"What is different this time? Central banks are driving all investment decisions, and what this implies is that they are in this trade so deeply that there is no obvious or practical exit.... This is a dangerous situation. The focus must return to the REAL economy; we cannot trade our way out of past mistakes."
Today is shaping up to be a rerun of yesterday where another frenzied Asian session that has seen both the Shanghai Composite and the Nikkei close higher yet again (following the weakest Chinese HSBC mfg PMI in one year which in an upside down world means more easing and thus higher stocks) has for now led to lower US equity futures with the driver, at least in the early session, being a statement by the BOJ's Kuroda that there’s a "possibility" the Bank of Japan’s 2% inflation target will be delayed and may occur in April 2016.
Everyone was shocked by yesterday's Chinese March trade update which showed that while imports slid largely as expected, it was the 15% drop in exports, the largest in over a year, that prompted many to wonder just how big the global trade slump really is, masked by what has now become pervasive, global QE. This was the worst performance, exports and imports combined, since late 2009. Below is a selection of responses by Wall Street analysts trying to justify how - with global equities, if only in local currency terms, at all time highs - China can be doing so badly.
Randolph Duke: Money isn't everything, Mortimer.
Mortimer Duke: Oh, grow up.
Randolph Duke: Mother always said you were greedy.
Mortimer Duke: She meant it as a compliment.
"...The negative divergence of the markets from economic strength and momentum are simply warning signs and do not currently suggest becoming grossly underweight equity exposure. However, warning signs exist for a reason, and much like Wyle E. Coyote chasing the Roadrunner, not paying attention to the signs has tended to have rather severe consequences."
the next time someone asks "why is Yellen so terrified of even the smallest possible rate hike", show them this chart above and explain that the Fed vividly remembers what heppened when LTCM blew up. What the Fed doesn't want, is not one but one thousand LTCMs going off at exactly the same time in what is now the world's most levered trade...
- Israelis vote as 'King Bibi's' reign hangs in the balance (Reuters), Factbox: Main candidates in Israel's election (Reuters)
- Iran Can Add Million Barrels a Day of Oil If Sanctions Halt (BBG)
- Kremlin rules out handing back Crimea to Ukraine (Reuters)
- Saudi Arabia Needs More Oil to Feed Local Refinery Expansion (BBG)
- How Lafarge’s CEO Went From Holcim Merger Architect to Obstacle (BBG)
- When Yellen Gets Less Predictable She’s Getting Back to Normal (BBG)
- Iran nuclear talks intensify as sides face tough issues (Reuters)
- Debunking $1.4 Trillion Europe Debt Myth in Post-Heta Age (BBG)
- “Bail-in is now the rule” - EU Finance Minister Noonan - Austrian bondholders today … international depositors tomorrow ... We urge readers to diversify deposit holdings and acquire allocated gold to protect their wealth during the next phase of the banking crisis.
- Goldman Employees Reaped $2 Billion From 2008 Options Last Year (BBG)
- On Bush turf, Obama blames immigration woes on Republicans (Reuters)
- Tougher Internet rules to hit cable, telecoms companies (Reuters)
- Russia's Gazprom says can exempt rebel-held areas from Ukraine gas contract (Reuters)
- Allianz Says Pimco Seeing ‘Substantially’ Lower Outflows (BBG)
- Merkel Faces Stepped-Up Dissent on Greek Bailout in Party (BBG)
- SEC Probes Companies’ Treatment of Whistleblowers (WSJ)
- 2-Year Trek From Turf to Table Delays Cheaper U.S. Beef (BBG)
- Turkish jets violate Greek air space (Kathimerini)
"I accepted this position, as I said at the time, to work side-by-side with Bill Gross, as economic counselor, doing the three things that I love: think, write and speak macro. My mission here is complete. I will continue doing the things I love in other spaces, possibly in the academic arena. PIMCO will always be Camelot in my heart."
At the start of Q4 2014, Appaloosa's David Tepper made a series of statements - dismissing Bill Gross as irrelevant (nope - turmoil caused by PIMCO unwinds roiled credit markets), calling the end of the bond bull market (nope - yields went on make lower and lower lows), and finally proclaiming that stocks were inexpensive and multiples not high. So, one wonders, if stocks were inexpensive and multiples not high, why did Appaloosa dump 40% of its US equity exposure in that quarter (only to end the quarter with even more exuberance proclaiming that stocks could rise another 10% in 2015)? It appears that when David Tepper says "buy", he means "buy... from me."
Remember the "great rotation"? Neither do we, because the bank that year after year coined the term to prepare investors for a renormalization of the economy as bond yields rise alongside stocks (something that happens in any normal, non-centrally planned banana world), that would be Bank of America for anyone confused, just reported that in the latest week, EPFR data showed inflows to all fixed income funds of $16.04 billion – the highest on record going back to at least 2008. On the "other side of the spectrum were stocks that had $5.52bn of outflows, down from a $1.62bn inflow in the prior week." And just like that, it's a bond-pickers' market, even as central banks trade with each other in various dark pools to keep global equities, and thus confidence, stable even as the capital tsuniami screams deflation for years to come.
If anyone is seeing a rate hike announcement on the imminent horizon, it sure isn't the exuberant buyers of today's 2 Year auction.
The Swiss National Bank just threw gasoline on Swiss F.I.RE. Expect to see combustive contagion in the Swiss banking, insurance and real estate giants as knock-on effects spread from so-called hedges
- Oil Drops Below $45; U.S. Stockpiles May Speed Collapse (BBG)
- Pound Drops as Traders Write Off Higher Rates on Inflation Slump (BBG)
- Oil prices down again as UAE defends holding production (Reuters)
- The Politics Behind the ECB's Threat to Cut Greece Funding (BBG)
- France dispatched thousands of police and military personnel to protect synagogues and Jewish schools, as the government warned of continued terror threats after three days of deadly violence (WSJ)
- Chinese Car Dealers Find Days of ‘Printing Money’ Ending (BBG)
- Gold Rises to Highest Since October as U.S. Rate Outlook Weighed (BBG)
- Divers retrieve crashed AirAsia jet's cockpit voice recorder (Reuters)