Tag: finance

Submitted by Mark St.Cyr,

In about 30 days the Federal Reserve will hold its scheduled June (13-14) meeting of the FOMC to either give a thumbs-up, or thumbs-down to increasing interest rates in earnest once again. The odds that the Fed. will indeed raise again now stands at about 99%. In other words – it’s all but a near certainty.

With that said, one can’t help but marvel at not only the “markets” sheer abandonment on volatility with such a near certainty on its doorstep. But rather, the only thing to rival it is the sheer arrogance being displayed by the Fed. itself that such another increase is warranted as every data point to a self-professed “data dependent” consortium is not just flashing, but screaming danger with every passing day. e.g., B.E.A. Q1 GDP 0.7%, Atlanta Fed. GDP Now™ 0.2%, JPM Cuts Q1 GDP to Just 0.3%, and more.

In days of yore (i.e., Ancient history circa 2016) whenever the odds of hiking approached anything like the levels they do now, the Fed. would take to the media in any manner possible and try to supplant soothing tones of, “Hush now little ones and not too worry…” as to make it evidently clear the Fed. had no such intentions going into their next meeting. After all, as history has shown time, and time again, just the “idea” that a rate hike could be imminent sent the markets reeling needing for an ever incessant response of one Fed. official after another to shout, “Don’t worry! We’re here with ever more potent QE should the need arise!” i.e., This is why we now have such a thing being worthy of its own moniker. e.g., “Bullard Bottom.”

Today, the exact opposite is the case. Not only are there not any soothing tones, but rather, there are tones emanating from what can only be described as an outwardly defiant, all seeing, ever proficient collection of “Hawks Are U.S.” for any and all questioning.

As an example: In what can only be taken at first glance as a “Wait, what?” moment. The New York Fed. has concluded that the more than $500 TRILLION dollars (and rising – again!) of O.T.C. derivatives outstanding remain (wait for it…) “an important asset class.”

For those of you having that “Wait…what?” moment as you’re reading this and just can’t remember why your brain just froze from the absurdity of such a statement? That’s because “derivatives” was that phrase you recalled as the center for every reason which caused the great financial crash. (For those of you wanting more on this topic, I highly recommend this succinct breakdown by Wolf Richter of Wolf Street™.)

So why is the above important other than it’s “ticking time bomb” factor? (As if that isn’t enough.) No, the reason why it stands out for me is how it’s viewed by members of the Fed. itself. i.e., “Don’t worry, we got this!” And here’s the reasoning…

If it’s now on the books (see above) openly stating its acknowledgment with its size and scope, along with, that the Fed. itself sees it as an “important asset class?” That makes the case (or allows for it) that the Fed. itself not only allowed, but rather, with eyes-wide-open helped facilitate its further ballooning. Hence: If (or when) it “pops” the Fed. has no one else to blame but itself (along with the potential hordes carrying “torches and pitchforks”) for they have now openly stated (again, and inserted it into their report) they not only knew of it, but rather, considered it as an “asset class.” e.g., Giving it their blessing and endorsement.

Remember how that other all important “derivative” class of assets backed securities worked to facilitate the “Great Financial Crash?” Hint: CDO, MBS, CDS, just to name a few? That too was another “We got this asset category.” Feel better?

The real issue that sits squarely in-front of the “markets” is the realization that the entire “reflation” trade may in fact be D.O.A. much like the legislation that was supposed to foster its existence to begin with. Let me put it this way since we’re talking about “derivatives” and their potential for highly correlated monetary wealth destruction vehicles.

The “reflation” trade that is now omnipresent in the “markets” which has facilitated the non-stop rocket-ship ride since the election of Donald Trump is nothing more than a “derivative” vehicle (or expression) of the underlying legislation that was to be its foundation or “backing asset.” e.g. Signed into law legislation.

In other words – If the legislation (i.e., tax cuts, Obamacare repeal, et cetera) don’t become signed into law legislation amounting to precisely what the “value” of those cuts and more represented (i.e. $1 TRILLION in infrastructure, Obamacare total repeal equivalents, massive corporate tax restructuring et cetera) the entire run up from Nov 2016 to today becomes de facto null and void. e.g., The “derivatives” (as in the profits made) based on “the trade” become? Hint: It’s not good.

The only thing that could (or will) make matters worse was if the Fed. had raised interest rates in anticipation. Again, hint: Not only have they raised, they’ve raised twice, and looking to raise for a third. All into further deteriorating economic data.

To re-emphasize just how precarious the “market” now sits, below is a chart I feel puts it into perspective. To wit:

(Source)

As one can see, that red rectangle represents the turmoil the “markets” had portrayed once the QE “IV tube” for all monetary woes was removed. Again, not only did the “market” suddenly halt its ever-ascending journey, but it suddenly produced ever-increasing bouts of near-death experiences needing ever the more dovish tones from the revolving cast of Fed. speakers hitting the media in ways that would make a Kardashian envious.

Again, for I can’t mention this enough, right before the election in October 2016 the economy was on such shaky footing (and as the “markets” were rolling over once again) the Chair of the Federal Reserve gave what I call her most contradictory speech when juxtaposed to today’s raising into weakness stating (paraphrasing): Running a “high pressure” monetary policy may be the only way to heal the damage still residing within the economy via the crisis. An “ultra-dovish” insinuation if ever there was one.

And yet, as the above shows, just 30 days later with the victory results of Donald Trump now into the books the Fed. morphed into “Hawks Are U.S.” and have been ever since.

I made note of this and was subsequently mocked via the mainstream business/financial media as something that “Ain’t gonna happen” using the prior 2 years as evidence. i.e., Directly after the meeting most analysis was, “They’ll probably not raise again till mid year, if then.” Then, all the jawboning for more began in earnest via one Fed. official after another including “balance sheet reduction.” Then March happened, and now June is about too. Here’s what I wrote in Dec. of that week. To wit:

“I implore you not to solely take my word, but to watch the presser for yourself and draw your own conclusions. I believe it’s one of the most forceful expressions made, or conveyed by The Federal Reserve that it may in fact act aggressively via monetary policy should it decide – It (“It” being the Fed.) seems fit. i.e., The implications seemingly being sent are that they’ll decide what a “good” economy is – fiscal implications be damned.

Now is where “fiscal implications be damned” might be far more relevant than the Fed. (as well as “markets”) ever imagined prior. The reasoning?

All that “fiscal” seems to now be damned to not seeing the light of day as far as 2017 may be concerned. And that’s something I feel the Fed. hadn’t calculated into their conclusions. (never-mind the “markets”) After all, with both the House, Senate, topped with a president all controlled by the same political party; how would legislation not be passed swiftly? (Although many others wonder that exact same thing, but I digress.)

However, with that said, the economy was/is in no shape (just using the “data” we’re all told influences a supposed “data dependent” Fed.) for incessant hawkish jawboning followed up by raising twice within 90 days. Again: All while arguing (and allowing the inclinations to be held via the futures fund) that indeed the Fed. is “hell-bent” on raising once again – in June!

That would be 3 raises in all but 6 months with balance sheet reduction arguments still front and center in Fed. communications when speaking in open forums. Are you beginning to see the implications for “policy error” more clearly?

I’m sorry to keep repeating, but it’s something which can not be repeated or stressed enough: With further deteriorating GDP and other metrics, along with no fiscal stimulus possibly seeing the light of day (meaning actually signed into law) for the rest of 2017, along with a potential government shutdown and more. June is now to be considered (as via the Fed. not saying or refuting anything to the contrary) a done deal? And a prudent one at that?

Oh, and for those who may want even further examples for contemplation? Here’s just one of the items that can be classified under “and more.” Hint: China.

But not too worry, for if you listen to current Fed. officials and their assessment of global economic conditions, you know, where the “reflation” trade is the “derivative” of the underlying asset of passed legislation (which has gone from “passed” to all but DOA) that the entire recent run up is based on?

“They’ve got this!” Just like they’ve got those other “derivatives” under their watchful eye. So June is now a shoe-in.

Feel better?

Perhaps that's why traders are starting to bet against The Fed… (quietly in the Eurodollar options market so as not to spook the average investor)

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In April 2014, just as the Ukraine conflict (and proxy civil war) was hitting its climax, in the process undermining US-Russian relations for years, some 2,066 Americans were asked to show where the Ukraine was on a map. The result, while leaving something to be desired, was not terrible.

Fast forward to this weekend, when the NYT repeated the same exercise with the latest geopolitical hotspot: North Korea. In an experiment led by Kyle Dropp of Morning Consult, he asked 1,746 American adults to point to where North Korea is on the world map. This was the raw result:

 

The bottom line: just 36% got it right. Here are the countries they selected:

Aside from showing that the majority of Americans are terrible at geography – hardly news – the NYT provided the following details explaining why the study was conducted: respondents who could correctly identify North Korea tended to view diplomatic and nonmilitary strategies more favorably than those who could not. These strategies included imposing further economic sanctions, increasing pressure on China to influence North Korea and conducting cyberattacks against military targets in North Korea.

They also viewed direct military engagement – in particular, sending ground troops – much less favorably than those who failed to locate North Korea, according to the NYT report. The largest difference between the groups was the simplest: Those who could find North Korea were much more likely to disagree with the proposition that the United States should do nothing about North Korea.

Not surprisingly, education was a major factor in participants’ ability to find North Korea. Those with postgraduate degrees had among the most success; the only ones who did better were people who said they knew someone of Korean ancestry. Those who had visited or been to a foreign country were also much more likely to find North Korea than those who had not.

However what was far more surprising according to the Morning Consult survey, is that on average, Republicans – and Republican men in particular – were more likely to correctly locate North Korea than Democratic men. And Republicans were more likely to be in favor of almost all the diplomatic solutions posed by the researchers. (Women tended to find North Korea at similar rates, regardless of party.) 

Which is surprising considering the Democrats’ reputations of being more progressive and, at least on paper, seek non-violent problem resolution. As the NYT further adds:

Geographic knowledge itself may contribute to an increased appreciation of the complexity of geopolitical events. This finding is consistent with – though not identical to – a similar experiment Mr. Dropp, Joshua D. Kertzer and Thomas Zeitzoff conducted in 2014. They asked Americans to identify Ukraine on a map and asked them whether they supported military intervention. The farther a respondent’s guess was from Ukraine, the researchers found, the more likely he or she was to favor military intervention.

Perhaps there is another reason: Ameriacns simply don’t care. Be that as it may, Americans’ relatively low interest in North Korea is not recroprical. “North Koreans are obsessed with the United States,” wrote Barbara Demick, the former Beijing bureau chief for The Los Angeles Times, in an interview with the New Yorker.

“They hold the U.S. responsible for the division of the Korean peninsula and seem to believe that U.S. foreign policy since the mid-20th century has revolved around the single-minded goal” of damaging them, she said. “The cruelest thing you can do is tell a North Korean that many Americans couldn’t locate North Korea on a map.”

In any case, the bottom line is clear: “Americans’ inability to identify countries and places is not new. A Roper survey in 2006 found that, in the midst of the Iraq war, six in 10 young adults could not locate Iraq on a map of the Middle East; about 75 percent could not identify Iran or Israel; and only half could identify New York state.”

As for North Korea, with just 36% of respondents being able to identify North Korea – and seek a diplomatic solution – it implies that roughly two-thirds of American adults would rather take the Kim regime out entirely. Which hardly bodes well for the longevity of  the North Korean dictator.

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The last time the US equity market had a longer stretch of calmness was February 1969. As UBS' veteran market operator Art Cashin exclaimed Friday, it "was another waste of carfare and a clean shirt."

This is the longest stretch of market smoves less than 0.5% since 1995.

Cashin added that the S&P first touched 2400 back on March 1st and it has not moved significantly away from that anchor in the two and a half months since then.

Cashin's advice: Consensus says bulls need to regroup and punch out of this consolidation phase – the challenge is to take the S&P clearly above 2400. Stick with the drill – stay wary, alert and very, very nimble.
 

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With the French election in the rearview mirror, Europe’s anti-establishment wave seemingly receding, and Merkel’s crushing victory (and stunning defeat for the SPD) in this weekend’s North Rhine-Westphalia election in Germany, some strategists have gone so far as to say there is virtually no political risk left in Europe (and certainly looking at a chart of Eurostoxx50 Vol or European credit spreads, this appears to be the case). To be sure, stocks have been ahead of the curve, with European YTD returns trouncing those in  the US, and some pundits saying there is much more upside to come. Not all, of course, as we showed earlier when we reported that equity strategists are cooling on the prospects for further gains in European stocks just as investors poured a record amount of money into the region’s equity funds.

 

Picking up the bearish baton, JPMorgan has gone one further, and in an overnight note from equity strategist Mislav Matejka, the bank says that the European upside thesis has now “played out” and recommends to not only tactically cut exposure to European stocks but to “even lay on outright shorts.”

Here is the summary thesis from JPMorgan:

As per our May chartbook, we argued that the market will keep grinding higher in the very short term, given bears’ ongoing capitulation and the return of inflows into Eurozone. We think this support is now close to being spent. We advise to tactically cut directional exposure to stocks and even lay on outright shorts, in addition to having recently reduced portfolio beta.

But what about the relentless inflows into European equities – recall last week there was a record inflow into European stocks – which still have a ways to go before catching up with historical levels?  Here is JPM’s response:

Looking at the largest 25 ETFs for Eurozone, since the worst point of outflows at the turn of the year, when the region lost 15% of AUM, as much as 64% has come back. We believe that a chunk of the long Eurozone trade hasn’t been done in the cash equity space, but in options, so the above inflows are probably understating the extent of current exposure to Eurozone. Also, flows are not a lead indicator, as they have typically tended to lag equity performance.

Furthermore, there are few if any euro shorts left:

Speculative Euro positions have fully erased all their past shorts. Measures of Eurozone volatility are back at lows, credit spreads, too, and Eurozone P/E relative to World is now outright expensive, suggesting that repositioning has been significant. Anecdotally, we find it interesting that pundits who were arguing to sell earlier in the year have now turned into cheerleaders, but accept that if SPX breaks through 2400 this could drive some remaining capitulation.

The market internals are also no longer euphoric:

Market internals are already turning more cautious, despite overall equity indices holding up as we had hoped. Cyclicals are rolling over sharply vs Defensives,. This is not a good sign for the overall market and could lead to a broader correction.

JPM also notes some recent divergence among Cyclicals. Commodities, which are the only Cyclical to have done poorly ytd, are starting to stabilize, but other Cyclicals, which have performed exceptionally well, are now weakening. Looking at the pattern of last year, Commodities were first up, followed by other Cyclicals and Banks. This year, Commodities were first down, and now appear to be followed by other Cyclicals.

Finally, JPM muses about the role of the USD during any potential upcoming risk-off event:

USD behavior will be an important factor in driving relative sector and regional trends. Typically, USD rallies during risk-off market phases, as investors unwind carry trades and the US is seen as a relative safe haven. This, in turn, puts pressure on EM, where central banks must tighten policy to protect their FX, thus hurting growth. Stronger USD is also a problem for commodities. 

 

What could be different this time around is that due to the potential further narrowing in the extreme rate differential between the US and RoW, the USD could continue rolling over. That is why we are not closing our EM OW, and the commodity legs of our proposed trades get a boost.

* *  *

Below are some additional key snippets from the JPM report:

We argued in our May Chartbook that easing political stress in Eurozone should lead to further near-term upside for equities, as bears capitulate and inflows come back to the region. We believe that most of this has now played out. Following our downgrade of Cyclicals last week, we advise to use the recent market resilience as an opportunity to reduce directional risk into summer, as well.

Eurozone is not a consensus UW anymore – reversal of last year’s outflows is advanced…

 

Anecdotally, we find it interesting that many pundits who earlier in the year were advising caution, have now turned into bulls, calling for new highs to be reached. Their main argument appears to be that investors are still UW the region and that the return of inflows could drive significant upside.

 

 

We note that this process is already well advanced. Eurozone has seen 15 consecutive weeks of inflows. Just last week saw $2.7bn coming back into the region, the biggest weekly figure since March ’15.

 

 

As a result, Eurozone has caught up with Japan in terms of ytd cumulative inflows. Both are well above the other regions. At the worst point last year, Eurozone outflows amounted to nearly 14% of AUM. Since then, one third has come back, based on EPFR data.

 

Of these, we note that domestic-based investors, who account for nearly 50% of AUM, have already reversed 96% of last year’s outflows. International investors are still lagging. The US, which accounts for 16% of AUM, has only unwound 17% of last year’s outflows from Eurozone equities.

 

 

Looking at the country breakdown, in Eurozone it is Spain that has seen the biggest reversal of last year’s outflows, at 45%, followed by Germany (33%) and France (32%). Only 19% of last year outflows have  come back into Italy.

 

ETF flows, which are more timely than EPFR data, show that 64% of last year outflows have already come back into Eurozone equities.

 

…there could be some more to go, but our key point is that flows have tended to lag market performance, not lead it

 

Of course, there could be more to go in terms of inflows. However, the key question in our view is whether this will drive further significant upside for the market.

The above chart shows that equity flows and market performance have tended to be at best coincident. In a sense, one could say not only that inflows are needed for Eurozone equities to sustain their recent strong run, but also that the market needs to continue rallying for investors to keep buying.

 

In relative terms, the relationship between the Eurozone / US equity performance and the regional flows shows that market performance leads the flows by seven weeks, on average. Put another way, equities might be peaking now, even though the region could well continue to receive inflows for another two months.

 

As good as it gets? Euro shorts have been covered, credit spreads are record tight, Vol is record low…

 

Short positions on the Euro have now been closed for the first time in three years, as investors are apparently becoming more comfortable with respect to the region’s political backdrop.

Consistent with this, equity volatility has fallen sharply. V2X now stands at 14, the bottom of its historical range.

 

Eurozone credit spreads have moved to the lows of the historical range, too.

 

…and Eurozone valuations have moved to the expensive side of fair value.

 

 

Clearly, if inflows into Eurozone equities were to pick up materially over the medium term, this could drive a significant relative re-rating of the region.

 

However, we note that Eurozone is no longer trading at a discount to historical relative to MSCI World. Its P/E relative is above the long-term median, near the highs of two years ago. Even adjusted for sectoral composition, Eurozone P/E has moved to the expensive side of fair value.

 

Market internals are turning defensive

 

While the overall market level has held up well recently, as we anticipated, sector leadership is starting to turn more cautious. Cyclicals, which led the market higher last month, are rolling over again vs Defensives. We downgraded Cyclicals last week and continue to see little relative upside for the group over the next few months.

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Authored by Gwynne Dyer via BangorDailyNews.com,

“I am no Mussolini,” Venezuela’s beleaguered President Nicolas Maduro insisted on television early this month. But if things go on this way, he could end up like Mussolini. That would be very unfortunate for him and also for Venezuela.

The daily street protests against Maduro’s rule are in their second month, and around 40 people have already been killed, most of them by the police. “Molotov cocktails” (fire-bombs) are old hat; the new fashion is for “poopootovs” — containers of human or animal excrement that are thrown at the security forces. Nobody knows when it will all end, but most people fear it will end badly.

It didn’t begin all that badly. Hugo Chavez, a radical former army officer who led a failed coup attempt in 1992, was elected to the presidency quite legitimately in 1998. Venezuela was the richest country in South America because of its oil wealth, but most of the 31 million Venezuelans were very poor, and Chavez proposed to change that.

He had strong popular support – majorities of around 60 percent in the 2002 and 2006 elections and still 55 percent even in 2012 – and he had lots of money to give to the poor. But he died of cancer in 2013, and his successor, a former bus driver called Nicolas Maduro, got barely 50 percent of the vote in a special election later that year. He has not had a quiet moment since.

The problem is money. Chavez ran up massive deficits to finance his spending on health, education and housing, which really did transform the lives of many of Venezuela’s poor, but the bills only came in after he died. The world price of oil collapsed, Venezuela’s income did too, and everything went sour.

Now Venezuela has the highest inflation in the world — 700 percent this year — and the economy has shrunk by almost one-fifth. There are chronic shortages of food and medicines: three-quarters of Venezuelans say they are eating less than two meals a day, and the child death rate is up by 30 percent. And a lot of people, including former Maduro supporters, are very angry.

To stay in power, Maduro must avoid an election, and the next presidential election is due next year. The opposition had already won a two-thirds majority in the National Assembly in 2015, so Maduro’s first move, in late March, was to have the Supreme Court (packed with his supporters) simply declare that the National Assembly was “in contempt” of the country’s laws and shut it down.

That was what brought the protesters out on the streets in such numbers that three days later Maduro lost his nerve and the Supreme Court revoked its decree. But the protests, fueled by the growing shortages of practically everything, just kept going, and now the demonstrators were demanding that the next presidential election be brought forward from 2018 to this year.

Maduro is cornered. He could not win a presidential election this year, or in 2018 either. It’s not even certain that the rank-and-file of the security forces can be relied on to defend him forever. So he has played his last card: a new constitution.

The last constitution was written by Chavez himself and adopted in 1999. At the time, he said it was the best in the world and promised it would last for centuries, but on May 1st Maduro said the country needs a new one. He is going to call a “constituent assembly” to write it, although he was vague on how its members would be chosen. Some might be elected, and others would be chosen from “social organisations” (i.e. his cronies).

The Chavez constitution does not give Maduro the authority to do this, but the man is desperate. He needs an excuse to postpone elections he knows he would lose, and this is the best he can come up with. It won’t work, because the opposition understands his game and will not accept it. The country is drifting towards civil war.

“I don’t want a civil war,” Maduro said while announcing his constituent assembly, but he is laying the foundations for one. He might even win it, in the short term, if the army and police stay loyal to him. But in the longer run he really does risk ending up like Mussolini: executed without trial and hanging upside-down in a public square.

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After years of DOJ service outside the spotlight, Deputy Attorney General Rod Rosenstein was thrust into the public eye last week when the Trump administration cited his scathing letter of FBI Director Jim Comey’s handling of the Clinton investigation as the primary reason for Comey’s sudden dismissal that took pretty much everyone by surprise, including Comey himself.

Amid the chaos, rumors quickly surfaced, courtesy of the Washington Post and anonymous sources of course, that Rosenstein threatened to resign after the White House placed the blame for Comey’s dismissal squarely at his feet.  The DOJ quickly issued an on-the-record denial of the allegations, but it didn’t really matter because, as we all know, once the narrative has been planted it’s impossible to shake irrespective of facts.

DOJ on the record: Rosenstein did not threaten to resign

— Laura Jarrett (@LauraAJarrett) May 11, 2017

 

As such, it’s not terribly surprising that Senate Majority Leader Mitch McConnell has just announced that Rosenstein will brief the Senate on the events leading up to Comey’s abrupt dismissal this Thursday at 2:30pm EST.  Per The Hill:

Deputy Attorney General Rod Rosenstein will brief all 100 senators on President Trump’s decision to fire FBI Director James Comey on Thursday, Senate Majority Leader Mitch McConnell has announced.

 

The briefing will take place at 2:30 p.m., according to a press release.

The Senate previously invited Comey to testify at a closed session about his firing though he declined.

We can’t wait to see how many different ways Democrat Senators can find to ask whether Rosenstein threatened to quit despite his repeated denials that it ever happened.

* * *

For those who missed it, here is the letter that Rosenstein previously wrote to Trump regarding Comey’s handling of the Clinton investigation.

In the letter from Deputy Attorney General Rod Rosenstein, he cites the handling of Comey’s Clinton investigation, and says that Comey was wrong to cite his conclusions about the Clinton email probe in July of 2016: “I cannot defend the Director’s handling of the conclusion of the investigation of Secretary Clinton’s emails, and I do not understand his refusal to accept the nearly universal judgment that he was mistaken,” Rosenstein wrote.

Rosenstein was referring to Comey’s decision to announce in July last year that the probe of Hillary Clinton should be closed without prosecution, but then declared – 11 days before the Nov. 8 election – that he had reopened the investigation because of a discovery of a new trove of Clinton-related emails.  Democrats say the decision cost Clinton victory.

Rosenstein also identified several areas in which he said Comey had erred, saying it was wrong of him to “usurp” then-Attorney General Loretta Lynch’s authority by announcing the initial conclusion of the email case on July 5.

Comey “announced his own conclusions about the nation’s most sensitive criminal investigation, without the authorization of duly appointed Justice Department leaders,” Rosenstein wrote. Comey also “ignored another longstanding principle” by holding a news conference to “release derogatory information about the subject of a declined criminal investigation.”

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Day after day, we are witnessing new and inexpicable shifts in the so-called stock 'market' and machines and men battle it out (the latter losing to the former) in the war of information overload and trend analysis. As Richard Breslow, a former FX trader and fund manager who writes for Bloomberg, wrote so pointedly, one of the, many, evil consequences of the current trading environment is that people aren’t really paying attention to what's going on.

What looks like hyper-sensitivity to every headline and news tidbit, is merely a manifestation of the sad truth that investors have realized there’s very little upside to believing in anything. Market narratives aren’t carefully crafted as new information deepens their texture. They change as if investors are wantonly playing with the remote control on the television set.

And, of course, it only makes matters worse if risk appetite changes dramatically every Friday afternoon. No one has the fortitude to risk weekend misadventures from the various powers that be.

As a result of the poor track-record of central bank forecasting every forward-looking speech now comes with the obligatory data-dependent disclaimer. Monetary-policy rate setters feel the need to make sure we really know we live in an uncertain world. And then proceed to present seemingly precise quarter-by-quarter forecasts. Staying within their educational comfort zone with complete deniability.

We all know how people are conditioned to ignore boiler-plate. And this may have been all right when forward guidance was meant to buck us up and then ease quantitatively some more. But the ground is shifting. And this approach is becoming dangerous.

It’s contributing to the death of asset-price volatility. The very phenomenon that so many correctly warn about. It’s bad communication. They just seem to have a perpetual inability to make academic and practical applications sync.

Last week, the ECB’s Peter Praet extolled the benefits from “very low interest rates”. He went on to remind that “our monetary-policy decisions are only guided by our price-stability mandate.” Which, even if true, they haven’t met. But then went on to warn everyone to prepare for policy normalization. Just how are they supposed to do that? It’s contra-indicated for traders to keep putting themselves in a position to have their eyes ripped out.

Stay calm, we will be gentle, gradual and won’t upset the apple cart isn’t exactly a cri de guerre for bond vigilantes. And it’s not going to galvanize governments to all of a sudden embrace responsible behavior.

If central bankers hope that investors will start to exhibit sensible behavior, consistent with their fiduciary duties, they need to start speaking their minds. And if that causes markets to back up, so be it. No one believes they aren’t in complete thrall to financial conditions. They are going to have to prove it isn’t the case. So far there’s no indication they have the stomach for it.

This “you can’t handle the truth” condescension no longer serves any good purpose. It’s indicative of the belief that the worst thing that can happen is “I’m wrong”. No matter what else bad may have to happen to protect their egos. Why should investors do what their central bankers are afraid to?

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After evading the press for much of the past week in the aftermath of Comey’s firing, and following this weekend’s unconfirmed report that Trump may be seeking to fire Sean Spicer (along with several other key members of the Trump inner circle), not to mention the latest SNL skit, today’s press briefing may be somewhat awkward affair for the White House press secretary.

Expect more of the same: questions on Comey, whether there is a growing chasm between Trump and the Senate on healthcare policy as well as questions on the global malware attack.

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Just over a month after the US launched a cruise missile attack at Syria, US relations with Syria are deteriorating rapidly once more after the State Department accused the Syrian government of carrying out mass killings of thousands of prisoners and burning the bodies in a large crematorium outside the capital.

According to Reuters, Stuart Jones, the acting assistant secretary of near eastern affairs, told reporters on Monday that the State Department believes that about 50 detainees a day are being hanged at Saydnaya military prison, about 45 minutes from Damascus. Many of the bodies, it said, are then being burned in the prison’s crematorium in order to hide evidence of mass murder.  

“We now believe that the Syrian regime has installed a crematorium in the Saydnaya Prison Complex which could dispose of detainees remains with little evidence,” Stuart Jones said. “Credible sources have believed that many of the bodies have been disposed in mass graves.” It was not immediately clear what he considers credible sources.

He added that “although the regimes’ many atrocities are well-documented, we believe that the building of a crematorium is an effort to cover up the extent of mass murders taking place in Saydnaya prison.” Jones added that the regime will put up to 70 prisoners in a cell designed to hold five people before they are killed.

The State Department released the additional information in order to put pressure on Russia, which has provided Assad with crucial support. “Russia holds tremendous influence over Bashar al-Assad,” State Department spokeswoman Heather Nauert said Monday. “The killing and devastation has gone on for far too long in Syria.”

The department released commercial satellite photographs showing what it said is a building in the prison complex that has been modified to support the crematorium. That said, the department conceded that photographs taken over the course of several years, beginning in 2013, do not definitely prove the building is a crematorium, but they show construction consistent with such use. One photograph taken in January 2015 shows one area of the building’s roof cleared of snow due to melt.

In presenting the photographs, Jones said Syrian President Bashar Assad’s government “has sunk to a new level of depravity” with the support of Russia and Iran and called on both countries to use its influence with Syria to establish a credible ceasefire and begin political talks.

Today’s report suggests that the recently proposed plan to implement “de-escalation zones” in Syria is rapidly falling part.

“In light of the information about the mass killings, Jones said that Russia’s calls for “de-escalation zones” in the country would be met with “skepticism” and added that  “the (Assad) regime must stop all attacks on civilian and opposition forces. And Russia must bear responsibility to ensure regime compliance.

Jones detailed the information about Assad’s crematorium as part of a condemnation of Russia’s “apparent tolerance of Syrian atrocities” as they support Assad. “We hope that we will now be able to work with the Russians in a constructive way to put pressure on the regime to end these atrocities,” he said.

While we doubt Russia will bother changing its pro-Syria policy as a result of today’s announcement, the bigger question is whether today’s disclosure is the preamble for more strikes aimed at Syria: the answer will likely depend on how desperate the administration is for another distraction from the various ongoing scandals and dead-ends involving the Trump increasingly more shaky domestic policy.

via http://ift.tt/2qkAda6 Tyler Durden