Australia

• Saudi Arabia’s New King Probably Will Not Change Current Oil Policy (BBG)
• Saudi King’s Death Clouds Already Tense Relationship With U.S. (WSJ)
• Oil Pares Gains as New Saudi King Says Policies Stable (BBG)
• Kuroda Says BOJ to Mull Fresh Options in Case of More Easing (BBG)
• U.S. pulls more staff from Yemen embassy amid deepening crisis (Reuters)
• Putin Said to Shrink Inner Circle as Hawks Beat Billionaires (BBG)
• A Few Savvy Investors Had Swiss Central Bank Figured Out (WSJ)

With less than two hours until the ECB unveils its first official quantitative easing program, the markets appear to be in a unchanged daze. Well, not all markets: the Japanese bond market overnight suffered its worst sell off in months on a jump in volume, although for context this means the 10Year dropping from 0.25% to 0.32%. Whether this is a hint of the "sell the news" that may follow Draghi's announcement is unclear, although Europe has seen comparable weakness across its bond space as well and the US 10 Year has sold off all the way to 1.91%, which is impressive considering it was trading under 1.80% just a few days ago. Stocks for now are largely unchanged with futures barely budging and tracking the USDJPY which after rising above 118 again overnight, has seen active selling ever since the close of the Japanese session.

Curency wars are zero-sum.  Interest rate race is not. 

Laugh if you want to.  Cry if you want to, but the bull market for the US dollar has legs and life. 

• Obama Targets Income Gap in Address That Shapes 2016 Election (BBG)
• Republicans Reject Obama’s Main Economic Proposals (WSJ)
• Senate’s Shelby Says White House Bank Tax Is Dead on Arrival (BBG)
• Is Dollar Next? Investors Reassess After Swiss Shock: Currencies (BBG)
• Bank of Japan Cuts Price Forecast, Maintains Record Stimulus (BBG)
• Pound Weakens After BOE Policy Makers Drop Call to Raise Rates (BBG)
• Putin not flinching on Ukraine despite economic crisis (Reuters)
• Indonesia will not make public full preliminary AirAsia crash report (Reuters)
• Party Hasn't Stopped for Russians at Davos Even With Ukraine Sanctions (BBG)

• Obama to focus on middle class in State of Union address (Reuters) - all 4 of them?
• European Stocks Buoyed by ECB Hopes (WSJ)
• China's 2014 economic growth misses target, hits 24-year low (Reuters)
• Federer on Swiss Franc Shock: "Does It Mean I've Got to Win Now?" (BBG)
• First-time buyers help Christie’s reach record sales (FT)
• So it was the NSA? U.S. Spies Tapped North Korean Computers Prior to Sony Hack (BBG)
• Why Chinese Developer Kaisa's Default Risk Has Money Managers Spooked (BBG)
• Morgan Stanley Misses Estimates on Drop in Bond-Trading Revenue (BBG)

One day after the SNB stunner roiled markets, overnight global markets have seen - as expected - substanial downward pressure, with the Swiss market slide resuming post open, while European stocks have seen some pressure despite what is now an assured ECB QE announcement next week. However, the one trade that can not be mistaken is the global rush into the safety of government paper, with every single treasury yielding less today than yesterday (the Swiss 10Y was trading below 0% at last check), except for Greek 10Y which are wider on deposit run fears. That said, with capital market liquidity absolutely non-existent even the smallest trade has a disproportionate effect on futures, and expect to see much more rangebound trading until the damage report from the SNB action is fully digested, something which will take place over the weekend.

At the very least, the ‘great recession’ seems likely to continue. A serious recession or depression will likely collapse the already fragile banking system, especially in Europe, and the savings of ordinary people and companies will become exposed to bail-ins.

When an accounting 'fudge' accounts for $300 billion of a nation's Balance of Payments, you might suspect something is amiss. And sure enough, as Goldman notes, the growing 'error and emission' items in China’s balance of payments may reflect a pickup in hidden cash transfers as China's anti-corruption probes encouraged  the corrupt oligarchs to get their money out of dodge. As Goldman warns, "such outflows may be harder to contain with regulations, a continuation of their recent acceleration could start posing tangible financial stability concerns."

"The biggest bubble out there is central bank credibility. If Draghi was a stock he'd be on a P/E of 200! Yellen's on 100. When that bubble pops, all hell will break loose again, and there you really just want to be in cash."

• Earnings Pessimism Jumps as Oil Threatens S&P 500 Growth (BBG)
• It’s Amateur Hour in the Booming Chinese Stock Market (BBG)
• France mobilizes 10,000 troops at home after Paris shootings (Reuters)
• European Stocks Gain With S&P 500 Futures While Oil Drops (BBG)
• Nasdaq Looks to Operate Dark Pools for Banks (WSJ)
• This Guy Called Bonds in ’14. You Listening This Time? (BBG)
• Paris attacks boost support for Dutch anti-Islam populist Wilders (Reuters)
• OPEC price war in Asia intensifies as oil falls below $50 (Reuters)

People are becoming more critical of our current monetary system. In the past six years, central banks have promised us growth within six months’ time. They and the whole monetary and financial system have lost credibility. The banks’ profit to GDP is the highest in history in an economic environment where we have the highest amount of unemployment since WWII. There is something very wrong with the way the system works and this is all due to the overemphasis on trying to minimize the business cycle. The real conclusion of QE can only become visible if we experience the full business cycle. In Jakobsen's view, we have never been allowed to have a down cycle since 2008. But now, there is finally going to be a down cycle because central planners can’t print more money. As Jakobsen puts it: “Now is the time for the real economy to take over”.

"This is why Putin is Public Enemy Number 1. It’s because he’s blocking the US pivot to Asia, strengthening anti-Washington coalitions, sabotaging US foreign policy objectives in the Middle East, creating institutions that rival the IMF and World Bank, transacting massive energy deals with critical US allies, increasing membership in an integrated, single-market Eurasian Economic Union, and attacking the structural foundation upon which the entire US empire rests, the dollar." Up to now, of course, Russia, Iran and Venezuela have taken the biggest hit from low oil prices; but what the Obama administration should be worried about is the second-order effects that will eventually show up...

• Global Debt Crisis II – Total Global Debt to GDP Ratio Over 300% - Risk of Bail-Ins in 2015 and Beyond - Currency and Gold Wars - $1 Quadrillion “Weapons of Mass Destruction” Derivatives - Cold War II and New World Order as China and Russia Flex Geopolitical Muscles - Enter The Dragon – Paradigm Shift of China Gold Demand - Forecast 2015: None. Forecast 2020: Gold $2,500/oz and Silver $150/oz

The oil industry is facing rising debt from collapsing oil prices, but there could be another sector that becomes a casualty of the low oil price environment: liquefied natural gas (LNG).