Poland

With no major macro news on today's docket, it is a day of continuing reflection of Friday's abysmal jobs report, which for now has hammered the USDJPY carry first and foremost, a pair which is now down 170 pips from the 105 level seen on Friday, which in turn is putting pressure on global equities. As DB summarizes, everyone "knows" that Friday's US December employment report had a sizeable weather impact but no-one can quite grasp how much or why it didn't show up in other reports. Given that parts of the US were colder than Mars last week one would have to think a few people might have struggled to get to work this month too. So we could be in for another difficult to decipher report at the start of February. Will the Fed look through the distortions? It’s fair to say that equities just about saw the report as good news (S&P 500 +0.23%) probably due to it increasing the possibility in a pause in tapering at the end of the month. However if the equity market was content the bond market was ecstatic with 10 year USTs rallying 11bps. The price action suggests the market was looking for a pretty strong print.

The word “violence” comes with numerous negative connotations. We believe this is due to the fact that in most cases violence is used by the worst of men to get what they want from the weak. Meeting violence with violence, though, is often the only way to stop such abuses from continuing. We tend to discuss measures of non-participation (not non-aggression) because all resistance requires self-sustainability. Americans cannot fight the criminal establishment if they rely on the criminal establishment. Independence is more about providing one's own necessities than it is about pulling a trigger.

2013 already saw violent unrest in some of the most stable countries in the world like Singapore and Sweden, all underpinned by absolute disgust for the status quo. Whether today or tomorrow, this year or next, there will be a reckoning. The system is far too broken to repair, it must be reset. It’s simply absurd to look at the situation objectively and presume this status quo can continue indefinitely... that this time is different… that we’re somehow special and immune to universal principles.

The fifth anniversary of Zero Hedge is just around the corner, and so, for the fifth year in a row we continue our tradition of summarizing what you, our readers, found to be the most relevant, exciting, and actionable news of the year, determined objectively by the number of page views. Those eager for a brief stroll down memory lane of prior years can do so at their leisure, by going back in time to our top articles of 2009, 2010, 2011 and 2012. For everyone else, without further ado, these are the articles that readers found to be the most popular posts of the past 365 days...

Sir Halford Mackinder’s 1904 speach in which he outlined his “Heartland Theory” was a founding moment for geo-politics. He argued that control of the Eurasian landmass (Europe, Asia and the Middle East), which contained the bulk of the world’s population and natural resources, was the major geo-political prize. As time passed, energy (first crude oil then natural gas), became increasingly integral to this concept and its strategic significance cannot be overstated. Remarkably, Mackinder’s theory has remained equally valid, if not more so, in the modern era - although key “pivot areas” for exercising control have evolved. In addition to Central Asia and Trans-Caucasus in Mackinder’s day, the oil producing nations of the Middle East took on increasing importance in the “New Great Game”. We see a “New New Great Game” emerging.

The US Senate moves toward the confirmation of Janet Yellen, now posited for next January 6th, as chair of the Federal Reserve System. Let us in this moment of recess reflect on eerily similar observations by two of history’s most transformational figures:  John Maynard Keynes and Nicolas Copernicus. One of Keynes’s most often-cited observations, from his 1919 The Economic Consequences of the Peace, chapter VI, contains an indictment of policies very like those which the Federal Reserve System has been implementing for the past dozen, and more, years.  These policies in slow motion are at the root of  the very political, social, and cultural dysphoria — uneasiness or generalized dissatisfaction — predicted by Keynes.

Overnight one of the main stories is that the European Union has been downgraded to AA+ from AAA by S&P. While the market digests the impact of the downgrade, all eyes remain on the US treasury market. As Deutsche Bank notes, treasuries are increasingly being viewed as a potential sign of the success or not of the Fed taper in early 2014. From the lows in the immediate aftermath of Wednesday’s FOMC, 10yr UST yields have added more than 10bp. Yields continue to leak this morning (-2bp to 2.95%) though we’re still hovering at levels last seen in early September just before the Fed surprised markets with its non-taper. Despite this, US equities and credit were both reasonably well supported yesterday. However the combination of higher UST yields and a stronger dollar resulted in a fairly difficult day for EM. In EMFX, the Brazilian Real fell 1.1% against the USD, underperforming most other EM currencies. The move was exacerbated by the announcement from the BCB that it would wind back its intervention in the currency market, following the initial positive reaction to tapering on Wednesday. Other EM currencies also struggled including the TRY (-0.7%), MXN (-0.7%) and IDR (-0.3%). A number of EM equity markets struggled including in Poland (-0.7%) and Turkey (-3.5%).

2013 was a year when Europe tried to reallign its primary source of natgas energy, from Gazpromia to Qatar, and failed. More importantly, it was a year in which Russia's Vladimir Putin undisputedly won every foreign relations conflict that involved Russian national interests, to the sheer humiliation of both John Kerry and Francois Hollande. However, it seems the former KGB spy had a Plan B in case things escalated out of control, one that fits with what we wrote a few days ago when we reported that "Russia casually announces it will use nukes if attacked." Namely, as Bloomberg reports citing Bild, Russia quietly stationed a double-digit number of SS-26 Stone, aka Iskander, tactical, nuclear-capable short-range missiles near the Polish border in a dramatic escalation to merely verbal threats issued as recently as a year ago.

If one was to believe the picture that most Western media outlets are painting, Ukraine has been lost to Russia. Though the country fought valiantly to sign an Association Agreement with the European Union in Vilnius, Lithuania last month, President Viktor Yanukovych suspended negotiations with the EU at the last possible moment, betraying Ukrainians everywhere. Two recent energy deals that Ukraine has reportedly made, one with Russia and the other with Slovakia, however, show that the reality of the situation is slightly more complex.

The US data flow is relatively light which is typical of a post-payrolls week but it’s worth noting wholesale inventories on Tuesday and retail sales on Thursday. Importantly US House and senate negotiators are supposed to come to an agreement on a budget before the December 13th deadline. A lot of optimism has been expressed thus far from members of congress, and there are reports that a budget deal will be unveiled this week.

Everywhere you look these days, central planning just can't stop reaping failure after failure. First it was Japan's Q3 GDP rising just 1.1%, well below the 1.9% in the previous quarter and the 1.6% expected, while the Japanese current account posted its first decline since of €128 billion (on expectations of a JPY149 billion increase) since January. What's worse, according to Asahi, Abe's approval rating tumbled to 46% in the current week, down from the low 60s as soon as early 2013, while a former BOJ member and current head of Japan rates and currency research, Tohru Sasaki, said that the high flying days of the USDJPY (and plunging of the JPY respectively) is over, and the USDJPY is likely to slide back to 100 because the BOJ would not be able to expand monetary easing by enough to repeat this year's "success." He definitely uses that last word rather loosely.

Previewing the rest of this week’s events, we have a bumper week of US data over the next five days, in part making up for two days of blackout last week for Thanksgiving. Aside from Friday’s nonfarm payroll report, the key releases to look for are manufacturing ISM and construction spending (today), unit motor vehicle sales (tomorrow), non-manufacturing ISM (Wednesday), preliminary Q3 real GDP and initial jobless claims (Thursday), as well as personal income/consumption and consumer sentiment (Friday). Wednesday’s ADP employment report will, as usual, provide a preamble for Friday’s payrolls.

In addition to its three previously announced so far "Top Trades" for 2014 (see here, here and here), just over an hour ago Goldman revealed its fourth top recommendation to clients. To wit: Goldman is selling China equities (via the HSCWI Index), while buying copper (via Dec 2014 futs), or at least advising its flow clients to do the opposite while admitting that "for the long China equity/short commodity pair trade to “work” best, these two assets, which are usually positively correlated, will have to move in opposite directions." For that and many other reasons why betting on a divergence of two very closely correlating assets will lead to suffering, read on. Finally - do as Goldman says, or as it does? That is the eternal question, one whose answer is a tad more problematic since the author in this case is not Tom Stolper but Noah Weisberger.

Governments ADMIT They Carry Out False Flag Terror

The following Top Ten Market Themes, represent the broad list of macro themes from Goldman Sachs' economic outlook that they think will dominate markets in 2014.

1. Showtime for the US/DM Recovery
2. Forward guidance harder in an above-trend world
3. Earn the DM equity risk premium, hedge the risk
4. Good carry, bad carry
5. The race to the exit kicks off
6. Decision time for the ‘high-flyers’
7. Still not your older brother’s EM...
8. ...but EM differentiation to continue
9. Commodity downside risks grow
10. Stable China may be good enough

They summarize their positive growth expectations: if and when the period of stability will give way to bigger directional moves largely depends on how re-accelerating growth forces the hands of central banks to move ahead of everybody else. And, in practice, that boils down to the question of whether the Fed will be able to prevent the short end from selling off; i.e. it's all about the Fed.