Sun King

The Writing Is On The Wall (Again)

Yesterday, the S&P 500 hit a new all-time high. And the Dow just hit a new record close as well. If you haven’t sold yet, dear reader, this may be one of the best times ever to do so.

European Stocks Jump As Inflation Disappoints, US Futures Flat Ahead Of Yellen Speech

It is only logical that a day after the S&P500 surged, hitting Goldman's 2016 target of 2,100 more than a year early because the US manufacturing sector entered into a recession, that Europe would follow and when Eurostat reported an hour ago that European headline inflation of 0.1% missed expectations of a modest 0.2% increase (core rising 0.9% vs Exp. 1.1%), European stocks predictably surged not on any improvement to fundamentals of course, but simply because the EURUSD stumbled once more, sliding by 40 pips to a session low below the 1.06 level.

A Game Of Euro Chicken From The German Perspective: "Playing Until the Germans Lose Their Nerve"

"The next stage in the crisis will be blatant blackmail....

With their refusal to accept money from the bailout fund to recapitalize their banks, the Spanish are not far from causing the entire system to explode. They clearly figure that the Germans will lose their nerve and agree to rehabilitate their banks for them without demanding any guarantee in return that things will take a lasting turn for the better."

The Sun Chairman, What's Future Is Prologue, And Why The Second French Revolution Is Coming To America

For our closing post of the day we once open the floor to Sean Corrigan who proves that just when we thought all historical comparisons to the current deplorable economic miasma have been used up, a new one springs up, this time perhaps the one most indicative not so much of the past but of the future. Indeed, if history is any indication, and it is, America's catastrophic and untenable position is worse than even that of one Louis XIV, better known as "The Sun King", whose rule set the stage for the downfall of the French monarchy and which ultimately culminated with the French Revolution of 1789. For arguably the best indication of historical parallels to the present, and yet another confirmation that there really is nothing new in this world, especially in the world of central planning of monetary affairs, we present the following summary of the practices of Louis XIV which is verbatim applicable to the actions of the current central planning cartel: "The administration of the finances appears to have practised a subtle and ingenious tactic… [and] by modifications in the monetary unit, attempted to influence economic phenomena. Changes… were made to prepare for the issue of loans or to audit the circulation of the treasury notes, or to regulate exchange, to modify the balance of trade… to effect a redistribution of wealth, to influence the price level of commodities, perhaps to attenuate economic crises and famines…" It may come as a surprise to some that the very same type of central planning that Bernanke, and his central banking brethren, are trying to inflict (and failing) upon the world, was the same that was attempted on so many occasions in history, most poignantly, and catastrophically in the late stages of the French monarchy. And unfortunately, that's just the beginning of the parallels...

Why Dylan Grice's Commodities "Pair Trade" Is Irrelevant During Times Of Central Planning And Failed Market Efficiency

Some time ago, SocGen's Dylan Grice wrote an extended essay which could be synthesized in the following line: "to be 'long commodities is to be short human ingenuity'." Many took this statement as a sign of capitulation from the otherwise highly skeptical Grice, who not once has criticized the current financial and economic status quo.  Last week, as Zero Hedge pointed out, Grice made the effort to clear up any confusion about why gold is not and was never meant to be included under this broad umbrella defintion: "although I've said I'm not a fan of plain commodities as investment vehicles because buying commodities was equivalent to selling human ingenuity, I exclude gold from that logic. I prefer to see buying gold as buying into the stupidity of governments, policy-makers and economists, and I'm comfortable doing that." Then over the last few days, Diapason Securities' Sean Corrigan, took a turn at also deconstruction the corollary to the Grice "pair trade" adding the key qualifier: "while Mr. Grice is right in so far as he goes, he has only stated half the case. The true dictum is that 'to be long commodities is to be short human ingenuity but also to be long political stupidity and avarice.'" What has gotten Corrigan so riled up? Why the same underlying premise that makes all those who once had a fascination with the stock market, deride and ridicule it: namely the fact that in doing all he can to flip reality by 180 degrees, Ben Bernanke has completely destroyed the core principle of capital markets: price formation by way of proper information content, i.e. "the free market [must] be allowed to work its magic and that price formation not be deprived of much of its crucial informational content by our dysfunctional monetary and, hence, corrupted financial systems." Sadly, free markets are now only a topic best left to the history books, and as such any idealistic perspective on commodities and the like must take this key persistent variation from the mean into account.

German Economic Contraction Begins As Both Mfg And Services PMI Prints Miss Expectations

Another reason why Angela Merkel is furiously contemplated just how to kill the EUR next, was this morning's German manufacturing PMI which came at a far wear weaker than expected 55.3 (on expectations of 57.6). Same thing with the services PMI which missed a consensus reading of 57.0 to land at 54.6. Even Goldman's Dirk Schumacher who has long been screeching about the imminent second coming of the Sun King who will make all things well, is starting to realize that in the central bank FX game, economic outlooks now change intervention to intervention.