The dust has barely settled on the latest high profile banker suicide in which Deutsche Bank's associate general counsel, and former SEC regulator, Charlie Gambino was found dead, having hung himself by the neck from a stairway banister, and here comes the latest sad entrant in the dead banker chronicles of 2014 when earlier today, the Post reports, a Citigroup banker was found dead with his throat slashed in the bathtub "of his swanky downtown apartment, authorities said Wednesday."
Despite the apparent economic and profit news improvements recently, JPMorgan CIO Michael Cembalest notes there are a few instances where people are still flipping out. It’s worth reviewing them, he suggests, as they're indicative of risks and opportunities in financial markets heading into 2015, and of the continued presence of central banks affecting asset prices.
‘Gold wars’ are intensifying with just 16 days left to polling day in the Swiss Gold Initiative. If the Swiss vote to revert to having 20% of currency reserves in gold, the Swiss National Bank will be forced to make huge purchases of gold bullion. Switzerland and its ‘Gold Initiative’ would contribute to driving the price of gold higher - likely in the short term and contributing to higher prices in the long term. Understanding the important recent past and what has led to the forthcoming Swiss Gold Initiative is important and why we look at it today. This context is all important and is essential reading for all who wish to understand the key issues in the debate, for all who invest in and own gold internationally and for all Swiss people.
Throughout history, in most cases of economic collapse the societies in question believed they were financially invincible just before their disastrous fall. Rarely does anyone see the edge of the cliff or even the bottom of the abyss before it has swallowed a nation whole. This lack of foresight, however, is not entirely the fault of the public. It is, rather, a consequence caused by the manipulation of the fundamental information available to the public by governments and social gatekeepers.
There are things in this world which simply look plain stupid, and then there are those that at closer examination prove to be way beyond stupid...
Gold and crude oil have been in a slow motion free fall of late, even as U.S. equities rally but ConvergEx's Nick Colas looks at the value of each asset class relative to the other two and assess their historical relationship. For example, you currently need 1.72 ounces of gold at $1178 to “Buy” one S&P 500 index at 2032. That is cheap to the 30-year average of a 1.86x ratio, putting fair value on U.S. stocks 8% higher. Separately, it currently takes 25.1 barrels of crude to buy the S&P 500, versus the 30-year average of 27.8, making stocks look cheap by 11%. Closing out this analytical triangle: you need 14.5 barrels of oil to buy an ounce of gold, but the 30-year average is 16.6. Bottom line using these long-term ranges: U.S. stocks look mildly cheap to oil and gold, but drops in those commodities would erase the difference just as easily as a further rally in stocks. Gold looks cheap relative to oil and should be $170 higher, or oil should trade closer to $71.
Non-bombastic overview of the forces influencing the capital markets in the week ahead.
When the wrecking ball hits, the IMF stands at the ready with the SDR composite to pick up the structural pieces.........
Back in September, there was a summit meeting in a city that involved an organization that most Americans have never heard of. Mainstream media coverage was all but nonexistent. The place was Dushanbe, the capital of Tajikistan, a country few Westerners could correctly place on a map. But you can bet your last ruble that Vladimir Putin knows exactly where Tajikistan is. Because the group that met there is the Russian president’s baby. It’s the Shanghai Cooperation Organization (SCO), consisting of six member states: Russia, China, Kazakhstan, Kyrgyzstan, Tajikistan, and Uzbekistan. We should care what’s going on inside the SCO. Once India and Pakistan get in (and they will) and Iran follows shortly thereafter, it’ll be a geopolitical game changer.
A week ago the Russian Ruble exhibited intraday volatility that makes the JPY look quiet when it crashed to record lows then soared dramatically on intervention hopes. Since then we have had a Russian Central Bank disappointment and some jawboning which did nothing press the Ruble to record-er lows against the USD. Then today, last week's volatility in the Ruble was dwarfed when USDRUB blew past 48.5 only to be sent soaring (USDRUB lower) below 46 on hope of intervention. Russia is not alone. The Saudi Riyal has seen massive vol in recent weeks and Nigeria, another oil-producing nation, saw the Naira collapse yesterday then soar 8 handles this morning on what is confirmed intervention by the nation's central bank. It appears the strong dollar is becoming an issue for the world's oil-producing nations...
And then there is BusinessWeek, which quite to the contrary, is urging its readers in its cover story, ignore common sense, and do more of the same that has led the world to dead economic end it finds itself in currently. In fact, it is, in the words of NYT's Binyamin Appelbaum, calling the world governments to become the slaves of a defunct economist. And spend, spend, spend, preferably on credit. Because, supposedly, this time the resulting crash from yet another debt-funded binge will be... different?
- "Soaring consumer confidence" - How the Economy Is Stoking Voter Anger at Incumbent Governors (WSJ)
- Euro zone deflation worries shield German Bunds from upbeat Fed (Reuters)
- Greece’s Euro Dilemma Is Back as Minister Sees Volatility (BBG)
- Ukraine gas supplies in doubt as Russia seeks EU payment deal (Reuters)
- Sterling Lads Chats Show FX Traders Matching Fix Orders (BBG)
- NATO Tracks Large-Scale Russia Air Activity in Europe (WSJ)
- U.K. SFO Charges Ex-Tullett Prebon Broker in Libor-Rigging Probe (BBG)
- Jerusalem on edge after shooting of rabbi (FT)
- Israeli police kill Palestinian suspected of shooting far-right activist (Reuters)
- Samsung seeks smartphone revamp to arrest profit slide (Reuters)
Based on the lessons of history, all empires collapse eventually; thus, the probability that the US empire will collapse can be set at 100% with a great deal of confidence. The question is, When? (Everyone keeps asking that annoying question.)
Of the last 150 years of developed market monetary policy, we suspect nothing will prepare market participants or Fed members for the twisted terms and double-speak the FOMC will try to unleash today as they attempt to 'end' the most extreme policy measures ever. Goldman Sachs' 'base-case' for today's FOMC is a "steady as she goes" message with few substantive changes in language and asset purchases ending on schedule... but Goldman warns, recent macro and market action might bias the Fed dovish.
As Deutsche Bank observes, the Fed has been wanting to hike rates on a rolling 6-12 month horizon from each recent meeting but never imminently which always makes the actual decision subject to events some time ahead. They have seen a shock in the last few weeks and a downgrade to global growth prospects so will for now likely err on the side of being more dovish than in the last couple of meetings. They probably won't want to notably reverse the recent market repricing of the Fed Funds contract for now even if they disagree with it. However any future improvements in the global picture will likely lead them to step-up the rate rising rhetoric again and for us this will again lead to issues for financial markets addicted to liquidity. And so the loop will go on for some time yet and will likely trap the Fed into being more dovish than they would ideally want to be in 2015.