War is Peace
Freedom is Slavery
Ignorance is Strength
Censorship is Transparency...
Evan as The "boxed-in" Fed nears the vinegar strokes of its easing cycle, today's statement continued to offer something for everyone (hawks, doves, bulls, & bears) to hold onto:
- *FED DROPS PATIENT STANCE ON INTEREST-RATE RISE GUIDANCE (hawk)
- *FED SAYS ECONOMY `HAS MODERATED SOMEWHAT,' JOB MARKET IMPROVED (dove)
- *FED SEES 2015 GDP GROWTH OF 2.3%-2.7% VS 2.6%-3% DEC. EST. (dove)
- *FED WANTS TO BE `REASONABLY CONFIDENT' ON INFLATION FOR LIFTOFF (hawk)
So, despite previous Fed promises, we have seen dismal macro data, no consumption gain from low gas prices, and USD strength headwinds; and yet, as they shift growth expectations in their dot plot, we're supposed to believe that. The bottom line: Fed to Markets: "you're on your own"-ish: undertainty is back. Full redline below...
Pre-FOMC: S&P Futs 2059, EUR 1.0650, 10Y 2.05%, Gold $1152
Just a few short days ago we were the first to bring attention to the potential of an Iran nuclear deal being a catalyst for the next big leg lower in the energy complex and sure enough, not only is the market startuing to leg lower in a hurry as the deadline looms, but the mainstream media is catching on too. WTI hit fresh cycle lows this morning at $42.63 with the contango continuing to surge.
"Ladies and gentlemen. A few weeks ago, in Riyadh, I was at a small, private function along with the British central bank governor, Mark Carney. Mr Carney asked me two questions. First, why did the oil price drop? And the second, where is the price heading? I will tell you today what I said to him then."
- Ibrahim Al-Muhanna, Advisor to the Minister of Petroleum and Mineral Resources for Saudi Arabia
In his fiercest rhetoric yet, Germany's angry Finance Minister Wolfgang Schaeuble unloaded at a CDU event today:
SCHAEUBLE SAYS DOESN'T KNOW WHAT TO DO WITH GREECE NOW, NEW GREEK GOVERNMENT HAS DESTROYED ALL THE TRUST THAT HAD BEEN REBUILT
He went on to explain that "no one I talk to sees how Greek approach can work," which perhaps explains why Greek 3Y bond yields spiked back above 20% for the first time since the election today.
It started off as the perfect storm for futures: after Sunday night's latest plunge in WTI, which saw it drop to the lowest price since Lehman, the double whammy that has now forced Deutsche Bank to become the first major institution to forecast no growth for S&P500 EPS in 2015, namely the strong dollar, reared its ugly head and the EURUSD seemed dangerouly close to breaching the all important 1.04-1.05 support level we first noted last week. However, overnight parties tasked with preserving "financial stability" appear to have once again stepped in, and not only has the EURUSD rebounded off 1.05, but crude is now just barely down from the Friday close as all firepower is put to the same use, that sent the Shanghai Composite soaring by 2.3% overnight, and which sent the Dax over 12,000 for the first time ever.
As Greeks solemnly remembered the horrific acts of 72 years ago (when the first of 19 trains transported nearly 50,000 local jews to Nazi death camps), the Greek President Pavlopoulos made statements today that he "remains adamant" that "Greece's demands for German war reparations and the occupation loan are active and can be claimed legally." German Finance Minister Wolfgang Schaeuble has once again ruled out the possibility of a retreat from what Berlin has already officially said on the matter - that the issue has been settled decades ago. But, today the Greek Defense Minister issued a statement confirming that archives that they possess from Nazi armed forces support the country's claims for reparations.
There is a possibility of a nuclear deal being agreed between the P5 + 1 nations and Iran next Friday, 20th March. This may be the precursor for energy stocks to recouple to downside and for spending cuts to spread from capex to dividends for majors.
With all deference to Dr. Richard Fisher, the surging dollar is not good for either the economy or ultimately a stronger labor market. This is particularly the case when the dollar is only stronger because the rest of the world is on the brink of recession and or deflation. The negative impact of a surging dollar in a weak economic environment will more than likely outweigh any positive inputs for the U.S. consumer. Time will tell, but the evidence is mounting that the we are likely closer to the end of the current economic cycle than the beginning.
While the dollar strength this morning, which has pushed it to a fresh 13 year high and has accelerated the EURUSD plunge to under 1.06 - a drop of over 300 pips since the start of the week - has been a recap of yesterday's trading action, the main difference is that unlike yesterday, the USDJPY has managed to find a strong bid in the overnight session, pushing not only the Nikkei up by 0.4%, but also lifting US equity futures as the entire global marketplace is now merely a sandbox in which the central banks try to crush their currencies as fast as possible.
... gradually, from one scare to another, many – and especially those who have nothing left to lose – have given up looking for defenses, whether individual or collective, and have given in to the sin of sloth. They are not lazy or indifferent but experiencing emotional apathy. It has become a certainty that our destruction is much worse than a self-fulfilling prophecy: It has been orchestrated from outside. Either to punish the “lazy Greeks” or to warn others being tempted into believing that the European Union – as it is today, as a herald of a policy of austerity that can’t even be backed by the numbers – is repulsive rather than attractive.
Why are negative interest rates now making an appearance? They are a natural consequence of the rampant money creation undertaken by central banks in response to the global financial crisis as there is a lot more newly-created money floating around the financial system than there are safe places to put it. With the increasingly globalized world of international finance a bank run or financial panic anywhere can easily become a bank run or financial panic everywhere, it might be a good time to give your mattress a bit of extra padding.
Dalian Iron Ore prices have been cut in half in the last year (which must mean over-supply and not under-demand, right?). Amid China's growth target cut, Iron Ore prices there have crashed to below $60 - a record low - and that is having dramatic impacts across many regions. As we recently noted, Aussie gold miners are producing desperately to generate cashflow, but despite the booming housing market in some areas, as Reuters reports, the drop in iron ore and coal prices (the nation's 2 biggest exports) have led former boom towns to bust as "reality comes into the marketplace."