Hong Kong

The Hong Kong government is so foolish that one official said: "There is a need to stimulate the city’s domestic consumption by introducing measures to leave more cash in the hands of the public." What are you talking about, man? Everyone knows that you stimulate the economy by increasing government spending, not reducing it and just leaving the people to decide what they’re going to spend it on. It’s insane.

Moments ago the number of central banks who have eased so far in 2015, most of them unexpeted, rose by one more from 15 to 16, when in addition to Singapore, Europe, Switzerland, Denmark, Canada, India, Turkey, Egypt, Romania, Peru, Albania, Uzbekistan and Pakistan, Russia and, most recently, Australia it was China's turn to do what so many banks had said was inevitable, even if meant backtracking on all its blustery talk about limiting bad debt expansion, and cut its reserve requirement ratio for bank by 0.5% effective Thursday, to boost liquidity and support the economy.

The fundamental problem with real estate is cost.  The average household, whether renters or homeowners, is allocating too much of its income to housing.  As a result, public policies are likely to continue in the direction of more subsidies, such the Federal Reserve’s manipulation of long term rates, and more regulations, such as eviction and foreclosure prevention, and rent controls.  Real estate, could become a lot less “real” in the foreseeable future. As the market has witnessed since 2007, the Government could dictate the conditions of real estate ownership, even when it was not the lender.  Today, it is in full control. 

• Germany Sees No Need to Scrap Troika in Overseeing Greek Turnaround (WSJ)
• European markets subdued as Chinese data weighs (Reuters)
• U.S. Oil Workers Strike Enters Second Day as Crude Prices Slide (BBG)
• Oil prices rally above $55 as investors pile in (Reuters)
• Obama Wants a New Tax on U.S. Companies' Overseas Profits (BBG)
• If Trading Bonds Is Hard, Think About Pain When Rates Rise (BBG)
• Julius Baer Braces for Swiss Franc Impact (WSJ)
• Coke, Budweiser win as Super Bowl ad battle gets serious (Reuters)

The sales of iPhone, which are captured in other consumer durable sales, grew on average 60%y/y since September, propelled predominately by the launch of new product. Excluding iPhones, retail sales value would have contracted almost 1%y/y in October, at the peak of the 'Occupy' movement, and expanded a more subdued 1.3%y/y during Sep-Nov 14 (see figure 1). In other words, over 60% of retail sales growth was attributable to iPhone in late 2014.

Alibaba is down over 10% this morning following a disappointing earnings release. This comes on the heels of selling pressure after the Chinese government released its report claiming significant "issues" at China's richest man's company. A combination of weak revenues, a 28% plunge in net income, slower than expected growth on its Tmall platform (and disappointment at the progress into mobile advertising) have sent the stock tumbling back near Facebook's market cap.

• 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)

"Eighty people hold the same amount of wealth as the world’s 3.6 billion poorest people, according to an analysis just released from Oxfam. The report from the global anti-poverty organization finds that since 2009, the wealth of those 80 richest has doubled in nominal terms — while the wealth of the poorest 50 percent of the world’s population has fallen." There you have it. The reason the wealth of the richest has doubled since 2009, is because “it’s not a recession, it’s a robbery.” Central bank and government policy has done this, it is no accident.

Given that Russia perceives itself to be under financial and economic attack from the West, there is the possibility that they are accumulating more gold than they are declaring officially to the IMF.

De Nederlandsche Bank, the Dutch central bank has denied reports in Reuters, Bloomberg and picked up by GoldCore, that the bank had increased its gold holdings for the first time in sixteen years. IMF data had shown that the Dutch had increased their holdings to 622.08 tonnes.

Following the deaths of 36 bankers last year, 2015 has got off to an inauspicious start with the reported suicide of Chris Van Eeghen - the 4th ABN Amro banker suicide in the last few years. As Quotenet reports, the death of Van Eghen  - the head of ABN's corporate finance and capital markets -"startled" friends and colleagues as the 42-year-old "had a great reputation" at work, came from an "illustrious family," and enjoyed national fame briefly as the boyfriend of a famous actress/model. As one colleague noted, "he was always cheerful, good mood, and apparently he had everything your heart desired. He never sat in the pit, never was down, so I was extremely surprised. I can not understand." Most believe that the suicide is not related to his work at the bank, but a former colleague had noticed that on his Facebook recently changed its job title to "former." Chris leaves behind a son - who had recently been cleared of cancer.

The US Dollar rally, combined with the ECB’s policies are at risk of blowing up a $9 trillion carry trade.

• 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)

Since its inception in 2008, easy monetary policy has created very few positive effects for the real economy — and has created considerable (and in some cases unforeseen) negative effects as well. The BIS warns of financial bubbles. While economic policymakers should take a closer look at Japan, China, and yes, the United States, when debating the limits of monetary stimulus and the dangerous nature of financial bubbles; sadly, the discussion is happening too late to be anything more than an intellectual exercise.

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.

As we detailed previously, the first USD-denominated Chinese corporate bond default last week - of developer Kaisa Group - signals considerably deeper problems in China's economy as one manager noted, "everyone is rethinking risk right now." As Bloomberg reports, Chinese companies comprised 62% of all U.S. dollar bond sales in the Asia-Pacific region ex Japan last year, issuing $244.4 billion and that huge (and illiquid) market "has been too complacent," according to one credit strategist who warned, investors would be “rational to adopt a cautious approach in view of the fact that anything can happen, anywhere, anytime. It would be irrational to continue thinking that after Kaisa none of the companies will see a similar fate."