JPY Tests 100.00 For First Time In 6 Weeks; US Treasury Curve Collapses To Flattest In 13 Months; Gold/Silver SlammedSubmitted by Tyler Durden on 09/05/2013 01:36 -0400
UPDATE 2: And there go the precious metals... with their ubiquitous 'opening' slamdown...
UPDATE 1: US Treasuries are now rallying urgently back from the edge as European markets awake (and the EUR slammed)... what else would one expect on ECB/BoE day?
The exuberance of the US day-session has flopped into the evening and Asian stocks, buoyed by a plunging JPY and the carry-mob is on a charge once again. USDJPY just broke back over 100.00 for the first time since July 25th managing to lift the Nikkei almost 1000 points since Friday's close. Most Asian stocks are higher (India +2.6%) but FX is more varied with the Rupiah, Baht, and Ringgit lower still as the Rupee strengthens modestly (as forwards compress too). The USD is bid against the majors with EUR cracking lower. The tale of the night though is US Treasuries which have slammed higher in yield once again. The spread between 5Y Treasuries and 30Y has plunged over 30bps in the last month and now hovers just above 200bps - its lowest in 13 months. This bear-flattening (belly and short-end is underperforming notably overnight) has driven the market's implied 10Y rate for year-end over 3% for the first time since July 2011. The entire forward curve of the Treasury complex is repricing higher in rates as 'absolute' NIM expectations drop.
Over the past several decades, a tumorous growth has emerged from and taken over the Republican Party. This cancer is called a neoconservative, or colloquially just simply neocon. These folks are extremely insecure and hotheaded. It is best to avoid them in the wild whenever possible. Some signs that you may be in the presence of one are below...
Ahead of September, historically the worst month for stocks, Deutsche Bank notes that volatility has picked up and corporate bond issuance has slowed. There are several possible risks over the next few weeks that could trigger a further escalation in market volatility...
Next week Congress can do far more than stop a feckless Tomahawk barrage on a small country which is already a graveyard of civil war and sectarian slaughter. By voting “no” it can trigger the end of the American Imperium - five decades of incessant meddling, bullying and subversion around the globe which has added precious little to national security, but left America fiscally exhausted and morally diminished. By long standing historical demonstration, the US Congress specializes in paralysis, indecision and dysfunction. In the end, that is how the American warfare state will be finally brought to heel and why the American Imperium will come to an end - at last.
With interest rates rising and now clearly weighing on the housing recovery (and affordability, as we noted earlier), many look at the extreme jumps in auto sales being pumped out today and worry that higher rates will impact that credit-fueled orgasm of optimism. While house price appreciation and belief in its linear extrapolation seemed to have prompted an inordinate amount of fed-funded credit-based car sales in the last month, the fact is that rates won't 'directly' affect car-buyers, since as CNBC's Rick Santelli exclaims, auto-loan rates are massively high already with millions paying high double-digit rates and terms are now as long at 97 months!! Simply put, with incomes stagnating, should we see any marginal impact on ability-to-pay or credit-availability (which will be affected by higher rates weighing on funding abilities - see below), then as Santelli concludes, watch out for these little words... "Auto Sub-prime loans."
As we asked (rhetorically, of course) over 3 months ago, why has the little nation of Qatar spent 3 billion dollars to support the rebels in Syria? Could it be because Qatar is the largest exporter of liquid natural gas in the world and Assad won't let them build a natural gas pipeline through Syria? Of course. Qatar wants to install a puppet regime in Syria that will allow them to build a pipeline which will enable them to sell lots and lots of natural gas to Europe. If the U.S. is successful in getting rid of the Assad regime, it will be good for either the Saudis or Qatar (and possibly for both), and it will be really bad for Russia. This is a strategic geopolitical conflict about natural resources, religion and money, and it really has nothing to do with chemical weapons at all...
As a proxy for economic activity, the addition of US exports and imports provides a useful indication of 2-way trade underlying growth in the US. Following the collapse in 2008/9, 2-way trade surged by over 30% YoY providing the impetus for the initial 'recovery' off the lows. That 'growth' has now dissipated and for almost 2 years, 2-way trade has gone nowhere. The last 3 times that this activity indicator was so poor, very significant systemic events occurred. Will 4th time be the charm?
"I have met a number of politicians over the years, but lately it has dawned on me that very few of them are seriously prepared to stand up for their beliefs, if indeed they have any. ...
Ideologies and courage have been consigned to the past and, as I see it, Europe’s Achilles’ heel is the German Chancellor Angela Merkel, the de facto leader of the EU, and her lack of vision for the single-currency bloc. ... Her lack of vision stands as a striking contrast to the emotional feelings that dominated much of post-war European political thinking. ...
As I see it, the research is done. The verdict is out. We have to re-evaluate the EU."
- Robert Menendez, D-N.J. - net worth from $317,005 to $680,000
- Barbara Boxer, D-Calif. - net worth from $1,147,008 to $5,380,000
- Ben Cardin, D-Md. - net worth from $1,416,074 to $3,998,000
- Jeanne Shaheen, D-N.H. - net worth from $1,692,382 to $5,223,360
- Chris Coons, D-Del. - net worth from $2,690,584 to $7,095,576
- Dick Durbin, D-Ill. - net worth from $1,208,567 to $1,443,564
- Tim Kaine, D-Va. - net worth from $667,015 to $1,507,000
- Bob Corker, R-Tenn. - net worth from $6,625,018 to $76,453,998
- John McCain, R-Ariz. - net worth from $3,226,239 to $15,247,981
- Jeff Flake, R-Ariz. - net worth from $-234,998 to $299,999
Reading the financial press, one gets the impression there are only two sides to the austerity debate: pro-austerity and anti-austerity. In reality, we have three forms of austerity. There is the Keynesian-Krugman-Robert Reich form which promotes more government spending and higher taxes. There is the Angela Merkel form of less government spending and higher taxes, and there is the Austrian form of less spending and lower taxes. Of the three forms of austerity, only the third increases the size of the private sector relative to the public sector, frees up resources for private investment, and has actual evidence of success in boosting growth.
And like that, the first step to all out war has been taken:
- SENATE PANEL AUTHORIZES LIMITED U.S. MILITARY STRIKE IN SYRIA
Vote breakdown: 10 Yes; 7 No; 1 Present. The measure includes new language saying U.S. policy is to "change the momentum on the battlefield in Syria" in way that brings about negotiated settlement of conflict, leading to a democratic govt in Syria. In other words: a pro-Qatari/Saudi coalition government that will permit the passage of natgas pipelines under Syria, through Turkey and into Europe, breaking Gazpromia's marginal energy monopoly over the broke continent.
Standard & Poor's has broken its relative silence over the US government's $5 billion fraud lawsuit against it in style. Slamming the DoJ's suit as "impermissibly selective, punitive, and meritless," S&P - seeking to dismiss the lawsuit with prejudice - exclaimed that the suit was brought "in retaliation for [their] exercise of their free speech rights with respect to the creditworthiness of the United States of America." The government says there was "no connection" between the downgrade and the filing of the lawsuit which is focused on the S&P inflating ratings to win more fees from issuers and failing to downgrade CDOs. Interestingly, as Reuters notes, S&P noted yesterday that $4.6bn of the alleged losses were from CDOs structured and marketed by BofA and Citi...
US equities were drifting quietly lower after a modest rise overnight fadsed through Asian anxiety and European political issues in Italy but all that changed once McCain said "no" and proposed a broader-scope, deficit-growing Syrian plan. Stocks instantly rushed higher to Russia "catastrophic consequences" levels from last week with Trannies and the NASDARK having their best day in a month. Commodity markets - most notably silver, copper, gold, and crude oil - were all sliding lower before McCain, and oddly accelerated lower in his news. Treasures also rallied into the morning and then sold off significantly after McCain's comments with 10Y now up 11bps on the week at high yields with 10Y closing at its highest yield in 25 months. The USD slipped lower as AUD smashed to its best 3-days in 21 months and EUR slid but that left the USD unchanged on the week (compared with S&P's +1.6%). Stocks gave up some gains into the close but ended with Healthcare and Discretionary almost unchanged from Kerry's 8/26 speech.
Yesterday, it was the Senate committee on foreign relations, today it is the House committee on foreign affairs' turn. Hagel, Kerry, and a seemingly begrudging General Dempsey trudge across the street to re-pitch the 'surgical, 90-day minimum, no-well-maybe-some-boots-on-the-ground' "use of force in Syria," and "weighing the Obama Administration's Response."