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This Is Not A Retest - It's A Live Bear!

The US economy was not “decoupled” in the slightest during the expansion of the great global monetary boom that has now crested. Nor will it uncouple during the deflationary bust that must necessarily ensue. The ultimate worldwide hit to US exports is evident in the 20% drop in shipments to Brazil, and that’s just for starters because its economic depression is just getting underway. Likewise, the panicked flight of hot dollars from Brazil now besetting the global financial markets is only indicative of the turmoil to come as the massive “dollar short” unwinds on a global basis. So this is not a retest. We are in the midst of an unprecedented global deflation. A real live bear market is once again at hand.



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Americans Have Never Been Dumber

Three years ago, we noted the dumbification of America was accelerating as SAT scores hit record lows. It appears the need for the Derek Zoolander Center For Kids Who Can't Read Good And Wanna Learn To Do Other Stuff Good Too has never been greater as Bloomberg reports that students in the high school class of 2015 turned in the lowest critical reading score on the SAT college entrance exam in more than 40 years, with all three sections declining from the previous year.



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This Is What The Historic "Risk Parity" Blow Up Looked Like

The volatile sell-off in global equities from Thursday August 20th through Tuesday August 24th, alongside a relatively muted diversification benefit from fixed income, led many risk parity funds to suffer a sudden and sharp drawdown over the four-day period. The performance drawdown and subsequent spike in the volatility of risk parity funds likely triggered a significant deleveraging in their assets.



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West Point Professor Calls For Military Strikes On Journalists Critical Of War On Terror

An assistant professor from the U.S. Military Academy at West Point recently declared that professionals critical of the “War on Terror” constitute a “treasonous” opposition that should be subject to military force.



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Will The Fed Have To Save Emerging Markets With QE4?

The risk-off tide is rising, and sand castles of QE will only hold the tide back for a brief period of apparent calm.



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Saudi Arabia Just Cut Crude Selling Prices To The US, Europe And Asia

WTI Crude oil prices are in total panic buying mode this morning as the algos are fully in charge once again. WTI is up 5% this morning in a straight line since US equity markets opened (and USO went vertical). What is most ironic is that Saudi Aramco just slashed prices for crude oil to everyone around the world.



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Suddenly The Bank Of Japan Has An Unexpected Problem On Its Hands

By monetizing more than the entire Japanese budget deficit, the BOJ is running of out willing sellers. Without those, Japan's QE, just like that of the ECB, will grind to a halt. Better yet, this creates a vicious loop, because with every passing month, the inevitable D-Day when the BOJ has no more TSYs on the offer gets closer, which in turn will force those who bought stocks to sell in anticipation of the end of QE, and to seek the safety of bonds themsleves, in effect precipitating the next inevitable Japanese stock market crash.



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Silver, Stocks, & Crude All Screaming Higher

Because... why not...



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Charting The Rise Of Bernie (And Demise Of Republicans)

Democrats are the happiest relative to Republicans in over 3 months according to Bloomberg's Consumer Comfort index. In fact, whether because the market is tumbling or The Donald is soaring, Republican 'comfort' is the lowest since Nov 2014 while Democrat 'comfort' remains relatively stable...



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US Services Economy 'Solid' In August - Signals September Hike Back On Table

Markit's US Services PMI printed a healthy 56.1 for August, rising for the 2nd consecutive month, comfortably beating expectations and giving The Fed more ammo for a September hike. This rise was achieved despite the weakest rise in new work in 3 months. While Markit notes that this headline print suggest 'everything is awesome' it suggests the need for more stimulus just in case, as prices are falling. Following the dramatic spike in the July ISM Services to 10 year highs, it dropped back modestly, thanks to slide in New Orders, with an August print of 59.0 - still the highest since Nov 2005, again offering no excuse for The Fed to stay on hold.



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Bob Shiller Fears "Substantial Decline" Sees Dow 'Fair Value' Around 11,000

"This is a dangerous time," warns Nobel laureate Bob Schiller as he warns of the false signal that typical P/E ratios are misleading and in fact his CAPE ratio (looking through the cycle) implies "fair value" for The Dow should trade around 11,000 and around 1300 for the S&P 500. "There is a risk of a substantial decline," he adds, warning that the recent rebound "maybe someone's good will effort to stabilize the market," and in fact the market's valuation is high now and people are over-exposed.



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Stocks Erase Draghi "Moar QE" Gains As USDJPY Tumbles

Draghi - we have a problem. They hoped, he came, they sold. US stocks and bonds knee-jerk rallied on the "expanding QE" promise from Draghi thi8s morning but all those gains have been erased now as USDJPY 'fun-durr-mentals' drag it lower. If not even the latest reduction in European economic forecasts can push stocks higher, we central banks may have a real problem on their hands.



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The Bigger-est Hockeystick Ever: Presenting The ECB's Latest Inflation Expectations

Back in March, we mocked the ECB's inflation forecasts with a post titled "Mario Draghi Reveals Biggest. Hockeystick. Ever!", which highlighted the ECB's ridiculous expectation that inflation would soar from 0.0% in 2015 to 2016. We though no other hockeystick could possibly surpass this. We were wrong.



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Stocks Surge As ECB Expands QE Monetization Limits, Boost Purchase Threshold From 25% to 33% Per Issue

ABN Amro was right: moments ago Mario Draghi announced that, just as the Pavlovian Dogs were salivating, the ECB would not leave markets hanging, and while not boosting QE in size, announced he would increase the amount of monetizable assets, i.e., the ECB's share limit per CUSIP equivalent, from 25% to 33%. The result: an immediate surge in both stocks (ES jumping 21 points) and bonds (the 10Y dropping to 2.156%).



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Initial Jobless Claims Jumps Most In 2 Months - Unchanged Since End Of QE3

Initial jobless claims have risen for 5 of the last 6 weeks with the last week showing a 12k rise to 282k. This is the biggest weekly rise in 2 months and raises the claims print overall to 2-month highs. Perhaps most remarkable is that initial jobless claims are now back up to unchanged since the end of QE3.



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