JPY was its strongest at the start of October - and then the new Abenomics plan began. Very quickly the "long of gold in JPY terms" trade became extremely popular. After an impressive 16.4% rise into mid-February, gold-in-JPY corrected modestly; but the BoJ-inspired action smashed gold-in-JPY back up to its recent highs (helped by the seeming capitulation is JPY longs on the bigger-than-expected QQE). This appears to be the last straw on this trade. With JPY shorts so extremely positioned, the small rally on Thursday/Friday in JPY sent many scrambling to cover and, along with the need to unwind any and every asset to cover cash needs for JGB volatility, the avalanche began in gold-in-JPY. In 2 days, the entire Abe-inspired 'rally' in gold-in-JPY has been undone and all post-Abe buyers are now underwater. Whether this marks a short-term capitulation of these positions is unclear but CTFC CoT this week will be intriguing - and further JGB vol will not help. The rally in JPY of the last two days is the largest in 35 months - so someone clearly broke something...
When news hit the tape in February of 2007 that TXU would be acquired by a consortium of PE firms including KKR, TPG and Goldman, for the mind-boggling price of $45 billion, to this day the biggest LBO in history, there were those who were morbidly excited about the future as money was flowing freely, bonuses would hit a record, and there was only upside, and then there were those who knew this was the can't miss top-tick indicator of the beginning of the end. The latters ones turned out to be right. And not only because a year later the entire financial system imploded and only a $25 trillion global coordinated bailout prevented the collapse of the western way of life as we know it, but because now six years later, in the worst kept secret of Wall Street of the past month, TXU, now known as Energy Futures Holdings, is on the verge of the ultimate humiliation for private equity investors: Chapter 11, and a complete wipe out of not only the equity but major impairment of the debt holders as well.
Remember when the last time a cluster of Hindenburg Omens nearly toppled the market in August 2010 and the only saving grace was Ben Bernanke's QE2 announcement at Jackson Hole which sent risk soaring? Today, nearly three years later, we got the first instance of the Omen again. Will it be a one-off fluke, or a cluster, which is needed to confirm this dreaded technical formation? Stay tuned in the coming days to find out...
A month ago we discussed the rising anti-Euro sentiment in the core of Europe and the "Alternative for Germany" party appears to be growing in strength. As the NYTimes reports, this is a party driven a collection of elites (not a groundswell from the streets) tired of Merkel's "flagrant breach of democratic, legal, and economic principles." While we warned that the forthcoming 'wealth tax' will raise the ire of the southern-European elites (and thus increase the likelihood of a euro breakup), it appears this small-but-growing party in Germany is pushing in the same direction, as one member noted, "we keep giving out more and more money when we have so many problems at home." Polls show as many as 1-in-4 would consider voting for the new party, and "they don't need more than 5% to make things very tight for [Merkel]." The increasing tension in Europe (and rising anti-Germany sentiment) is helping raise membership as "every swastika on the streets of Athens" reduces Merkel's support, and, as members note, "if the euro fails, Europe will not fail," amid nostalgia for the former German Mark.
North Korea's daily war bluffs may be (rightfully) ignored by the market, but an unexpected and tragic development comes out of Boston, where local media reports of two explosions and numerous injuries:
AT LEAST 12 INJURED IN BOSTON MARATHON BLAST: BOSTON HERALD
BOSTON BLAST SEEM CENTERED IN `TRASH CAN': BOSTON HERALD
CNN CITES SOURCE ON REPORTS OF DEVICE AT BOSTON MANDARIN HOTEL
AT LEAST 3 DEAD AT BOSTON MARATHON, FOX NEWS CITES SOURCE
BOSTON POLICE SAY "SECONDARY DEVICES" ARE STILL BEING FOUND
Did you know that the greatest period of economic growth in American history was during a time when there was absolutely no federal income tax? Between the end of the Civil War and 1913, there was an explosion of economic activity in the United States unlike anything ever seen before or since. Unfortunately, a federal income tax was instituted in 1913, and this year it turned 100 years old. But there was no fanfare, was there? There was no celebration because the federal income tax is universally hated. This year, the American people will shell out approximately $4.22 trillion in state and federal income taxes. That amount is equivalent to approximately 29.4 percent of all income that Americans will bring in this year, and that does not even take into account the dozens of other taxes that Americans pay each year. At this point, the U.S. tax code is about 13 miles long, and those that are honest and pay their taxes every year are being absolutely shredded by this system.
Anyone surprised, please raise your hands. And yes, it was fun when margin were hiked only on surges in the various futures contracts. Now, dumps works just as well. The logic, of course, is that gold shorts are also margined. However, judging by the immediate $15 drop in gold upon the announcement, those who are short the metals certainly have a much, much bigger balance sheet and cash hoard to satisfy any collateral requirements than those long. Next: expect the Shanghai Gold Exchange to hike margins in a few short hours once China wakes up and looks at overnight PM prices in horror.
Update from Bloomberg: Boston Police says no suspects are in custody. Could it be that even the venerable NYPost got something wrong? Or is the Boston PD merely making a distinction between someone in custody (i.e., arrested) and someone guarded as a possible suspect? We should find out soon.
Just a brief blurb at the NY Post for now (which may have been overzealous in reporting the number of casualties earlier) but for what it's worth:
- Authorities ID'd a suspect in marathon bombings - he is being guarded in Boston hospital.
- Authorities have a identified a suspect, who is currently being guarded in a Boston hospital with shrapnel wounds.
Unclear how much credibility to assign to this, but that's what is being reported. We will provide more info if and when we see it. Some more via twitter, where we learn that according to CBSNews, police have surveillance video a person bringing multiple backpacks into the area 20 or so minutes before the explosions. The NY Post has released more, such as the nationality of the suspect: Saudi.
At 6:10 pm, Barack Obama is expected to address the nation over today's explosions at the Boston marathon. It is unclear what additional info he can provide at this time as there is little to no incremental information available, aside from the conviction everywhere that this was a terrorist attempt (which likely means war against someone is imminent), but watch it live below in any case.
A bad day all around. Liquidation continued from Asia and commodities were Baumgartner'd - especially gold and silver, suffering their biggest single-day drop in 30 years. Weak NAHB data stalled any BTFD in stocks and despite a couple of tries at EUR ramps, stocks had their biggest drop in 5 months. The horrible acts in Boston seemed a catalyst for late-day weakness in stocks but there was no bid and heavy volume as homebuilders were hit their hardest in 10 months and US equity indices plunged into the close. Dow Transports had its worst day in 17 months. Away from stocks, FX markets were just as volatile with JPY's 2-day rally the biggest in 35 months (and AUD the biggest down day in 5 months). Swiss 2Y rates dropped to their lowest of the year and US Treasuries were relatively calm (though bid) until Boston hit and then dropped 3-4bps on the day. VIX also surged higher by 5.2 vols to 17.25% (its highest since the Italian elections).
As law enforcement authorities investigate today’s explosions in Boston, I ask all New Yorkers to keep the victims and their families in your thoughts and prayers. I have spoken with Police Commissioner Ray Kelly, and the NYPD has stepped up security at strategic locations and critical infrastructure, including our subways. Some of the security steps we are taking may be noticeable, including deployment of Critical Response Vehicles and additional police personnel, and others will not be. We have 1,000 members of the NYPD assigned to counter-terrorism duties, and they – along with the entire NYPD and the investments we have made in counter-terrorism infrastructure – are being fully mobilized to protect our city.
While headlines are flashing with increasingly worrisome details, the Boston PD is about to provide up-to-date details on the incident.
*MASSACHUSETTS' PATRICK SAYS WE DON'T HAVE WHOLE PICTURE YET
*TWO DEVICES WERE FOUND IN TRASH CANS AND DEFUSED: WBZ RADIO
*BOSTON POLICE COMMISSIONER SAYS EXPLOSIONS 50-100 YRDS APART
*BOSTON POLICE COMMISSIONER SAYS CASUALTIES FROM BOTH BLASTS
*BOSTON'S DAVIS SAYS THIRD INCIDENT OCCURED AT JFK LIBRARY
*BOSTON'S DAVIS SAYS JFK EXPLOSION WAS HALF HOUR AGO
Boston PD are warning people to stay home - this is an ongoing event.
Previously, levered hedge funds were forced to sell gold on stock margin calls. How long until today's gold plunge, the largest 2-day drop in the past 30 years, forces funds to start selling stocks to meet margin clerks vocal demands some time around 2pm today?