Update: in direct flashback from the summer of 2011 when the ECB leaked news only to retract it within minutes, this just happened: CONSTANCIO: DOESN'T KNOW ABOUT 1 TLN-EURO QE MODEL REPORT
When in desperate need to crush your currency (being bought hand over fist by the Chinese), so urgently need to boost German exports, since you are unable to actually do QE as per your charter, what do you do if you are Mario Draghi? Well, you leak, leak, leak that you are contemplating QE, and then you leak some more. Such as today.
- ECB HAS MODELED BOND PURCHASES UP TO 1 TLN EUROS, FAZ SAYS
- ECB TESTS SHOW INFLATION COULD BE BOOSTED 0.2% TO 0.8%: FAZ
Like US inflation soared on the $1 trillion QEternity? Can't wait. In other news, expect zero reaction from gold on this latest news that another $1.4 trillion in fiat is about to flood the market. If only inbetween Mario Draghi's jaw bones.
The most common pushback from any China bull, industrial commodity bull, US equity market bull, or in fact any risk market in general "bull" is "won't the authorities just pull the trigger? Won't they just stimulate?" As UBS Commodities group notes, the debate is most advanced for China and for industrial commodities, where the weakness in the economy, and the sharp commodity price falls of recent weeks, has consensus looking for a stimulus driven bounce. UBS does not think so - the authorities in China and the US have become increasingly focused on structural issues - which, simply put, means they are less willing to act than before. It appears last night's mini (railway-focused) stimulus supports the expectations of no "bazooka".
So, they might be on the opposite side of the Atlantic Ocean, but the Europeans and the Americans have one thing very much in common.
America is being run by an unelected gang of essentially self-perpetuating PhDs. The notion of an economics coup d’ etat is not so far-fetched. So the last 35 years have brought the greatest exercise in mission creep ever undertaken by an agency of the state. That explains why the monetary politburo persists in its absurd quest to force more debt into an economy which is already saturated with $59 trillion of the same. To pretend, as does Yellen and most of the monetary politburo that they must plow ahead printing money at lunatic rates because Congress so mandated it, is the height of mendacity. The Fed has seized power and is not about to let go - common sense be damned, and the constitution, too.
One of the evils of massive over-financialization is that it enables Wall Street to scalp vast “rents” from the Main Street economy. These zero sum extractions not only bloat the paper wealth of the 1% but also fund a parasitic bubble finance infrastructure that would largely not exist in a world of free market finance and honest money. The infrastructure of bubble finance can be likened to the illegal drug cartels. In that dystopic world, the immense revenue “surplus” from the 1000-fold elevation of drug prices owing to government enforced scarcity finances a giant but uneconomic apparatus of sourcing, transportation, wholesaling, distribution, corruption, coercion, murder and mayhem that would not even exist in a free market. The latter would only need LTL trucking lines and $900 vending machines. In this context, the sprawling empire known as Bloomberg LP is the Juarez Cartel of bubble finance.
This is no plain modern event with civil unrest erupting because of an interconnected world. These are grassroots uprisings cross-fertilized perhaps from a world contagion yet they often have similarities – corrupt governments. Turkey, Ukraine, Thailand, Venezuela and Bosnia-Herzegovina are all middle-income democracies with elected leaders besieged by people angry at misgovernment, corruption and economic sclerosis. These days it is no longer just dictators who have something to fear from the crowd. This is the promise of Marxism that centralized planning and false promises are coming home and governments are too corrupt and incompetent to deliver what they have claimed for decades.
Back in October, when European inflation shocked market observers after it tumbled to a then (revised)low of 0.7%, the reaction by the ECB was to shock everyone and lower rates by 25 bps - a completely unexpected move. Earlier today, Europe shocked everyone once again after it reported that annual Eurozone consumer inflation in March tumbled from 0.7% to a paltry 0.5%, the lowest level since November 2009, below already the depressingly low 0.6% forecast, driven primarily by energy costs which tumbled 2.1% courtesy of Japan continuing to export deflation (where are energy costs soaring? Look at the price of natgas in Japan for a hint).
U.S. stocks are like a duck, floating on a quiet pond – calm above the surface, but lots of furious churning invisible to the naked eye. The S&P 500 looks like it will end the first quarter within a hair of the 1848 level where it started the year, but that doesn’t mean everything else is all stasis and light. Today we offer up a quick ‘Top 10’ list of surprises from the last 90 days. Gold, for example, is back from the grave, up 7.3%. So is an imperial Russia, with the biggest land grab since the building of the Berlin Wall. Mutual fund flows are ahead of exchange traded funds by a factor of 5:1. And most of those ETF inflows are into bond funds, not the “Great Rotation” we all expected into stocks. The 10-year U.S. Treasury yields all of 2.67%, and bonds have bested U.S. stocks consistently in 2014. First quarter 2014 may not have been a long trip, but it certainly has been strange.
If there is one thing that unites trade unionists, Keynesian Cargo Cultists, free-market fans and believers in American exceptionalism, it's a misty-eyed nostalgia for the Golden Era of the 1950s and 60s, when one wage-earner earned enough to buy all the goodies of a middle-class lifestyle because everything was cheap. Food was cheap, land was cheap, houses were cheap, college was cheap and most importantly, oil was cheap. The nostalgic punditry quite naturally think of this full-employment golden age of their youth as the default setting, i.e. the economy of the 1950s/60s was "normal." But it wasn't normal--it was a one-off anomaly, never to be repeated.
Presented with little comment aside to ask... sustainable? Every string will be pulled today to ensure that the S&P 500 closes in the green for Q1, this is just the beginning salvo...
SSDD... the overnight ramps are getting weaker and the morning monkey-hammerings of precious metals are not as aggressive but once again, for the benefit of those playing at home, USDJPY is surging in an attempt to drag stocks healthily green and prove that everything is fixed and gold is being dumped to also prove that the status quo rules and barbarous relics are a thing of the risk-strewn past.
- Crimea Resolution Backed by U.S. Barely Gets UN Majority (BBG)
- Russian Buildup Stokes Worries (WSJ)
- As reported here first: China’s Developers Face Shakeout as Easy Money Ends (BBG)
- U.S. House Poised to Clear Sanctions Called Putin Warning (BBG)
- Bitcoin Prices Plunge on Report PBOC Orders Accounts Shut (BBG)
- Search for lost Malaysian jet shifts significantly after new lead (Reuters)
- Russian fund taps China and Middle East (FT)
- Long battle looms between U.S. college, athletes seeking to unionize (Reuters)
- Official warns EU-US trade deal at risk over investor cases (FT)
- New iPhone likely out in September, Nikkei daily says (AFP)
By this point, one has to be impressed at the resilience with which algos repeat the same pattern over and over again, hoping for a different outcome. It is now the 6th day in a row that the JPY-carry trade (be it USDJPY, EURJPY or AUDJPY) driven levitation has pushed equity futures smartly up in overnight trading. And by all accounts - in the absence of ugly macro news which in today's sparse data line up (just Personal Income and Spending and UMich consumer condfidence) - the same post early highs fade we have seen every day in the past week will repeat again. The overnight euphoria was driven primarily by Europe where Bloomberg reported 2 Year Spanish yields have traded below those of the UK for the first time since 2009. And since it is obviously not the strong fundamentals, what is continuing to happen, as has been the case since October 2013, is everyone is pricing in the ECB's QE, which even Weidmann is openly talkin about now, which simply means it will most likely never actually happen, certainly not until it is too late.
$20 billion yesterday for a "virtual" reality corporation... but it gets better, as Property Guru reports, Singapore-based game developer Planet Arkadia is offering investments in what is believed to be the world’s first million dollar virtual property. It offers the 'investor' a chance to participate (by spending real money) in the "vibrantly growing economy of Planet Arkadia" - which we note is entirely virtual. Top, much?