FOMC Minutes Spark Un-Taper Unwind

Stocks are confused. The FOMC Minutes, which clarified that a) taper is on (no matter what almost), and b) forward guidance has been replaced by some fluffy words; have sent the USD higher, bond yields higher, and precious metals lower in 'classic' un-taper unwind mode. Stocks are holding (for now) as the USD strength (and implicit JPY weakness) is supporting US equities via the idiocy of the carry trade. VIX remains well bid and credit markets are blowing wider.

 

 

And stocks are confused as USD strength is being confused with JPY carry exuberance and holding stocks up here at VWAP…

 

Charts: Bloomberg


    



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Authoritarian Regimes (Like the U.S. and Britain) Treat Reporters Like Terrorists

The U.S. Government Condemns Authoritarian Regimes Which Use Anti-Terror Laws to Stifle Journalism

It is widely known that authoritarian regimes use “anti-terror” laws to crack down on journalism.

But this extreme tactic is becoming more and more common.  The Committee to Protect Journalists reported a year ago that terrorism laws are being misused worldwide to crush journalism:

The number of journalists jailed worldwide hit 232 in 2012, 132 of whom were held on anti-terror or other national security charges. Both are records in the 22 years CPJ has documented imprisonments.

The American government has rightly condemned such abuses.  For example, the U.S. State Department noted last April:

Some governments are too weak or unwilling to protect journalists and media outlets. Many others exploit or create criminal libel or defamation or blasphemy laws in their favor. They misuse terrorism laws to prosecute and imprison journalists. They pressure media outlets to shut down by causing crippling financial damage. They buy or nationalize media outlets to suppress different viewpoints. They filter or shut down access to the Internet. They detain and harass – and worse.

The State Department condemned Burundi in 2012 for treating journalists as terrorists.

The 2012 State Department human rights report on Turkey criticized the country for imprisoning “scores of journalists…most charged under antiterror laws or for connections to an illegal organization.”

The State Department rightly announced in 2012:

We are deeply concerned about the Ethiopian government’s conviction of a number of journalists and opposition members under the Anti-Terrorism Proclamation. This practice raises serious questions and concerns about the intent of the law, and about the sanctity of Ethiopians’ constitutionally guaranteed rights to freedom of the press and freedom of expression.

 

The arrest of journalists has a chilling effect on the media and on the right to freedom of expression. We have made clear in our ongoing human rights dialogue with the Ethiopian government that freedom of expression and freedom of the media are fundamental elements of a democratic society.

 

As Secretary Clinton has said, “When a free media is under attack anywhere, all human rights are under attack everywhere. That is why the United States joins its global partners in calling for the release of all imprisoned journalists in every country across the globe and for the end to intimidation.”

Last October – in response to respected Moroccan journalist Ali Anouzla being arrested under an anti-terror law for linking to a Youtube video – the State Department said:

We are concerned with the government of Morocco’s decision to charge Mr. Anouzla. We support freedom of expression and of the press, as we say all the time, universal rights that are an indispensable part of any society.

U.S. and U.K. Do the Exact Same Thing

Unfortunately, the American and British governments are doing the exact same thing.

The British High Court just ruled that Glenn Greenwald’s partner could be treated like a terrorist because he was trying to deliver leaked documents to reporters.

Amnesty International writes:

It is clearly deeply troubling if laws designed to combat terrorism can be used against those involved in reporting stories of fundamental public interest. There is no question the ruling will have a chilling effect on freedom of expression in the future.

Indeed, the British government considers the following activities to constitute terrorism:

The disclosure, or threat of disclosure, is designed to influence a government [or] made for the purpose of promoting a political or ideological cause.

The ACLU’s Ben Wizner satirically writes:

Relax, everyone. You’re not terrorists unless you try “to influence a government.” Just type what you’re told.

The U.S. government is targeting whistleblowers in order to keep its hypocrisy secret … so that it can keep on doing the opposite of what it tells other countries to do.

As part of this effort to suppress information which would reveal the government’s hypocrisy, the American government – like the British government – is treating journalists as terrorists.

Journalism is not only being criminalized in America, but investigative reporting is actually treated like terrorism.

Veteran reporters and journalists say that the Obama administration is the most “hostile to media” of any administration in history.

The government admits that journalists could be targeted with counter-terrorism laws (and here). For example, after Pulitzer Prize winning journalist Chris Hedges, journalist Naomi Wolf, Pentagon Papers whistleblower Daniel Ellsberg and others sued the government to enjoin the NDAA’s allowance of the indefinite detention of Americans – the judge asked the government attorneys 5 times whether journalists like Hedges could be indefinitely detained simply for interviewing and then writing about bad guys. The government refused to promise that journalists like Hedges won’t be thrown in a dungeon for the rest of their lives without any right to talk to a judge

After the government’s spying on the Associated Press made it clear to everyone that the government is trying to put a chill journalism, the senior national-security correspondent for Newsweek tweeted:

Serious idea. Instead of calling it Obama’s war on whistleblowers, let’s just call it what it is: Obama’s war on journalism.

Moreover:

  • The Bush White House worked hard to smear CIA officers, bloggers and anyone else who criticized the Iraq war
  • In an effort to protect Bank of America from the threatened Wikileaks expose of the bank’s wrongdoing, the Department of Justice told Bank of America to a hire a specific hardball-playing law firm to assemble a team to take down WikiLeaks (and see this)

And the American government has been instrumental in locking up journalists in America (and here), Yemen and elsewhere for the crime of embarrassing the U.S. government.


    



via Zero Hedge http://ift.tt/1kY9xUi George Washington

How Obama’s Chief Negotiators on the Trans-Pacific Partnership Treaty Received Huge Bonuses from Mega Banks

Anyone that has spent any time whatsoever looking into the Trans-Pacific Partnership (TPP) trade treaty, understands that it is a oligarch crony capitalists’ wet dream. Being negotiated entirely in secret, the treaty is designed to institutionalize corporate rule, giving companies the ability to sue governments and prevent them from exerting regulatory control over their own societies.

Bill Moyers has described the treaty as “Death for Democracy,” and now, unsurprisingly, we find out that several of the main negotiators for the TPP have received huge payments from taxpayer bailed out “Too Big to Jail” banks.

From the Republic Report:

Officials tapped by the Obama administration to lead the Trans-Pacific Partnership trade negotiations have received multimillion dollar bonuses from CitiGroup and Bank of America, financial disclosures obtained by Republic Report show.

Stefan Selig, a Bank of America investment banker nominated to become the Under Secretary for International Trade at the Department of Commerce, received more than $9 million in bonus pay as he was nominated to join the administration in November. The bonus pay came in addition to the $5.1 million in incentive pay awarded to Selig last year.

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The Most Important Line In Today’s FOMC Minutes

Perhaps the most important line in today’s FOMC minutes:

… Several participants suggested that risks to financial stability should appear more explicitly in the list of factors that would guide decisions about the federal funds rate once the unemployment rate threshold is crossed…

What this means is that since the Fed’s legacy forward guidance of a 6.5% unemployment threshold is dead and buried (and will become a non-factor as soon as next month when unemployment could fall well below this red line), what the Fed is now suggesting is that the Fed will “qualitatively” guide to more intangible factors: like “risks to financial stability” better known as the prevailing level of the S&P 500. In short, is the Fed about to admit that screw inflation and screw unemployment, it was all about the S&P 500 and making the rich richer all along?

Also, one wonders just what form this guidance will take? A 25 bps rate hike for every 100 upside points in the S&P 500? Or 50 bps if a semi-insolvent Caa/CCC company can issue covenant-lite fourth lien debt at Libor + 1% to widows and orphans from the Ukraine? Alternatively, will the Fed guarantee that the second the S&P enters a correction then it will proceed to resume $85 billion of monthly QE. What about a 1000 point correction – will the Fed simply buy every share of AMZN then?


    



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The Most Important Line In Today's FOMC Minutes

Perhaps the most important line in today’s FOMC minutes:

… Several participants suggested that risks to financial stability should appear more explicitly in the list of factors that would guide decisions about the federal funds rate once the unemployment rate threshold is crossed…

What this means is that since the Fed’s legacy forward guidance of a 6.5% unemployment threshold is dead and buried (and will become a non-factor as soon as next month when unemployment could fall well below this red line), what the Fed is now suggesting is that the Fed will “qualitatively” guide to more intangible factors: like “risks to financial stability” better known as the prevailing level of the S&P 500. In short, is the Fed about to admit that screw inflation and screw unemployment, it was all about the S&P 500 and making the rich richer all along?

Also, one wonders just what form this guidance will take? A 25 bps rate hike for every 100 upside points in the S&P 500? Or 50 bps if a semi-insolvent Caa/CCC company can issue covenant-lite fourth lien debt at Libor + 1% to widows and orphans from the Ukraine? Alternatively, will the Fed guarantee that the second the S&P enters a correction then it will proceed to resume $85 billion of monthly QE. What about a 1000 point correction – will the Fed simply buy every share of AMZN then?


    



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President Obama Warns Ukraine Against “Crossing The Line”

The US is adding its $0.02 to the international condemnation of the actions under way in Ukraine – desparate to re-write Victoria Nuland’s narrative of “f##k the EUR” and political manipulation. President Obama, having not learned his lesson the last time he drew a red line, has come out swinging…

  • *OBAMA:`THERE WILL BE CONSEQUENCES IF PEOPLE STEP OVER THE LINE’
  • *OBAMA SAYS U.S. CONDEMNS UKRAINE VIOLENCE IN `STRONGEST TERMS’
  • *OBAMA:MILITARY SHOULDN’T ACT WHERE CIVILIANS CAN RESOLVE ISSUES

Of course, it’s unclear if open military action against civilians is ‘crossing the line’ but we await Putin’s response.


    



via Zero Hedge http://ift.tt/1gi7sgf Tyler Durden

President Obama Warns Ukraine Against "Crossing The Line"

The US is adding its $0.02 to the international condemnation of the actions under way in Ukraine – desparate to re-write Victoria Nuland’s narrative of “f##k the EUR” and political manipulation. President Obama, having not learned his lesson the last time he drew a red line, has come out swinging…

  • *OBAMA:`THERE WILL BE CONSEQUENCES IF PEOPLE STEP OVER THE LINE’
  • *OBAMA SAYS U.S. CONDEMNS UKRAINE VIOLENCE IN `STRONGEST TERMS’
  • *OBAMA:MILITARY SHOULDN’T ACT WHERE CIVILIANS CAN RESOLVE ISSUES

Of course, it’s unclear if open military action against civilians is ‘crossing the line’ but we await Putin’s response.


    



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THIS Sector Offers a Compelling Asymmetric Trade

By: Chris Tell at http://ift.tt/146186R 

We recently discussed the asymmetry available in the gold mining stocks here.
We showed the spectacular returns that have been achieved by investing
in beaten down sectors since the 1920’s. Just the facts on what the past
has shown us. We offer no guarantees to what the future holds, but we
are placing our money where our mouths are.

Barrick Gold just announced some terrible news and the stock rallied slightly, but DID NOT fall. Barrick was the subject of a special “Trading Gold”
report we recently published. Brad’s (our trader) timing seems to have
been spot on. It may be too early to say, but this is exactly what we
spoke about in our article “Buying Bombed out Equities for Outsized Returns”. This is typically what you see with a sector bottoming.

Incidentally I just watched an interview with Rick Rule, who believes that “today’s bottom matches the 2000 Junior Resource Market”.
Now is Rick selling his own book? Probably…but I wouldn’t accuse
myself of being as knowledgeable on the sector as Rick, and as mentioned
above the market is showing all the typical signs found at the bottom.

A long time reader and subscriber to Brad’s trade alerts commented on
the Barrick Trade Alert, which you can read in its entirety here. He wanted to know if the same applied to uranium stocks, another beaten down resource sector. He said the following:

Hi Guy’s,

This trade had me wondering about uranium and a potential uranium trade.
Since in this article we are dealing with the largest Gold company, I
was wondering if a similar trade could be done with Cameco, the largest
uranium company. I am bullish uranium long term and I think by 2016
uranium should be much higher. So, I was wondering with regards to a
vertical call spread on 2016 Cameco call options. I am not a pro on
which call options to use and at what price, but maybe this could also
be a trade in the future. Maybe Brad could take a look at it if he is
also bullish on uranium long term.

G J

I’ve been following the uranium market loosely. It is part of a watch
list of sectors which I keep an eye on. It is certainly beaten up, but I
don’t know much more than what the average Joe probably knows. A big
run up a few years back, Fukushima, bad juju for the sector, price
collapse, coming up to a probable bull run just on cycles. Nothing
extraordinary in terms of knowledge, so I got one of our analysts to dig
for me and this is what we found.

Key points:

  • Breakeven price for producers – $70-$80/lb;
  • Current price (over past 5 years) $20-$35/lb;
  • Demand has continued to increase (even with Fukushima), supply has not kept up;
  • Supply has come from above ground stockpiles (HEU Agreement);
  • Final shipment for above agreement which supplied fully 24 million lb of Uranium each year was Dec 2013;
  • Min amount of time to get a new uranium mine into production – 5 years;
  • New demand? – 72 new reactors under construction with 62 of them expected to be completed by 2016.

The above is a tiny snapshot, and I’ve just highlighted the key points I
think worth mentioning.

I shot the question over to Brad to get his views, and in true Brad
fashion he came back with a well researched, thoughtful answer.

Hi Chris,

With respect to Cameco, I too am rather bullish more from a contrarian point of view and the fact that options are so cheap.

If you agree with our premise the next question is how to effectively apply a bullish view.

Well it starts with the volume of Cameco. Below
is an index of 12 month implied volatility on Cameco options. It is
close to record lows – clearly no one thinks that the price of Cameco
will move at all over the coming months. But this is exactly where our
asymmetry comes from, as options are priced way too low.

Screen Shot 2014-02-14 at 06.47.49

Given that options are priced so cheap all we
need to do is to buy January 2016 calls with a $22 strike (at the money)
calls. This will cost $3.50, giving a breakeven of $25.50. If CCJ was
to get to 30 by January 2016 (not a tall order) it would result in a
return of 130%.

Screen Shot 2014-02-14 at 06.53.57

Alternatively a more aggressive position could
be established using an ‘out of the money’ bull call spread, in this
case buying the January 2016 $25 and selling the January 2016 $35 strike
@ $0.75 or better.

If CCJ was to close at or
above $35 on expiry it would result in a gain of 372% (1000 – 180/180).
Below is how the trade would appear on the Interactive Brokers 
platform:

Screen Shot 2014-02-14 at 07.59.48

Hopefully this addresses the problem of ‘how to apply a bullish view on uranium.’

– Brad

This is not an official Trade Alert that we have sent to our
subscribers, but if you DO want to receive Brad’s trades, you can do so HERE. The Trade Alerts are still complimentary for a limited time.

 

– Chris

“I think that we cannot survive without Nuclear.” – Masakazu Toyoda (Chairman of the Institute of Energy Economics in Japan)


    



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FOMC Minutes Show Fed Taper Continuing But Forward Guidance Confusion

With a plethora of Fed speakers playing good cop, bad cop todasy, it is hardly surprising that the FOMC minutes (as adulterated as they are) still show disagreement…

  • *SEVERAL FOMC PARTICIPANTS SAID TEMPORARY FACTORS SPURRED GROWTH
  • *FED TO CHANGE RATE GUIDANCE AS UNEMPLOYMENT FALLS, MINUTES SHOW
  • *SOME FOMC PARTICIPANTS FAVORED `QUALITATIVE GUIDANCE’
  • *SEVERAL PARTICIPANTS FAVORED $10 BILLION QE TAPER PER MEETING

The bottom-line is that the Fed is very confused and while headlines will crow of communication and forward-guidance, it is clear they are winging it now as “qualitative” guidance is the new way forward.

Choice excerpts,

First, forward guidance is now dead. Long live forward guidance:

Participants agreed that, with the unemployment rate approaching 6½ percent, it would soon be appropriate for the Committee to change its forward guidance in order to provide information about its decisions regarding the federal funds rate after that threshold was crossed. A range of views was expressed about the form that such forward guidance might take. Some participants favored quantitative guidance along the lines of the existing thresholds, while others preferred a qualitative approach that would provide additional  information regarding the factors that would guide the Committee’s policy decisions.

Perhaps just as importantly, the Fed is close to admitting all it cares about is the S&P 500:

Several participants suggested that risks to financial stability should appear more explicitly in the list of factors that would guide decisions about the federal funds rate once the  unemployment rate threshold is crossed, and several participants argued that the forward guidance should give greater emphasis to the Committee’s willingness to keep rates low if inflation were to remain persistently below the Committee’s 2 percent longer-run objective.

On the emerging market turmoil:

Inflation in emerging market economies remained moderate on average, although Brazil, India, and Turkey again tightened monetary policy during the intermeeting period in response to concerns about inflation and currency depreciation. The policy tightening in Turkey was particularly sharp and followed several days of heightened financial market pressures toward the end of the intermeeting period. Similar pressures were evident in some other emerging market economies as well.

In contrast, amid a ratcheting-up of financial market strains in some emerging market economies, headline stock price indexes in most emerging market economies declined, outflows from emerging market mutual funds continued, and yield spreads on dollar-denominated emerging market bonds increased. Local-currency yields rose in some emerging market economies, such as Brazil, South Africa, and Turkey, and short-term interbank rates in China were volatile and trended higher over the period.

In considering recent events in emerging market economies, the staff judged that the effects of recent financial market volatility had not been large enough to have a material effect on the overall outlook for those economies and, similarly, that the spillover effects on the United States of developments to date were likely to be modest. Because conditions were in flux, however, these markets would require careful monitoring.

It seems that tapering of $10 billion per meeting unless it snows in August, is a given:

Several participants argued that, in the absence of an appreciable change in the economic outlook, there should be a clear presumption in favor of continuing to reduce the pace of purchases by a total of $10 billion at each FOMC meeting. That said, a number of participants noted that if the economy deviated substantially from its expected path, the Committee should be prepared to respond with an appropriate adjustment to the trajectory of its purchases.

On the use of the Fed’s reverse repo as a means to provide collateral to collateral-starved banks:

Messrs. Fisher and Plosser dissented because of their preference for retaining a cap on the maximum size of counterparties’ offers during the extension; Mr. Plosser also preferred a shorter extension of the exercise.

Full minutes below:


    



via Zero Hedge http://ift.tt/1eSLdeh Tyler Durden

“Polar Vortex” Shock And Awe: The Utility Bill Arrives (And Why It Will Get Worse Before It Gets Better)

The “polar vortex” shock has arrived, only this time it is not in the form of another 12 inches of overnight snow accumulation but in the shape of household utility bills. A reader was kind enough to send us his just received ConEd bill for the month ended Februery 10. The result speaks for itself. It also speaks for where so much of US household disposable income will go in first quarter. Spoiler alert: not toward discretionary purchases.

 

If readers have more dramatic instances of the “Polar Vortex” invoice shock, please forward them to us at the usual address.

And unfrotunately it will get worse before it gets better. On the back of a rapid decline in the “glut” of low cost natural gas (as stockpiles are drawn down to the lowest level since 2004) and the shift in forecast (that the freezing weather could last well into March), Natural gas futures are soaring (up over 10% today). This is the highest front-month futures contract price since December 2008 as “the possibility of periodic shortages now looms.”

 

 

Charts: Bloomberg


    



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