Russia Says “Forced To Respond” But Warns Sanctions “Not Our Method”

Despite JPY and bonds not playing along, US equities (courtesy of the squeeze of the “most shorted”) had rallied mightily this morning. Then, all of a sudden – reality hit with some rather ominous-sounding threats from Russia:

  • *RUSSIA SAYS WILL RESPOND TO BROADER U.S., CANADA SANCTIONS
  • *RUSSIA SAYS FORCED TO RESPOND TO ‘UNFRIENDLY ACTIONS’
  • *RUSSIA SAYS SANCTIONS ‘NOT OUR METHOD’

So if ‘sanctions’ are not their method? Then what is? It seems that uncertainty was enough to spook bonds (yields plunged) and JPY (strength) and take the shine modestly off of VIX/Stocks.

 


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“All Is Not Well In The Housing Market” As All Cash Buyers Double In Past Year, Hit Record High

Confirming and continuing a trend we first described a year ago, overnight RealtyTrac reported, as part of its Q1 institutional investor and cash sales report, that the percentage of all-cash buyers has soared in the past year with “42.7% of all U.S. residential property sales in the first quarter were all-cash purchases, up from 37.8% in the previous quarter and up from 19.1% in the first quarter of 2013 to the highest level since RealtyTrac began tracking all-cash purchases in the first quarter of 2011.”

Curiously this is happening as institutional investors, think Blackstone, are slowly exiting the market: “Institutional investors — entities that have purchased at least 10 properties in a calendar year — accounted for 5.6 percent of all U.S. residential sales in the first quarter, down from 6.8 percent in the fourth quarter of 2013 and down from 7.0 percent in the first quarter of 2013 to the lowest level since the first quarter of 2012.”

“Strict lending standards combined with low inventory continue to give the advantage to investors and other cash buyers in this housing market,” said Daren Blomquist, vice president at RealtyTrac. “The good news is that as institutional investors pull back their purchasing in many markets across the country, there is still strong demand from other cash buyers — including individual investors, second-home buyers and even owner-occupant buyers — to fill the vacuum of demand left by institutional investors.

 

“While the institutional investor purchase share declined in the first quarter in 18 of the top 20 markets for institutional investor share a year ago, home prices continued to appreciate in most of those markets, albeit at a slower pace in many cases,” Blomquist continued. “There are a couple notable exceptions that could be cause for concern: Jacksonville, Fla., where the institutional investor share of purchases was down to 13.5 percent in the first quarter compared to 18 percent a year ago and where median home prices decreased 1 percent from a year ago in March after 15 consecutive months of annual increases; and Greensboro, N.C., where the institutional investor of purchases was down to 6.4 percent in the first quarter compared to 10 percent a year ago and where median home prices decreased 8 percent from a year ago in March following 14 of 16 months were median home prices increased annually.”

Or, in other words, the smart money is fading the market as the last flippers scramble to pick up the pieces. And while one can debate the mix composition and what it means for future trends, one thing is clear. Via Bloomberg:

The cash buyers today mean that all is not well in the housing market,” said Clifford Rossi, finance professor at the University of Maryland’s Robert H. Smith School of Business. “First-time home buyers should make up 40 percent and we’re not seeing it because of mortgage rules.”

Actually we’re not seeing it because US consumers are unable to chase home prices into the stratosphere and instead have opted to rent, as all the recent data has confirmed, and as even Jeffrey Gundlach confirmed recently with his bearish call on housing.

However, while the market reserved for the US middle class is floundering, one segment is still vibrant – that segment which allowed foreigners to launder their money with US real estate.

“In Manhattan, you have foreign buyers coming in and using properties as a second, third, fourth or fifth home and hedging risks in their home countries,” said Chris Mayer, a real estate professor at Columbia University Business School in New York.

And as long as the NAR continues to be exempt from anti-money laundering requirements, as Zero Hedge also described well over a year ago, this explicit money laundering will continue unabated. Them, and hedge fund managers still riding on the wave of Fed generosity of course:

In Manhattan, buyers are using cash for trophy apartments and to gain an advantage over borrowers who must depend on loans to finance a purchase. Pej Barlavi, owner of brokerage Barlavi Realty LLC in Manhattan, said three of his five current clients buying homes prevailed with all-cash offers.

 

Barlavi said two of them are hedge fund managers who used year-end bonuses to buy the properties: a $2.2 million two-bedroom apartment in Midtown, selling for $150,000 above the asking price; and $1.5 million for a one-bedroom in Tribeca. His client in the second transaction was “nudged higher by a foreign buyer” before being chosen by the seller, Barlavi said.

Bottom line: in the Miami area, 67.1 percent of sales were cash deals; New York posted 57 percent; Detroit recorded 53.5 percent; Atlanta had 53.2 percent, and Las Vegas posted 52.2 percent.

Needless to add, with risk momentum still up as the global central banks continue to pump liquidity into the system at an unprecedented pace, the trajectory of all cash transactions will keep rising until inevitably it approaches 100%, if not for the entire country, then certainly for the abovementioned key markets. At that point, US housing will be nothing but a flippers game as the ultra-rich merely flip properties from and to each other at an ever faster pace.

Just like stocks.




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VIX Slamdown Sparks Buying Panic As Yellen Testimony Begins

Looking for a reason? Don’t bother… having disconnected from JPY carry thanks to Draghi’s injection of volatility, it was left up to the VIX-slammers to push stocks back up near record highs once again.

 

Draghi’s promise sparked EUR weakness and FX vol…

 

Which left JPY carry out in the cold (for now)….

 

And bonds…

 

Leaving VIX responsible for keeping the dream alive…




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Britain Deploys Destroyer To “Shadow” Russian Aircraft Carrier

In case US destroyers operating in the Black Sea was not sufficiently clear of the western approach to containing Russia, the latest naval news will hardly boost the de-escalation theme. Reuters reports that earlier today Britain had deployed a destroyer to track a Russian aircraft carrier sailing close to its coastal waters, “the latest in a series of such incidents and a reminder of underlying tensions between London and Moscow.”

The reason the Russian navy is suddenly a concern to Britain is because the Admiral Kuznetsov, which is capable of carrying up to 26 fixed-wing fighters and 24 helicopters, had completed a deployment as part of Moscow’s naval force in the Mediterranean “and was on its way back to its base of Severomorsk in north-west Russia.” As part of this return, the carrier is to pass in proximity to the British isles, so just in case it gets any ideas, the UK is preparing a welcome party.

A spokesman from Britain’s Ministry of Defense said HMS Dragon had been “activated” on Wednesday in response to the approach of a Russian task force including the Admiral Kuznetsov, Russia’s only aircraft carrier.

 

“It was activated yesterday to meet the Admiral Kuznetsov task force,” the spokesman told Reuters.

This is not the first time Britain has deployed warships to keep Russia at bad:

HMS Dragon, a modern air-Defense destroyer, was deployed in similar circumstances just last month to shadow another Russian warship, the Vice-Admiral Kulakov, as it sailed past Britain.

 

 

Britain last month also scrambled Typhoon fighter jets to see off Russian military planes flying close to its airspace off the coast of Scotland.

And in other news, the VIX is sliding on the prospect that central planning is once again firmly in control, which alongside the now traditional post-open USDJPY ramp, has sent the S&P500 well on its way to new all time highs.




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Vietnam Stocks Crash Most In 13 Years As China Tensions Escalate

While most mainstream media is focused on villainizing Putin and the ongoing ‘diplomacy’ in Ukraine, we warned Monday of the dramatically escalating tensions between Vietnam and China over oil-drilling in disputed waters. The initial verbal to and fro – Vietnam angry at the move and China shunning them – was followed by physical interactions (multiple rammings and water-cannon use) and the US then got involved (laying the blame firmly at China’s foot calling the move “provocative”). The capital markets appear a little more concerned about where this ‘tension’ leads as the Vietnamese stock market crashed almost 6% – its largest drop in 13 years.

 

 

As Bloomberg reports,

Vietnam stocks posted their biggest retreat since 2001, extending a six-week selloff that turned the benchmark index into the world’s worst performer, amid escalating tensions with China.

 

 

The VN index has wiped out most of the 20 percent advance through its March high that had made the gauge this year’s top performer in Asia.

 

“The talk is all about the political tension,” Michel Tosto, the head of institutional sales at Viet Capital Securities in Ho Chi Minh City, said by phone. Some investors are showing signs of “panic” while others are “bottom-fishing” for beaten-down stocks, he said.

 

Vietnam said this week it’s prepared to take measures over China’s placement of an exploration rig in disputed waters, as the U.S. called the Chinese move “provocative” given recent regional tensions.

 

 

“This row between China and Vietnam has put cold water on the market,” Marc Djandji, a partner at Asean Strategy Group, said by phone. “This is a serious thing. It’s not something that is resolved in a day. People are hoping for some sort of way to resolve this internationally.”

 

 

“The sea tensions are worrying investors a lot, and prompted many of them to sell,” Hoang Thach Lan, the Ho Chi Minh City-based brokerage unit head at MHB Securities Co., said by phone today. “However, there are also some investors who viewed the tensions as a temporary situation and they took this chance to buy. We see trading volume is very large.”

So BTFD on the biggest drop in 13 years because, hey, what can go wrong when the world’s largest economy steps all over your mineral resources and no one in the world gives a shit…




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Yellen Testifies To The Senate – Live Webcast

Reflecting proudly on how her words were received (surprise!) dovishly yesterday during her congressional hearing (and stocks closed green), we are sure Fed Chairmanwoman Janet Yellen will be brimming with “nothing can stop me now” confidence as she heads into the ring with the Senate Budget Committee. The big headline from yesterday’s Q&A that “the recent flattening out in housing activity could prove more protracted than currently expected,” will we are sure be caveated with excess hope and exuberance today as yet another set of politicians attempt to pin her back down to 6 months. The biggest thing to watch, we suspect, if she reiterates her “sell small caps” recommendation

 

 

 

If embed is not working click here for C-SPAN link

 

Yesterday’s prepared remarks (in algo-readable format)

and full text

Yellen Testimony




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Here Comes Crimea 2.0: Following Referendum, East Ukraine Votes To Become Part Of Russia

Yesterday we correctly predicted that while the world is distracted by this and that, the next real short-term catalyst is the east Ukraine referendum vote on Sunday, whose results would be available as soon as May 11, indicating that, almost with 100% certainty, the Ukraine region would vote to become independent.

This was promptly followed by a skillful diplomatic gambit by Putin who, knowing full well Donetsk would just say no, suggested the referendum be postponed thus giving himself cover when the western press attacked him for using Crimean tactics for the second time in two months. This was confirmed this morning when the Donetsk “separatists” indeed politely thanked Putin for his concern, but decided to proceed with this weekend’s referendum anyway.

The irony is that as we also explained yesterday, the Crimea scenario is fully in play once more. Confirming precisely that was news from News of Donbass which reported moments ago that in the aftermath of the new certain May 11 referendum, a week later east Ukraine will formalize the Russia annexation process and on May 18 there will be a “second round of the referendum where you will be asked to support accession to the Donestk region of Russia.”

From News of Donbas:

Gathered on the square of the self-proclaimed Donetsk Republic, administration representatives announced a “referendum” in two rounds. As the correspondent of URA-Inform.Donbass, the first round of the referendum will be held on May 11.

 

In the first round resident of Donetsk will be offered to vote for recognition of the Donetsk republic and then on May 18 will be held the second round of the referendum “, where you will be asked to support accession to the Donetsk region of Russia.

 

The decision on such a scheme of “referendum” was made today at a meeting of deputies DNR today in Donetsk.

 

We note that the pro-Russian activists gathered in the square outside the administrative building reactied negatively to the assessment statement by Russian President Vladimir Putin on the need to delay the “referendum”.

In summary: in one master stroke, Putin “distanced” himself from the Donetsk administration so he is not seen as pulling their strings, and more importantly, in 10 days, said Donetsk republic will formally join Russia.

And that is how you successfully conduct foreign policy. There is a second way: using hash tags.




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EUR Soars Then Plunges On ECB Inactivity But Promise Of Future Activity

  • Having voiced his “serious concern” about a strong foreign exchange rate and low inflation, Mario Draghi came over the top with yet another resounding promise of action…
  • *DRAGHI SAYS ECB IS COMFORTABLE WITH ACTING IN JUNE IF NEEDED

This was enough to send the EUR tumbling down from near 1.40 levels (which it hit as traders saw no actual actions) and spark a renaissance in risk-on assets… always the promises… The question – of course – is how long the half-life of this jawbone lasts?

 

 

In Summary: Draghi: We’ll keep delaying actually doing anything “whatever it takes”




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Initial Claims Drop But Alaska & New Jersey Remain Top Of “Insured Unemployed” List

The total number of people claiming benefits in all programs for the week ending April 19 was 2,832,693, an increase of 10,353 from the previous week (on an unadjusted basis) but the headlines will gloat of the drop in initial claims after last week’s rather disturbing spike (which temporarily destroyed the pent-up demand post-weather meme). Initial claims dropped 26k to 319k, beating expectations. New York and Massachusetts saw the largest increase in claims while Michigan and New Jersey the largest drop.

 

The highest insured unemployment rates in the week ending April 19 were in Alaska (4.9), New Jersey (3.5), Connecticut (3.4), Puerto Rico (3.3), California (3.2), Illinois (3.0), Pennsylvania (3.0), Nevada (2.9), Maine (2.6), and Michigan (2.6).




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