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What Has Happened So Far
Once again: The FOMC minutes had nothing to do with overnight's events, especially since both Ben Bernanke and Bill Dudley made it very clear previously that for any tapering to occur (and which is supposedly bullish according to David Tepper, who may finally be done selling to momentum chasers) if ever, the economy would have to be be stronger (which is of course a paradox because it is the Fed's QE that is making the economy weaker). If anything, the minutes reminded us that there is a mutiny in the FOMC with finally someone having the guts to say on the record that Bernanke is blowing a bubble - something never seen before on the official FOMC record. And after all, the Nikkei opened way up, not down. It was only after the realization of what soaring bond yields mean for, wait for it, stocks (despite central planner promises that it is soaring bond yields that are a good thing - turns out, they aren't) that the sell-off really started. That, and of course copper, and the end of the Chinese Copper Financing Deals arrangement that has been China's illicit cross-asset rehypothecation scheme for years (more shortly). So in a nutshell, here is what has transpired so far, courtesy of Bloomberg.
- Treasuries higher as global stock markets fell on concerns over rising interest rates in wake of Bernanke’s testimony yday and evidence that China’s economy may be slowing.
- Japan’s Topix index fell almost 7%, the most since the aftermath of the March 2011 tsunami and nuclear disaster; financial firms slid amid rising bond yields
- 10Y JGB yields erased earlier losses as stocks fell after yields touched 1%, the highest in a year
- UST domestic trading volumes were highest in 5yrs yday, FTN’s Jim Vogel wrote. 10Y yield rose as high as 2.062%, highest since March 14; TY traded 3m contracts yday, busiest day for 1st contract on record, according to Bloomberg data to 1982
- Economy Minister Amari said there’s no reason to be concerned over stock market decline, economic recovery on track
- China’s HSBC flash manufacturing PMI stood at 49.6 for May, contracting for 1st time in 7 mos. and adding to signs of slowing economic growth in 2Q
- Bond buying should respond to economic data, Fed’s Bullard said in speech in London; Fed should “continue with the present quantitative easing program, adjusting the rate of purchases appropriately in view of incoming data on both real economic performance and inflation”
- The euro area’s manufacturing PMI for May rose to 47.8, services to 47.5; composite index at 47.7, est. 47.2; Germany’s manufacturing PMI 49.8
- U.K. GDP +0.3% in 1Q, confirming initial estimate, on inventories, consumer spending; exports declined sharply in quarter
- Surge in Japanese bond yields since early April would push up Prime Minister Abe’s budget bill by about $3 billion, a possibility that’s prompting central bank Governor Haruhiko Kuroda to pledge more focus on curbing debt-market swings * Deutsche Bank AG, continental Europe’s biggest bank, said some investors are probably underestimating the ramifications of the European debt crisis and a political stalemate over the U.S. debt ceiling
- Bond investors don’t perceive the six biggest U.S. banks as “too big to fail,” according to a report from one of those lenders, Goldman Sachs
- U.S. bankers and insurers are trying to use trade deals, which can trump existing legislation, to weaken parts of the Dodd-Frank Act designed to prevent a repeat of the 2008 financial crisis
- China will tighten rules on bond sales by polluters, local government financing vehicles with higher debt levels and companies in industries with overcapacity as the government seeks to redirect the economy
- BofAML Corporate Master Index OAS steady at 141bps, tight for year, as $14.05b priced. Markit IG at 71.6bps, YTD low 69bps. High Yield Master II OAS tightened to 427bps from 435bps; $1.59b priced yesterday. CDX High Yield fell to 106.63 from 107.13
- Sovereign yields mixed; euro-area peripheral yields higher; core G-4 yields lower. Asian stocks fell across the board; European stocks, U.S. stock-index futures lower. WTI crude, metals lower, gold gains 1.4%
And SocGen's recap:
The 7.3% collapse in the Nikkei and the sharp intra-day volatility
yesterday in bonds and currencies shows the formidable task facing the
Fed (and other central banks) as they prepare to take the first steps of
ending the policy of extreme accommodation. A tapering of asset
purchases is by no means a tightening in policy, but the wild reaction
to the faintest indication that the Fed is preparing to start dialling
back, possibly as soon as September, demonstrates how tricky it will be
for policymakers to wean markets off liquidity without causing a tremor.
However, Bernanke in his prepared remarks could not have been clearer
yesterday: he is in no hurry to change monetary policy. While he
acknowledged afterwards that the pace of asset purchases may slow over
the next few meetings, the Fed Chairman was unequivocal that so far,
economic indicators and fiscal considerations do not yet make that an
option. The job market's recovery does not yet make it an option. He
clearly does not want a change in monetary policy to push up interest
rates and endanger the real estate market's recovery. Today, we will be
watching the initial claims and new home sales data.
In
the short term, pro-risk strategies are likely to be favoured still but
the days of remorseless gains may well be numbered for stocks after the
drubbing for the Nikkei. A
possible change of tack by the Fed and a simultaneous weakening in
China will spur further profit taking, ending a blistering rally.
USD/JPY hit 103.45 yesterday but the subsequent pull back overnight
shows the JPY still has its admirers when risk goes in reverse.
The
EUR/USD trend is more muddied. In the euro zone, the manufacturing and
services PMI indices announced today will give us some more information
on the outlook for activity in Q2, but the focus will be on the speech
by ECB president Draghi. We are hoping that the string of unpleasant
surprises will slow, giving some modest support to EUR/USD. Support runs
at 1.2797 and 1.2775. The trend in US 10-year bond yields should
dictate the path as illustrated in our chart.
Across the
Channel, will the downward pressure on EUR/GBP resume as UK growth
outpaces that of the euro zone, or will EUR/GBP get caught up in the
woes affecting other EUR exchange rates? We still prefer fading
short-term gains.
»
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One word caused it all: "Buoyant"
Yo-yo time. All you guys who play the volatility spreads - get ready.
Great time to be short miners! enjoy it suckers ...
thats why i do not bother to do my own analysis ... i wont have all the information anyway ... just follow the money .... like SOROS ... as soon as they said he put 25 million on call options on juniors i did not bother anylonger ... thats it as simple as that ... everything else is just talk ..
Miners are only good for quick flashes. I realized a decade ago that no matter how much gold goes up in price....management will always dilute the share price by an equal amount.
Always take money off the table and convert it into physical and throw it in the sock drawer.
Then forget you have a sock drawer.
True dat.... But I'm not sure how reliable the information published on SoreAss's transactions really is.
Be sure to give us your magic technique for figuring out what the big boys are doing. If you're relying on news feeds telling you what the they're doing then you are the chump at the poker table. Your technique will work if you have mind readin abilities but by the time you hear about it in the news feeds you will likely be the muppet taking the wrong end as they close out their now profitable positions. Real question, if you have a technique share it please. If you are relying on the news then I suggest not being smug, it's easier to wipe egg off a non smug face.
Last night just took a little froth off the top of Japan markets....they're still 6000 - 7000 points too high.... about what our Dow is.
Is there any chance this huge dump can lead to another asset rotation into paper pms and miners with a 500% runup in ten years ? I wouldn't be fucked anymore and most here could be very wrong on end the of the world scenarios , and the advantages of physicall over paper ect...
Instead of red arrows i would like a little hope,,,,
OT. I felt strange on the guy killed by police in Florida and the central Africa scene in London yesterday. So, two murders and the main WORLD NEWS is we will fight terror for eternity. They do have qe to eternity to pay for it. and... i,m still not over the Boston thingy.
The " oy my." from Shepperd on fox when they showed the guy on the weelchair , the zooming, the acting, OMG.
I don,t see the world crashing , just becoming one big max headroom.
So did YOU sell in May and go away?
Yes, many years ago ...
Dup post. (Touch screen)
I sold and went away in 2004 when Au was $400 and Ag was $7. I sleep good every night.
Looking like a smart move now.
On the other hand, I am continually amazed by the people who do not have any trouble rationalizing (clearly without the aid of math) that inflation for the interim years since your purchase has supposedly been around 3% each year and that they now claim the cost to produce an ounce of gold is about $1200 and silver about $18/oz ... clearly something is broken in logic cycle.
Statistically-speaking, most crashes happen in the Fall. So it's probably better to just not play.
BTFD Bernanke's computers still have a lot of covering for Holder and Obama to do. Plus I think the military forces are giving the CIA a lot of hell about attacking the United States of America. The banksters may not get the backing they are counting on.
Classic! Front page of Reuters and...NO MENTION of Japanese "market" drubbinig. It should be fun fun fun to watch BlowHorn [CNBC] blathering fools try to distract the sheeple with stories about Netflix, softer serve ice cream cones, and other unicorns.
Let's see: down yesterday, going down today as of now, and friday is approaching. I'm like everyone else around here thinking this is a bunch of overpriced garbage but I would be real careful about going 'all in' short right here. Rebound fridays are notorius.
Blow this crap so high that with a 3000 pt onslaught we'd still be at 12k. Would be fun to break out the DOW 10k hats again. Fucking morons.
MSM will come out with "this is healthy for the markets"
Japan flew the Kamikaze into the economy to raise equity proces. In effect doubling the bond rates.... The HELICOPTER has done the exact same thing.. Mr Market is going to Close the TBTF clowns that levered the mistakes of the debt slaves. So now the mandate keeps Jamie. Barry.... Of course no speaaking of IRS but drone strikes....... "Buoyant" you bet Mr Market is doing a "blowback" lesson on moral hazzard. POMO will buy mortgages, bonds and continue stealing the bleak future of debt bubble...
I want Pitsa! Who else wants Pitsa!?
zugzwang...
An interesting term:
http://en.wikipedia.org/wiki/Zugzwang
It's funny listening the the idiots on CNBS talking about how good the economy is doing and about how this is just a blip when you consider how far the markets have come.
Please keep us posted.....cause I can't look.
I have to disagree. He shouldn't look, too. It won't do any good, but could drive the mood down real fast.
ONWARD.....MOTHERFUCKERS...DAMMIT....GET THIS ASS-KICKING ON THE ROAD AGAIN....
Markets here in the US are closed Monday...could be an interesting couple days.
Sell in may and blown away!
But wait! There will be so much QE that the traders need to update algo SW to be able to intepret the sums.
Do not fight the FED (or other CB:s for that matter) i'll repeat DO NOT FIGHT THE FED!
We await "Marc to Fuckit" 's d i s p a s s i o n a t e analysis of the k e y d r i v e r s.
It is curious how the whole "I'll stop drinking as soon as I stop feeling hungover" strategy doesn't seem to be working.
I am hoping that in the end some sound minds with magically appear and realize that sound fundamentals at ANY level are a better building point than unsound and fleeting financialization.
The unfortunate thing is that the US is currently so very much dependent on foreign production of raw materials and finished goods (just are people are so incapable of taking take of themselves) that the destruction of the dollar would be catastrophic.... and yet here we continue on destroying the dollar instead of preserving it as a resource.
Too much information and too little of it is pertinent.
Stick this in your brains people, it's white house and congress who GIVE ORDERS to the Fed, not vice versa.
If you dare to request people to use their brain - why stop halfways? While they are at it, they could also stick in their brains that even the white hut and the fed are given orders, and guess by whom? ;-)
whom? uber wealthy, ultra secretive, non-conscience minded, and narcissisticly money centric psyco's
In case anyone hasn't figured it out yet here is about 20 different local MSM TV news outlets reading the same economic new story word for word (except for the 2 awkward rebels who try switch up word order and screw up the delivery in the process) from a single script written or approved by one of the state comedy writers. This how they did it in the USSR down to the tee.
https://www.youtube.com/watch?v=IL6zvHlMQGM
USSA,USSA,USSA.......
Consider this: the DC scandals are showing the world what a bunch of criminals are running our country. What better way to CYA than have Ben threaten to stop QE to spook the markets, precipitate a financial crisis, stock market crash and other associated mayhem?
Keep your eyes open!
"A tapering of asset purchases is by no means a tightening in policy, but the wild reaction to the faintest indication that the Fed is preparing to start dialling back, possibly as soon as September, demonstrates how tricky it will be for policymakers to wean markets off liquidity without causing a tremor."
Interesting mentality. I suppose it is okay for stock markets to surge ever higher on money printing, but it is not okay for stock markets to sell off when the money spigot gets adjusted. So much for fair and open price discovery...
We're down 50 points on the DOW and its the end of the world. The VIX is only up 1.23%. This thing is gonna rebound hard like Dennis Rodman by closing Friday