Archive for September, 2014

Bill Gross, one of the founder of PIMCO, left his position to go to Janus Capital.

What is the issue there? The issue is that Pimco is the largest bond manager (owned by Allianz)  in the world with over USD2 trillion of bonds in assets, Mr. Gross is a legend for the market and was directly overseeing USD270 Billion Dollars.

After 39 years of wins, the last two years where losing trades.

The mortgage and bond market has already an illiquidity issue.

So the largest bond deal maker is temporarily gone.

Plus in October the FED is due to exit the same market.

Wall Street Journal said, unofficially, that already USD 10 billion have been pulled from PIMCO. Now we need to see in the next two weeks if this flow become an exodus.

As they say “Houston we have a problem”.

Not all is bad.

The Fed could decide to delay is step away from the bond market (covertly or not).

Pimco could succeed in calm the market – anyway the money manager will assume the most defensive position.

As usual, in the end, another crisis in the hand of the FED – which till now did a great job against all odds.



I found the measure that worries the most more the traders. PIMCO manages approximately 40% of all High Yield and Emerging Markets Bond issued in the world. And the liquidity of instruments is on average low (6.5% from the 1990s), but now is even lower at 4.2%

Unlisted news for the week

Posted: September 29, 2014 in Uncategorized

Some of the facts that do  not make the regular headlines, but present interesting data point.

Today 29 September 2014 is an important day for Gold – China has just opened the Shangai Gold Exchange, open to foreigners. It is the first Gold Exchange in the world that cannot be easily manipulated by the US-Jewish-South African powers. It will take time to go at regime, but a space to watch.

In France the Senate fell into the hands of the Front National. As in October there is the French Budget and Hollande has just 13% of the polls, this is a space to watch. A fall in the French Government would be of great influence for Europe (as of now the win would be for Front National, full on Euroskeptic).

Syria – the warmonger dream “infinite war” is well under way. As a good thing it seriously crippled the financing activities of IS, as a bad thing it is actually not well accepted by the Syrians and other rebel groups. As Obama threatened Assad to wipe out his air force in case one the air fighters is touched ….you have to pay attention of the possibility of a “set up” accident (as also the 2013 gas attack that almost provoked the US attack was a set-up). Turkey is hinting at deploying Turkish soldiers (a NATO country) into Syria to create a buffer zone.

-Russia has “won the war” versus Ukraine and Gazprom just signed a lucrative deal with the benediction of the UE. Plus it had a boost as Russia just found a massive oil reserve in the Arctic, potentially larger than the Gulf of mexico. And now starts to play the “good boy” and call for a reset of relations.

-Catalonia (Spain) wants to held a referendum Scottish style (nothing to lose, if they win they will be independent, if they loose they will get concessions). The trend as started!

– The markets in general are on the edge of precipice. I do not think it is now, but it is a build up of forces that will become stronger and stronger between now and February 2015 and ultimately will provoke some serious dent in the bull market (well, there are also some usually non-bear managers that paint a 2008 style scenario)

Germany at the US is currently playing the great de-escalator of the conflict between Russia and Ukraine.

But the real battle is actually behind doors between Mario Draghi that want a European Quantitative Easing (idea on which the market has all hopes after the end of the US QE in order to keep on rallying) and the Euroskeptical Alternative that point (with success) at the illegality of such an action (view supported also by the Bundesbank. Also the challenge (to the ECB powers)  pursued in 2012 by the German Courts is now under review).

So a hard battle for Draghi and the markets

Russian counter-sanction

Posted: September 26, 2014 in Uncategorized

I was wondering what would be the Russian counter sanctions.

From Moscow Times today we get know that there is a draft legislation that allow Russia to seize foreign assets in response to sanction.

It appears as a retaliation from the action to the Italian authorities seizing over USD30 million of property owned by a close ally of Putin, Arkady Rotemberg.

But this opens the gates of hell as Russian could decide to seize assets from Exxon (largest listed company in the world), Visa etc. As a counter sanction such a scenario would definitely kill the Bull market.

It is a definite second warning (after the hack of Morgan Stanley and other 5 unknown US market. If you want financial war, be careful what you wish for.

Nice to have Putin as friend. Not so nice to piss him off.

Well I am becoming too Australian! The death roll is the kill move of the crocodile!

Anyway, the market seems to catch up with the Geopolitics.

– Russia has practically won the war for what is concerned (never wanted to conquer Ukraine, just not push it in the US arms), it is weaponizing Crimea. And definitely is in a Cold War 2 scenario rebuilding all its weapon systems and trying to undermine gold.

– People are finally realizing that the Middle East campaign will not be a walk in the park. It is more an everybody against everybody. Syrian did not welcome to be bombed also by the US. Islamic State was hit in the revenue making facilities, but quite a few other rebel factions did not realize they were a target and suffered major losses (specifically the Kohrasan group, Al Qaeda and Al Nusra affiliated). Meanwhile Lebanon and Jordan are in high alert as they fear a IS diaspora towards them.

– The biggest risk is still the end of Quantitative Ease and the likely effect on a potential credit event (it did create very weird situation …The US 10 years T Bond yield implies an higher risk then the equivalent Italian 10 bond. The High Yield credit Market in US and specially in Southern Europe (which has boomed) is experiencing a lack of liquidity).

Volatility almost at 16 is just a touch lower than serious danger.

Usually at this point the FED intervenes….but there has been a change of pattern. Practically while the SP500 and Dow Jones all the other markets are crumbling

High Alert is the norm. It can be a “return to normal”, it can be something more serious.

Stock Market Crystal Ball

Posted: September 25, 2014 in Uncategorized

How many times we have wished for a market crystal ball.

I found this amazing chart that shows the expansion of Federal Reserve Balance Sheet and the US market behaviour.

Every time a Quantitative Easing, the market drop with a maximum time laggard of 3 months.

As Quantitative Easing is ending (unless something weird happens…it is almost October!) the 28 October the end of the Bull Market is somewhere between November 14 and February 15. I would think end of January!

Capture The future

Middle East update

Posted: September 23, 2014 in Uncategorized

Finally the US and the coalition of the unwilling attacked Raqqa in Syria (practically Islamic State capital), a week after it had been evacuated.

From what I hear Syrians are not too happy to be bombed also by the Americans (aside Assad’s forces and other rebel). It could be used even as a recruitment tool. And it will not solve anything,

Pretty amazingly even in Iraq, where the US did more than 150 strikes, the situation is almost World War I style. Islamic State could not reach Baghdad, but for the rest is like a trench war with some villages won and some lost.

The only real change is less strategic view as IS can’t use any more phones as they get targeted.

Only a evil alliance of American airpower with Iran and Syria’s Assad could really cripple the Islamic State.

You wonder if that is the real objective (some suppressed information from the famous turncoat US spy Snowden suggests otherwise….that Islamic State has been let flourish (if not created) to distract the Arab States from Israel. Naturally this is a unconfirmed theory).

As for Islamic State is trying to foment grassroot jihadist to kill American, French, Australian and English (mainly the coalition of the unwilling).

As in a previous comment, Islamic State is more of an army than a terrorist organization and, unless Al Qaeda helps, it is not able to mount terrorist strike in an enemy territory with full electronic surveillance like the US or Australia.

This highlight the possibility of random “lone wolf attack”. And in that case the best defence is yourself.

As this grassroot jihadist are not trained operatives they are likely to commit errors than anyone. let’s call it a grassroot defender,  can pick up – you know when you have a sense of something is wrong….well do not dismiss it. And do not wear headphone. Just be alert to your surroundings.

This will go on for long time.