Tag: finance

One weekend ago, in an unexpected episode of Zero Hedge trolling by Jefferies economists, the junk-bond focused mid-tier investment bank sent out a note in which it defended the “recovery” as follows:

“Lightweights like Zero Hedge might point to a sub-50 ISM as another reason to hate equities, but there’s a reason why little ZH is a choker, a reason he’s got one of the worst records in predicting markets anywhere, just a harrable record, harrable, I mean, successful people have pointed out that he’s 0 for 2600. He’s succeeded at being wrong. Success is my son-in-law, I’m successful, my daughter is both beautiful and successful. I have many successful friends.” Made up quote, but the point is that it’s hard to be successful when just reacting to backward looking information. Our work suggests that by the time the ISM breaks 50 to the downside the market is already pricing in much of the concern–actually a break through 50 to the downside tends to be quite positive for the market over the next 12M even when you include recessionary periods. When that break of 50 hasn’t been associated with an immediate recession (i.e. perhaps now), median market performance is up 11% over the next 6M, and 21% over the next 12M. This week we got a better than expected ISM, and skeptics point to the fact that it’s still below 50, but that may be a positive.  See supporting chart, table and methodology below. (T.J. Thornton, US Product Management).

We responded not by retaliating with childish name calling, but by showing both the recent collapse in Jefferies revenues, the stock price of Jefferies Group owner Leucadia…

… as well as the massive restructuring in the company’s investment bank group, as a result of which countless current Jefferies employees would become former:

Jefferies Group LLC will merge its junk-rated loans and bonds business with the junk debt unit of its joint venture with MassMutual Financial Group, according to people familiar with the matter, in the biggest reorganization by a U.S. investment bank since the leveraged finance markets seized up last year.

 

Jefferies’ management presented the changes internally as a way to boost efficiency and focus on clients, rather than a response to troubled deals, the sources said. It was not immediately clear if the combination would offer Jefferies more financial resources to increase lending.

In retrospect it appears the changes were indeed in response to troubled deals, but more in that in a second.

We further said, that if instead of trolling “fringe blogs”, the company’s economists actually did their job and actually “predicted” what was coming instead of cherrypicking goalseeked economic datapoints to “justify” the bank’s falsely bullish outlook and help their employer be better positioned for the proper trading environment, Jefferies wouldn’t be forced to report quarter after quarter of abysmal results.

Well, make that after another quarter.

Moments ago Jefferies, which is still on the investment banking cycle of reporting where its earnings (and in this case, losses) arrive one month ahead of the other banks, and as such is a good bellwether into overall Wall Street revenue trends, reported an absolute disaster of a quarter, its worst since the financial crisis.

The appalling numbers: trading revenue plunged 82% in the fiscal first quarter, leading to the firm’s first non-GAAP loss for the period since 2008. Unlike previous quarters, this time the collapse in sales and trading was not led by massive losses in bond trading but by a massive remarking to market of its equity exposure, which is not to say bond trading was ok: revenue from fixed income plunged 55%, while equities imploded by an unprecedented 99%, down from $203 million to just $2 million!

 

The result: a ghastly net loss of $166.8 million, which not even non-GAAP adjustments could make stink any less.

 

Dick Handler’s apologetic commentary for the third month in a row could make life for the firm’s CEO difficult if its main shareholder, Leucadia decides it has had enough. This is what he said:

“Our overall first quarter results reflect an exceptionally volatile and turbulent market environment during our first fiscal quarter, although our core businesses performed reasonably, considering the environment. A quiet December was followed by an extremely challenging January and first few weeks of February. Almost every asset class, including equities and fixed income, suffered significantly amid concerns about the pace of global economic growth, outflows from the high yield market, forced selling from hedge funds, uncertainty over China, a potential Brexit, and an overall void in liquidity.

But wait, aren’t your “economists” expected to anticipate events such as these and help your traders position accordingly? Perhaps they have “more important things” to do with their time.

What caused the collapse? First equity:

Although our Equities revenues declined to $2 million for the quarter from $203 million for the first quarter of 2015, this was primarily attributable to a $145 million difference in net revenues related to two listed equity block positions, including KCG, and our share of the results of our Jefferies Finance joint venture. The two equity block positions generated pre-tax, mark to market losses during the quarter that totaled $82 million, $67 million of which is unrealized, including KCG, which was written down by $37 million. This compares to the combined net revenues of the same positions of positive $30 million during the first quarter of 2015, a year-on-year decline of $112 million.

And then credit:

Leverage lending activity and related liquidity was very muted during the quarter, and two loans Jefferies Finance closed during the quarter and held for sale as of the end of the quarter were marked down by a total of $38 million. That is reflected in our share of Jefferies Finance’s results. The two loans held for sale in Jefferies Finance as of the end of February 2016 were marked at prices believed to be required to clear their sale, with the potential for gains should markets improve prior to sell-down.

There was the odd defense of the balance sheet, which explained the firm’s ongoing gross derisiking as well as its dramatic reduction in risk positions as confirmed by the 13% drop in VaR:

Our balance sheet at February 29, 2016 was $35.2 billion, down $3.4 billion from 2015 year-end and $8.6 billion from the year ago period. We estimate period-end tangible leverage to be 9.8 times. We continue to have ample excess liquidity. At the end of the first quarter our liquidity buffer was about $4.3 billion and represented 12.9% of gross tangible assets. We repaid our $350 million March debt maturity today from cash on hand and have retired a net $784 million of debt in the last six months. Our Level 3 assets decreased 10% to $489 million, from the year end level of $542 million and represents 3.6% of inventory. Average VaR for the quarter of $8.4 million was lower by 13%, compared to $9.7 million for the fourth quarter.”

 

Jefferies Finance’s equity is $949 million. Jefferies Finance is highly liquid and positioned well to serve our clients in this important business as the market recovers. We recently strengthened our Leveraged Finance origination team and expect to grow further our presence in this segment.

But first the team will be substantially trimmed, as reported last weekend. Handler went on:

New issue equity and leveraged finance capital markets were virtually closed throughout January and February, which resulted in many of our potential Investment Banking capital markets transactions being postponed until some stability returns to the markets. As we have done through many other turbulent periods in our history, we reduced our already smaller balance sheet to continue to reduce risk during this difficult period. We are humbled by Jefferies’ quarterly loss and will strive to deliver the better results that our shareholders deserve and Jefferies is more than capable of achieving.

Humbled enough to actually read the economy correctly, or still unhumbled to where your novelty clown “economist” appears on Bloomberg TV wearing “I Heart QE” hats? Actually, we have a feeling said economist was instrumental in soothing investor nerves with the following Dick Handler line:

While we are early in the second quarter and one can never predict the future, it appears markets have not only stabilized, but aggressively snapped back. Bank holding company stocks in the U.S. and globally have halted their sell-off, high yield inflows have been at record levels, hedge funds appear to have stabilized, equity markets have rebounded, and energy/commodity prices have improved significantly. We are experiencing mark-ups in our block equity positions and believe there may be potential upside in the value of the loans held for sale in Jefferies Finance should the current market tone continue. Our core businesses are performing well, with total sales and trading net revenues for the first ten trading days of our second quarter averaging above our recent periods’ mean results, and our investment banking backlog is stronger.

Yes, Jefferies just extrapolated a trend based on 10 trading days, which considering its novelty “market strategist” – who seems to be good at anything but actually ‘strategizing markets’ – appears on TV dressed as follows…

Typical Wall Street economist: betting it all on central bank bailouts for 2600 days running http://pic.twitter.com/knCOTCsDve

— zerohedge (@zerohedge) February 21, 2016

 

… is not really unexpected.

We wish Jefferies well, and that sooner or later the much “hearted” Fed QE will return and help the bank regain its central-bank infused mojo, in lieu of actual analysis by its highly overpaid cadre of forecasters.

via Zero Hedge http://ift.tt/1Mk4xTK Tyler Durden

“Putin is a wily guy. He is showing he’s a statesman. Russia is also sending a message to Assad who has been sounding too confident.”

That’s from Joshua Landis, director of the Center for Middle East studies at the University of Oklahoma, and a frequent commentator on Syria’s five-year conflict.

On Monday, Putin surprised the world by announcing a partial withdrawal of the Russian military presence from Syria. Moscow’s warplanes, backed by Hezbollah ground troops, had effectively encircled Aleppo where rebels were preparing to make what amounted to a last stand just prior to the ceasefire that took effect late last month.

“I think that the tasks set to the defense ministry are generally fulfilled,” Putin said. “That is why I order to begin withdrawal of most of our military group from Syria starting from tomorrow,” he added.

Indeed. Despite President Obama’s early contention that Russia would end up in a “quagmire” in Syria, The Kremlin instead showed what happens when a mishmash of loosely aligned rebels squares off against a modern air force.

Five months and thousands upon thousands of sorties later, the rebel cause has become virtually hopeless. It’s much easier to broker a ceasefire when the enemy has been, for all intents and purposes, decimated.

Now, all eyes are on peace talks in Geneva where there is “no Plan B,” according to United Nations special envoy for Syria Staffan de Mistura.

De Mistura has called a political transition the “mother of all issues,” with the only alternative being a return to war. But Syrian Foreign Minister Walid Muallem has shown little willingness to negotiate for the future of President Assad while the main Syrian opposition umbrella group, the High Negotiations Committee looks determined to demand the installation of some manner of interim government devoid of Assad and his top brass. 

“[We don’t know] who we are negotiating with and what the issues are,” Syria’s UN representative, Bashar Jaafari complains. All sides probably feel the same way. 

The media is generally pitching Putin’s pullback as a move designed to put pressure on Assad to negotiate. That may be partially true, but make no mistake, it also puts pressure on the rebels. They are not, after all, negotiating from a position of strength. Moscow will keep a presence at its airbase in Latakia and it’s no longer clear that the anti-Assad elements which are party to the ceasefire are in any kind of shape to mount a counteroffensive. In other words: they probably aren’t optimistic about their chances if the war resumes. 

“For Putin, who’s worked with the U.S. to promote diplomacy in Syria even though the two powers backed opposite sides in the war, it’s an opportunity to display peacemaking credentials while preserving the gains Assad’s army made under Russian air cover,” Bloomberg writes, in what’s probably a reasonably accurate assessment of Moscow’s gambit. 

If both sides come to some kind of tenuous agreement, Putin will get to claim that Russia came, saw, and conquered, then brokered a peace settlement – two things no country had been able to do in Syria since the beginning of the war in 2011.

“[It’s] a symbolic gesture to sweeten the opposition’s pill, because Assad is clearly not going to go away even if Russia slightly reduces its operations,” Anton Lavrov, an independent Russian military analyst told Bloomberg, adding that “this is clearly linked to the start of negotiations in Geneva [and] it’s a signal to the opposition and an attempt to influence their agreeability.” That underscores our assessment above: the opposition has now seen what can happen when there’s a lack of “agreeability,” so now Putin will play good cop to his own original bad cop and see if that works to bring the rebels to the table.

Meanwhile, Russian state television has begun to air the first footage of Russian warplanes triumphantly departing from Hmeymim air base in Latakia.

“The personnel are loading equipment, logistics items and stock onto transport aircraft,” the Russian Defense Ministry said.

“Aircraft from the Hmeymim base will fly back to the airfields where they are permanently based on Russian territory accompanied by military transport aircraft.”

Meanwhile, on the ground, al-Nusra is stirring up trouble in Idlib. As we wrote yesterday evening, the al-Qaeda affiliate overran Division 13 at Marat al-Numan on Sunday, seizing US-made weapons including TOWs and armored vehicles. “On Monday, there were reports of demonstrations against the Nusra Front in territory it holds in Idlib province in north-western Syria,” BBC reports. “Photos and videos circulated on social media by an analyst with the Brookings Institution think-tank showed supporters of Western-backed rebels marching in the town of Marat al-Numan [and] there were also reports the protestors had stormed a Nusra Front prison, freeing detainees.”

Are we seeing a mini-civilian uprising v. Nusra in Marat al-Numan? Civilians stormed AQ prison, freeing 4 detainees http://pic.twitter.com/12TiMMKtEQ

— Charles Lister (@Charles_Lister) March 14, 2016

#BREAKING Al-Qaeda in Syria vows new offensive after Russian pullout

— AFP news agency (@AFP) March 15, 2016

As for ISIS, the SAA is reportedly advancing on Palmyra, the UNESCO heritage site seized by the militants last year in what commentators decried as a major blow to the effort to preserve antiquity.

Russia has indicated it will still support Syria in the fight against “the terrorists.” 

#BREAKING Russian planes to keep striking ‘terrorist’ targets: Russian official in Syria

— AFP news agency (@AFP) March 15, 2016

And what, you might ask, happens if the SAA and the US-led coalition still can’t manage to finish off ISIS and al-Nusra? Here’s Viktor Ozerov, head of the defense committee in the upper house of Russia’s parliament with the answer: “We can come back.”

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

• Bank of Japan Holds Fire on Stimulus, Negative Rate Unchanged (BBG)
• Donald Trump Aims for a Knockout in Tuesday Primaries (WSJ)
• Global Stocks Fall on Commodities Decline, Ahead of Fed Meeting (WSJ)
• Oil prices fall as clouds gather over supply picture (Reuters)
• Many Shale Companies Are Unable to Ramp Up Oil Output (WSJ)
• Valeant Slashes Guidance, stock crashes (WSJ)
• Fed to sit tight on rates at March meet, hint at hikes to come (Reuters)
• Big Money Gets On China’s Lifeboats (BBG)
• Republican Party gears up to fight Obama court nominee (Reuters)
• BOJ Move Backfires as 0.001% Deposits Lure Cash of Fund Managers (BBG)
• VW Whistle-Blower’s Suit Accuses Carmaker of Deleting Data (NYT)
• Apple fight could escalate with demand for ‘source code’ (Reuters)
• Near-Record Cash `Comfort’ for Canada Oil Firms Amid Price Rout (BBG)
• The Koch Brothers Have Started a New Family Office to Quietly Invest Their Fortune (BBG)
• Stanley Fischer and Lael Brainard Are Battling for Yellen’s Soul (BBG)
• Ex-Sequoia Partner Goguen Calls Sex-Abuse Suit Extortion (BBG)
• State TV shows Russian troops in Syria packing up (Reuters)
• Cost-Cutting Shale Drillers Limit Potential for Oil Rally (BBG)
• U.S. Investors Have Capitulated on Europe at the Worst Possible Time (BBG)

 

Overnight Media Digest

WSJ

– Chinese insurance company Anbang Insurance Group Co lobbed in a roughly $13 billion bid for Starwood Hotels & Resorts Worldwide Inc, an effort to break up the hotelier’s pending sale to Marriott International Inc and the latest sign of China’s growing appetite for overseas takeovers. (http://on.wsj.com/1Rj9Xjd)

– North Korean leader Kim Jong Un claimed a key advance in ballistic missile technology and called for further missile and nuclear warhead tests “in a short time”, the latest in a string of recent threats aimed at creating fear of war in the U.S. and South Korea. (http://on.wsj.com/1Rja1Q7)

– Sony Corp has reached an agreement with the estate of Michael Jackson for Sony to obtain ownership of Sony/ATV Music Publishing LLC by purchasing the estate’s 50% stake. (http://on.wsj.com/1RigWPJ)

– Bottles of Honest laundry detergent say they don’t contain SLS, a chemical that the consumer-products company says can irritate skin. But Earth Friendly Products LLC, the company that makes the detergent for Honest, dropped such marketing claims from its own website last year. (http://on.wsj.com/1RjaaDb)

– Avon Products Inc said Monday that it would eliminate around 2,500 jobs and move its corporate headquarters to the United Kingdom, the latest step in a years-long turnaround of the struggling beauty company. (http://on.wsj.com/1RjadPm)

– Goldman Sachs Group Inc’s investment-management division said it would buy Honest Dollar, an online retirement-savings startup that is barely a year old, consisting of portfolios of low-cost exchange-traded funds to small companies, charging $8 to $10 an employee a month. Terms of the deal were not disclosed. (http://on.wsj.com/1RjahhZ)

– JPMorgan Chase & Co is trying to sell new securities that would pass along most of the credit risk on $1.9 billion in mortgages, in an attempt to revive a debt market that has been largely left to the government since the financial crisis. (http://on.wsj.com/1RjamCb)

 

FT

China’s Anbang Insurance Group has challenged Marriott International Inc’s merger with U.S. hotel operator Starwood with a $12.8 billion cash offer.

Russian President Vladimir Putin announced on Monday that “the main part” of Russian armed forces in Syria would start to withdraw.

Brussels is urging European banks to stay away from Russia’s first sovereign bond issue, creating doubts about the viability of the offering.

 

NYT

– A fired Volkswagen AG employee in Michigan contends that employees erased electronic files as U.S. officials were investigating its emissions cheating. (http://nyti.ms/1RihVPN)

– China’s Anbang Insurance Group hopes to expand its hotel empire with an unsolicited bid to acquire Starwood Hotels & Resorts Worldwide’s, hoping to derail Starwood’s $10.8 billion cash-and-stock merger with Marriott International Inc that is set to be considered by shareholders of both hotel operators this month. (http://nyti.ms/1QTxkTk)

– As China’s economy slows after more than two decades of breakneck growth, strikes and labor protests have erupted across the country. Factories, mines and other businesses are withholding wages and benefits, laying off staff or shutting down altogether. Worried about their prospects in a gloomy job market, workers are fighting back with unusual ferocity. (http://nyti.ms/1Riin0C)

– Goldman Sachs Group Inc is adding a little robo to its investment management business, buying Honest Dollar, a digital retirement savings tool aimed at millions of small-business employees who do not have access to traditional employer-sponsored savings plans. (http://nyti.ms/1Riiwkt)

– The Obama administration is expected to withdraw its plan to permit oil and gas drilling off the southeast Atlantic coast, yielding to an outpouring of opposition from coastal communities from Virginia to Georgia but dashing the hopes and expectations of many of those states’ top leaders. (http://nyti.ms/1QToghl)

 

Canada

THE GLOBE AND MAIL

** The largest shareholder in Postmedia Network Canada Corp is soliciting offers to sell its stake in the media company, signalling a potential shift in the ownership of Canada’s biggest chain of newspapers. (http://bit.ly/1pk4Nx5)

** Federal prison authorities are under criminal investigation for possible illegal surveillance, The Globe and Mail has learned. The probe centres on Correctional Service Canada’s use of a dragnet surveillance device inside a penitentiary. (http://bit.ly/1Uvs8rs)

NATIONAL POST

** London’s city council has lambasted Bombardier Inc for “duping” the British capital into awarding it a train-signalling contract that it was incapable of delivering, creating “nothing short of a disaster” for the London Underground. (http://bit.ly/1UvsKNB)

** Low oil prices could cost Canada’s federally owned mortgage insurer C$7 billion ($5.23 billion) a year in lost profits, though the organization’s top executive said Monday the oil price collapse will not drain its capital to unsustainable levels. (http://bit.ly/1RiCUlI)

** Airfares are falling across the globe but that isn’t affecting the financial performance of North America’s airlines, according to a new report by the International Air Transport Association. (http://bit.ly/1V8KLSG)

 

Britain

The Times

The chief executive of Britain’s biggest supermarket, Tesco Plc, has warned that the retail sector could come under intolerable pressure unless British finance minister George Osborne pledges to reform business rates. (http://thetim.es/1QS4WCv)

Shares of London Stock Exchange Group Plc hit a record high Monday as expectations grew that it will reveal the details of an agreed merger with Deutsche Boerse AG within days, valuing the combined group at more than 20 billion stg. (http://thetim.es/1V7QJmw)

The Guardian

Weaker growth and a deterioration in public finances will force the Treasury to make an additional 4 billion stg of savings by the end of the current parliament, British finance minister George Osborne has said. (http://bit.ly/1QWo135)

Fever-Tree, the supplier of premium tonic water and other carbonated mixers, is toasting a surge in profits after it won new business with Marks and Spencer Group Plc and British Airways. (http://bit.ly/1LndBg2)

The Telegraph

Supporters of Brexit are more likely to vote in the forthcoming referendum which could give the Leave campaign a decisive edge in the final result, a new Telegraph poll suggests. (http://bit.ly/250Ooya)

Iran has vowed to resist a move to cut oil production as its output soared by the largest monthly amount in nearly 20 years. (http://bit.ly/1UceKtk)

Sky News

Royal Bank of Scotland Group Plc is to cut around 550 jobs in the UK as it moves away from offering face-to-face advice to automated services. (http://bit.ly/1QTzzYb)

British people on low incomes will be eligible for a bonus of up to 1,200 stg over four years if they put money away in a new savings scheme, Prime Minister David Cameron has announced. (http://bit.ly/1Mjb01l)

The Independent

British Chancellor of the Exchequer George Osborne has been warned that he risks damaging the struggling UK economy with another round of spending cuts. (http://ind.pn/1QYVRo2)

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

Was that it for the great February/March bear market rally?

After soaring by 200 S&P point from the February 11 lows, the S&P 500 appears to have finally hit a resistance at a point where GAAP P/E is now a frothy 23x, and where even Goldman says the S&P500 is overvalued based on conventional market valuation metrics. Perhaps it was the fundamentals finally catching up, or perhaps it was disappointment that the BOJ added nothing new to the stimulus menu, after last week’s Draghi’s bazooka, and coupled with the stunning announcement by China it was willing to launch a Tobin Tax, a move that confirms that under the surface China’s capital flight is accelerating, overnight global markets and US equity futures have dropped while the yen jumped the most in a week.

What is surprising, is that not even a week after Draghi’s bazooka, some are already concerned it won’t be enough: “Monetary policy does not work without fiscal reform,” Brett McGonegal, chief executive officer of Capital Link International, told Bloomberg TV. “You can keep the monetary stimulus going, but if you’re not changing anything and there’s no reform going on, you’re at this point where it’s not going to work.”

Also notable is that oil has continued its decline for the second day, and at last check WTI was down $1, or over 2% – the lowest price in a week – as focus returns to the market oversupply, Russia signalling Iran won’t join a production freeze (which means neither will Kuwait, and likely most other OPEC members) and today’s API inventory data today which will forecasts another big inventory build at Cushing. As a result, there has been notable weakness among commodities, with currencies of resource-exporting nations sliding as copper and gold prices fell, while iron ore, last week’s record highlight short squeeze, plunged the most in eight months.

“Market participants now appear to be paying greater attention to the current oversupply again,” Commerzbank analyst Eugen Weinberg says in a note. “The primary focus is on Iran, which for understandable reasons is refusing at the current time to sign up to any agreement to cap production.”

Adding more pressure on the rally, Bloomberg explains that while world equities have staged a comeback since reaching a two and a half-year low in mid-February, “so far there are few signs that monetary easing in China, Europe and Japan is pulling the global economy out of a slump. The BOJ’s decision to maintain policy was forecast by most economists and the authority said it’s prepared to ease further if needed to revive inflation expectations. The European Central Bank announced unprecedented stimulus last week, while the Federal Reserve will conclude a review on Wednesday and the Bank of England a day later.”

“Monetary policy does not work without fiscal reform,” Brett McGonegal, chief executive officer of Capital Link International, told Bloomberg TV. “You can keep the monetary stimulus going, but if you’re not changing anything and there’s no reform going on, you’re at this point where it’s not going to work.”

But as we wrote yesterday, the one event that will truly make or break the market is tomorrow’s FOMC announcement: if Yellen turns overly hawkish and there is no major revision to the dots, or – don’t even think it – the Fed shocks the market and hikes another 25 bps, then we go right back to square one, where the market was in December of 2015, terrified every time China sneezes.

Market snapshot:

• S&P 500 futures down 0.6% to 1998
• Stoxx 600 down 0.9% to 342
• FTSE 100 down 0.6% to 6137
• DAX down 0.3% to 9956
• German 10Yr yield up 1bp to 0.29%
• Italian 10Yr yield up 2bps to 1.32%
• Spanish 10Yr yield up 3bps to 1.49%
• S&P GSCI Index down 1.3% to 322.9
• MSCI Asia Pacific down 0.9% to 127
• Nikkei 225 down 0.7% to 17117
• Hang Seng down 0.7% to 20289
• Shanghai Composite up 0.2% to 2864
• S&P/ASX 200 down 1.4% to 5111
• US 10-yr yield down 2bps to 1.93%
• Dollar Index up 0.1% to 96.72
• WTI Crude futures down 2.7% to $36.18
• Brent Futures down 2.9% to $38.38
• Gold spot down 0.1% to $1,234
• Silver spot up less than 0.1% to $15.35

Global Top News

• Avon Plans to Move Headquarters to U.K. and Cut 2,500 Jobs: Will generate one-time expenses of ~$60m in 1Q, expects to generate savings of as much as $70m from the cuts by 2017
• Kuroda Holds Fire on Stimulus as Japan Digests Negative Rate: BOJ kept the target for increasing the monetary base unchanged, and left benchmark rate at minus 0.1%
• Apollo Said to Seek $700 Million for CLO Firm as New Rules Loom: New firm will issue collateralized loan obligations, as part of its effort to comply with rules designed to curb excessive risk-taking by managers of the vehicles, according to 2 people with knowledge
• Sony Buys Jackson Stake in Music Venture for $750 Million: Co. exercised right to acquire partner’s stake
• Brookfield, Qube Join Forces in A$9.1 Billion Asciano Bid: Former rival groups led by Brookfield Asset and Qube joined forces to buy Asciano in a A$9.05b ($6.8b) bid
• U.S. Steel Vows to Escalate War on Imports If Duties Fall Short: CEO Longhi vows to file 201 case if final penalties fall short
• Cliffs Natural Investors Sue for Being Shut Out of Debt Swap: Investors say Cliffs Natural has two classes of bondholders
• U.S. Ethanol Glut Begins to Test Limits of Storage Capacity: Kinder Morgan rerouted deliveries away from Illinois terminal
• Herbalife Spent $700,000 Protecting Its CEO From Threats in 2015: CEO faced threats to his well-being after Bill Ackman began accusing the company of being an illegal pyramid scheme
• Outerwall Rises 9% Post-Mkt on Strategic Alternatives, Div Boost: Hires Morgan Stanley for strategic and financial alternatives
• Question Looming Over Aubrey McClendon Crash May Go Unanswered
• GM Offers Rentals to Lyft Drivers Accelerating Challenge to Uber
• Trump Victories in Key Races Could Vanquish Kasich, Rubio
• JPMorgan Said to Prepare to Sell $1.9b RMBS: WSJ: Expected to price residential mortgage-backed deal over next 2 weeks; would hold 90% of the deal, WSJ reports
• Amazon Set to Launch Cloud Migration Service: WSJ: Thomas Publishing to transport data from own servers to Amazon’s data centers, WSJ reports
• U.S Govt May Withdraw Plan for SE Atlantic Coast Drilling: NYT

Looking at regional markets, Asian stocks traded negative following Wall St.’s lacklustre lead amid weakness in commodities, while Japan reacted to the BoJ decision to keep the policy unchanged. Nikkei 225 (-0.7%) was pressured as JPY strengthened following the BoJ decision to leave policy unchanged while also dropping its reference regarding deeper cuts into negative territory. Energy and basic materials underperformed in the ASX 200 (-1.4%) after commodity prices declined. Shanghai Comp (+0.2%) completed the somber tone with materials underperforming, while the PBoC kept its liquidity injections reserved and weakened the reference rate. 10yr JGBs traded lower and fell below 151.00 amid a lack of demand and disappointment from a lack of BoJ action.

BoJ kept policy steady with the annual rise in monetary base at JPY 80trl and interest rates held at -0.10% as expected.

• BoJ voted 8-1 to maintain monetary base and voted 7-2 to maintain its negative rate.
• BoJ said that additional easing will happen if required but removed phrase regarding cutting interest rates deeper into negative territory if deemed necessary.

PBoC sets CNY mid-point at 6.5079 vs. close. 6.5015 (Prey. mid-point 6.4913), injects CNY 20bIn via 7-day reverse repo.

Top Asian News

• Foxconn Said to Delay Sharp Deal for Clarity on Quarterly Result: Delaying finalization of its deal for Sharp to get a clear understanding of Sharp’s performance in the current qtr, increasing the chances an agreement won’t be reached this month, according to people familiar with the matter
• China Said to Draft Currency Transaction Tax to Damp Speculation: Initial rate of levy may be kept at zero, people familiar said
• Bangladesh Central Bank Chief Ready to Quit Over Cyber Heist: Atiur Rahman offers to resign
• Singapore Developers Post Lowest New Home Sales in 14 Months: Builders sold 301 units in Feb., -7% m/m
• Day of Reckoning Coming for India’s ‘Pigs With Lipstick’ Lenders: Central bank audit ending March 31 to uncover more bad debt

European markets follow on from Asia to see equities trade in the red this morning, with dampened sentiment apparent across asset classes. In terms of the session’s laggard’s, financials, material and energy names underperform , as the likes of Anglo American (-9.6%) and BHP Billiton (-5.8%) are among the worst performers in Europe. Despite the edginess in equities, fixed income have done their own thing for much of the morning, trading lower by around 20 ticks and around 161.50. Ultimately, price action could remain relatively rangebound as participants look ahead to today’s tier 1 data releases which include US Retail Sales, PPI Final Demand, Empire Manufacturing and Business Inventories.

Top European News

• Legal & General Full-Year Profit Rises on Retirement Revenue: 2015 oper. profit GBP1.46b vs est. GBP1.47b; Solvency II ratio was 169%, based on a surplus of GBP5.5b
• Antofagasta Scraps Dividend as Metal Rout Erases Most Profit: Net income ex-some items fell to $5.5m from $422.4m yr earlier, dividend scrapped as interim payment exceeds 35% payout ratio
• Sainsbury Joins Listed Supermarket Rivals Back in Growth Mode: For the first time since 2011, LFL sales are rising at Sainsbury, Tesco and Morrison; Sainsbury 4Q LFL sales rose 0.1%
• Russia Begins Syria Withdrawal as Putin Puts Onus on Assad: Jets have started to return to Russia, Defense Ministry says
• Traders Missing Rebound Yank Billions From European Stocks: U.S. traders withdraw money from euro-area ETF for fifth week
• U.K. Bond Sales Seen Jumping Most Since 2009 as Osborne Thwarted: Median forecast from dealers is for GBP139b issuance
• Italy Recovery From Recession Seen Continuing Slowly but Surely: Will extend the expansion that started last year, said 19 of 25 respondents in a Bloomberg survey published Tuesday
• Campari Agrees to Acquire Grand Marnier for $760 Million: Bid of EU8,050/shr is 60% premium to closing price

In FX, the big move this morning was expected to have been USD/JPY, but the modest dip below 113.00 was modest given the BoJ’s no change policy decision. 112.90 is the low seen here so far, and little aggressive interest to push lower from these levels seen in London. However, no such respite for GBP, which has been under the cosh since yesterday, after both NY and Tokyo sold moderate pullbacks but London more aggressively so . The latest Telegraph/ORB poll on the EU vote puts the leave camp in the lead at 49% vs 47%, but the selling began ahead of this. Cable is now in the mid 1.4100’s, while EUR/GBP is eyeing a test of the double top at .7847. Elsewhere, the USD index has ripped higher, adding momentum to Cable losses, but EUR, AUD, NZD and CAD all losing out to a more modest degree. AUD support seen in the mid .7400’s — now being tested, while USD/CAD is now close to 1.3400.

In commodities, WTI and Brent continue to slide during European trade as concerns of a global glut take hold of markets due to Iran not budging on the production freeze. Gold has rallied in the last couple of hours but it is yet to reach the highs at the beginning of the Asian sessions of 1238.13/oz. Base metals are retracing some of the moves seen yesterday after China hinted it will invest further in property sector with copper futures down nearly 1%.

After several days of quiet on the US macro front today we have a spike in data updates and the February retail sales report looks set to be the highlight where market expectations are for a -0.2% mom decline in the headline and +0.2% mom gain in the core and control group components. Also out today will be the NY Fed empire survey which is expected to remain consistent with the weakness in the manufacturing sector. The February PPI report will also be important and it’s worth keeping an eye on the healthcare subcomponent given it is used in the core PCE deflator. Also due out will be January business inventories and the March NAHB housing market index print. Away from this, tonight will see five more primaries in the US President race

Bulletin Headline Summary from Bloomberg and RanSquawk

• European equities trade lower across the board after taking the lead from Asia which saw the BoJ refrain from carrying out any additional easing
• As such, the JPY remains firmer against its major counterparts, while GBP remains out of favour as London continues aggressive selling of the currency
• Looking ahead, highlights include US Retail Sales, PPI Final Demand, Empire Manufacturing and Business Inventories
• Treasuries rise in overnight trading while global equity markets, oil sell off after BOJ refrained from additional monetary easing as they await impact of the negative rate strategy adopted in January; FOMC begins two-day meeting today.
• Deutsche Bank, whose debt plunged last month, is offering three-year notes in euros. The sale will test investor appetite for the bank’s debt following management efforts to allay concerns about capital levels
• Britain is set to increase government-bond sales by the most since the financial crisis as a cooling economy and asset- sale delays hinder plans to balance the books. Gross issuance may jump 17% in the next fiscal year
• The chances of a U.K. interest-rate cut are rising, the big risk on the horizon is June’s European Union referendum. A vote to leave the bloc could push Britain toward a recession and force the BOE to respond
• Lenders are getting stingier when it comes to funding risky U.S. real estate developments, putting pressure on landlords in need of fresh funding to keep their projects afloat
• German Chancellor Angela Merkel got her marching orders from voters to cut the flow of refugees. Now she needs Turkish President Recep Tayyip Erdogan to play along and help lift her out of a career-threatening jam
• Russia said its forces have started leaving Syria after President Vladimir Putin ordered the military withdrawal in a surprise move that puts pressure on the regime of Bashar al-Assad and opposition groups to reach a peace deal
• $8.3b IG corporates priced yesterday; MTD $94.72b, YTD $388.97b; $1.1b HY priced yesterday, $15.125b MTD
• Sovereign 10Y bond yields mostly steady; European, Asian equity markets lower; U.S. equity- index futures drop. WTI crude oil, copper, gold fall

US Event Calendar

• 8:30am: Retail Sales Advance, Feb. est. -0.2% (prior 0.2%)
  • Retail Sales Ex Auto, Feb., est. -0.2% (prior 0.1%)
  • Retail Sales Ex Auto and Gas, Feb., est. 0.2% (prior 0.4%)
  • Retail Sales Control Group, Feb., est. 0.2% (prior 0.6%)
• 8:30am: PPI Final Demand m/m, Feb., est. -0.2% (prior 0.1%)
  • PPI Ex Food and Energy m/m, Feb., est. 0.1% (prior 0.4%)
  • PPI Ex Food, Energy, Trade m/m, Feb., est. 0.1% (prior 0.2%)
  • PPI Final Demand y/y, Feb., est. 0.1% (prior -0.2%)
  • PPI Ex Food and Energy y/y, Feb., est. 1.2% (prior 0.6%)
  • PPI Ex Food, Energy, Trade y/y, Feb. (prior 0.8%)
• 8:30am: Empire Manufacturing, March, est. -10.5 (prior -16.64)
• 10:00am: NAHB Housing Market Index, March, est. 59 (prior 58)
• 10:00am: Business Inventories, Jan., est. 0% (prior 0.1%)
• 4:00pm: Total Net TIC Flows, Jan. (prior -$114b)
  • Net Long-term TIC Flows, Jan. (prior -$29.4b)

DB’s Jim Reid concludes the overnight wrap

So with the ECB ticked off, next on the central bank conveyor belt line was the BoJ this morning. Unlike what we saw from its European counterpart on Thursday, the BoJ has refrained from adding further stimulus this month. That means Japan’s new benchmark interest rate has been held at -0.1% and the annual purchases also maintained at ¥80tn a year. The decisions to hold fire on both were met with fairly convincing 7-2 and 8-1 respective majorities by BoJ board members. The bigger event now will be what Governor Kuroda chooses to say in his statement, the outcome of which we should know shortly.

Taking a look at the price action, an initial modest weakening in the Yen (touching 114.1) has given way to a decent bounce now, with the currency now +0.30% stronger on the day at 113.5. JGB yields are little changed relative to the moments prior to the decision, with the 10y currently up 2bps at -0.026%. The Nikkei is -0.89% and near its lows.

At this stage its worth putting some colour around the moves in Japanese assets since the BoJ cut rates into negative territory on January 29th. In that time (based on the intraday level just prior to the announcement and the current level this morning) the Nikkei is flat, while the Yen has strengthened over 4.5%, and 10y JGB’s are 24bps lower in yield (although have been more). In contrast, the S&P 500 and Stoxx 600 are +6.7% and +2.9% respectively, the USD index is -2%, the Euro -1.7% and 10y Treasury and Bund yields are unchanged and 12bps lower respectively. So clearly the effect has had a far greater impact on bond yields as opposed to Japanese equities, while the move for the Yen is perhaps the most curious of all.

Before we move on, a quick look at the rest of Asia this morning where it’s been a broadly weaker start on the whole. Along with those declines in Japan, the Hang Seng (-0.72%), Shanghai Comp (-1.13%), Kospi (-0.21%) and ASX (-1.30%) are all lower, while Aus and Asia credit indices are 5bps and 2bps wider respectively. Oil markets are off another percent or so which has helped US equity market futures turn negative this morning. Also of note this morning is news out of China where Bloomberg reports are suggesting that PBoC is in the process of drafting rules for a form of tax on FX transactions, in what’s said to be aimed at curbing currency speculation.

Moving on. Consolidation was the name of the game for markets yesterday and one which certainly reflected a ‘wait and see’ mode between the ECB and BoJ/Fed meetings. This was reflected by what was a fairly mundane session for US equity markets in particular where we saw the S&P 500 eventually close -0.13% (a rare decline this month) with the intraday high-to-low range a lowly 0.62% which is the smallest in 2016 so far. It’s amazing to see that the average range of the 49 trading days so far this year has been 1.73% and that 39 of those sessions have seen ranges of greater than 1%. Prior to this, European equities extended their gains with the Stoxx 600 closing +0.71%, although the post-ECB mammoth rally for European credit markets finally halted with iTraxx Main and Crossover closing 5bps and 9bps wider respectively. That said the indices are still 15bps and 47bps tighter than their pre-ECB levels. US credit also succumbed, with CDX IG over 2bps wider by the close of play.

With newsflow very light, it was Oil (a not too uncommon theme this year) which attracted the bulk of the headlines and ultimately dictated the price action for risk assets with WTI back below $38/bbl following a -3.43% decline yesterday. Much of this reflected stories emerging out of Iran with the country’s oil minister warning that the nation would not participate in an output freeze with other producers until they reached their production target of c.4m barrels a day, or roughly a third higher than current production levels. This follows the sanctions which were lifted on the country in January with the nation looking to ramp up output again to regain lost sales. Oil has risen nearly 50% from the intraday lows back in mid-February with the prospect of production freezes being a contributor in that rally. The WSJ touched on the possibility of these latest comments raising the risks that other countries involved in these talks (namely Saudi Arabia, Venezuela and Russia) may not follow through given the participation is contingent on Iran cooperating, however comments from Russia’s oil minister last night suggesting that Iran ‘may join us in the freeze with time’ and that ‘this is a normal, constructive position’ for them should abate major concerns for now.

One of the other interesting snippets from yesterday came from the European financials market and specifically UBS with the news that the Bank has issued Europe’s first coco bond since the huge sell-off which swept through the asset class in January. According to Bloomberg, the $1.5bn AT1 deal was said to have attracted $8bn of orders, with pricing also coming in tighter than the initial talk. Further evidence of the remarkable swing in sentiment that we’ve seen in the last six weeks or so.

Away from this there was little else to report yesterday. The only data of note was a robust industrial production print for the Euro area which bettered expectations at +2.1% mom (vs. +1.7% expected) in January which was the best monthly performance since 2009, with the data also helping support growth expectations for Europe. Meanwhile the ECB’s Villeroy spoke mid-morning and made mention to the need for the ECB to continue to adhere to its inflation mandate, highlighting the need for the target being essential for the ‘credibility of monetary policy’. Villeroy also noted that expanding purchases to corporate bonds is ‘a very significant signal for the real economy’.

Looking at the day ahead now, kicking off proceedings this morning will be France where we’ll receive the final revision to the February inflation report, followed later on by the Q4 employment report for the Euro area. This afternoon in the US is set to be a bumper session. The February retail sales report looks set to be the highlight where market expectations are for a -0.2% mom decline in the headline and +0.2% mom gain in the core and control group components. Also out today will be the NY Fed empire survey which is expected to remain consistent with the weakness in the manufacturing sector. The February PPI report will also be important and it’s worth keeping an eye on the healthcare subcomponent given it is used in the core PCE deflator. Also due out will be January business inventories and the March NAHB housing market index print. Away from this, tonight will see five more primaries in the US President race

 

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A car exploded in Berlin on Tuesday, killing the driver. 

According to some reports, the vehicle was in motion when the blast occurred. 

• GERMAN POLICE SAY ON TWITTER THEY BELIEVE AN EXPLOSIVE DEVICE CAUSED A CAR TO EXPLODE IN BERLIN

Here are the visuals from the scene: 

Berlin car bomb looks very professional, pointed charge, only killed driver, no bystanders. Interesting signature. http://pic.twitter.com/lIiJpK2UX7

— Julian Reichelt (@jreichelt) March 15, 2016

Gemäß unserer Kolleg. vort Ort, ist der PKW während der Fahrt explodiert und hat sich dann überschlagen.
^yt http://pic.twitter.com/Ae1K6OvkdG

— Polizei Berlin (@polizeiberlin) March 15, 2016

BREAKING: German police: Car explosion that killed driver in Berlin likely caused by bomb

— The Associated Press (@AP) March 15, 2016

Terror attack? Or perhaps a false flag to put still more pressure on the Merkel government to end the open-door refugee policy?

One certainly imagines it wasn’t faulty engineering – the vehicle was, after all, German-made.

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By Stefan Wieler and Josh Crumb from GoldMoney.com

The full report can be accessed here
as PDF

 

Inflection
Points

 

Introduction

Gold prices
in USD have rallied strongly in recent weeks, up 18% year-to-date. Gold prices
in other currencies look similar; of the 20 most traded currencies in the
world, gold is up in all of them. In the media and in finance, as with most
exchange-traded commodities, gold is almost always quoted in USD. Hence, as
gold prices in USD moved lower over the past year, many remained under the
impression that gold was in a downtrend. However, when we look at gold priced
in the 20 most traded currencies in the world, in 80% of them, gold showed a
positive performance over the past two years. But does that mean gold in these
currencies has resumed its long term upward trend? In order to find that out,
we have created a set of intuitive rules to define inflection points at which
gold prices decisively change direction. We find that in 55% of the world’s
most traded currencies, gold has re-entered a clear uptrend.

Gold prices
in all currencies saw their peaks somewhere in 2011. What followed then was a
more or less sharp decline, but unlike for gold priced in USD, gold priced in
most other currencies troughed in late 2013 to early 2014 and has been trending
higher since. We find that for the world’s major currencies, uptrends tend to
last about 4.5 years on average during which gold prices increase by more than
100%. 95% of the world population does not use the USD as local currency and is
not paid in USD. Saving in gold has helped them to protect their wealth as
their currencies resumed their long-term decay. In the end, this is the path
all fiat currencies follow as their purchasing power declines. Gold is the only
money that has held its purchasing power over time. Indeed it is the only money
that has survived throughout history.

While the
USD and a few other currencies have so far been the outliers, prices have
reversed sharply as well. Applying our set of rules to the USD, we find that
gold has entered an uptrend as well as long as prices remain above $1165/ozt,
roughly USD100/ozt below current levels. Historically USD gold uptrends lasted
over three years and pushed gold prices up more than 200%.

 

Inflection Points

 

Gold prices rallied strongly in recent weeks in all major
currencies. In the 20 most traded currencies, gold is up between 13% and
23%year-to-date (see Figure 2). Unprecedented central bank action had pushed
gold priced in USD to an all-time high in 2011 but since then gold prices
trended down as longer dated energy prices moved sharply lower and USD real
interest rates have recovered from negative levels. (We explain how
longer-dated energy prices and real interest rates affect gold prices here.) In
the media and in finance, as with most commodities, gold is almost always
quoted in USD. Hence, as gold prices in USD have moved lower over the past
year, many remained under the impression that gold was in a downtrend. However,
a quick analysis of the year-over-year performance in gold shows that this view
is not warranted (see Figure 2). Last year, gold was flat or up in half of the
20 most traded currencies in the world. And it’s up with double digit returns
in all of them so far this year.

 

But does that mean gold in these currencies has resumed its
long-term upward trend? In order to find that out we have created a set of
intuitive rules to define inflection points at which gold prices distinctively
change direction. An inflection point is defined by two things: 1) the first
derivative of the 200-day moving average changes sign; and 2) there must be a
5% price change in the 200-day weighted moving average between two inflection
points.

The first rule simply says that the inflection point (the
point where gold ceases to be in a downward trend and enters an upward trend or
vice versa) is where the 200-day weighted moving changes direction, from down
to up or up to down. What is the 200 day weighted moving average and why are we
not simply using spot prices? The 200 day weighted moving average is the
average price of gold in a currency over the past 200 days, where the last day
is weighted with 1, the day before with 1-1/200 and so forth. The advantage of
the 200-day weighted moving average of a price is that the price history is
much smoother than just the daily price. Daily prices tend to be volatile and
change direction all the time. Hence over the analyzed period of 45 years since
1971, we could not positively identify long term trends as there would be
thousands of inflection points.

But even with the 200-day weighted moving average, there
will be some shorter periods where the curve changes direction without
establishing a clear trend change. That is where the second rule comes into
effect: An inflection point is only confirmed when the performance of the
200-day weighted average exceeds 5% (or -5% respectively) in the new direction.
In a nutshell, we define the local extrema where prices move in one direction
for at least 5% until the next local extrema. This rule allows us to identify
clear and sustainable trends. Once gold prices in a particular currency have
entered an upward trend, these trends tend to last for several years.

Before we show the results for all currencies we take a
closer look at gold in USD. The results for the USD are presented in figure 3.
There have been eight upward trends and eight downward trends since 1971. The
average trend lasted around 2.9 years where up-trend lasted slightly longer
than the average down-trends. The average uptrend yielded a performance of
207%, the average down move a performance of -39% measured by the 200-day
weighted moving average. Despite the recent rally, it is still too early to
determine whether gold in USD has re-entered an uptrend. Should gold prices not
drop below USD1165/ozt over the coming months (almost USD100/ozt below current
levels), a new uptrend will be confirmed.

 

By choosing the 200-day weighted moving average, we minimize
the number of trend changes, which allows us to identify the long term trends.
But the downside is that inflection points will only reveal themselves well
into the cycle and the inflection points on the 200-day weighted average are
lagging the true troughs and peaks (spot prices). For example, the lasted peak
in USD gold prices was in September 2011, but the 200-day weighted average only
changed trend in March 2012. In order to reduce the time lag we ran the same set of rules
but used a 50-day moving average instead. This time series is more volatile and
hence shows more frequent trend changes. By analyzing the 50-day moving average
indicated that gold in USD has already re-entered an uptrend.

For other currencies the case is much more decisive. In
euros for example, the 200-day weighted average made a low in June 2014. The
respective trough in the spot price was in December 2013. Since then prices
moved up 33%. The picture is similar for gold priced in Canadian dollars, where
prices are up 34% since the low in 2013. If historical performance is a good
indicator, these trends will continue to last for another two years and should
push gold prices substantially higher.

 

Applying these rules to the 20 major world currencies (20
most traded currencies according to the Bank of International Settlements), 55%
are now thoroughly in an uptrend (see Table 1). Of those currencies where gold
is still trending down, both the Hong Kong dollar and the Chinese yuan are
quasi pegged to the USD, so that shouldn’t come as a surprise. Excluding those
shows that in 2/3 of the world’s major currencies, gold is in a sustainable
up-trend. Table 1 shows how gold in the 20 most traded currencies has performed
through the up- and down-cycles since 1971 (some currencies with smaller price
history show shorter time-frames). On average there were eight up- and seven
down-trends. The up-trends lasted 4.5 years on average, the downtrends only two
years. Gold prices in their respective currencies were up anywhere from 133% to
several thousand % on average during an up-cycle, but only down between -24%
and -40%.

Gold has undoubtedly been a better store of value than any
currency over any prolonged period in modern history. After the sharp price
rise in the aftermath of the 2008-09 credit crisis, gold prices in all
currencies went through a period of consolidation. We believe, this was partly
because gold prices overshot to the upside and had to correct. In addition, the
sharp decline in energy prices has created negative headwinds for gold prices
in all currencies. These headwinds seem to be mostly behind us as longer-dated
energy prices have now reached unsustainable levels. (See our previous report
on this topic here.)

Gold prices in most currencies have thus resumed their long
term upward trend. 95% of the world population does not use the USD and is not
paid in USD. Saving in gold has helped them to protect their wealth as their
currencies resumed their long term decay. In the end, this is the path all fiat
currencies go as their purchasing power inevitably declines. Gold is the only
money that has held its purchasing power over long periods of time and indeed
is the only currency to have survived through history.

The USD and some USD-pegged currencies have been the
standouts of late as they appreciated vs other currencies as well as gold for
the past few years. However, with gold prices now firmly higher, gold in USD
has likely re-entered the uptrend as well. Our historical analysis implies
there is much more upside still ahead.

 

 

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Forex remains to be the largest market in the world and the least understood.  Central banks have more influence on global markets than any other force.  In other words, monetary policy is the ONLY economic indicator(s) investors should be watching, because let’s face it, if the Fed raised rates to 10% like they should do and called in all that QE money, stocks would collapse.

But yet Forex remains a mystery, something that someone may have mentioned or you heard about.. wait FX is a TV channel?  or graphics?  a movie?

One has to wonder who is more stupid, is it the clowns that worked for the big FX banks getting fined, jailed, or fired for misbehavior – or PBOC who seems intent to destroy not only any hope of becoming a ‘real’ currency (let alone a world reserve currency) but killing their trade markets as well:

In September last year, Chinese regulators stepped on the throat of a ‘fair’ market in equity futures trading and for all intent and purpose killed the Chinese equity market. Tonight – after 2 days of Yuan weakness – having warned everyon from Soros to Kyle Bass that “betting against the Yuan can’t possibly work,” The PBOC just unleashed plans for so-called “Tobin Tax” on FX transactions (which implicitly taxes each transaction, reducing liquidity, raising margins and reducing leverage).

Meanwhile, there is a real world demand for Forex, and the CME group is reporting record volumes, even 6% more than the previous record:

CME Group (NASDAQ:CME), one of world’s leading derivatives marketplaces, announced that on March 10 it reached record trading volumes for forex futures and options. The record 2 517 334 contracts were traded on the Chicago Mercantile Exchange (CME). The number is 6% higher than the previous record of March 6, 2010. Also on March 10, were traded the record 2 350 478 forex futures contracts, exceeding by 142 061 the previous record of 2 208 417 contracts from May 6, 2010. 

The record volumes were driven by the Euro FX Futures (EUR/USD) trade: $127.13 billion in notional value in futures and $18.5 billion in options.

As central banks become more and more like big hedge funds, and Forex markets become more volatile, there will be a growing need for Forex for any investment portfolio.

More and more public companies report ‘currency headwinds’ – the most notable recent report comes from Toys R Us:

Toys “R” Us Inc. said revenue slipped 2.6% in the latest quarter as the retailer faced currency headwinds over the holiday period.

The foreign exchange volatility was partially offset by the rise of same store sales of 2.3% in the fourth quarter. Currency woes, however, had a negative $169 million impact.

For the year, the toy store’s same store sales increased a modest 0.9%.

“Throughout the year, and especially during the holiday season, we focused on improving our execution to deliver a positive and memorable shopping experience to our customers,” said Dave Brandon, chief executive officer. “We significantly improved our performance, but we can and will make further progress on our quest to achieve flawless execution in every aspect of our operations.”

It must take a multi-million dollar salary to make such a bombastic statement… losing millions because of a lack of internal financial controls (i.e. no Forex hedging) and at the same time, state that we are on a ‘quest to achieve flawless execution in every aspect of our operations.’  Or maybe ‘flawless’ is executive-speak for misplacing a few million in the Forex market.  This guy should run for political office!

But it shouldn’t be alarming, in the meetings leading to the “Nixon Shock” and the modern free floating Forex system, genius statesman Henry Kissinger admitted honestly “Economics is not my Forte.”

Secretary Kissinger: But if they ask what they’re doing—let me just say economics is not my forte. But my understanding of this proposal would be that they—by opening it up to other countries, they’re in effect putting gold back into the system at a higher price.

Mr. Enders: Correct.

Secretary Kissinger: Now, that’s what we have consistently opposed.

Mr. Enders: Yes, we have. You have convertibility if they—

Secretary Kissinger: Yes.

Mr. Enders: Both parties have to agree to this. But it slides towards and would result, within two or three years, in putting gold back into the centerpiece of the system—one. Two—at a much higher price. Three—at a price that could be determined by a few central bankers in deals among themselves.

So, in effect, I think what you’ve got here is you’ve got a small group of bankers getting together to obtain a money printing machine for themselves. They would determine the value of their reserves in a very small group.

There are two things wrong with this.

Secretary Kissinger: And we would be on the outside.

We want money printing machine! We want money printing machine! (childish dancing and yelling)  

If The Fed had any sense, they would immediately raise rates to 10%, the US Dollar would soar.  Prices of imports would plummet.  Money would flow to USA like a river.  Exports, would need to be managed – but anyway the USA is a net-importer and it costs us nothing to print money and buy from foreigners.  

It’s amazing, the lack of understanding out there for the most important market in the world – the global money markets; FOREX.  On the one hand, our money is worth less and less every year (most economic actors are Forex losers).  On the other hand, Forex hedging is simple to use; and it’s possible to even make money by trading Forex.  

Elite E Services, Inc. published a book for those who want to know more about Forex “Splitting Pennies” on sale on kindle and in print from Lulu.  

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USDJPY was in full chaos mode ahead of tonight's BOJ statement. With only 5 of 40 economists expecting further actions by Kuroda (and close Abe advisor Hamada suggesting "I think the BOJ wouldn't take further action right now… probably it will be a wise decision," The BoJ decide to stay put – holding rates flat at -10bps, holding QQE buying flat, and maintaining its ETF buying program at expected levels.. After 'mixed' results following its NIRP bomb in January, perhaps it is wise to give the 'economy' time to absorb the craziness as Japan's Peter-Pan-ic continues. The initial reaction was weaker Nikkei and stronger JPY.

USDJPY algos were utterly confused by every headline before the release:

 

And then the chaos erupted:

• *BOJ MAINTAINS MONETARY BASE TARGET AT 80T YEN
• *BOJ MAINTAINS POLICY BALANCE RATE AT MINUS 0.100%
• *BOJ:FROM APRIL, ETFS TO INCREASE AT 3.3T YEN ANUALLY AS PLANNED
• *BOJ SAYS IT NEEDS TO BE MINDFUL OF RISK TO PRICE TREND
• *BOJ'S BOARD VOTES 7-2 TO KEEP NEGATIVE RATE UNCHANGED
• *BOJ CITES RISKS TO DELAY IN CHANGING DEFLATIONARY MINDSET

So nothing for now – more is always possible – and the board is split. Of course while expectations were for no change (from economists) the market seems disappointed…

 

Since Kuroda unleashed NIRP, things have been mixed…

Stocks are 'just' unchanged, JPY is stronger…

 

But the good news is yields have collapsed…

 

Bear in mind, this is the central bank that conjured the concept of Peter Pan to represent its efforts:

I trust that many of you are familiar with the story of Peter Pan, in which it says, "the moment you doubt whether you can fly, you cease forever to be able to do it." Yes, what we need is a positive attitude and conviction.

In other words – you have to believe to receive – or the entire ponzi collapses.

Perhaps alternative forms of stimulation are required:

 

Charts: Bloomberg

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In September last year, Chinese regulators stepped on the throat of a 'fair' market in equity futures trading and for all intent and purpose killed the Chinese equity market. Tonight – after 2 days of Yuan weakness – having warned everyon from Soros to Kyle Bass that "betting against the Yuan can't possibly work," The PBOC just unleashed plans for so-called "Tobin Tax" on FX transactions (which implicitly taxes each transaction, reducing liquidity, raising margins and reducing leverage).

Deputy central bank governor Yi Gang raised the possibility of implementing a Tobin tax late last year in an article written for China Finance magazine, and now, as Bloomberg reports, it is on!

China’s central bank has drafted rules for a Tobin tax on currency trading, according to people with knowledge of the matter.

 

Rules are aimed at curbing speculative trading, say the people, who asked not to be identified as the discussions are private

 

An initial tax rate may be set at zero so as to allow authorities time to set up rules without immediately implementing the levy, people say

 

Tax is not designed to disrupt hedging and other FX transactions undertaken by companies, people say

 

Rules still need final approval by central government and it’s not clear how quickly they may be implemented, people say

 

People’s Bank of China doesn’t immediately respond to faxed request seeking comment

What happens next? Well that's easy… This!~

NOTE: Yes that is real… and Yes there is 'some' volume there

Good luck unwinding those levered shorts… and even if the hedgies are profitable, we suspect the tax will be tiered to enable the maximum pain to be extracted from so-called speculators.

 

Charts: Bloomberg

via Zero Hedge http://ift.tt/22heA5g Tyler Durden

Submitted by John Whitehead via The Rutherford Institute,

“We want no Gestapo or secret police. The FBI is tending in that direction. They are dabbling in sex-life scandals and plain blackmail. J. Edgar Hoover would give his right eye to take over, and all congressmen and senators are afraid of him.”—President Harry S. Truman

“Don’t Be a Puppet” is the message the FBI is sending young Americans.

As part of the government’s so-called ongoing war on terror, the nation’s de facto secret police force is now recruiting students and teachers to spy on each other and report anyone who appears to have the potential to be “anti-government” or “extremist.”

Using the terms “anti-government,” “extremist” and “terrorist” interchangeably, the government continues to add to its growing list of characteristics that could distinguish an individual as a potential domestic terrorist.

For instance, you might be a domestic terrorist in the eyes of the FBI (and its network of snitches) if you:

• express libertarian philosophies (statements, bumper stickers)
• exhibit Second Amendment-oriented views (NRA or gun club membership)
• read survivalist literature, including apocalyptic fictional books
• show signs of self-sufficiency (stockpiling food, ammo, hand tools, medical supplies)
• fear an economic collapse
• buy gold and barter items
• subscribe to religious views concerning the book of Revelation
• voice fears about Big Brother or big government
• expound about constitutional rights and civil liberties
• believe in a New World Order conspiracy

Despite its well-publicized efforts to train students, teachers, police officers, hairdressers, store clerks, etc., into government eyes and ears, the FBI isn’t relying on a nation of snitches to carry out its domestic spying.

There’s no need.

The nation’s largest law enforcement agency rivals the NSA in resources, technology, intelligence, and power. Yet while the NSA has repeatedly come under fire for its domestic spying programs, the FBI has continued to operate its subversive and clearly unconstitutional programs with little significant oversight or push-back from the public, Congress or the courts. Just recently, for example, a secret court gave the agency the green light to quietly change its privacy rules for accessing NSA data on Americans’ international communications.

Indeed, as I point out in my book Battlefield America: The War on the American People, the FBI has become the embodiment of how power, once acquired, can be easily corrupted and abused.

When and if a true history of the FBI is ever written, it will not only track the rise of the American police state but it will also chart the decline of freedom in America.

Owing largely to the influence and power of the FBI, the United States—once a nation that abided by the rule of law and held the government accountable for its actions—has steadily devolved into a police state where justice is one-sided, a corporate elite runs the show, representative government is a mockery, police are extensions of the military, surveillance is rampant, privacy is extinct, and the law is little more than a tool for the government to browbeat the people into compliance.

The FBI’s laundry list of crimes against the American people includes surveillance, disinformation, blackmail, entrapment, intimidation tactics, harassment and indoctrination, governmental overreach, abuse, misconduct, trespassing, enabling criminal activity, and damaging private property.

And that’s just based on what we know.

Whether the FBI is planting undercover agents in churches, synagogues and mosques; issuing fake emergency letters to gain access to Americans’ phone records; using intimidation tactics to silence Americans who are critical of the government; recruiting high school students to spy on and report fellow students who show signs of being future terrorists; or persuading impressionable individuals to plot acts of terror and then entrapping them, the overall impression of the nation’s secret police force is that of a well-dressed thug, flexing its muscles and doing the boss’ dirty work of ensuring compliance, keeping tabs on potential dissidents, and punishing those who dare to challenge the status quo.

The FBI was established in 1908 as a small task force assigned to deal with specific domestic crimes. Initially quite limited in its abilities to investigate so-called domestic crimes, the FBI has been transformed into a mammoth federal policing and surveillance agency. Unfortunately, whatever minimal restrictions kept the FBI’s surveillance activities within the bounds of the law all but disappeared in the wake of the 9/11 attacks. The USA Patriot Act gave the FBI and other intelligence agencies carte blanche authority in investigating Americans suspected of being anti-government.

As the FBI’s powers have grown, its abuses have mounted.

The FBI continues to monitor Americans engaged in lawful First Amendment activities.

 

COINTELPRO, the FBI program created to “disrupt, misdirect, discredit, and neutralize” groups and individuals the government considers politically objectionable, was aimed not so much at the criminal element but at those who challenged the status quo—namely, those expressing anti-government sentiments such as Martin Luther King Jr. and John Lennon. It continues to this day, albeit in other guises.

 

The FBI has become a master in the art of entrapment.

 

In the wake of the 9/11 terrorist attacks the FBI has not only targeted vulnerable individuals but has also lured them into fake terror plots while actually equipping them with the organization, money, weapons and motivation to carry out the plots—entrapment—and then jailing them for their so-called terrorist plotting. This is what the FBI characterizes as “forward leaning—preventative—prosecutions.”

 

FBI agents are among the nation’s most notorious lawbreakers.

 

In addition to creating certain crimes in order to then “solve” them, the FBI also gives certain informants permission to break the law, “including everything from buying and selling illegal drugs to bribing government officials and plotting robberies,” in exchange for their cooperation on other fronts. USA Today estimates that agents have authorized criminals to engage in as many as 15 crimes a day. Some of these informants are getting paid astronomical sums: one particularly unsavory fellow, later arrested for attempting to run over a police officer, was actually paid $85,000 for his help laying the trap for an entrapment scheme.

 

The FBI’s powers, expanded after 9/11, have given its agents carte blanche access to Americans’ most personal information.

 

The agency’s National Security Letters, one of the many illicit powers authorized by the USA Patriot Act, allows the FBI to secretly demand that banks, phone companies, and other businesses provide them with customer information and not disclose the demands. An internal audit of the agency found that the FBI practice of issuing tens of thousands of NSLs every year for sensitive information such as phone and financial records, often in non-emergency cases, is riddled with widespread violations.

 

The FBI’s spying capabilities are on a par with the NSA.

 

The FBI’s surveillance technology boasts an invasive collection of spy tools ranging from Stingray devices that can track the location of cell phones to Triggerfish devices which allow agents to eavesdrop on phone calls.  In one case, the FBI actually managed to remotely reprogram a “suspect’s” wireless internet card so that it would send “real-time cell-site location data to Verizon, which forwarded the data to the FBI.”

 

The FBI’s hacking powers have gotten downright devious.

 

FBI agents not only have the ability to hack into any computer, anywhere in the world, but they can also control that computer and all its stored information, download its digital contents, switch its camera or microphone on or off and even control other computers in its network. Given the breadth of the agency’s powers, the showdown between Apple and the FBI over customer privacy appears to be more spectacle than substance.

 

James Comey, current director of the FBI, knows enough to say all the right things about the need to abide by the Constitution, all the while his agency routinely discards it. Comey argues that the government’s powers shouldn’t be limited, especially when it comes to carrying out surveillance on American citizens. Comey continues to lobby Congress and the White House to force technology companies such as Apple and Google to keep providing the government with backdoor access to Americans’ cell phones.

 

The FBI’s reach is more invasive than ever.

 

This is largely due to the agency’s nearly unlimited resources (its minimum budget alone in fiscal year 2015 was $8.3 billion), the government's vast arsenal of technology, the interconnectedness of government intelligence agencies, and information sharing through fusion centers—data collecting intelligence agencies spread throughout the country that constantly monitor communications (including those of American citizens), everything from internet activity and web searches to text messages, phone calls and emails.

 

Today, the FBI employs more than 35,000 individuals and operates more than 56 field offices in major cities across the U.S., as well as 400 resident agencies in smaller towns, and more than 50 international offices. In addition to their “data campus,” which houses more than 96 million sets of fingerprints from across the United States and elsewhere, the FBI is also, according to The Washington Post, “building a vast repository controlled by people who work in a top-secret vault on the fourth floor of the J. Edgar Hoover FBI Building in Washington. This one stores the profiles of tens of thousands of Americans and legal residents who are not accused of any crime. What they have done is appear to be acting suspiciously to a town sheriff, a traffic cop or even a neighbor.”

 

If there’s one word to describe the FBI’s covert tactics, it’s creepy.

 

The agency’s biometric database has grown to massive proportions, the largest in the world, encompassing everything from fingerprints, palm, face and iris scans to DNA, and is being increasingly shared between federal, state and local law enforcement agencies in an effort to target potential criminals long before they ever commit a crime.

 

This is what’s known as pre-crime.

If it were just about fighting the “bad guys,” that would be one thing. But as countless documents make clear, the FBI has no qualms about using its extensive powers in order to blackmail politicians, spy on celebrities and high-ranking government officials, and intimidate dissidents of all stripes.

It’s an old tactic, used effectively by former authoritarian regimes.

In fact, as historian Robert Gellately documents, the Nazi police state was repeatedly touted as a model for other nations to follow, so much so that Hoover actually sent one of his right-hand men, Edmund Patrick Coffey, to Berlin in January 1938 at the invitation of Germany’s secret police. As Gellately noted, “[A]fter five years of Hitler’s dictatorship, the Nazi police had won the FBI’s seal of approval.”

Indeed, so impressed was the FBI with the Nazi order that, as the New York Times revealed, in the decades after World War II, the FBI, along with other government agencies, aggressively recruited at least a thousand Nazis, including some of Hitler’s highest henchmen, brought them to America, hired them on as spies and informants, and then carried out a massive cover-up campaign to ensure that their true identities and ties to Hitler’s holocaust machine would remain unknown. Moreover, anyone who dared to blow the whistle on the FBI’s illicit Nazi ties found himself spied upon, intimidated, harassed and labeled a threat to national security.

So not only have American taxpayers been paying to keep ex-Nazis on the government payroll for decades but we’ve been subjected to the very same tactics used by the Third Reich: surveillance, militarized police, overcriminalization, and a government mindset that views itself as operating outside the bounds of the law.

This is how freedom falls, and tyrants come to power.

The similarities between the American police state and past totalitarian regimes such as Nazi Germany grow more pronounced with each passing day.

Secret police. Secret courts. Secret government agencies. Surveillance. Intimidation. Harassment. Torture. Brutality. Widespread corruption. Entrapment. Indoctrination. These are the hallmarks of every authoritarian regime from the Roman Empire to modern-day America.

Yet it’s the secret police—tasked with silencing dissidents, ensuring compliance, and maintaining a climate of fear—who sound the death knell for freedom in every age.

via Zero Hedge http://ift.tt/21spJhq Tyler Durden