Three unlucky attempts in a row to retake the S&P 500 all time high may have been all we get, at least for now, because the fourth one is shaping up to be rather problematic following events out of the Crimean in the past three hours where the Ukraine situation has gone from bad to worse, and have dragged the all important risk indicator, the USDJPY, below 102.000 once again. As a result, global stock futures have fallen from the European open this morning, with the DAX future well below 9600 to mark levels not seen since last Thursday. Escalated tensions in the Ukraine have raised concerns of the spillover effects to Western Europe and Russia, as a Russian flag is lifted by occupying gunmen in the Crimean (Southern Ukrainian peninsula) parliament, prompting an emergency session of Crimean lawmakers to discuss the fate of the region. This, allied with reports of the mobilisation of Russian jets on the Western border has weighed on risk sentiment, sending the German 10yr yield to July 2013 lows.
Update as things just got worse: TURKISH POLICE CLOSE DOWN GEZI PARK IN ISTANBUL, CNN-TURK SAYS
As we reported previously, on Monday new revelations in the graft scandal surrounding Turkish PM Erdogan in the form of a leaked phone conversation between him and his son, Bilal, detailing plans how to hide huge sums of cash, by some estimates up to $1 billion, brought back the political crisis that has gripped the nation front and center, and led to renewed demands by the opposition party that the PM resign. It also sent the USDTRY surging to levels not seen in weeks. We said: "Somehow we doubt that Erdogan will resign, however, this latest confirmation that the graft scandal that is and will continue to dodge the Turkish Prime Minister is not going away, may just be the catalyst that pushes the TRY, and with it some of the other recently pacified EMs, back into volatile mode." Today the crisis is fully back and so is the predicted volatility, with the Lira blowing out by another 400 pip to a level of 2.240, not seen since the first week of February when the Turkish central bank was scrambling to restore confidence in the imploding currency.
- Turkish PM says tapes of talk with son a fabrication (Reuters) but opposition confirms authenticity, and national TV carriers cut parliament when played live
- Inside the Showdown Atop Pimco, the World's Biggest Bond Firm (WSJ)
- Ex-Jefferies Trader’s Customers Say Lies Common Tactic (BBG)
- Bitcoin exchange Mt. Gox disappears in blow to virtual currency (Reuters)
- The messenger mania is spreading: SoftBank Said to Seek Stake in Naver’s Line Messaging Unit (BBG)
- Ukraine Replaces Central Bank Head (BBG)
- Yup, an actual headline: Harsh weather tests optimism over U.S. economy (Reuters)
- Hiring of Law Grads Improves for Some (BBG)
- Easy Currency Bet Gets Harder as the Chinese Yuan Tumbles (WSJ)
- In Ukraine turbulence, a lad from Lviv becomes the toast of Kiev (Reuters)
Turkish Opposition Leader Says More Erdogan Evidence To Come, Urges Prime Minister To "Flee The Country"Submitted by Tyler Durden on 02/25/2014 08:31 -0400
#Wow! CHP leader Kilicdaroglu: there will be other evidences come forward..so my advice to Erdogan, take a helicopter & flee the country!!
— ilhan tanir (@WashingtonPoint) February 25, 2014
All eyes were on China overnight, where first the PBOC drained a quite substantial CNY 100 billion in liquidity via 14 day repos in the month following the biggest credit injection on record, pushing those worried about China's credit schizophrenia to the edge, and then things got even more bizarre when in an act of clear PBOC intervention, the CNY dropped to the lowest since August 2013 as concerns about the global carry trade's impact on China (as noted here previously) start to reverberate. We will have more to say about China's Yuan intervention, but what should be noted is that the Shanghai Composite has tumbled nearly 10% in the past week, and was down another 2% overnight and is once again just barely above 2000, a level it can't seem to get away from for years (which is fine: recall that the real bubble in China is not the stock but the housing market). Chinese property stocks dropped to 8-month lows as concern continues about bank's withdrawing some liquidity for the asset class.The USDJPY drifted along and after rising to a resistance level of about 102.600 has since slide just shy of its 102.20 support area which means US equity futures are now in the red, and concerns that the S&P 500 may not close at a new record high are start to worry the technicians.
Turkish Lira Sinks After New Alleged Recording Reveals More Erdogan Corruption; Opposition Calls For ResignationSubmitted by Tyler Durden on 02/24/2014 18:14 -0400
It is almost remarkable that it was a few short weeks ago when the Turkish Lira was crashing to new daily record lows against all reserve currencies, and when Erdogan, embroiled in a bitter political corruption scandal, was firing judges and police officers left and right. Since then, things have quieted down, on the back of the return to surface calm across the broader Emerging Markets (even if nothing has actually been resolved fundamentally in the post-Taper era), however the Turkish graft scandal refuses to go away. As a result, today the Turkish Lira soared by over 200 pips following the release of a new recording which is allegedly a leaked telephone conversation in which the premier discusses plans how to hide at least $1 billion in cash (an amount which would buy about 20 Yanukovich-style presidential palaces) in the period when the Police was raiding various affiliated venues as part of a corruption investigation.
What others describe as the Deep State we term the National Security State which enables the American Empire, a vast structure that incorporates hard and soft power--military, diplomatic, intelligence, finance, commercial, energy, media, higher education--in a system of global domination and influence. One key feature of the Deep State is that it makes decisions behind closed doors and the surface government simply ratifies or approves the decisions. A second key feature is that the Deep State decision-makers have access to an entire world of secret intelligence. What would best serve the Deep State is a dollar that increases in purchasing power and extends the Deep State's power.
Sometimes you just have to sit back, look at some charts, and say WTF...
The Chinese Gold & Silver Exchange Society is prepared to spend at least HK$ 1 billion to set up a gold vaulting warehouse in mainland China that will be able to store a massive 1,500 tonnes of gold. Owning gold directly and in a fully allocated, fully segregated account and with an ability to take delivery remains vital.
This next paragraph contains what Grant Williams believes is the fundamental principle of investing in gold and silver, which so few people genuinely understand — despite the multitudes of commentators expending countless thousands of words.
"So these anti-gold idiots are just that, idiots, or else they have the memory of a goldfish, because currencies come and currencies go, as sure as night follows day. It is the natural order of things. And as you can see, it's not about trading gold to get rich or getting long gold or buying one by two call spreads or getting fancy, it literally is about protecting yourself in the end. It's not like Williams got rich. He just stayed rich. Everyone else got poor."
Central banks are accumulating gold because it cannot go BANG! like fiat currencies do. Individuals should be doing the same — not being sidetracked by the distractions. It's not about price - if you own gold, it will do all the heavy lifting for you when the time comes.
A considerable area of investor concern remains on emerging economies. As UBS' Larry Hatheway notes, the last thing that vulnerable emerging economies need at the moment is worries about a global growth slowdown, if that is indeed what is happening. That’s particularly true given that one of the relative few bright spots in the emerging complex of late was improved PMIs, reflecting some pickup in global manufacturing, exports and trade. While that lift might not help the down-trodden commodity producers within the emerging complex, it is helpful for the more manufacturing-oriented economies of Asia, selected parts of EMEA, or Latin America. But as Hatheway warns below, emerging vulnerability is about much more than just growth.
Statist Hypocrisy ...
With a plethora of Fed speakers playing good cop, bad cop todasy, it is hardly surprising that the FOMC minutes (as adulterated as they are) still show disagreement...
- *SEVERAL FOMC PARTICIPANTS SAID TEMPORARY FACTORS SPURRED GROWTH
- *FED TO CHANGE RATE GUIDANCE AS UNEMPLOYMENT FALLS, MINUTES SHOW
- *SOME FOMC PARTICIPANTS FAVORED `QUALITATIVE GUIDANCE'
- *SEVERAL PARTICIPANTS FAVORED $10 BILLION QE TAPER PER MEETING
The bottom-line is that the Fed is very confused and while headlines will crow of communication and forward-guidance, it is clear they are winging it now as "qualitative" guidance is the new way forward.
We noted that two US Navy ships - the guided-missile frigate USS Taylor and an amphibious command ship the USS Mount Whitney - entered the Black Sea on Feb 4th on what the Navy said was a routine deployment (following terrorist threats surrounding the Olympic Games in Sochi). 8 days later, the Navy reports, the USS Taylor is under inspection for damage (and rumored to be inoperable) after running aground as it was preparing to moor in Samsun, Turkey.