European bond markets, simply put, did not blink at anything this week (and Portugal spreads actually rallied) as the insanity of that segment of the market remains. Europe's high-yield credit market moves to near record low spreads (on rumors of an aggressive hedge fund squeeze). But all of this beggars belief as we see European stocks giving up their post-Putin gains and collapsing today on the good-news-is-bad-news from the US but much more critically the Gazprom threats (which smashed Germany's DAX red for 2014 and down around 2% today).
"If you're sick in Greece, you have an expiration date," is the cheery message from Greece. As WaPo reports, while economists proclaim Europe is turning the corner, a look across the still-bleak landscape, from Greece to Spain, Ireland to Portugal, suggests a painful aftermath, where the plight of millions of Europeans is worsening even as the financial crisis passes with public health being hit in the most troubled corners of the European Union. Greece is the hardest hit and while Greek Health Minister Adonis Georgiadis is attempting to create a fund to help the most acute cases, his concluding remarks are chillingly blunt, "illnesses like cancer are not considered urgent, unless you are in the final stages."
As the big questions surrounding the future of the Ukraine crisis persist, the countries neighboring the former communist nation, and especially the Baltic states which are members of NATO, are asking for safeguards should Russian ambitions end up just a little too big to be contained solely by the Ukraine. As a result, the WSJ reports, they are considering calling for a greater North Atlantic Treaty Organization presence in their countries “if the situation gets worse” in the Ukraine, Ojars Kalnins, the chairman of the foreign-affairs committee of the Latvian parliament, said Monday. Mr. Kalnins said that a worsening of the Ukraine crisis “such as an outright invasion” of areas outside Crimea would present a threat to all of Russia’s neighbors, including the Baltic states–which are members of NATO. Such an expanded conflict should be reason for NATO to “bring extra military support to the Baltic region as a safeguard.”
We were perhaps even more amused than our readers by our Friday headline "Stocks Close At New Record High On Russian Invasion, GDP Decline And Pending Home Sales Miss." It appears that today the market forgot to take its lithium, and is finally focusing on the Ukraine part of the headline, at least until 3:30 pm again when everything should once again be back to market ramp normal. As expected, the PMI data from China and Europe in February, was promptly ignored and it was all about Ukraine again, where Russia sternly refuses to yield to Western demands, forcing the shocked market to retreat lower, and sending Russian stocks lower by over 11%. This is happening even as Ukraine is sending Russian gas to European consumers as normal, gas transport monopoly Ukrtransgas said on Monday. "Ukrtransgas is carrying out all its obligations, fulfilling all agreements with Gazprom. The transit (via Ukraine to Europe) totalled 200 million cubic meters as of March 1," Ukrtransgas spokesman Maksim Belyavsky said. In other words, it can easily get worse should Russia indeed use its trump card.
While social unrest has been a thing that occurs "over there", the increasing visualization of people taking to the streets in the face of desperate economic situations amid an elite class of politicians, dictators, and tyrants is becoming clearer by the day. As the following chart shows, across 500 billion words in over 5.2 million books, the words "unemployment, "taxes", and "inequality" tend to correlate highly with "war". The 18th century saw these terms the most correlated and as the following chronology suggests, that is not a time to reflect gladly upon...
Overview of the events and data that will be of interest to investors.
The number of Americans that renounced their citizenship was 221 percent higher in 2013 than it was in 2012. That is a staggering figure, and it is symptomatic of a larger trend. In recent years, a lot of really good people with very deep roots in this country have made the difficult decision to say goodbye to the United States permanently. A few actually go to the trouble to renounce their citizenship, and that is mostly done for tax purposes. But most willingly choose to leave America for other reasons. Once upon a time, the United States was seen as "the land of opportunity" all over the globe and it seemed like everyone wanted to come here. But now that is all changing. As we have abandoned the principles that this country was founded upon, our economy has gone steadily downhill.
After Friday's surge fest on weaker than expected news - perhaps expecting a tapering of the taper despite everyone screaming from the rooftops the Fed will never adjust monetary policy based on snowfall levels - overnight the carry trade drifted lower and pulled the correlated US equity markets down with it. Why? Who knows - after Friday's choreographed performance it is once again clear there is no connection between newsflow, fundamentals and what various algos decide to do. So (lack of) reasons aside, following a mainly positive close in Asia which was simply catching up to the US exuberance from Friday, European equities have followed suit and traded higher from the get-go with the consumer goods sector leading the way after being boosted by Nestle and L'Oreal shares who were seen higher after reports that Nestle is looking at ways to reduce its USD 30bln stake in L'Oreal. The tech sector is also seeing outperformance following reports that Nokia and HTC have signed a patent and technology pact; all patent litigation between companies is dismissed. Elsewhere, the utilities sector is being put under pressure after reports that UK Energy Secretary Ed Davey urged industry watchdog Ofgem to examine the profits being made by the big six energy companies through supplying gas, saying that Centrica's British Gas arm is too profitable.
Although there are no policy making meetings, central banks will still dominate the agenda in the week ahead.
It’s now clear that the spate of positive economic data coming out of Europe prior to the German Federal Election in September 2013 was just political gaming to get Angela Merkel back into office.
Even before the new myRA program was announced, there had been whispers about the need for the US government to assume some risk for US retirement accounts. That's code for forced conversion of private retirement assets into government bonds. As bad as it is to deceive naïve Americans into trading their hard-earned retirement savings for garbage (i.e., Treasury securities), the myRA program potentially represents something far worse... the first step toward the nationalization of existing private retirement accounts.
- Goldman to Fidelity Call for Calm After Global Stock Wipeout (BBG)
- Turnabout on Global Outlook Darkens Investor Mood (Hilsenrath)
- EU Said to Weigh Extending Greek Loans to 50 Years (BBG)
- Second Storm Hitting Northeast Halts Planes, Schools (BBG)
- Small Banks Face TARP Hit (WSJ)
- As Sony prepares PCs exit, pressure mounts for reboot on TVs (Reuters)
- IBM Uses Dutch Tax Haven to Boost Profits as Sales Slide (BBG)
- ECB faces dilemma with inflation drop (FT)
- London Subway Strike Snarls Traffic as Union Opposes Cuts (BBG)
In order to understand what solutions to our energy predicament will or won’t work, it is necessary to understand the true nature of our energy predicament. Most solutions fail because analysts assume that the nature of our energy problem is quite different from what it really is. Analysts assume that our problem is a slowly developing long-term problem, when in fact, it is a problem that is at our door step right now.
A story that won't go away: The German central bank 'proposing' an emergency "capital levy" in "conditions of extraordinary national crisis."