International Monetary Fund
While there may be some confusion about why massive bond buying greeted yesterday's "better than expected" loss of 209 jobs in the 25-54 age group, dragging stocks down, the answer is actually very simple: there is a war in the Ukraine.
A day after over 40 anti-government protesters died brutally in Ukraine's Black Sea town of Odessa, and Kiev resumed its "anti-terrorist" military offensive in Slavyansk and Krematorsk in what now even Ukraine officials admit is essentially a civil war, Ukraine has escalate its operation against pro-autonomy activists in the city of Mariupol, southeastern Ukraine, as well as the town of Konstantinovka, according to local self-defense activists. But for now, perhaps the most dramatic footage of the night, is this clip from Mariupol, where a branch office of PrivatBank has just burned down to the ground. At this point US bankers are slaying various animals to their assorted idols hoping nobody in the US is watching this clip and getting any ideas.
When one thinks of Switzerland, banking comes to mind easily but gold doesn’t as much. But, "it is said that the Swiss only love money... this is not true. They also love gold." A full two-thirds of the world’s gold goes through Switzerland and, in an average year, it refines grossly 70% of the world’s gold. Six of the gold refiners on the LBMA Good Delivery list make for 90% of global volume, and four of those are in Switzerland. Up until 1992, the Swiss franc’s 40% backing by gold was written in the country’s Constitution. When Switzerland became a member of the IMF it had to abandon this backing by gold. Today, Swiss citizens have asked for a referendum to be called in order to get back to that backing. As Gilles Labarthe wrote, "Switzerland is for gold what Bordeaux is to wine."
Oil prices have increased recently as tension in Ukraine has escalated and raised concerns about the risks of disruption in Russian energy exports. There is a risk that the security situation in the east Ukraine will worsen even further ahead of the 25 May elections. As Nordea notes, Russia is as important an oil exporter to Europe (of both crude and refined products) as it is a gas exporter, and the consequences of a cut in Russian oil supplies could be as grave since the global oil market has little back-up capacity to lean on. As a result, a halt in the oil deliveries from Russia to Europe will spark a sharp spike in oil prices (potentially to $150/bbl) and in a worst case scenario an oil crisis and European recession (and major slowdown in global growth) and US shale oil or an SPR release will prevent the spike.
Italy’s central bank, the Banca d’Italia, has recently published an important document detailing the storage locations and composition of the country’s gold reserves. The document confirms that Italy’s gold is held across four vault locations, three of which are outside Italy. This is a significant announcement given that the Banca d’Italia is the world’s third largest official holder of gold after the U.S. and Germany. Italy officially holds 2,451.8 tonnes of gold, worth more than €72 billion (US$ 100 billion) at current market prices. In the detailed three page report focusing exclusively on its gold reserves (and only published in Italian), the Banca d’Italia reveals that 1,199.4 tonnes, or nearly half the total, is held in the Bank’s own vaults under its Palazzo Koch headquarters on Via Nazionale in Rome, while most of the other half is stored in the Federal Reserve Bank gold vault in New York. The report also states that smaller amounts are stored at the Bank of England in London, and at the vaults of the Swiss National Bank in Bern, Switzerland.
Another day where the taken for granted overnight futures levitation is missing (despite a rather rampy USDJPY), indicates that algos are likely waiting for guidance from today's NFP data (buy if beat, buy more if miss) before committing monopoly money. The consensus for today's NFP is 218K, (up from 192K), although as Goldman notes the whisper number is as high as 240K. As DB says, the honest truth is that markets are in one giant holding pattern at the moment with volatility and conviction low. One evidence of this is the AAII weekly sentiment indicator which shows the % bullish, bearish or neutral on the US stock market for the next six months. This week the neutral indicator (40.78) is at its highest level for 9 years. No wonder volumes and volatility are low if investors are lacking a directional bias. Yesterday’s reaction to the ISM manufacturing was interesting. Though the headline number came in firmer than expected (54.9 vs 54.3 expected) and more than 1pt higher than last month’s reading of 53.7, the UST and equity reaction suggested that the data had actually surprised to the downside.
After a few days of extended verbal foreplay, it was only a matter of time before Ukraine finally snapped and resumed a military operation to regain the lost cities in the east, especially once the warmongering IMF made it explicitly clear that should Ukraine lose control of pro-Russian controlled cities the $17 billion bailout package would be lost too. Sure enough, early this morning Kiev launched a military operation to regain control of the pro-Russian separatist stronghold of Slovyansk, overrunning numerous roadblocks and surrounding the city, officials said, but meeting stiff resistance from militants who managed to shoot down at least one helicopter.
The still-dominant consensus view that America’s economy is poised to single-handedly yank the world out of its lethargy is likely to be disappointed once again with the odds high that our economy will remain burdened by growth-inhibiting monetary policies. In addition, it will continue to be negatively impacted by various other impediments, including a populace that is increasingly under-employed, an unwieldy and inscrutable tax code, a Rube Goldberg-like healthcare system, an increasingly ossified infrastructure, and a regulatory apparatus that congests the lungs of our economy, small businesses... weaning the stock market off of casino capitalism promises to be anything but pain-free. But did any responsible adult really believe there would be no pay-back for all these years of the Fed’s force-fed gains? If you do, you probably also believe foie gras grows on trees.
Days after acting Defense Minister Mykhailo Koval warned "the Armed Forces are not ready for this," Ukraine has announced the return of military conscription. After Mr Turchynov admitted his security forces were 'helpless' to quash the pro-Moscow insurgency that has tightened its grip on the increasingly chaotic east of the country, Koval believes "if there were conscripts in military units, then the situation might be different." Of course, this is exactly what the IMF 'demanded' as yet more cities in the East fall to pro-Russian separatists. We can only imagine how pro-Russian 20-23 year old men will feel when they get their call-up papers to fight... against themselves.
Fascism has been a term applied to the manner of organizing a society in which a government ruled by a dictator/bureaucracy that is unelected or a republic with pretend “lifetime” politicians, controls the lives of the people and in which people are not allowed to disagree with the government. Such systems have always placed the “good” of the state before the worth of an individual. Government has abused its power and looks upon the people as a herd of unwashed wild animals for them to drive in whatever direction they desire for their own self-interest. They retain that power by preaching to the ignorant that they are never the problem, it is always the “rich” who refuse to turnover everything they own so politicians can live high and mighty. This is why Thomas Jefferson, Madison, Adams, Washington, and Franklin, just to mention a few, forbid direct taxation. They experienced that the power to directly tax the people destroys the liberty of the people for once a direct tax is imposed, you must account for whatever you do, earn, and have. The future of the present and younger generations is being systemically wiped out and therein we will discover the seeds of revolution.
IMF approved the $17bn tranched loan to Ukraine last night, Gazprom gets paid; Ukraine gets its cash; and the door's wide open for the US and EU to pour more 'controlling influence' into the divided nation... Except there's one thing:
- IF UKRAINE GOVERNMENT LOSES EFFECTIVE CONTROL OVER EAST OF COUNTRY, $17 BLN IMF BAILOUT WOULD NEED TO BE REDESIGNED
Which, roughly translated, appears to mean go to war with pro-Russian forces (and thus Russia itself if Putin sees his apparent countrymen in trouble) or you don't get your money!
Since the entire developed world is insolvent (don't believe us, believe Paul Singer), it was only a matter of time before this percolating English idea moved across the big pond: this we warned about also when we said that "if anyone is still confused, the IMF-proposed "mansion tax" is most certainly coming to the US, and every other insolvent "developed world" nation, next." Today we learn that we were right about this too. The Post reports that "After his failed attempt to hike income taxes on the wealthy, Mayor de Blasio is eyeing another way to squeeze money from millionaires to fund another top priority: affordable housing. Multiple sources tell The Post that the mayor is talking to people about how to increase the so-called “mansion tax” on homes selling for $1 million or more to help offset the cost of adding 200,000 affordable-housing units."
It is May Day, which means half the world - the half where welfare contributions to one's standard of living are off the charts - celebrate labor, or rather the lack thereof, by taking a day off. Which means virtually all of Europe is closed, as are Eurex and Euronext futures, and most European markets expect the UK. In light of the non-existent volume, futures are relatively unchanged despite the latest Chinese Mfg PMI disappointment (50.4, below the 50.5, expected but just above the prior print of 50.3), and of course yesterday's US GDP debacle which helped push the DJIA to a record high. The good news is that with volume even more miserable than usual, the few momentum ignition algos that are operating will have a field day with the now standard low-volume levitation that happens like clockwork if the news is bad, and also happens just in case if the news is bad.
Challenging a Sacred Cow of Banking Dogma
This is an impressive, comprehensive analysis of the February 2014 Ukraine coup from the perspective of a senior Russian academic. It details the interests and affiliations of the main Ukrainian domestic players - oligarchical clans many of whose leaders have dual nationality - with some shocking and little known detail. It exposes the glaring hypocrisies and double standards of the western sponsors of the coup and their Russian/Ukrainian '5th Column traitors'. It sees the coup and Russia's successful incorporation of Crimea as major game-changing events in the on-going, US-lead post-WWII machinations of the West to subdue Russia to its own agenda and outlines how Russia should now respond. All-in-all a must-read for westerners needing to understand what is really happening in both the Ukraine and the wider Anglo-US-NATO globalisation drive which it brings into sharp focus