"...the American scheme of world domination through military aggression and unlimited money-printing is failing before our eyes. The public has no interest in any more “boots on the ground,” bombing campaigns do nothing to reign in militants that Americans themselves helped organize and equip, dollar hegemony is slipping away with each passing day, and the Federal Reserve is fresh out of magic bullets and faces a choice between crashing the stock market and crashing the bond market. In order to stop, or at least forestall this downward slide into financial/economic/political oblivion, the US must move quickly to undermine every competing economy in the world through whatever means it has left at its disposal, be it a bombing campaign, a revolution or a pandemic..."
Spot the odd one out: Short-end Treasuries flat, JPY carry risk-off, IBM/KO/MCD dumped, HY Credit weak... Stocks best day in a year!
Summing it all up: Volumeless buying panic on ECB buying rumors!
Extend the trendlines in these charts, and then ask yourself: where do they end? What will they trigger as they push ever deeper into uncharted waters?
It is unclear what the catalyst is - aside from the bounce back from The FT's rejection of Reuters rumor-spreading about ECB corporate bond buying but instead of the usual morning smackdown, precious metals are spiking higher. Gold hit $1255 - its highest in over 5 weeks). Oil is also spiking higher, WTI just broke above $83 (so much for that consumer tax cut?).
For now its unclear what is driving this BUT we do note that Saudi's Riyal has tumbled notably away from its peg in recent days... weakest sicne Jan 2009
FT Rejects Reuters Unsourced Trial Balloon About ECB Buying Corporate Bonds, Futures Refuse To PlungeSubmitted by Tyler Durden on 10/21/2014 08:08 -0400
Precisely half an hour ago, we mocked the overnight Reuters trial balloon about ECB corporate bond buying, whose only purpose was to send futures higher, when not only did we question the credibility of the report based on "one person familiar with the work inside the ECB, speaking on condition of anonymity" and said that now "we await Germany to throw up all over what is a clear Reuters trial balloon floated by "one person familiar with the work inside the ECB, speaking on condition of anonymity" to see what the market reaction is to even more stimulus (as if it is unclear)." Well, it wasn't Germany. At least not yet. It was Reuters' competitor in the coverage of ECB rumors and innuendo, the FT, which moments ago blasted this, via Bloomberg:
- ECB SAID NOT TO HAVE PUT CORPORATE BOND BUYING ON AGENDA: FT
So just in case anyone forgot how credible the Reuters rumor mill is when bailing out European risk (think summer of 2011 and 2012), here is a stark reminder.
As commented previously, the reason for today's 30 point rip in emini futures from the lows hit just 4 hours ago, was a test of the ECB emergency BTFD service, today provided courtesy of Reuters which, just after the European close, gave what is ever more incorrectly called the "market" its dose of upward momentum ignition, when it reported that, in addition to the previously announced "private QE" which includes ABS and covered bond purchases, that Goldman's head of the European central bank would also go ahead and monetize corporate bonds, taking a step even further than the Fed, which at least is confined to public securities, and directly influencing private asset prices.
- Total CEO de Margerie killed in Moscow as jet hits snow plough (Reuters)
- China GDP Growth Rate Is Slowest in Five Years (WSJ)
- Oil at $80 a Barrel Muffles Forecasts for U.S. Shale Boom (BBG)
- Carney Faces Scrutiny on Worst Payments Outage Since 2007 (BBG)
- Ebola crisis turns a corner as U.S. issues new treatment protocols (Reuters)
- Gold Buying Rebounds in India on Diwali Jewelry Sales (BBG)
- China-backed hackers may have infiltrated Apple's iCloud (Reuters)
- Greece Said to Seek Recycling of Bank Funds for Exit (BBG)
yes, I know it feels soooo good. Hint: China is the dealer
The problem for a city like Houston (or many others like it), with deep ties to the production and oil, is a "shock" from a supply/demand reversion could bring the economic "boom" quickly to an end. We are certainly not saying that the "wheels are about to come off of the cart." However, we do suggest that there is a potential for a very negative shock in the energy space given the extreme complacency that current exists. History suggests that true "miracles" are few and far between as most tend to just "illusions of hope."
Confused why one second the market is down 1%, and then moments later, upon returning from the bathroom, one finds it up by the same amount on negligible volume? Simple: there continues to be zero liquidity. Although, not just in equities, but in bonds as well, something this website - and the TBAC and Citi's Matt King - has warned for over year. It is the lack of bond liquidity that led to last week's dramatic surge in bond prices as Bloomberg noticed overnight. So for those curious just how bad bond liquidity is now, here is JPM's Nikolaos Panigirtzoglou with the explanation:
As futures opened last night, it was all looking so bright as the 'rebound' extended and every knife-catching "in it for the long-run" manager was proved 'right'. Then Eric Rosengren pissed in the punchbowl - explaining QE will end in October "unless somethinh dramatic happens" - somewhat taunting the market to crash to ensure the Fed keeps the party going. Markets leaked lower and then came Big Blue which slammed futures lower. Oil prices are falling once again this morning, ECB's bond-buying was a disappointment, and USDJPY's fundamentals hit an air-pocket. Having retraced perfectly 50% of last week's losses, the S&P 500 is fading at the open...
Draghi, we have a problem. Just as Coeure 'promised' the ECB, according to The FT, began its bond-buying program this morning. However, peripheral sovereign bond-buying front-runners banking on the ECB greater fool to offload to are disappointed as they are go no easy money love. The initial program is covered-bond-buying (similar to US MBS, but a considerably smaller market) and the ECB will reveal how much it has bought each Monday afternoon (starting next week). Greek bonds are suffering the most with 5Y yields at cycle highs once again and prices at lows (vanquishing all of Friday's gains).
In the past few years the stock market has always recovered from corrections to make new highs, and we cannot be sure if the party is indeed over. However, both from a fundamental and technical perspective, the probability that it is over seems quite high. Should market internals and trend uniformity to the upside improve again, this assessment would obviously have to be revised. However, there are surely more than enough warning signs extant now and every financial asset bubble must end at some point.
The European status quo and EU elites are becoming increasingly concerned by popular calls in Italy for Italy to leave the European Monetary Union and the euro "as soon as possible" and return to the lira.
And the overnight futures ramp started off so promising.