- U.S. Index Futures Decline on Commodities Slump, Growth Concerns (BBG)
- Al Qaeda claims French attack, derides Paris rally (Reuters)
- Charlie Hebdo With Muhammad Cover on Sale With Heavy Security Precautions (BBG)
- How an Obscure Tax Loophole Brought Down Obama's Treasury Nominee (BBG)
- ECB’s bond plan is legal ‘in principle’ (FT)
- Charlie Hebdo fallout: Specter of fascist past haunts European nationalism (Reuters)
- DRW to acquire smaller rival Chopper Trading (FT)
- Oil fall could lead to capex collapse: DoubleLine's Gundlach (Reuters)
'After two days of sharp intraday and vicious reversals, the BTFD algos are suspiciously missing overnight, when as reported earlier, a bout of margin calls and stop loss selling meant not crude but copper would crash in today's episode of "guess the crashing commodity", on what Goldman dubbed a Chinese demand collapse which for those confused is different than an OPEC supply glut, and is also the reason why the entire commodity complex is trading at a decade plus low. As a result copper plunged to a five and a half year low, in the process halting the market due to the severity of the plunge. But the big event overnight was the farcical announcement by the European top court, which as everyone expected, rejected the German rejection of the OMT as illegal, stating it was not only legal (with certain conditions) but greenlighting the way for the ECB's QE in one week, a move which sent the EURUSD crashing to a fresh 9 year low!
Today's prime time event hasn't even arrived, that would be the European Court of Justice (ECJ) delivering its final opinion on the legality of the ECB’s previously announced OMT program, in less than an hour, and already the fireworks have begun, most notably out of Asia where after yesterday's epic commodity drubbing many were caught with their pants down and margin calls up, and what followed was a classic liquidation puke, when Copper prices crashed over 8% on the LME, to fresh 5 year lows and below USD 5,500/T in London.
COMEX Copper crashed to as low as $242.35 (from $261.70 before China's open). The catalyst for the move is unclear but between technical level breaks at $250 (and support at 2010 lows), World Bank global growth forecast cuts, and capitulation on CCFD rehypothecation deal hedges... massive volume is pushing through futures markets... LME prices are as low as $5,500/mt... Crude prices are also tumbling (WTI back below $46)
"We have to rethink our world just about from scratch. Or else. We’ve lived chasing the recovery carrot for years now, but the economy won’t recover; it can’t. There hasn’t been any real growth since at least the 1980s, the only thing there’s been is increasing debt levels that we mistook for growth." We need to do a lot more thinking, and take a far more critical look at ourselves, than we do at present. We’re not even playing it safe, we’re only playing it easy. And that’s just not enough.
"This is why Putin is Public Enemy Number 1. It’s because he’s blocking the US pivot to Asia, strengthening anti-Washington coalitions, sabotaging US foreign policy objectives in the Middle East, creating institutions that rival the IMF and World Bank, transacting massive energy deals with critical US allies, increasing membership in an integrated, single-market Eurasian Economic Union, and attacking the structural foundation upon which the entire US empire rests, the dollar." Up to now, of course, Russia, Iran and Venezuela have taken the biggest hit from low oil prices; but what the Obama administration should be worried about is the second-order effects that will eventually show up...
2014 is in the bag and there's something for everyone to celebrate. Here are the narratives that painted the past year - what’s real about them versus what we’re being told they are about.
How did the investment ideas we discussed throughout the year play out
With Greek CDS surging to near post-bailout highs (and short-end bond yields back above 11%), it appears the market is anxious of the endgame as tomorrow's 3rd and final 'snap-election'-saving vote looms. Following Samaras fearmongering yesterday, it appears Germany is starting to fear the worst (and play down its effect), as Merkel's bloc states "the prospect of a Greek sovereign default is no longer a concern for euro member countries and financial markets," adding "hope that Greece’s international partners would pay if the country’s policymakers refuse to carry out necessary reforms is misplaced." However, as Bruno de Landevoisin notes, "what is at stake is none other than the prosperity of the common man pitted against the privilege of concentrated power."
On the old continent, this December 29th, a succinct political showdown is scheduled to take place which may well become a defining moment for our entirely unsettled new millenium.
"I find it so disturbingly illogical that we Americans are willing to die so that our political class can enjoy ill gotten riches and power yet we cower when it comes to defending our great nation against the political class, something our founding fathers pleaded for us to do. The truth, which the political class legislates so hard for us to overlook, is that they are powerless without us. It is us that fight their fights, fund their wars and enforce their laws that enslave us yet we bow down and call them Mr. President and Madame Secretary. And so I ask each and everyone of you, when will we wake up and recognize that we are the power and the wealth and that the political class has only managed, through deception, to harness our strengths and pass them off as their own? For until that day of awakening, we will continue to live as an oppressed people ruled by others for others."
"Most investors go about their job trying to identify ‘winners’. But more often than not, investing is about avoiding losers. Like successful gamblers at the racing track, an investor’s starting point should be to eliminate the assets that do not stand a chance, and then spread the rest of one’s capital amongst the remainder." So as the year draws to a close, it may be helpful if we recap the main questions confronting investors and the themes we strongly believe in, region by region.
The 40%-plus drop in oil prices over the past 6 months has garnered a lot of attention recently, most of it focused on the economic stimulus lower oil prices should provide the global economy, the impact on currency and fixed-income markets, and the increase in economic pain suffered by exporters such as Iran and Russia. However, based on historical data, the potential increase in geopolitical tail risk that lower oil prices may represent is an overlooked consequence that, while low probability, would have an outsize impact on the global economy.
This is it, folks; this is the endgame right in front of our faces. The year of 2014 is the new 2007, with all the negative potential but 100 times more explosive going into 2015. Our nation has wallowed in slowly degrading financial conditions for years, hidden by fake economic statistics and manipulated stock prices. All of it has been a prelude to a much more frenetic and shocking event. We expect a hailstorm of geopolitical crises over the next year to provide cover for the shift away from the dollar. Ultimately, the death of the dollar will be hailed in the mainstream as a “good and necessary thing.” They will call it “karma.” They will call it “progress.” They will even call it “decentralization” and a success for the free market. But it will not feel like a positive development for the American public, who will suffer greatly as the dollar crumbles.
"Distinguished Economist Willem Buiter Joins CFR as Senior Fellow
Willem H. Buiter, a renowned macroeconomist and global chief economist at Citigroup, has joined the Council on Foreign Relations (CFR) as an adjunct senior fellow. His work will focus on geoeconomics, deglobalization, international financial institutions, and global economic governance. “We are thrilled to have someone of Willem Buiter’s experience and reputation joining CFR,” said CFR President Richard N. Haass. “His presence will make an already strong economics program that much stronger.” Buiter is the newest addition to CFR’s Maurice R. Greenberg Center for Geoeconomic Studies, which provides analysis on how economic and geopolitical forces interact to influence world affairs."