"While we are not likely to see a repeat of that type of [30Y bond] bull market any time soon, we also do not believe we are at the beginning of a bear market for bonds."
"We are concerned by the growing downside of zero-based money and QE policies – among them a worrisome distortion in asset pricing, the misallocation of capital and ultimately a dis-incentivizing of risk taking by corporations and investors."
"We believe caution is warranted not just for fixed income investors, but for investors in all risk assets; avoiding long durations, reducing credit risk away from economically vulnerable companies and sectors"
Wednesday may be the new Tuesday (which halted its relentless and statistically impossible streak of 20 out of 20 up DJIA days last week), if only in terms of the overnight no news stock futures ramp, which today is back with a vengeance. In a session that was devoid of any news, the e-Mini is up enough to practically erase all of yesterday's losses. Whether this is due to a relatively calm Nikkei trading session, to no further surge (or collapse) in the USDJPY, or to the 10 Year trading flat inside 2.20% is unclear. What is clear is that the bipolar market swings from extreme to extreme on speculation about the largely irrelevant topic of whether the Fed will taper (because if it does, it will be very promptly followed by an untapering once risk assets around the world implode.)
- Citigroup Facing $7 Billion Currency Hit on Dollar, Peabody Says (BBG)
- World has 10 years of shale oil, reports US (FT)
- ECB prepares to defend monetary policy in German court (FT)
- European Stocks Sink to Seven-Week Low as Treasuries Fall (BBG)
- Fitch warns on risks from shadow banking in China (Reuters)
- Obama administration to drop limits on morning-after pill (Reuters)
- ACLU asks spy court to release secret rulings in response to leaks (MSNBC)
- SEC Nets Win in 'Naked Short' Case (WSJ)
- SoftBank Raises Offer for Sprint to $21.6 Billion (WSJ)
- Chinese rocket launch marks giant leap towards space station (FT)
Currency markets are anticipating the conclusion of the BOJ meeting on Tuesday. No changes are expected to the current policy scheme and asset purchase targets, but it is likely that the committee will introduce measures to try to stem JGB volatility. Based on their recent record, it is unlikely they will succeed. Later in the week, the focal point will shift to the US where the monthly Treasury statement on Wednesday and retail sales data on Thursday will shed more light on how automatic federal spending cuts are affecting the broader economy.
Emerging markets have tanked but some of the reasons for their underperformance will prove overblown, providing opportunities for long-term investors.
- Reports on surveillance of Americans fuel debate over privacy, security (Reuters)
- Apple to Yahoo Deny Providing Direct Access to Spy Agency (Bloomberg)
- Misfired 2010 email alerted IRS officials in Washington of targeting (Reuters)
- Spy vs Spy: Cyber disputes loom large as Obama meets China's Xi (Reuters)
- When NSA Calls, Companies Answer (WSJ)
- How the Robots Lost: High-Frequency Trading's Rise and Fall (BBG)
- Japan's Pension Fund to Buy More Stocks (WSJ)
- ‘Frankenstein’ CDOs twitch back to life (FT)
- China’s ‘great power’ call to the US could stir friction (FT)
- Toyota Tries on Corolla Look That’s Just Different Enough (BBG)
Not exactly a ringing endorsement of his hodgepodge of old ideas and new contradictions.
Another day, another sell off in Japan. The Nikkei index closed down 0.9%, just off its lows and less than 1% away from officially entering a bear market, but not before another vomit-inducing volatile session, which saw the high to low swing at nearly 400 points. Hopes that a USDJPY short-covering squeeze would push the Nikkei, and thus the S&P futures higher did not materialize. And while the weakness in Japan is well-known and tracked by all, what may come as a surprise is that the Chinese equities are down for the 6th consecutive session marking the longest declining run in a year. Elsewhere in macro land, the Aussie Dollar continues to get pounded on China derivative weakness, tumbling to multi-year lows of just above 94 as Druckenmiller, who called the AUDUSD short nearly a month ago at parity shows he still has it.
That concept of the Chinese Dream "came just in time" and will "benefit the world"
Technology, technology, and more technology—this is what has driven the American oil and gas boom starting in the Bakken and now being played out in the Gulf of Mexico revival, and new advances are coming online constantly. It’s enough to rival the Saudis, if the Kingdom allows it to happen. Along with this boom come both promise and fear and a fast-paced regulatory environment that still needs to find the proper balance. In an exclusive interview with Oilprice.com, Chris Faulkner, CEO of Breitling Energy Companies - a key player in Bakken with a penchant for leading the new technology charge—discusses: How Bakken has turned the US into an economic powerhouse; What the next milestone is for Three Forks; What Wall Street thinks of the key Bakken companies; Where the next Bakken could be; What to expect from the next Gulf of Mexico lease auction; What the intriguing new 4D seismic possibilities will unleash; What the linchpin new technology is for explorers; How the US can compete with Saudi Arabia; Why fossil fuel subsidies aren’t subsidies; How natural gas is the bridge to US energy independence; Why fossil fuels shouldn’t foot the bill for renewable energy; Why Keystone XL is important; Why the US WILL become a net natural gas exporter
Following April's surprising drop in crude imports which led to a multi-year low in the March trade balance (revised to -$37.1 billion), the just released April data showed an 8.5% jump in the deficit to $40.3 billion, if modestly better than the expected $41.1 billion. This was driven by a $2.2 billion increase in exports to $185.2 billion offset by a more than double sequential jump in imports by $5.4 billion, to $222.3 billion. More than all of the change was driven by a $3.2 billion increase in the goods deficit, offset by a $0.1 billion surplus in services.The Census Bureau also revised the entire historical data series, the result of which was a drop in the March deficit from $38.8 billion to $37.1 billion. In April 233,215K barrels of oil were imported, well above the 215,734K in March, and the highest since January. Furthermore, since the Q1 cumulative trade deficit has been revised from $126.9 billion to $123.7 billion, expect higher Q1 GDP revisions, offset by even more tapering of Q2 GDP tracking forecasts. And since the data is hardly as horrible as yesterday's ISM, we don't think it will be enough on its own to guarantee the 21 out of 21 Tuesday track record, so we eagerly look forward to today's POMO as the catalyst that seals the deal.
In almost every asset class, volatility has made a phoenix-like return in the last few days/weeks and while equity markets tumbled Friday into month-end, the bigger context is still up, up, and away (and down and down for bonds). From disinflationary signals to emerging market outflows and from fixed income market developments to margin, leverage, and valuations, here is the 'you are here' map for the month ahead.
Back in 2010 we started an annual series looking at the (re)distribution in the wealth of nations and social classes. What we found then (and what the media keeps rediscovering year after year to its great surprise) is that as a result of global central bank policy, the rich got richer, and the poor kept on getting poorer, even though as we predicted the global political powers would, at least superficially, seek to enforce policies that aimed to reverse this wealth redistribution from the poor to the rich (a doomed policy as the world's legislative powers are largely in the lobby pocket of the world's wealthiest who needless to say are less then willing to enact laws that reduce their wealth and leverage). Now that the topic of wealth distribution (or rather concentration) is once again in vogue, below we present the latest such update looking at a global portrait of household wealth. The bottom line: 29 million, or 0.6% of those with any actual assets under their name, own $87.4 trillion, or 39.3% of all global assets.
Here are four things that seem to be dominating the weekend discussions.
While the U.S. student loan debt “crisis” might be the primary concern associated with the youth population here, this morning's dreadful European data confirms that 15-24 year olds around the world are struggling with a more widespread and pressing issue: high unemployment. In 2012, the youth unemployment rate was 12.4%, projected to grow to 12.6% in 2013 – nearly 3 times the rate of adult unemployment, which stood at 4.5% in 2012. Developed economies, along with the Middle East and North Africa, have some of the worst youth unemployment rates in the world: the US’s unemployment rate for 15-24 year olds in 2012 was 15.4%, according to the Current Population Survey, more than 3 percentage points above the world average. ConvergEx's Nick Colas notes there is one exception to the U.S.’s high rates, though: for all the talk about how student loan debt has crippled young adults in the U.S., we actually have one of the lower unemployment rates for young adults with a tertiary (college) education – better, even, than many countries with free or low-cost universities (though the 'type' of jobs may be questionable).