- CME GLOBEX RESUMES FUTURES TRADING AFTER TECHNICAL ISSUE
It appears - judging from FX markets this evening - that consensus on Jackson Hole is Yellen was more hawkish and Draghi & Kuroda more dovish than expected. The USD index is pushing on towards one-year highs as EUR is down 50 pips (not helped by a dovish FT article on deflation fears) to 11-month lows, and USDJPY broke to as high as 104.45 (weakest JPY in 7 months).
In addition to this action, the CME confirms all Globex Futures products will have a delayed opening due to technical issues with NO estimated opening time.
This essay is not intended to address a crisis that may be occurring on the border at this time. We make no comment on that. Nor does it discuss the issues around war, such as how to deal with citizens of enemy nations. This essay is not a policy proposal, it does not set out, for example, when an immigrant can become a citizen and attain the vote or what to do to immigrants who commit crimes. It has but one purpose: to enumerate and respond to the common arguments used in favor of an impenetrable and guarded border fence to shut down immigration.
With Russia pushing to end its government's dependency on Microsoft's Operating System, it is perhaps not surprising (especially following the various raids that have been undertaken) that another BRICS member, as Reuters reports, China could have a new homegrown operating system by October to take on imported rivals such as Microsoft, Google, and Apple, Xinhua news agency said on Sunday. A spokesperson stated, China hoped domestically built software would be able to replace desktop operating systems within one to two years and mobile operating systems within three to five years.
There was something missing at this year's Jackson Hole meeting of the world's most 'brilliant' monetary minds - a stock market rally - and while VIX was slammed lower (by mysterious forces assuming that uncertainty must have fallen), even the local rag understood i) the context - Yellen did not even make the main headline in The Jackson Hole Daily (the 'common folk' preferring something far more - or less - trivial, like the weather); and ii) All she has done is raise uncertainty. We await the machines to manually read these headlines before the requisite trading actions are taken... It seems, as we noted before, the Fed's magic is running out (for now).
From Arab Spring-related uprisings in Libya or Egypt, to a civil war in Syria and now violence in Iraq and the Ukraine, geopolitics are impacting oil. True, geopolitical risk measured by combat deaths does not always correlate well with market volatility. But wars and conflict are easy to spot on an oil price series. With combat deaths rising four fold in the last 10 years, oil markets should prepare for more turmoil. BofA 's Francisco Blanch asks "Can the US preserve geopolitical stability?" America still takes up 38% of global military spending, but appetite for foreign adventures has been low. As an example, a drop in US combat deaths in recent years has been mirrored by a rise elsewhere. Following a drop to multi-decade lows, implied vol in long dated oil options at 15% looks cheap. Oil after US hegemony may not be as steady.
Late on Saturday afternoon, supposedly in retaliation for yet another round of shelling by Hamas now that the X+1 "ceasefire" has failed to lead to anything tangible, Israel bombed an apartment tower in Gaza City, collapsing the 12-story building with 44 apartments. The dramatic strike is shown in the blip below. Amazingly, while dozens were wounded in the strike, no one was killed, Palestinian officials said.
The Federal Reserve’s prevailing view of the world seems to be that a) QE lowers interest rates, b) lower interest rates stimulate jobs and economic activity, c) the only risk from QE will be at the point when unemployment is low enough to trigger inflation, and d) the Fed can safely encourage years of yield-seeking speculation – of the same sort that produced the worst economic collapse since the Depression – on the belief that this time is different. From the foregoing discussion, it should be clear that this chain of cause and effect is a very mixed bag of fact and fiction.
The zombification of corporate America is nowehere more evident than the yield-starved demand that has enabled companies with the lowest of the low credit ratings to raise debt capital and stay alive far beyond their 'natural' lifespan. As WSJ reports, investors are gobbling up some of the riskiest debt from junk-rated European companies at the fastest pace in years. The riskiest tranche of that debt - so-called second-lien, or junior, loans - amounts to $3.3 billion, almost double the amount raised at the same stage last year and the most over the same period since 2007. The reason is simple - Central Banks - "If you have more demand than supply then you end up with a loosening of terms and potentially more leverage and more aggressive structures." This is 'mal-investment' writ large, and at least as bad as during the 2007 bubble.
Argentina’s economic minister, Axel Kicillof, has become famous for his assertion that it is possible to centrally manage the economy now because we have spreadsheets such as Microsoft Excel. This assertion comes from the mistaken view that the cost of production determines final prices, and it reveals a profound misunderstanding of the market process. This issue, however, is not new. The first half of the twentieth century witnessed the debate over economic calculation under socialism. Apparently, Argentine officials have much to learn from this old debate. The problem is not whether or not we have powerful spreadsheets at our disposal; the problem is the impossibility of successfully creating a centrally-planned market. Just ask Maduro...
It appears that yet another international organization has been caught lying. Three days ago, in a clear attempt to avoid spreading a panic, a WHO spokesman when asked if the latest Ebola-like disease to claims over 70 lives was the virus in question responded, "this is not Ebola." He lied: Reuters confirms: Democratic Republic of Congo declared an Ebola outbreak in its northern Equateur province on Sunday after two out of eight cases tested came back positive for the deadly virus, Health Minister Felix Kabange Numbi said. "I declare an Ebola epidemic in the region of Djera, in the territory of Boende in the province of Equateur," Kabange Numbi told a news conference. Sadly, this simply means that the WHO is just the latest global organization willing to sacrifice its credibility in order to avoid the spread of social panic, even though the truth always emerges in the end, and when society realizes it can't even trust those mandated with telling the truth, the end panic is orders of magnitude worse.
This one is almost too sensational to be real. Almost. Jon Corzine (of MF Global) walks the streets a free man. Yet FinCEN is wasting taxpayer resources sending undercover agents to entrap some offshore casino, and they act as if they’ve infiltrated a major terrorist organization. Amid all the debt, graft, and incompetence that’s so prevalent today in government, this is another sad testament to the direction that things are headed.
An earthquake of 6.0 magnitude, the largest in the region for 25 years, shook the San Francisco Bay Area early on Sunday, waking residents and causing some power outages and minor damage, according to initial reports.
As part of his latest weekly report, Goldman's David Kostin breaks down the full array of strategy "baskets" used by hedge funds at this moment to outperform the market in 2014. In a nutshell, here are the best and worst performing HF strats so far in 2014.
India, Pakistan Intensify Shooting Across Border; Iran Downs Israel Drone; ISIS Seizes Military AirportSubmitted by Tyler Durden on 08/24/2014 12:07 -0400
Since in the New Normal no geopolitical events appear to have any adverse impact on risk and asset prices (because the central banks are always there to protect investors should the market "plunge" by say 5%) with general newsflow completely irrelevant on what has been a straight line up in the S&P since the announcement of QE4 in December 2012, one might as well see how much further geopolitical events can be pushed further before it all crashes. In other words, time for this weekend's geopolitical update which covers everything from India, Pakistan, Iran, Israel, Iraq, Syria and Qatar.