After less than three months consideration, the IRS has issued its statement clarifying th etax treatment of Bitcoins (and other virtual currencies) before the April 15th Deadline. The finding, summarized, is that Vitual currencies will be treated as property (not as a currency) which, as WSJ notes, means an investor who buys bitcoin would typically have a capital gain or loss when it’s sold. The price of Bitcoin is rising modestly on this news...
Words matter, and the Fed’s words matter more than anyone’s. But this is the classic mistake that academic economists always make – the quasireligious belief in theory over practice, in the triumph of bloodless ideas over the market’s fang and claw. Woodford’s ideas are sweet music to the enormous egos of the academics who control the Fed: you can save the world just by stating your brilliant policy intentions. Your words will become self-fulfilling prophecies as the markets shape themselves in expectation of your mighty deeds. And so what do we get? Horror shows like Bernanke’s press conferences last summer or Yellen’s press conference last week. If the Fed was surprised by the rotten tomatoes thrown up on the stage last year, they ain’t seen nothing yet.
Last week we reported that while the West was busy alienating Russia in every diplomatic way possible, without of course exposing its crushing overreliance on Russian energy exports to keep European industries alive, Russia was just as busy cementing its ties with China, in this case courtesy of Europe's most important company, Gazprom, which is preparing to announce the completion of a "holy grail" natural gas supply deal to Beijing. We also noted the following: "And as if pushing Russia into the warm embrace of the world's most populous nation was not enough, there is also the second most populated country in the world, India." Today we learn just how prescient this particular comment also was, when Reuters reported that Rosneft, the world's top listed oil producer by output, may join forces with Indian state-run Oil and Natural Gas Corp to supply oil to India over the long term, the Russian state-controlled company said on Tuesday.
Moments ago the Treasury sold $32 billion in 2 year paper. Those who have been keeping track of the amazing bear flattening in rates in the past week will probably not be surprised by the result. Everyone else will surely like to know that it just cost the US the most to sell 2 year paper since May of 2011, which at a high yield of 0.469% was the highest yield since May of 2012, or before the great rotation out of stocks and into bond began. And thanks to the "dots" expect to see the yield on short-dated paper to continue rising, even as the long-end drops further in an epic flattening which is sure to crush bank Net Interest Margins. It also explains why nobody talks about it on CNBC any more: after all what is there to say?
The Nasdaq Biotech index is down 4% from earlier opening highs and is once again testing the 100-day-moving-average that provided some impetus for a modest bounce yesterday. This is a 10-week low level (-14% from Feb highs) and has retraced over 60% of the gains since the Fed announced the taper in December. Volume has been very heavy.
For some inane reason, about a year ago, there was a brief - and painfully boring - academic tussle between one group of clueless economists and another group of clueless economists, debating whether Too Big To Fail banks enjoy an implicit or explicit taxpayer subsidy, courtesy of their systematic importance (because apparently the fact that these banks only exist because they are too big in the first place must have been lost on both sets of clueless economists). Naturally, it goes without saying that the Fed, which as even Fisher now admits, has over the past five years, worked solely for the benefit of its banker owners and a few good billionaires, has done everything in its power to subsidize banks as much as possible, which is why this debate was so ridiculous it merited precisely zero electronic ink from anyone who is not a clueless economist. Today, the debate, for what it's worth, is finally over, when yet another set of clueless economists, those of the NY Fed itself, say clearly and on the record, that TBTF banks indeed do get a subsidy. To wit: " in fact, the very largest (top-five) nonbank firms also enjoy a funding advantage, but for very large banks it’s significantly larger, suggesting there’s a TBTF funding advantage that’s unique to mega-banks."
The structural incompetence of centralized, wrong-unit-size agencies and central banks is global: the centralized strategies of China, Japan, the European Union and yes, Russia, too, will all fail for the same reasons: organizations with a few limited controls are intrinsically incapable of managing complex systems.
Oh the dashed hopes... Just as we warned earlier... the dreams that yesterday was the dip to get back in and ride the waves of central bank largesse to another double in your favorite social media or Biotech stock are fading fast. Today is an almost perecect replay of yesterday's market action so far... pre-open Gold dump, JPY pump to sustain stocks at highs, spark retail bounce buyers back in and pros sell into strength as the "high growth" momentum stocks and Biotechs all reverse earlier gains in a hurry as all major stock indices are once again red post-Yellen.
The last time Obama announced he would "wind down" the NSA the NSA... got bigger!? Which is why we don't have any hopes whatsoever that this latest appearance by the teleprompted populist in chief, in which he is expected to announce a proposal to end NSA bulk data collection (yeah right), will lead to any deescalation of the centrally-planned, totalitarian state which has all 20th century dictators spinning in their CIA-facilitated graves. We do expect him to issue more warnings, and explain the "costs" to Putin once again, just in case he missed them the last time, before he annexed Crimea...
A surprise (to some) drop in China's PMI was just enough bad news to prompt the good-news-seeking BTFD'ers into expectations of additional stimulus from China. Despite 'PBOC advisors' (implictly the mouthpiece of official policy strawmen) stating openly not to expect stimulus and confirming that China will see a "crisis" in local-government financing "but not as expolosive as the 2008 crisis", and that "China must face the moral hazrd issue", investors are buying CNY, copper, Chinese stocks, and practically everything else on the back of hopes for moar money. However, as Bloomberg's Tom Orlik explains, with the government facing conflicting pressures an abrupt about-face in policy is unlikely.
It was only a matter of time before, as we said last month, January's reported surge in New Home Sales soared by 10% to 468K (well above the 400K then expected) would be revised lower. This just happened, when moments ago the Census Bureau lowered the January number from 468K to 455K. But what's worse is that last month's seasonally abnormal print was obviously an aberration due to the law of small numbers (explained here in detail), February's print was even worse, printing at 440K, below the 445K expected, and the lowest monthly print since September. Then again looking at the chart below shows why 20K houses up or down is absolutely meaningless in the grand scheme of things, as New Home Sales is the one category that resolutely refuses to bounce from the Depression lows.
The 'recovery' has reached a new cyclical high in consumer confidence. Despite the economic growth sapping, recovery dampening, Fed tapering, consumers have not been more exuberant since January 2008. Of course, the jump to new highs is all about the future - the Present Situation index dropped while the "Expectations" index jumped 7 points to 83.5 - its highest in 6 months.
February 2013 saw Russian visitors spend 16% more than in 2012 as "investor" visas flowed, property soared, and hot money slooshed into the UK recovery. However, as AFP reports, Russian spending in British shops fell by 17 percent last month compared to February 2013 as the "unstable situation in Russia has shown its effect on tourism spend this year," already. Shoppers from the Middle East (up 31%) and China (up 23%) continue to represent the highest proportion of international sales in Britain, but it is clear, as The Economist points out, Russian wealth has permeated the upper reaches of society in Britain more completely than in any other Western country, with the health of "Londongrad" now at stake if sanctions are extended.
Case Shiller Home Price Index Declines For Third Month A Row: Longest Negative Stretch Since March 2012Submitted by Tyler Durden on 03/25/2014 09:18 -0400
Another month, another sequential drop in the Case Shiller NSA index - the one the index creators themselves say should be used, not the Seasonally Adjusted data used by most commentators eager to find the best data. At a sequential decline of -0.08% in January, this was the third drop in a row - the longest consecutive period of sequential declines since March 2012 - and post a year over year increase of 13.24%, down from 13.38% in December, and the lowest since September 2013. Clearly, the pricing gains across the country are slowing.
This morning's pre-open is dominated by deja vu all over again. Just as we saw yesterday, right on cue at 830ET, gold (and silver) are unceremoniously dumped and USDJPY is pumped so as to ensure stocks look shiny for the US open (and Biotech can be dumped to the next greater fool). Oil is not moving, 30Y bonds are weaker, and the USD is flat... all makes perfect sense if you don't think about it.