iftttwall

As Deutsche Bank kindly reminds us today, on Monday it will be exactly 5 years since the Fed made the historic move to drive interest rates to zero (well, 0-0.25%) where they have remained ever since. In the same announcement the Fed reaffirmed its commitment to purchase large quantities of agency debt and mortgage-backed securities, a policy that after numerous changes also continues to this day.

The chart below shows the total returns of different global assets over this “unique five-year period” of ZIRP. It’s fair to say that the Fed have created a marvellous environment for virtually all assets even if this remains one of the weakest economic recoveries on record in the US and through virtually all of the DM world.

Deutsche Bank adds:

Only Greek equities (-24%) in our sample have seen negative returns. The standout asset class over the past 5 years has been high-yield corporate bonds, with total returns in Europe of 151% and in the US of 142%. We did a back of the envelope calculation to work out where European HY yields would have to go to see returns of 150% over the next 5 years. The answer was around -47% – although we’d warn you that the calculation did break our computer and it is very dependent on the path of yields. Anyway, it’s not going to happen so no need to get bogged down in the calculations. DM and EM equity has also performed strongly with the US leading the way. The S&P 500 has returned 120% compared to the MSCI EM return of 103% (albeit increasingly under-performing DM over the last couple of years). European equities have lagged (but are catching back up) given the sovereign crisis. Core markets have still seen strong returns though with the FTSE and the DAX both up more than 90% whilst most peripheral markets have still seen positive returns with Spain’s IBEX (+37%) and Italy’s MIB (+12%) higher. Nevertheless the peripherals have under-performed with Greek equities still negative as discussed at the top. Commodities have also performed well over the 5-year period but with most of the returns front-loaded in the first half of the period. Overall copper (+145%) is leading the way with gold something of a middling performer up +47% after a fairly sharp decline from the peak.

 

Within the DM fixed income universe, HY has been followed (in order of performance) by Fin Sub Debt (around +70%), IG and Fin Sen Corporate Debt (+50%) and finally government bonds (Gilts +34%, Bunds +23% and Treasuries +12%).

DB’s conclusion: “When you see the scale of returns seen in these assets it’s hard to imagine that withdrawing QE or ZIRP will be particularly easy for assets.” Which is perhaps why withdrawing QE or ZIRP will never happen voluntarily.

via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/NspMbXpnJtM/story01.htm Tyler Durden

• Presidential Task Force Recommends Overhaul of NSA Surveillance Tactics (WSJ)
• Monte Paschi’s Largest Shareholder Says It Will Vote Against $4.1 Billion Capital Increase (WSJ)
• SAC Reconsiders Industry Relationships—and Its Name (WSJ)
• Icahn’s Apple Push Criticized by Calpers as ‘Johnny Come Lately’  (BBG)
• In Yemen, al Qaeda gains sympathy amid U.S. drone strikes (Reuters)
• Missing American in Iran was on unapproved mission (AP)
• In China, Western Companies Cut Jobs as Growth Ebbs (WSJ)
• U.S. lays out steps to smooth Obamacare coverage for January (Reuters)
• Las Vegas Sands Said to Drop $35 Billion Spanish Casino Proposal (BBG)
• Twitter Reverts Changes To Blocking Functionality After Strong Negative User Feedback (TechCrunch)
• U.S. Video-Game Hardware Sales Rise on New Consoles (BBG)
• Stolper makes Bloomberg: Goldman Sachs Goes Against Consensus in Dollar Call (BBG)
• Chinese men try to steal U.S. seed technology (Reuters)

 

Overnight Media Digest

WSJ

* A presidential task force has drafted recommendations that constitute a sweeping overhaul of the National Security Agency, according to people familiar with the recommendations. The panel’s draft proposals would change the spy agency’s leadership from military to civilian and limit how it gathers and holds the electronic information of Americans.

* Airplanes are unlikely to be filled with passengers talking on cellphones anytime soon, after the Obama administration signaled it would keep a ban on calls in place.

* Major wireless carriers committed on Thursday to allowing consumers to keep their cellphones when they switch providers, in a voluntary move backed by federal regulators. AT&T Inc , Sprint Corp, T-Mobile USA Inc, U.S. Cellular Corp and Verizon Wireless signed on to the agreement, which requires carriers to “unlock” devices or ask manufacturers to do so within two days of receiving a consumer’s request.

* Facebook Inc’s Instagram app is launching a photo- and video-messaging service, soon after popular mobile app Snapchat spurned a $3 billion offer from the social network.

* Apple Inc’s major supplier Foxconn hasn’t reduced overtime hours at some of its factories to meet the legal requirement in China, the Fair Labor Association said in a report.

* Google Inc’s hopes of settling its high-profile antitrust case in the European Union suffered a setback as rivals and consumer groups blasted its latest proposal for resolving the EU’s competition concerns.

* Coca-Cola Co is shaking up its senior management, announcing late Thursday that its Americas chief is leaving. The sudden departure of Steve Cahillane, once viewed as a potential successor to Chief Executive Muhtar Kent, comes as the maker of Minute Maid orange juice, Powerade sports drinks and its namesake cola struggles to grow in its key U.S. market and faces slowing sales in Brazil and Mexico.

* A U.S. bankruptcy judge ruled Anadarko Petroleum Corp could be liable for at least $5 billion in a lawsuit over environmental and legal liabilities related to its 2006 acquisition of Kerr-McGee Corp.

* Jones Group Inc is nearing a deal to sell itself to private-equity firm Sycamore Partners, according to a person familiar with the matter, in a takeover that would value the footwear and apparel maker at roughly $1.2 billion.

* Americans spent more freely as the holiday shopping season opened, reflecting renewed consumer strength that could boost economic growth next year. Retail sales rose a seasonally adjusted 0.7 percent in November from October, marking the biggest gain since June, the Commerce Department said Thursday. The prior month’s gain was revised up to 0.6 percent from 0.4 percent.

* Netflix is trying to better understand your binge-viewing habits. The company on Friday will reveal a snapshot of a phenomenon that is reshaping TV culture-viewers devouring shows in long jags, episode after episode.

 

FT

German banking regulator Bafin has demanded documents from Deutsche Bank as part of a probe into suspected manipulation of benchmark gold and silver prices by banks, according to people familiar with the matter.

After a new contribution from JPMorgan Chase & Co, funds set up for victims of Bernard Madoff’s Ponzi scheme should recover almost three-quarters of the $17.5 billion of losses.

Bank of Japan Governor Haruhiko Kuroda said the central bank would keep its highly expansionary monetary policy in place until inflation hits and stabilises at its 2 percent target.

European financial watchdogs have warned of the “violent fluctuations in electronic currencies” consumers face by using virtual currencies such as Bitcoin, the price of which has fluctuated between $340 and $1,240 in the past week.

Tom Enders, chief executive of Europe’s largest aerospace company EADS, has warned that Europe will have to buy its next fighter jet from the U.S. or Asia if it does not invest in its own defence industry and allow sector consolidation.

An audit of operations at Foxconn Technology Group , best known for assembling Apple Inc’s iPhones, has found that workers still do more overtime than permitted by Chinese labour law.

 

NYT

* The United States Treasury called on Thursday for a greater federal role in the regulation of insurance, particularly in areas like mortgage insurance, the collection and use of personal data to set prices, and the use of secretive entities known as captives to keep risks off the books of insurers.

* The fallout from the bursting of the housing bubble continues to plague Wall Street. Bank of America agreed on Thursday to pay the Securities and Exchange Commission a $131.8 million penalty to settle an investigation linked to the structuring and sale of two complex mortgage securities that its Merrill Lynch division sold to investors.

* Wall Street financiers have occasionally been referred to as sharks or snakes. But on Thursday, one prominent firm was associated with entirely different kinds of cute and lovable critters. About a dozen kindergartners, and a few high-powered financiers, gathered at the Blackstone Group’s Midtown Manhattan headquarters to get up close with eight
animal ambassadors from Sea World, the theme park operator that the firm took public this year.

* The Energy Department will give a small company in Corvallis, Ore., up to $226 million to advance the design of tiny nuclear reactors that would be installed under water, making meltdown far less likely and opening the door to markets around the world where the reactors now on the market are too big for local power grids.

* Graduate teaching and research assistants at New York University have voted overwhelmingly to unionize, the American Arbitration Association announced this week after conducting the vote.

* In what could be the biggest economic change in two decades, President Enrique Pena Nieto is on the verge of rewriting the Constitution to open Mexico’s oil, gas and electricity industry to private investment – a provocative move expected to lure international oil companies and expand North America’s energy supply while testing the grip oil has on Mexico’s soul.

* When Spotify, the digital music company of the moment, announced an exclusive deal with Led Zeppelin and free access on mobile devices, it also reported impressive numbers. Its listeners have streamed 4.5 billion hours of music this year, and it has paid more than $1 billion in music royalties since its founding. But Spotify, a private company, did not disclose how many people use the service and how many pay for it.

* Verizon Communications has taken an aggressive stance against a proposed shareholder resolution that would require it to be more forthcoming about the customer information it shares with the government.

 

Canada

THE GLOBE AND MAIL

* The Conservative government’s decision to approve major cuts at Canada Post was driven by concern that the Crown Corp was just months away from becoming a major drain on Ottawa’s bottom line.

* Quebec authorities are calling it a first – an elected official coming forward to denounce people after being the target of alleged corruption. The province’s anti-corruption squad, known as UPAC, is giving Chateauguay Mayor Nathalie Simon full marks for filing a complaint with police this past September.

Reports in the business section:

* Canada is heading for a gridlock in energy development that will rob the country of future wealth unless it can solve vexing environmental and aboriginal conflicts, a blue-ribbon group including senior Calgary business people warned in a new report.

* The Canada Pension Plan Investment Board is making a foray into the booming Canadian agriculture business with the $128-million purchase of a portfolio of Saskatchewan farmland from Assiniboia Farmland LP.

* Another high-flying Canadian startup backed by deep-pocketed U.S. venture capitalists has hit an impressive milestone – although it admits it’s still a long way off from generating profits or meaningful revenues.

Kik Interactive, a Waterloo, Ontario-based instant messenger service started in 2009, said on Thursday that it now had more than 100 million registered users, a 233 percent increase in 12 months, and ahead of rival BlackBerry Messenger.

* Bank of Canada Governor Stephen Poloz used a speech in Montreal to set the record straight: He is not as dovish as many have thought; nor does he talk the dollar down to boost exports and listless inflation.

NATIONAL POST

* Toronto City Councillor Doug Ford has been accused of vote buying after he was filmed handing out $20 bills to public housing residents. It’s the second time in a week he has faced accusations of using his personal wealth for political gain.

* The commander-in-chief of the Canadian Forces, Governor General David Johnston, says the military and country must do more to treat post-traumatic stress disorder and prevent suicides among soldiers, explaining a “stiff upper lip” attitude needs to be overcome to help treat soldiers and veterans with mental illness.

FINANCIAL POST

* Canada’s telecom regulator said on Thursday that it would take a closer look at the rates cellphone providers charge their competitors to roam on each others’ networks, something it said the country’s big players could be using to kill competition from new entrants.

* U.S. hedge fund Golden Tree Asset Management LP increased its stake in Postmedia Network Canada Corp last month and now owns 39 percent of the newspaper chain’s shares. The New York City-based fund is Postmedia’s largest shareholder and in November it bought a further 4 percent of the company’s Class B shares, according to a Dec. 4 regulatory filing.

 

China

CHINA SECURITIES JOURNAL

– China’s first and second-tier property market is cooling following the implementation of policies to control pricing, according to data and industry insiders. Prices will continue to fall in the coming months, insiders predicted.

CHINA BUSINESS NEWS

– China’s small and medium commercial banks now need to apply for operating licenses, according to an announcement by the China Banking Regulatory Commission (CBRC). The aim is to tighten regulation over the services provided by such banks, said an unnamed CBRC source.

SHANGHAI SECURITIES NEWS

– A simulated stock option trial in China will involve four companies including Industrial and Commercial Bank of China Ltd and China Petroleum & Chemical Corp, broker sources said. The trial will also involve the launch of call and put option contracts.

CHINA DAILY

– There are currently around 3,000 government WeChat accounts across mainland China, Hong Kong and Macau, as China looks to make use the popular social media application to improve communication with citizens.

– Over 600 children’s products failed to meet quality standards, China’s industry watchdog said this week. The watchdog said 644 items, including toys, clothes and diapers, from 571 manufacturers were substandard.

PEOPLE’S DAILY

– China should unite to help build the “China dream”, which is to achieve national prosperity, said a commentary in the paper that acts as the Party’s mouthpiece. This dream embodies the aspirations of several generations of Chinese people and the overall interests of the nation, it said.

SHANGHAI DAILY

– A total of 24 Chinese provinces levied more than 20 billion yuan ($3.29 billion) in fines for extra births in 2012, but did not disclose how they spent the money. Ten other provinces have not yet published figures.

– The average salary in China is set to rise between 6 and 10 percent in 2014, a survey from recruiter Michael Page showed. Over 60 percent of respondents said they expected to raise salaries by this amount next year, while a further 18 percent eyed double-digit growth.

 

Britain

The Telegraph

GLG FINED $9 MLN FOR OVERVALUING STAKE

One of London’s largest hedge funds, GLG Partners, has been fined $9 million after it allegedly told investors that its assets were worth $160 million more than they really were.

EGGBOROUGH COAL PLANT CLOSURE ‘WOULD PUSH UP BILLS’

Household energy bills could be pushed higher if Eggborough power plant, which supplies 4 percent of the UK’s power, is forced to close, the company has claimed.

The Guardian

CENTRICA-LED CONSORTIUM POISED FOR IRISH ENERGY TAKEOVER

A consortium led by Centrica, the owner of British Gas, has been made preferred bidder by Irish ministers to take control of the state-owned energy group, Bord Gais Energy, for around 1 billion euros ($1.38 billion).

FORMER CITY MINISTER MYNERS JOINS CO-OP GROUP BOARD ON 1 POUND SALARY

Former minister Myners is to lead the overhaul of the management structure of the Co-operative Group after scandals at its banking arm that have seen control ceded to its bondholders and its former chairman accused of using ill
egal drugs.

G4S AND SERCO HAND OVER OFFENDER TAGGING CONTRACTS OVER FRAUD CLAIMS

Security companies G4S and Serco are to hand over their contracts to electronically tag criminals following fraud allegations over the way they charged the government.

EE THREAT TO RURAL 4G BROADBAND IF SPECTRUM FEES ARE QUADRUPLED

Britain’s largest mobile network EE has waded into the cost of living debate, saying if the government continues to raise spectrum fees and clamp down on mobile charges it will have to scale back plans to bring 4G mobile broadband to rural areas.

The Times

BIG FOUR AUDITORS FACING REVIEW

The Big Four accountancy firms are failing to properly question the books of banks and building societies despite being told to raise their game after the financial crisis.

SPORTS DIRECT GETS SHIRTY OVER KIT DISPUTE

Billionaire retailer Mike Ashley is tangled in a dispute with adidas after the German sportswear manufacturer refused to supply the Chelsea kit to Sports Direct next season.

The Independent

AT THE BANK OF ENGLAND, NOT EVERYONE AGREES WITH MR CARNEY

A Bank of England rate-setter yesterday said that Threadneedle Street’s flagship forward guidance policy was likely to have had little impact on the economy and appeared to clash with Governor Mark Carney over the timing of possible rate rises.

 

 

Fly on the Wall 7:00 AM Market Snapshot

ANALYST RESEARCH

Upgrades

Advance Auto Parts (AAP) upgraded to Top Pick from Outperform at RBC Capital
Amazon.com (AMZN) upgraded to Strong Buy from Buy at ISI Group
ArcelorMittal (MT) upgraded to Outperform from Market Perform at Cowen
athenahealth (ATHN) upgraded to Outperform from Market Perform at Leerink
athenahealth (ATHN) upgraded to Strong Buy from Outperform at Raymond James
Bed Bath & Beyond (BBBY) upgraded to Neutral from Cautious at ISI Group
Broadridge (BR) upgraded to Outperform from Market Perform at Keefe Bruyette
Charles Schwab (SCHW) upgraded to Market Perform from Underperform at Keefe Bruyette
Ciena (CIEN) upgraded to Outperform from Market Perform at BMO Capital
FedEx (FDX) upgraded to Strong Buy from Outperform at Raymond James
LPL Financial (LPLA) upgraded to Outperform from Market Perform at Keefe Bruyette
Omnicell (OMCL) upgraded to Buy from Neutral at B. Riley
Quiksilver (ZQK) upgraded to Buy from Neutral at B. Riley
Seagate (STX) upgraded to Buy from Neutral at Citigroup
Sibanye Gold (SBGL) upgraded to Neutral from Sell at UBS
SunCoke Energy (SXC) upgraded to Buy from Neutral at BofA/Merrill
U.S. Steel (X) upgraded to Outperform from Market Perform at Cowen
Western Digital (WDC) upgraded to Buy from Neutral at Citigroup

Downgrades

Anadarko (APC) downgraded to Underweight from Neutral at JPMorgan
Anglo American (AAUKY) downgraded to Hold from Buy at Deutsche Bank
BP (BP) downgraded to Neutral from Buy at UBS
CounterPath (CPAH) downgraded to Hold from Speculative Buy at Canaccord
Iberdrola (IBDRY) downgraded to Sell from Neutral at Goldman
Ipsen (IPSEY) downgraded to Neutral from Buy at Goldman
RWE AG (RWEOY) downgraded to Neutral from Buy at Goldman
Restoration Hardware (RH) downgraded to Neutral from Overweight at Piper Jaffray
lululemon (LULU) downgraded to Neutral from Outperform at Credit Suisse

Initiations

Avago (AVGO) initiated with an Outperform at Oppenheimer
Axcelis (ACLS) initiated with a Buy at B. Riley
Baker Hughes (BHI) initiated with a Neutral at RW Baird
Blue Capital (BCRH) initiated with an Outperform at Raymond James
Brixmor (BRX) initiated with a Buy at Deutsche Bank
China Mobile Games (CMGE) initiated with a Buy at Brean Capital
Coca-Cola (KO) initiated with a Buy at Janney Capital
Cott Corp. (COT) initiated with a Neutral at Janney Capital
Dr Pepper Snapple (DPS) initiated with a Buy at Janney Capital
Federated National (FNHC) initiated with a Neutral at Janney Capital
FireEye (FEYE) initiated with an Outperform at FBR Capital
FormFactor (FORM) initiated with a Neutral at B. Riley
Gazprom (OGZPY) initiated with an Underperform at Credit Suisse
Halliburton (HAL) initiated with a Neutral at RW Baird
Hilton Worldwide (HLT) initiated with a Neutral at SunTrust
Kaiser Aluminum (KALU) initiated with a Neutral at Goldman
LTX-Credence (LTXC) initiated with a Buy at B. Riley
OFG Bancorp  (OFG) initiated with a Buy at Guggenheim
Post Holdings (POST) initiated with a Buy at Citigroup
Proofpoint (PFPT) initiated with an Outperform at FBR Capital
Schlumberger (SLB) initiated with an Outperform at RW Baird
Tableau Software (DATA) initiated with a Market Perform at FBR Capital
TriMas (TRS) initiated with a Neutral at Goldman
Ubiquiti Networks (UBNT) initiated with an Outperform at Wells Fargo
Valero Energy (VLO) reinstated with a Neutral at Credit Suisse
Weatherford (WFT) initiated with a Neutral at RW Baird

HOT STOCKS

BlackBerry (BRY) extended purchase option deadline on convertible debt (FRFHF)
Simon Property (SPG) announced plan to spin off strip center business
EchoStar (SATS), GVT (VIVHY) ended talks for Brazilian JV
Las Vegas Sands (LVS) no longer pursuing Spain development, will continue in Asia
U.S. federal court ruled in favor of Tronox (TROX), Anadarko (APC) found liable, will appeal
United Technologies (UTX) said FY14 outlook ‘stretched but achievable’
Adobe (ADBE) expects to surpass 4M subscribers by end of FY15

EARNINGS

Companies that beat consensus earnings expectations last night and today include:
Restoration Hardware (RH)

Companies that missed consensus earnings expectations include:
SAIC (SAIC)

Companies that matched consensus earnings expectations include:
Adobe (ADBE)

NEWSPAPERS/WEBSITES

• Google’s (GOOG) hopes of settling its high-profile antitrust case in the EU suffered a setback as rivals and consumer groups (MSFT, NOK, TRIP) blasted its latest proposal for resolving the EU’s competition concerns, saying they would do next to nothing to improve competition in online search, the Wall Street Journal reports
• DirectTV (DTV) is exploring the idea of an online video service that would appeal to “price-sensitive” young people or other customers who have dropped their pay-TV service, the Wall Street Journal reports
• SEC Chairman White says her team will not shy away from high-stakes trials, and not just strike settlements with wrongdoers, but a string of recent court setbacks shows she has her work cut out for her, Reuters reports
• Singapore’s defense minister said his country was seriously considering buying Lockheed Martin Corp.’s (LMT) F-35 fighter jet but was in “no particular hurry” to buy new jets, Reuters reports
• The Louisiana Sheriffs’ Pension and Relief Fund, an IBM (IBM) shareholder, sued claiming the company’s cooperation with a National Security Agency eavesdropping program hurt investors as China sales dropped, Bloomberg reports
• McGraw Hill Financial’s (MHFI) Standard & Poor’s said it would be unfair to let the Justice Department put more than 150 selected securities before a jury to argue the firm’s ratings were the result of fraud, Bloomberg reports

SYNDICATE

Cheniere Energy Partners LP (CQH) 36M share IPO priced at $20.00
Fidelity & Guaranty Life (FGL) 9.75M share IPO priced at $17
Macquarie Infrastructure (MIC) 2.125M share Secondary priced at $52.50
Nimble Storage (NMBL) 8M share IPO priced at $21.00
Response Genetics (RGDX) files automatic common stock offering
TCP Capital (TCPC) files to sell 3.75M shares of common stock
XOMA (XOMA) files to sell common stock, no amount given

via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/OOCl-myMeh0/story01.htm Tyler Durden

While the generic overnight futures meltup is present this morning, it is nothing compared to what the epic surge in the EURJPY early in the overnight session suggested it would be, and in fact the levitation in US equities driven as usual by Yen carry trades (just what is the P/E or PEG on the USDJPY, or the EURUSD for that matter?) is far more muted than seen in recent days. The main reason for the easing of the carry-risk signal pair is the increasing confusion over what may happen next week when increasingly more are convinced Bernanke will announce a Taper, and since everyone remembers the summer very vividly, the last thing anyone wants is to be the last Kool-aid drinker at the centrally-planned party.

After a week of losses Asian markets were mixed overnight with the Nikkei outperforming on the back of USDJPY weakness, up +1%, whilst the Hang Sang is up +0.1%, however the Shanghai composite is down 0.31% as we type. This action comes as the US House passed its first bipartisan budget deal in four years yesterday, with the vote being won 332-94 today as 169 Republicans and 163 Democrats voting for the voting for the deal. Also overnight AUDUSD hit a three and a half month low after RBA governor Stevens said that fair value for the currency is 0.85 to the dollar.

Meanwhile in Europe, better trading stocks failed to weigh on Bunds this morning, which remained bid as market participants digested yet another uptick in the 3-month Euribor rate fix. Nevertheless, concerns over liquidity squeeze were somewhat offset by another rise in excess liquidity in the Euro-system, which rose to EUR 162.37bln from EUR 160.785bln and also a drop in EONIA fix to 0.139% from 0.144%, which was the first decline in 9 trading days. Consequent flattening of the Euribor curve, together with upside bets in Sep-14 Euribor with a strike of 100.00 were led by fears of potential negative deposit rates being implemented. Bear steepening of the Euribor curve resumed after the ECB said that banks to repay EUR 3.32bln from 1st 3y LTRO and EUR 19.33bln from 2nd 3y LTRO, which analysts attributed to reduction in bond holding pre-AQR next year and also potential implementation of negative deposit rates by the ECB. This, together with technical selling, saw EUR/USD and GBP/USD move back into negative territory.

On the US calendar today there is just one data point, the PPI release expected at 8:30am, and which consensus sees as rising 0.1%. Perhaps more important, at 11:00am the Fed’s POMO is set to purchase just $1.25b-$1.75b in the 2036-2043 sector.

 

Market Re-Cap from RanSquawk

Better trading stocks failed to weigh on Bunds this morning, which remained bid as market participants digested yet another uptick in the 3-month Euribor rate fix. Nevertheless, concerns over liquidity squeeze were somewhat offset by another rise in excess liquidity in the Euro-system, which rose to EUR 162.37bln from EUR 160.785bln and also a drop in EONIA fix to 0.139% from 0.144%, which was the first decline in 9 trading days. Consequent flattening of the Euribor curve, together with upside bets in Sep-14 Euribor with a strike of 100.00 were led by fears of potential negative deposit rates being implemented. Bear steepening of the Euribor curve resumed after the ECB said that banks to repay EUR 3.32bln from 1st 3y LTRO and EUR 19.33bln from 2nd 3y LTRO, which analysts attributed to reduction in bond holding pre-AQR next year and also potential implementation of negative deposit rates by the ECB. This, together with technical selling, saw EUR/USD and GBP/USD move back into negative territory. Looking elsewhere, FTSE-100 index underperformed its peers throughout the session, with RSA Insurance down close to 20% after company announced acceptance of chief executive’s resignation after the company issued its third profit warning in six weeks and admitted its dividend was in question. Also, Peugeot Citroen shares fell around 10% after General Motors announced plans to sell its entire Peugeot stake. Looking ahead for the session there is a relatively light economic calendar with the most significant event being the release of US PPI at 1330GMT/0730CST.

 

Overnight news bulletin from Bloomberg and RanSquawk

• Bear steepening of the Euribor curve resumed after the ECB said that banks to repay EUR 3.32bln from 1st 3y LTRO and EUR 19.33bln from 2nd 3y LTRO, which analysts attributed to potential reduction in bond holding pre-AQR next year and also potential implementation of negative deposit rates by the ECB.
• US House passes budget measure by 332-94 votes which would ease USD 63bln in US spending cuts, with the USD 1.01trl budget now awaiting a senate vote.
• Japan’s GPIF is to buy inflation-linked JGBs from April. According to reports, GPIF is to buy more than JPY 400bln in inflation-linked JGBs vs. total issuance amount of JPY 1.2trl in the next fiscal year.
• Treasuries head for weekly loss after 3Y/10Y/30Y auctions and as data including stronger-than- expected Nov. retail sales suggested a higher probability of Fed taper at next week’s FOMC.
• JPY fell to a five-year low vs USD as the yield difference between Treasuries and JGBs approached the widest since April 2011 amid investors speculation on the timing of a cut in U.S. stimulus
• The House passed the first bipartisan U.S. budget in four years yesterday, clearing the way for final Senate passage next week to ease $63b in spending cuts and avert another government shutdown
• Health insurers are being asked by the U.S. government to be lenient with Obamacare customers who miss the Dec. 23 deadline for enrolling in the program or are late with their initial payment
• German Social Democratic leaders expressed confidence that the party’s rank and file will agree to governing with Merkel, saying there’s no reason to expect SPD members will reject an alliance with her bloc
• Sovereign yields higher in Asia, little changed in EU. EU peripheral spreads steady. Asian and European stocks mostly higher, U.S. equity index futures gain. WTI crude lower, gold and copper little changed

 

Asian Headlines

Japan’s GPIF is to buy inflation-linked JGBs from April. According to reports, GPIF is to buy more than JPY 400bln in inflation-linked JGBs vs. total issuance amount of JPY 1.2trl in the next fiscal year.

BoJ’s Kuroda says Japan intends to achieve the 2% inflation target and maintain it in a stable manner. On that note, analysts at Morgan Stanley MUFG expect more BoJ easing in July.

EU & UK Headlines

ECB says banks to repay EUR 3.32bln from 1st 3y LTRO and EUR 19.33bln from 2nd 3y LTRO. Bear steepening of the Euribor curve resumed following the release, which analysts attributed to reduction in bond holding pre-AQR next year and also potential implementation of negative deposit rates by the ECB.

Ratings on Italy affirmed by S&P at BBB/A-2, outlook remains negative. Analysts at S&P also affirmed ratings on Luxembourg at ‘AAA/A-1+’; outlook stable.

Fitch head of sovereign ratings said will take time for Britain to earn back AAA rating as needs sustainable fall in debt-to-GDP.

SPD officials say they are more open to the kind of ‘solidarity’ with troubled EU economies frequently asked for by Brussels. That, they say, will mean a different kind of Germany at the EU’s negotiating tables.

UK Construction Output SA (Oct) M/M 2.2% vs Exp. 1.6% (Prev. -0.9%, Rev. -0.5%)

UK Construction Output SA (Oct) Y/Y 5.3% vs Exp. 1.3% (Prev. 5.8%, Rev. 8.2%)

– The ONS said that construction revisions add 0.1% to Q1, Q3 GDP growth and that UK home building grows by 18.6% Y/Y in October, the biggest rise since January 2011.

US Headlines

US House passes budget measure by 332-94 votes which would ease USD 63bln in US spending cuts, with the USD 1.01trl budget no
w awaiting a senate vote.

Following this, analysts at S&P and Moody’s said that the budget deal is encouraging for US credit rating. Specifically, S&P noted that smooth budget talks positive for US creditworthiness’ if continue and Moody’s stated that budget deal reduces possibility of disruptions.

Equities

Better trading stocks failed to weigh on Bunds this morning, which remained bid as market participants digested yet another uptick in the 3-month Euribor rate fix. FTSE-100 index under performed its peers throughout the session, with RSA Insurance down close to 20% after company announced acceptance of chief executive’s resignation after the company issued its third profit warning in six weeks and admitted its dividend was in question. Also, Peugeot Citroen shares fell around 10% after General Motors announced plans to sell its entire Peugeot stake.

FX

In European trade EUR/USD took a move to the downside after breaking the overnight lows around 1.3740 as concerns over negative rates continue to weighs on prices. Furthermore, there has been a trade go through in Euribor options (Sep-14 100.00 calls, buyer of 30k at 1) suggesting that there is a bet on negative rates in the Euro-zone, a topic that has been on the agenda for some weeks now. In combination with this move the USD index is trading in line with overnight highs after breaking above its 50DMA at 80.36 to trade at intra-day highs of 80.37. Consequently, GBP/ USD has also come under some selling pressure, now testing bids at the 1.6300 level.

Analysts at Santander see EUR/USD at 1.4000 in Q4 2014 vs previous forecast of 1.3800 and also see GBP/USD at 1.7000 in Q4 2014 vs previous forecast of 1.6400.

BofAML say that now is the time to turn bullish on EUR/GBP with potential for a 5% gain.

Commodities

Goldman Sachs says 2014 will be another tough year in metals and mining.

Brazil’s exports of copper ore and cathodes rose in November as more material was sent to Asia and Europe, according to figures from the country’s trade ministry.

– Copper ore exports rose 0.6% year-on-year in November, totaling 70,324 tonnes.

Iranian negotiators halted nuclear talks with major powers to return to Tehran for consultations after Washington blacklisted a dozen companies and individuals for evading US sanctions, state media reported.

Other press reports indicated that the EU says that further work is needed on Iran, P5+1 nuclear deal implementation.

* * *

DB’s Jim Reid concludes the overnight summary

As markets currently take a small but nervy backward step due to fears of the Fed removing some of its bond buying next week, it is worth reminding ourselves that on Monday it will be exactly 5 years since the Fed made the historic move to drive interest rates to zero (well, 0-0.25%) where they have remained ever since. In the same announcement the Fed reaffirmed its commitment to purchase large quantities of agency debt and mortgage-backed securities, a policy that after numerous changes also continues to this day. It’s fair to say  that the Fed have created a marvellous environment for virtually all assets even if this remains one of the weakest economic recoveries on record in the US and through virtually all of the DM world. Only Greek equities (-24%) in our sample have seen negative returns. The standout asset class over the past 5 years has been high-yield corporate bonds, with total returns in Europe of 151% and in the US of 142%. We did a back of the envelope calculation to work out where European HY yields would have to go to see returns of 150% over the next 5 years. The answer was around -47% – although we’d warn you that the calculation did break our computer and it is very dependent on the path of yields. Anyway, it’s not going to happen so no need to get bogged down in the calculations. DM and EM equity has also performed strongly with the US leading the way. The S&P 500 has returned 120% compared to the MSCI EM return of 103% (albeit increasingly under-performing DM over the last couple of years). European equities have lagged (but are catching back up) given the sovereign crisis. Core markets have still seen strong returns though with the FTSE and the DAX both up more than 90% whilst most peripheral markets have still seen positive returns with Spain’s IBEX (+37%) and Italy’s MIB (+12%) higher. Nevertheless the peripherals have under-performed with Greek equities still negative as discussed at the top. Commodities have also performed well over the 5-year period but with most of the returns front-loaded in the first half of the period. Overall copper (+145%) is leading the way with gold something of a middling performer up +47% after a fairly sharp decline from the peak.

Within the DM fixed income universe, HY has been followed (in order of performance) by Fin Sub Debt (around +70%), IG and Fin Sen Corporate Debt (+50%) and finally government bonds (Gilts +34%, Bunds +23% and Treasuries +12%). When you see the scale of returns seen in these assets it’s hard to imagine that withdrawing QE or ZIRP will be particularly easy for assets.

We’ve been getting a very small taste of this over the last few days as markets are adjusting to the possibility that the Fed might start to withdraw liquidity as soon as next week. After a week of losses Asian markets were mixed overnight with the Nikkei outperforming on the back of USDJPY weakness, up +1%, whilst the Hang Sang is up +0.1%, however the Shanghai composite is down 0.31% as we type. This action comes as the US House passed its first bipartisan budget deal in four years yesterday, with the vote being won 332-94 today as 169 Republicans and 163 Democrats voting for the voting for the deal. Also overnight AUDUSD hit a three and a half month low after RBA governor Stevens said that fair value for the currency is 0.85 to the dollar. The mixed tone in overnight Asian markets came after a third straight day of losses on Thursday which saw Equity markets across the board down; with the S&P down -0.38%, FTSE down -0.96%, the DAX down -0.66% and the IBEX down 0.93%. In government bond markets US 10Y rates rose almost 3bps to 2.87% whilst European Main and Xover were 2 and 5 bps wider respectively.

The trigger for these moves appeared to be the above consensus advanced retail sales figure which came out at +0.7% MoM vs +0.6% consensus which added to concerns the Fed may begin to taper after its 17-18 December next week. Listening to DB Chief Economist Peter Hooper yesterday on the World Outlook call he argued that this data point taken alongside the recent run of stronger data in the US certainly increases the chances the Fed may taper at the December meeting. He argued that three of four criteria for the Fed to start tapering now look to be met: (1) a significant improvement in the labour market (met), (2) confidence that the economic recovery is self  sustaining (very close, especially with recent data), (3) inflation on target (not met yet as inflation remains on a worryingly low trend) and (4) the removal of fiscal uncertainty (the deal over the past week has lessened concerns significantly). As Peter notes, the only criteria he sees not having been met is on inflation. This puts some importance on the US PPI numbers today with consensus expecting them to be flat MoM after falling 0.2% at the previous release. More important will be next Tuesday’s CPI numbers which come out on the day the FOMC meeting begins. Peter doesn’t think the Fed have made their final decision yet so maybe the inflation data will contribute towards it.

In other news yesterday the Spanish government promised to block a Catalan independence vote which the Catalan President had announced just minutes earlier to be held on November 9th next year. Spain’s struggles in recent years have increased support for independence in Catalonia, which is one of the country’s most developed regions,
accounting for about a fifth of Spain’s economic output. Opinion polls suggest that Catalans are roughly evenly split on the question of independence.

As we’ve already flagged the key event data release today will be US PPI, which comes out at 13.30 GMT.

via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/eUqM3GL_jB4/story01.htm Tyler Durden

Submitted by Michael Krieger of Liberty Blitzkrieg blog,

Meet Mike Caldwell. He is the maker of what seems to be the most popular physical bitcoins on the market, the Casascius coin. All Mr. Caldwell does is have people who want the coins produced send him a certain quantity of bitcoin and then for a $50 fee he puts the private key on a physical coin and sends them back. For this horrible crime of ingenuity and creativity, the U.S. government naturally, has decided to target him. Because they are too busy ignoring the real financial crimes happening out out there…

 

From Wired:

Mike Caldwell spent years turning digital currency into physical coins. That may sound like a paradox. But it’s true. He takes bitcoins — the world’s most popular digital currency — and then he mints them here in the physical world. If you added up all the bitcoins Caldwell has minted on behalf of his customers, they would be worth about $82 million.

 

Basically, these physical bitcoins are novelty items. But by moving the digital currency into the physical realm, he also prevents hackers from stealing the stuff via an online attack. Or at least he did. His run as the premiere bitcoin minter may be at an end. Caldwell has been put on notice by the feds.

 

Just before Thanksgiving, he says, he received a letter from the Financial Crimes Enforcement Network, or FINCEN, the arm of the Treasury Department that dictates how the nation’s anti-money-laundering and financial crime regulations are interpreted. According to FINCEN, Caldwell needs to rethink his business. “They considered my activity to be money transmitting,” Caldwell says. And if you want to transmit money, you must first jump through a lot of state and federal regulatory hoops Caldwell hasn’t jumped through.

But HSBC launders billions for Mexican drug cartels and they can continue their operations no problem.

Caldwell doesn’t accept U.S. dollars or any type of fiat currency. You send him bitcoins via the internet, and he sends you back metal coins via the U.S. Postal Service. To spend bitcoins, you need a secret digital key — a string of numbers and letters — and when Caldwell makes the coins, he hides this key behind a tamper-resistant strip.

 

So long as you can keep your Casascius bitcoins safe, nobody can learn the key. To date, Caldwell has minted nearly 90,000 bitcoins in various denominations. That’s worth about $82 million at today’s exchange rate.

 

Because he runs a bitcoin-only business, Caldwell says there’s no Casascius bank account for authorities to seize. But he adds that he has no desire to anger the feds, whether he agrees with them or not. So he’s cranking out his last few orders and talking to his lawyer. He says this may spell the end of Casascius coins. “It’s possible. I haven’t come to a final conclusion,” he says.

What a complete and total joke this government is. Don’t they have anything better to do?

Full article here.

via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/wqEjg9rgB0o/story01.htm Tyler Durden

Submitted by Michael Krieger of Liberty Blitzkrieg blog,

Meet Mike Caldwell. He is the maker of what seems to be the most popular physical bitcoins on the market, the Casascius coin. All Mr. Caldwell does is have people who want the coins produced send him a certain quantity of bitcoin and then for a $50 fee he puts the private key on a physical coin and sends them back. For this horrible crime of ingenuity and creativity, the U.S. government naturally, has decided to target him. Because they are too busy ignoring the real financial crimes happening out out there…

 

From Wired:

Mike Caldwell spent years turning digital currency into physical coins. That may sound like a paradox. But it’s true. He takes bitcoins — the world’s most popular digital currency — and then he mints them here in the physical world. If you added up all the bitcoins Caldwell has minted on behalf of his customers, they would be worth about $82 million.

 

Basically, these physical bitcoins are novelty items. But by moving the digital currency into the physical realm, he also prevents hackers from stealing the stuff via an online attack. Or at least he did. His run as the premiere bitcoin minter may be at an end. Caldwell has been put on notice by the feds.

 

Just before Thanksgiving, he says, he received a letter from the Financial Crimes Enforcement Network, or FINCEN, the arm of the Treasury Department that dictates how the nation’s anti-money-laundering and financial crime regulations are interpreted. According to FINCEN, Caldwell needs to rethink his business. “They considered my activity to be money transmitting,” Caldwell says. And if you want to transmit money, you must first jump through a lot of state and federal regulatory hoops Caldwell hasn’t jumped through.

But HSBC launders billions for Mexican drug cartels and they can continue their operations no problem.

Caldwell doesn’t accept U.S. dollars or any type of fiat currency. You send him bitcoins via the internet, and he sends you back metal coins via the U.S. Postal Service. To spend bitcoins, you need a secret digital key — a string of numbers and letters — and when Caldwell makes the coins, he hides this key behind a tamper-resistant strip.

 

So long as you can keep your Casascius bitcoins safe, nobody can learn the key. To date, Caldwell has minted nearly 90,000 bitcoins in various denominations. That’s worth about $82 million at today’s exchange rate.

 

Because he runs a bitcoin-only business, Caldwell says there’s no Casascius bank account for authorities to seize. But he adds that he has no desire to anger the feds, whether he agrees with them or not. So he’s cranking out his last few orders and talking to his lawyer. He says this may spell the end of Casascius coins. “It’s possible. I haven’t come to a final conclusion,” he says.

What a complete and total joke this government is. Don’t they have anything better to do?

Full article here.

via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/wqEjg9rgB0o/story01.htm Tyler Durden

By: Chris Tell
at http://capitalistexploits.at/

 

 

In late 2011 I started shorting the Japanese Yen. I spoke about it here, here and again here. I even tried to employ my skills in evaluating private equity deals to evaluating Japan. I was coming up empty.

I’ve employed a basic position of long the USD/JPY cross, long XAU/JPY cross and then taking small amounts of speculative capital buying long-dated puts on FXY. The results have been pretty average thus far. The USD long is working well, the long gold trade is slightly above water, while the puts on FXY have been miserable.

Timing is everything and I’m cognizant of that fact. I do however want to be positioned, because I remain unconvinced of the ability of central bankers to hold the ship together with monetary bailing twine, jawboning and any other measure they dream up.

I took the positions mentioned, not because I had carefully calculated the planetary alignments and noted that the Yen was going to get smashed as soon as Jupiter was in Mars. Frankly, like most market participants I didn’t know. What I did know was that the fundamentals supported a weaker yen, and importantly the political will to push the Yen lower was in the cards. Shinzo Abe campaigned on that very platform. From a risk/reward standpoint the risks were low while the reward was potentially very high. A speculators wet dream.

At the time we felt that establishing a core position in this trade was so important that we published a free report outlining various ways to play what we believe will be a very profitable trade. Feel free to grab a copy here.

On the 28th November our good friend and “trader extraordinaire” Brad Thomas alerted our readers in a trade alert that the Yen looked like it was turning.

Specifically he said:

The USDJPY is in a primary bull trend, has worked off an overbought condition over the last 7 months, and is now in the process of reconfirming the up-trend.

I think the USDJPY is in the process of “mean reverting” at least back to the level it was trading at just prior to the onset of the GFC in 2007 (120 level). This would be about a 20% rise from current levels, which is rather material.

Brad is easily the smartest trader I know, but what has made Brad so successful has been his implementation of his views. This can make all the difference. In the trade referenced above, his strategy has been to place multiple option trades across 12 months of expiry. Namely 120,000 options expiring in 12 different time frames over the next year. (note: not long after this ZH put out a trade overview using similar principals)

At the time Brad put the alert out, all 12 trades of 10,000 USD/JPY options would have cost approx US $3,400. As of today the USD/JPY cross sits at 102.82 and the respective 12 call options across 12 months net out at US $4,198.

Whatever strategy one uses I believe that being positioned for a substantially weaker Yen is an intelligent move.

We’ll be hearing more from Brad on how he plays this as well as his many other trade ideas long into the future.

To receive Brad’s alerts (complimentary for a while longer), click here.

– Chris

Excerpted from Steven Drobny’s, The New House Of Money:

“Drobny: You’re on the tape saying that dollar/yen is going to 200.

Kyle Bass: If I’m right, it will go much further than that. I don’t think it will hit 500, but in crises, currencies swing too far.”

via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/LsEUd3vLnAg/story01.htm Capitalist Exploits

Perhaps not so United States?

…how can 2 of the nation’s favorite cities be so painfully different?

 

(h/t @Not_Jim_Cramer)

via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/UXrqqq8omC8/story01.htm Tyler Durden

Economic history is pockmarked with policies instigated with the full intention of improving economic performance which have eventually turned out to do real damage. From the Napoleonic Wars to Weimar and up to the present day gold standards and Keynesianism, Deutsche’s Jim Reid notes all too often economic institutions allow themselves to be stuck in intellectual cul-de-sacs at their peril. Such a risk appears alive and well today in the halls of the Federal Reserve. The outlook for tapering is mired in a continuing war between an institutional framework which sees QE as an emergency measure that has gone on far longer then was desired and an economy whose self-sustaining momentum is far from secure. The following statements from the FOMC members shows the tight-rope of uncertainty they are treading…

What The FOMC members have said about Taper…

The FOMC came very close to tapering at the September 2013 meeting. It seems likely that if (a) Congress hadn’t been on the brink of another bout of fiscal-political grandstanding and (b) markets (especially rates) hadn’t reacted quite so strongly to the comments Bernanke made in May/June earlier in the year then the Fed would have started tapering at the meeting, irrespective of the failure of the US economy to press on in the middle of 2013.

The FOMC will be slightly more hawkish in 2014 – and even more so if Stan Fischer is added…

So how biased will the Fed committee in 2014 continue to be against QE? One way to try and take a view on this is to see the relative balance of power of FOMC doves and hawks in 2014, with an eye to their 2013 predecessors

In conclusion, Deutsche believes there is a chance that the Fed’s institutional biases lead it to taper earlier then the economic data might suggest is optimal. Whilst Yellen may be able to push against some of these biases, 2014 will still see a tightrope balancing act at the Fed as economics and institution bias battle it out and increasing noise is made for forward guidance to replace QE as the main tool of monetary policy activism.

via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/wWssBXS60bU/story01.htm Tyler Durden