Remember the post-tax-reform, pre-Christmas spike in yields and the yield curve? Yeah, that's all over now!!!!
Treasury yields are down 4 days in a row with a major collapse occurring today as the long-end plunges over 8bps - the most in 3 months. The 2s30s yield curve is down over 8bps - the biggest-single-day flattening since Brexit (June 2016)...
This is the biggest 4-day drop in 30Y yields since February.
Notably 10Y yields dropped back below 2.4% (YTD unch)...
The yield curve is crashing...
The biggest 1 day flattenig since Brexit...
All of which is fascinating given that net spec positioning is near record long the long-end...
2017 has been a banner year for the world’s richest individuals.
Pumped by a tidal wave of central-bank driven liquidity and corporate buybacks, equity indexes around the world climbed to all-time highs this year – a phenomenon that has disproportionately benefited the world’s wealthiest, particularly the 500 individuals included in Bloomberg’s billionaires index.
By the end of trading Tuesday, Dec. 26, the 500 billionaires controlled an aggregate $5.3 trillion, a $1.1 trillion increase from their holdings on Dec. 27 2016.
Unsurprisingly, the biggest beneficiary of this Federal Reserve inspired rally was Amazon.com Inc. founder Jeff Bezos, who added a staggering $34.2 billion to his net worth in 2017 as Amazon shares soared above $1,000.
After announcing in October that his family office had given $18 billion to his Open Society Foundations over the past several years (Masking an elaborate tax dodge under the guise of altruism), Soros slipped to No. 195 on Bloomberg’s ranking, with a net worth of $8 billion.
Bezos notably knocked Microsoft Corp. co-founder Bill Gates out of his spot as the world’s richest person in October – a position that Gates had held since May 2013. Notably, Gates has been donating much of his fortune to charity, including a $4.6 billion pledge he made the Bill & Melinda Gates Foundation in August. Bezos, whose net worth topped $100 billion at the end of November, currently has a net worth of $99.6 billion compared with $91.3 billion for Gates.
Over the past week we have shown on several occasions that there once again appears to be a sharp, sudden dollar-funding liquidity strain in global markets, manifesting itself in a dramatic widening in FX basis swaps, which - in this particular case - has flowed through in the forward discount for USDJPY spiking from around 0.04 yen to around 0.23 yen overnight. As Bloomberg speculated, this discount for buying yen at future dates widened sharply as non-U.S. banks, which typically buy dollars now with sell-back contracts at a future date, scrambled to procure greenbacks for the year-end.
However, as Deutsche Bank's Masao Muraki explains, this particular dollar funding shortage is more than just the traditional year-end window dressing or some secret bank funding panic.
Instead, the DB strategist observes that the USD funding costs for Japanese insurers and banks to invest in US Treasuries - which have surged reaching a post-financial-crisis high of 2.35% on 15 Dec - are determined by three things, namely (1) the difference in US and Japanese risk-free rates (OIS), (2) the difference in US and Japanese interbank risk premiums (Libor-OIS), and (3) basis swaps, which illustrate the imbalance in currency-hedged US and Japanese investments.
In this particular case, widening of (1) as a result of Fed rate hikes and tightening of dollar funding conditions inside the US (2) and outside the US (3) have occurred simultaneously. This is shown in the chart below.
As Israeli police conclude their corruption investigation of Prime Minister Benjamin Netanyahu, former advisor to the force, Lior Chorev, says the indictments to follow will be "earth-shattering" and will result in early elections - possibly as soon as May 2018, which would end the political career of the longest-serving Israeli leader since founding father David Ben-Gurion.
Israeli Prime Minister Benjamin Netanyahu (photo credit: AMIR COHEN/REUTERS)
Chorev, who resigned last month under pressure from Netanyahu's allies, told The Jerusalem Post “When they [the recommendations] will be announced, they will have information such as the specific charges and a complete list of the people involved,” he said, adding “Netanyahu is not running a campaign for his innocence but a campaign to keep the coalition intact. It is a political campaign, not a legal one, and so far he is succeeding. He is keeping his coalition in one piece despite very complicated investigations.”
The indictment recommendations will bear "a lot of information that we didn't know - and it will cause an earthquake here."
While police recommendations in Israel aren't binding, and prosecutors can choose to proceed with indictments, an official recommendation to indict would turn Israel's political landscape on its head. Netanyahu has been questioned seven times by investigators in connection with two corruption cases.In the first, he's suspected of receiving tens of thousands of dollars worth of cigars and champagne from wealthy friends. In the other case, Netanyahu is accused of offering to pass legislation favorable to a newspaper publisher in exchange for...
When you see something titled “Bitcoin 2018 Predictions”, you are probably most interested in just one thing: “Where will it go?” So let’s start there, but then add some other observations on a variety of topics.#1: We expect bitcoin will trade for between $6,470 and $21,600.
Here’s how we get there:
After yesterday's ugly, tailing 2-Year auction, it is probably not a big surprise that today's sale of $34 billion in 5Y Treasurys was just as ugly.
The auction printed at a high yield of 2.245% - the highest since March 2011 - and well above last month's 2.066% largely thank to the recent Fed rate hike. More troubling is that the auction tailed the When Issued 2.228% by a whopping 1.7bps, the biggest tail going back at least 2 years.
The internals were also lousy, with the Bid to Cover sliding from 2.46 in November to just 2.36, the lowest since June and well below the 6 month average of 2.49. And, just like yesterday's 2Y auction, the bidside demand tumbled, with Indirects awarded only 58.4% of the final allotment, the lowest since April, and below the 66.8% 6 month average, Directs left with 7.9%, also below the 6 month auction average of 9.7%, leading to the biggest Dealer award since April, at 33.7%, 50% higher than November's 22.8%, and well above the 6 month average of 23.4%.
What is strange is that today's ugly auction priced amid a backdrop of a relentless bid for longer-dated paper, and certainly 5Y, and not even the ugly auction did much to unsettle the yield on 5Y paper which had dipped to the lowest in a week ahead of the results, and has barely budged higher after the print.
An All Nippon Airways flight en route from Los Angeles to Tokyo was forced to turn around four hours into the eleven hour journey to remove an "unauthorized person" from the flight, angering passengers who were told by the airline that passenger had a ticket for another airline.
A twitter user claiming to have been on board flight ANA 175 said that four people were questioned and detained; "1 Muslim,2 white, and 1 asian lady."
Police said the massive U-turn was due to a "mix up, and was straightened out," according to ABC7, and that the flight has been rescheduled to depart Wednesday morning.
Model Christine Teigen was aboard and documented the incident over Twitter.
a flying first for me: 4 hours into an 11 hour flight and we are turning around because we have a passenger who isn’t supposed to be on this plane. Why...why do we all gotta go back, I do not know
— christine teigen (@chrissyteigen) December 27, 2017
.@chrissyteigen is on an international flight that turned around 4 hours in because a passenger isn’t supposed to be on plane. Look at this flight path! This is my Twilight Zone. pic.twitter.com/II06VmfOah
— Jensen Karp (@JensenClan88) December 27, 2017
Police were interviewing people seated near the mystery passenger, according to Teigen.
Police were interviewing all the people seated around the mystery person once we got off the plane. Why would they do this! I MUST...
When Janet Yellen spoke at her regular press conference following the FOMC decision in September 2017 to begin reducing the Fed’s balance sheet, the Chairman was forced to acknowledge that while the unemployment rate was well below what the central bank’s models view as inflationary it hadn’t yet shown up in the PCE Deflator.
Of course, this was nothing new since policymakers had been expecting accelerating inflation since 2014.
In the interim, they have tried very hard to stretch the meaning of the word “transitory” into utter meaninglessness; as in supposedly non-economic factors are to blame for this consumer price disparity, but once they naturally dissipate all will be as predicted according to their mandate.
That is, actually, exactly what Ms. Yellen said in September, unusually coloring her assessment some details as to those “transitory” issues:
For quite some time, inflation has been running below the Committee’s 2 percent longer-run objective. However, we believe this year’s shortfall in inflation primarily reflects developments that are largely unrelated to broader economic conditions. For example, one-off reductions earlier this year in certain categories of prices, such as wireless telephone services, are currently holding down inflation, but these effects should be transitory. Such developments are not uncommon and, as long as inflation expectations remain reasonably well anchored, are not of great concern from a policy perspective because their effects fade away.
Appealing to Verizon’s reluctant...
Russia's defense ministry has announced it is now in the process of establishing two permanent military bases in war-torn Syria after President Putin authorized prior deals with the Syrian government to move forward. Though Russia maintains merely up to ten military bases on foreign soil, the installations in Tartus and Khmeimim will be the most strategically located, allowing for a growing and permanent Russian presence on the Mediterranean, something which has already raised eyebrows in the West.
Though Putin formally announced the planned withdrawal of Russian forces from active operations in Syria in early December, there were parallel plans going back to at least early summer to maintain a smaller permanent presence based on an agreement with the Damascus government to host Russian forces for at least 49 more years, which includes the option of being prolonged further. Personnel and military hardware will be stationed at permanent Russian bases in Tartus and Khmeimim - both of which are on or near the Mediterranean.
Satellite image of Russia's facility at Tartus Navy docks. Left: (Source: WikiMapia); Right: (Source: GoogleMaps)
According to Russian media reports, Defense Minister Sergey Shoigu stated at a ministry meeting on Tuesday, “We have started the process of formation of our permanent forces [in Syria]." Though Tartus has operated as a Russian naval port since 1971 (referred to as a Material-Technical Support Point and not a "base") and was until recently minimally staffed mostly by civilian contractors, it will reportedly undergo a massive transformation and expansion, which is to...
The original wizard of Wall Street, W.D Gann was a finance trader and wealthy speculator that spent decades investigating cyclical trends in equity market patterns and found that prices could be predicted long in advance. He successfully predicted the crashes in the 1929 and Dot-Com stock market bubbles. And according to his analysis, the US stock market is due for another crash in 2020.
Every movement in the market is the result of a natural law and of a Cause which exists long before the Effect takes place and can be determined years in advance. The future is but a repetition of the past, as the Bible plainly states…
After suffering through the worst economic and financial crisis since the 1930s depression when the real estate and stock markets crashed in 2007, the United States’ bubble economy is back into full swing. Residential and commercial real estate prices are growing strongly, along with equities.
The US stock market, as defined by the S&P500 index, has boomed after collapsing to a trough in 2009. The market ‘recovered’ more quickly than anyone thought it would, and has continued surging from thereon in.
This has led to a lot of commentary and media coverage that the S&P500 is in the thrall of yet another bubble that will burst. Despite the many predictions of collapse, the bubble has powered on unhindered.
By the SRSrocco Report,
While the U.S. Shale Energy Industry continues to borrow money to produce uneconomical oil and gas, there is another important phenomenon that is not understood by the analyst community. The critical factor overlooked by the media is the fact that the U.S. shale industry is swindling and stealing energy from other areas to stay alive. Let me explain.
First, let's take a look at some interesting graphs done by the Bloomberg Gadfly. The first chart below shows how the U.S. shale industry continues to burn through investor cash regardless of $100 or $50 oil prices:
The chart above shows the negative free cash flow for 33 shale-weighted E&P companies. Even at $100 oil prices in 2012 and 2013, these companies spent more money producing shale energy in the top four U.S. shale fields than they made from operations. While costs to produce shale oil and gas came down in 2015 and 2016 (due to lower energy input prices), these companies still spent more money than they made. As we can see, the Permian basin (in black) gets the first place award for losing the most money in the group.
Now, burning through investor money to produce low-quality, subpar oil is only part of the story. The shale energy companies utilized another tactic to bring in additional funds from the POOR SLOBS in the retail investment community... it's called equity issuance. This next chart reveals the...
After a team of forensic experts ruled in September that the 2015 shooting death of Argentine prosecutor Alberto Nisman was, indeed, murder – not suicide as the authorities had initially ruled – a federal judge has validated those findings in a lengthy ruling that seems to point the finger at former Argentine President Cristina Fernandez de Kirchner.
The ruling is the latest blow to Fernandez, who won her bid for a senate seat in October. Though Fernandez has publicly said her decision to run is part of a political comeback, others have speculated that she ran for her senate seat to help insulate herself from accusations of money laundering and corruption, as well as her suspected work to cover up Iran’s role in financing the 1994 bombing of a Jewish community center in Buenos Aires - a bombing that killed 85 people.
Years later, Nisman was assigned to investigate a possible cover-up of Iranian officials’ role in the bombing. But he was found dead of a gunshot wound to the head in January 2015, hours before he was due to testify against former President Fernandez The ruling comes after a prosecutor recommended last year that the case be investigated as a murder.
In another stunning decision, Tuesday’s ruling by the Argentine judge also charged that Diego Lagomarsino, a former employee of Nisman’s, was an accessory to his murder, after a gun owned by Lagomarsino was found near Nisman’s body, as Reuters...
It is clear stocks are in a massive bubble based on their Price to Sale (P/S valuation).
What about the economy?
Warren Buffett once famously stated that his favorite means of valuing stock was the stock market capitalization to GDP ratio.
Below is a chart for this metric. As you can see, the stock market today is as overvalued relative to the economy as it was at the peak of the 1999 Tech Mania.
So stocks are overvalued based on the most reliable corporate data point (revenues) and they are also overvalued relative to the economy. Scratch that, they’re not overvalued… they’re trading at 1999-Tech Bubble insanity levels.
We all remember what came after that...
What's coming will take time for this to unfold, but as I recently told clients of my Private Wealth Advisory report, we're currently in "late 2007" for the coming crisis. However, there is one main difference between 1999 and today...
Namely, that the Fed has been INTENTIONALLY creating bubbles for nearly 20 years today... and it's out of more senior asset classes to use!
Let me explain...
The late ‘90s was the Tech Bubble.
When that burst in the mid-‘00s, the Fed created a bubble in housing.
When that burst in ’08 the Fed created a bubble in US sovereign bonds or Treasuries.
And because these bonds are the bedrock of the US financial system, the “risk-free rate” of return against which ALL risk assets are valued, when the Fed did this it created a...
Traders are dumping equity protection and buting chaos protection as VIX tumbles near the year's lows and Gold jumps back towards its 100-day moving average - and its highest level in a month.
Gold is up 9 of the last 10 days, at its highest since early Dec and testing its 100DMA... ($1292)
And while Bitcoin has stabilized, the divergence between the alt-currencies is closing...
One thing is for sure, when Dr.Copper's price is falling, the silence from prognosticators is deafening; but when it's rising it is the greatest indication of the global growth narrative the world has ever known. However, there's a hole in that story...
LME Copper prices are up for 9 straight days - the longest wining streak since 2004 - (and 13 of the last 14 days) pushing prcies above $7,200 intraday - the highest since 2014...
And given copper's rip higher relative to gold, based on DoubleLine's Jeff Gundlach's favorite chart, 10Y yields should be drastically higher to reflect this implied growthiness...
There's just one problem with this whole narrative - it's not a desperate demand pull from rapidly growing economies that is charging prices higher... its a collapse in supply...
As Bloomberg reports, China ordered its top producer to halt output to combat winter pollution...
The advance in 2017 has been backstopped by supply disruptions just as the outlook for global growth improves and investors and miners target potential new uses, including in electric vehicles. The world’s largest producer, Chile’s Codelco, has forecast that prices may test record highs above $10,000, while UBS Group AG’s wealth management unit on Wednesday predicted further gains.
“Supply cuts are set to boost prices in the short term, while further upside beyond $7,200 before the Lunar New Year might be limited,” Pu Honggang, an analyst with ITG Futures Ltd., said from Xiamen, referring...
A week after Russian President Putin thanked US President Trump and the CIA for their warnings about a possible terror attack in St.Petersburg, TASS reports that an explosion in a storage locker in a busy supermarket in St. Petersburg has left 10 injured and dozens more evacuated.
— ????? ????? ??????? (@5tv) December 27, 2017
The explosion occurred on Wednesday evening in the Perekrestok store in the shopping center on Kondratyevsky Avenue in the northern part of St. Petersburg. As reported by TASS in the main department of the Ministry for Emergency Situations in St. Petersburg and the Leningrad region, the place is pulled by the operational forces, the evacuation of the building has already been carried out.
"There was a clap in the building, the rescuers are already working on the spot, the evacuation is made, there is no fire," the administration said.
The strength of the explosion is unknown.
Live Feed from the area of the explosion...
According to a source in the emergency services, ten people were injured.
"The explosion of an unidentified device occurred in the entertainment complex" Giant Hall "on the ground floor in the area of the cells of the store" Perekrestok "(without ignition)," the source said.
According to preliminary information, four people have already...
In yet another galling example of historical revisionism put into practice, the Guardian reported Tuesday that thousands of documents from the National Archives have gone missing in recent years – and some may have been deliberately destroyed by civil servants hoping to purge unflattering details about the UK's abuses of power from the historical record.
Per the Guardian:
Thousands of government papers detailing some of the most controversial episodes in 20th-century British history have vanished after civil servants removed them from the country’s National Archives and then reported them as lost.
Documents concerning the Falklands war, Northern Ireland’s Troubles and the infamous Zinoviev letter – in which MI6 officers plotted to bring about the downfall of the first Labour government - are all said to have been misplaced.
Other missing files concern the British colonial administration in Palestine, tests on polio vaccines and long-running territorial disputes between the UK and Argentina.
Almost 1,000 files, each thought to contain dozens of papers, are affected. In most instances the entire file is said to have been mislaid after being removed from public view at the archives and taken back to Whitehall.
The controversy echos another incident from 2013 when a Guardian investigation found that the Foreign Office was storing documents that shed light on the brutality of colonialism from the in a secret bunker, where they would be safe from the public’s prying eyes. According to public records, many of the files that have gone missing this time around were “loaned out”...