Major Downward Shock To Asset Prices"

Merv "The Swerv" King - former governor of The Bank of England - has joined the ranks of those ex-central-planners-who-feel-the-need-to-protect-their-legacy-by-rewriting-history-and-admitting-the-entire-thing-is-crazy. Speaking in Tokyo overnight, King said he’s concerned that financial markets believe real interest rates will remain very low for a very long time which has created "a significant disequilibrium in the world economy," adding that he does "not believe and expect a market economy to thrive on real interest rates that are close to zero." Warning that many nations realize "they have pushed monetary policy as far as it can go," King added that with the additional risk of currency wars, "markets will discover that they have been pushing asset prices to an excessively high level and there will be a major downward shock to asset prices."



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The Surprising Consequences Of The Global Frenzy For Positive Yield

As central banks rush to depreciate their currencies and push yields into negative territory, what's becoming scarce globally is real yield in an appreciating currency.



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