The January statement had only modest changes so reading the tealeaves of the FOMC Minutes 'should' provide little additional color with the main focus on the meaning of 'patient', fears over 'international developments', the 'right' gauge of inflation, and pace of rate lift-off...
- *MANY FED OFFICIALS INCLINED TO STAY AT ZERO LONGER: MINUTES
- *MANY OFFICIALS FELT DROPPING `PATIENT' MAY LEAD TO DATE FOCUS
- *MANY FED OFFICIALS SAW RISKS IF FOREIGN WEAKNESS WORSENED
- *FED OFFICIALS AGREED POLICY SHOULD STAY DATA DEPENDENT
It appears The Fed is 'worried' again... lower for longerer. Pre-FOMC Minutes: S&P Futs 2091.25, 10Y 2.122%, Gold $1201.50, WTI $52.05
All Out War Pt 3: Contrary to Central Bank Rhetoric, the Danish Krone Peg's as Fragile As Glass, May Throw Banks Into Turmoil!Submitted by Reggie Middleton on 02/11/2015 09:22 -0400
Exactly as I warned 3 wks ago, Nordic countries are facing pressure. Here's strong evidence of a krone break, havoc to ensue in global banks, how to monetize when skittish brokers pull access & leverage.
So far it has been largely a repeat of the previous overnight session, where absent significant macro drivers, the attention again remains focused both on China, which reported some truly ugly inflation (with 0.8% Y/Y CPI the lowest since Lehman, just call it deflation net of the "goalseeking") data (which as usually is "good for stocks" pushing the SHCOMP 1.5% higher as it means even more easing), and on Greece, which has not made any major headlines in the past 24 hours as patience on both sides is growing thin ahead of the final "bluff" showdown between Greece and the Eurozone is imminent. The question as usual is who will have just a fraction more leverage in the final assessment - Greece has made its ask known, and it comes in the form of 10 billion euros in short-term "bridge" financing consisting of €8 billion increase in Bills issuance and €1.9 billion in ECB profits, as it tries to stave off a funding crunch, a proposal which will be presented on the Wednesday meeting of euro area finance ministers in Brussels. The question remains what Europe's countrbid, if any, will be. For the answer: stay tuned in 24 hours.
- Greek Risk Draws Global Concern on Lehman Echo Warnings (BBG)
- Merkel to urge caution in U.S. as pressure builds to arm Ukraine forces (Reuters)
- West Races to Defuse Ukraine Crisis (WSJ)
- German-French Push Yields Ukraine Summit Plan With Putin (BBG)
- Swiss Leaks lifts the veil on a secretive banking system (ICIJ)
- Italy Lenders Seen Cleansing Books Amid Bad-Bank Plans (BBG)
- G-20 Finance Chiefs Face Tough Test in Istanbul (WSJ)
- Demand for OPEC Crude Will Rise This Year, Says Group (WSJ)... or rather prays
- U.S. Banks Say Soaring Dollar Puts Them at Disadvantage (WSJ)
In the absence of any notable developments overnight, the market remains focused on the rapidly moving situation in Greece, which as detailed over the weekend, responded to Europe's Friday ultimatum very vocally and belligerently, crushing any speculation that Syriza would back down or compromise, and with just days left until the emergency Eurogroup meeting in three days, whispers that a Grexit is imminent grow louder. The only outstanding item is what happens to the EUR and to risk assets: do they rise when the Eurozone kicks out its weakest member, or will they tumble as UBS suggested this morning when it said that "the escalation of tensions between the Greek government and its creditors is so far being shrugged off by investors, an attitude which is overly simplistic and ignores the risk of market dislocations" while Morgan Stanley adds that a Grexit would likely lead to the EURUSD sliding near its all time lows of about 0.90.
It took a while, but three months after we wrote "How The Petrodollar Quietly Died, And Nobody Noticed", someone finally noticed.
The End Of Guitar Center (And An Irrational Addiction To Growth & The Scourge Of Unregulated Structured Finance)Submitted by Tyler Durden on 02/05/2015 21:15 -0400
The fact is, the die is cast. In a couple of weeks, Guitar Center will need to report its Christmas performance to its bondholders. If things do not look good, its bonds will be ripped apart like RadioShack’s. Here’s what this really means: it’s the end of big box retail, an irrational addiction to growth, and the scourge of unregulated structured finance. For a few years, unwise urban planning and unregulated banks created a new bubble in the American suburbs. The objective truth is that the growth of the last decade was financed by banking fraud, and that financial trickery of this sort only fools people in the short-term. Eventually, you must have a product people demand, sold by competent people who care about the business, financed in a way that makes sense.
The world believes it is in a sweet spot. There is global consensus that central banks know what they are doing and are in control, and that if economies falter, a bigger dose of QE or ZIRP or NIRP (negative interest rate policy – we just made that one up) will keep it from getting out of hand. Additionally, there seems to be a universally held belief that the U.S. is unquestionably the safe haven for the foreseeable future, that its financial crisis and long recession are behind it and that China has complete control over its own destiny. It may not surprise you to learn that we either disagree with or remain unconvinced about every one of the foregoing propositions.
Switzerland`s 10-Year Bond Yield is now negative 15 basis points. Yes even neutral Switzerland`s bond market has been broken...
Two weeks ago we reported that "the next victim of crashing oil prices has been identified: housing", particularly non-residential construction among the energy producing regions, where the capex collapse reality is already being felt far and wide. Eventually, once the overall economy of these same oil producing regions is impacted sufficiently, the pain would spread to residential housing as well, as the energy boom that kept the local economies humming for years, turns to a bust. But while the US patiently, and nervously, awaits the outcome of the crude crash, one place is already starting to suffer the consequences of the price collapse is Canada's energy Mecca, Calgary, where as the Financial Post reports, "the stage has been set for a massive correction in the oilpatch."
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.
Market Wrap: Chinese Stocks Crash As Financials Suffer Record Drop; Commodities Resume Decline; US ClosedSubmitted by Tyler Durden on 01/19/2015 08:12 -0400
Following last week's Swiss stock market massacre as a result of a central bank shocker, and last night's crack down by Chinese authorities, it almost appears as if the global powers are doing what they can to orchestrated a smooth, painless (as much as possible) bubble deflation. If so, what Draghi reveals in a few days may truly come as a surprise to all those- pretty much everyone - who anticipate a €500 billion QE announcement on Thursday.
So far today has been a replica of yesterday, with the crude rout continuing and pushing WTI under $45, but largely ignored by the FX carry pairs, and thus equity futures, which have seen some positive momentum from overnight trade data out of China where exports jumped 9.7% beating the 6% expectation, while imports fell 2.4% compared to a projected 6.2% decline as the trade surplus narrowed from November’s record $54.4 billion. For the full year, however, Chinese trade grew at just 3.4%, missing the government’s target of 7.5% growth for the third year in a row as the government quick to blame the slowing global economy. In any event, the USDJPY is well off the overnight lows which means the EuroStoxx is up some 0.8% which, just like yesterday, the E-mini is up some 9 points and rising. It remains to be seen if, just like yesterday, US equities will crash at a precipitous pace after the open, once algos realize that nothing at all has changed.
If you, like the BIS, are sick and tired of central bankers, and in this case the ECB's endless jawboning and now daily QE threats, determining the level of stocks, well then today is a good day as any to take your blood pressure medication. Because first it was ECB Governing Council member Ignazio Visco who told German newspaper Welt am Sonntag that the risk of deflation in the euro zone should not be underestimated and urged the bank to buy government debt, and then, yet another regurgitated story, came from CNBC whose "sources" reported that the ECB QE would be based on contributions from national central banks and paid in capital. And while otherwise the cross-correlation trades would have at least pushed the crude complex modestly higher, today it was Goldman's energy analyst Jeffrey Currie finally throwing up all over oil, with a report in which he said that "because shale can rebound quickly once capital investments return, we now believe WTI needs to trade near $40/bbl for most of 1H15 to keep capital sidelined."