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The Rich Actually Are Different

Submitted by Tyler Durden on 05/24/2013 - 15:22

With the long-weekend rapidly approaching, ConvergEx's Nick Colas takes a trip to the Hamptons, but through a time warp back to the Great Depression. Examining the social registers (colloquially called the “Blue Book”) from 1927 and 1940, he finds that “The great and the good” of the day had real trouble holding their status during the social upheavals of the late 1920s and 1930s. Only 32% of the families appearing in the Blue Book in 1927 were still there in 1940. The ratio was even worse, at 29%, for the ultra-elite who belonged to the Meadow Club in Southampton. It’s too early to tell what the last few volatile years will do to the upper crust of East Coast society, of course. Or what may still be in store. But when the hedgie in the Bentley cuts you off on Route 27 this weekend, take some solace in knowing he may not be there in a few years. “Yes, the wealthy are different. Every year there are different wealthy people.”

Comments: 145
Reads: 15,205

The Economic Engine Of Europe Is Beginning To Sputter

Submitted by Tyler Durden on 05/24/2013 - 14:54

Despite ultra-low interest rates, practically unlimited liquidity, and a capital market seemingly willing to lend to anyone for anything on any terms, the very heart of Europe's economy - German CapEx on machinery - is falling at a rate faster than during the Tech bust... the tough news for anyone looking for a silver lining is that this just goes to confirm what we saw in US durable goods orders - there is simply no 'decoupling', it is a lead-lag inter-linked global economy.

Comments: 42
Reads: 9,906

The Hamptons Weekend Disconnect

Submitted by Tyler Durden on 05/24/2013 - 14:27

Today's binary message to vacuum tubes: "ignore the last available signal that has driven the market for months and make sure stocks close green" - simply just not to leave a bitter taste in the mouths of all those billionaire hedge-funders enjoying the launch of Hamptons season. The other best hope is that volume tapers (sorry Hilsenrath, we just said the word, oops) to zero, in which case the DJIA (now that nobody even pretends to care about the S&P) may just close limit up on a 1-lot trade.

Comments: 48
Reads: 7,303

The Latest "Inflation Evasion" Scam: Bars Serving Caramelized Rubbing Alcohol Instead Of Scotch

Submitted by Tyler Durden on 05/24/2013 - 13:58

In the past, food and alcoholic beverage makers got in trouble for attempting to cover the impact of inflation (such as the 12% Y/Y increase in Fed employee salaries) by diluting the content, or simply serving less, of their products while keeping the price constant: the same thing as rising prices, but optically more palatable to less than sophisticated consumers. That was the past. A new breed of industrious, high profit margin-seeking alcohol vendors have decided to skip this protocol entirely and instead of serving booze, have opted to replace the product outright. As AP reports, at numerous New Jersey bars, including 13 TGI Fridays restaurants, owners were accused of substituting cheap booze while charging premium prices. The profitability at all costs situation was so bad that at one bar, a mixture that included rubbing alcohol and caramel coloring was sold as scotch. In another, premium liquor bottles were refilled with water — and apparently not even clean water at that.

Comments: 219
Reads: 17,385

RANsquawk Weekly Wrap - 24th May 2013

Submitted by RANSquawk Video on 05/24/2013 - 13:48

Comments: 3
Reads: 619

What If Stocks, Bonds and Housing All Go Down Together?

Submitted by Tyler Durden on 05/24/2013 - 13:27

The problem with trying to solve all our structural problems by injecting "free money" liquidity into financial Elites is that all the money sloshing around seeks a high-yield home, and in doing so it inflates bubbles that inevitably pop with devastating consequences. As noted yesterday, the Grand Narrative of the U.S. economy is a global empire that has substituted financialization for sustainable economic expansion. In shorthand, those people with access to near-zero-cost central bank-issued credit can take advantage of the many asset bubbles financialization inflates. Those people who do not have capital or access to credit become poorer. That is the harsh reality of neofeudal, neocolonial financialization. It is widely accepted as self-evident that all these bubbles will not pop because the central banks won't let them pop. That's nice, but if this were the case, then why did stocks crater in 2000-2001 and 2008-2009, and why did the housing bubble implode in 2008-2011? Did they change their minds for some reason? No; they assured us right up to the moment of implosion that everything was fine, there was no bubble, etc. The only logical conclusion is that bubbles pop even though central banks resist the popping with all their might.

Comments: 91
Reads: 13,282

Explaining This Week’s Market Jitters In One Chart

Submitted by Tyler Durden on 05/24/2013 - 13:09

Presented with no comment...

Comments: 43
Reads: 13,152

"Get To Work, Mr. Portfolio Manager" - Federal Reserve Profits Plunge Even As Salaries Surge

Submitted by Tyler Durden on 05/24/2013 - 12:40

There was something odd in today's quarterly financial report (as of March 31) by the world's largest and most profitable hedge fund: the US Federal Reserve. Despite that its Assets Under Management have grown to a mindblowing $3.4 trillion, or about $700 billion more than this time last year, there was something oddly missing in the reported data: a surge in remittances to the US Treasury, or profits. Well, the Fed did remit some $15.3 billion to the Treasury, so not too shabby, but this was well below the $23.8 billion in Q1 2012 and under half of the remitted profit of $30.7 billion in the previous quarter. Has the world's most profitable portfolio manager, a Princetonian economist who has otherwise never traded one security in his entire life, gone cold? Please Ben, proves us wrong. And while you are at it, get to work, Mr. Portfolio Manager.

Comments: 46
Reads: 6,091

BNP Warns On Japanese Repression: Echoes Of The 1940s Fed

Submitted by Tyler Durden on 05/24/2013 - 12:12

In the 1940s, the Fed adopted pegging operations to protect the financial system against rising interest rates and to ensure the smooth financing of the war effort. In effect, the Fed became part of the Treasury’s debt management team; as the budget deficit hit 25% of GDP in WW2, it capped 1Y notes at 87.5bps and 30Y bonds at 2.5%. From the massive bond holdings of its domestic banks to its exploding public debt, Japan today faces a situation very similar to the US in the 1940s. When the long-term rate climbs above 2%, the BoJ will probably adopt outright measures to underpin JGB prices to prevent turmoil in the financial system and a fiscal crisis - and just as Kyle Bass noted yesterday, they are going to need a bigger boat as direct financial repression in Japan is unavoidable.

Comments: 48
Reads: 11,756

European Bonds Plunge Most In 8 Months, Stocks Worst Week In 2 Months

Submitted by Tyler Durden on 05/24/2013 - 11:47

European stocks fell for a second day-in-a-row (notable in its own right as not having happened for 5 weeks) for the biggest drop in 6 weeks capping the worst week in 2 months. Spain and Italy saw their stock indices drop 3.6% on the week. But it was European banks and peripheral sovereign bonds that saw the most damage. As JPY-funded leveraged momo come rapidly undone, Italian and Spanish bond spreads saw their biggest 2-day drop in 8 months to end back at 5-week highs. EURUSD ends the week up 0.6% (and the JPY +2.2%) as repatriation escalates. Europe's VIX is holding around 18.% (up 2.5 vols on the week).

Comments: 16
Reads: 5,268

The Two Charts That Keep Draghi Up At Night

Submitted by Tyler Durden on 05/24/2013 - 11:18

While many would argue that youth unemployment (the real scariest chart here), in fact we suspect it is the following two charts that are really keeping Mario Draghi up at night. The lip service paid by the French and the Germans to growth strategies and youth unemployment pale in relation to the desperation of the European collateralizer-of-last-resort to de-fragment his transmission channels and unleash his own QE to the starving banking systems of Spain and Italy. As BNP notes, recent data on Italian and Spanish banks’ bad and non-performing loans (NPLs) have reignited the debate on the health of the banking sector in the eurozone’s peripheral economies and its implications for the bloc’s credit supply and, ultimately, economic growth. But what is worse is that interest rates on new loans for a company in Italy or Spain are almost double those in Germany and France. It is against this backdrop that Draghi expressed plans to revive the ABS market - but implementation will prove significantly more challenging than market hopers believe (as is clear in credit markets) and direct purchases will probably face vetoes by a number of influential members of the board. To add further salt to these fresh wounds, the FT reports that Spanish banks will need to set aside more than EUR10 billion more reserves to cover the rolling over of EUR 200 billion of 'extend-and-pretend' loans.

Comments: 18
Reads: 8,396

Europe Opens $80 Trillion Shadow Banking Pandora's Box: Will Seek To Collapse Repo "Collateral Chains"

Submitted by Tyler Durden on 05/24/2013 - 10:51

In what may be the most important story of the day, or maybe year, for a world in which there already is an $11 trillion shortfall in high-quality collateral (and declining every day courtesy of Ben's monetization of Treasury paper) so needed to support the deposit-free liability structures of the shadow banking system (as most recently explained here), Bloomberg has just reported that Europe may begin a crackdown on that most important credit money conduit: the $80 trillion+ global shadow banking system, by effectively collapsing collateral chains, and by making wanton asset rehypothecation a thing of the past, permitted only with express prior permission, which obviously will never come: who in their right mind would allow a bank to repledge an asset which may be lost as part of the counterparty carnage should said bank pull a Lehman. The result of this, should it be taken to completion, would be pervasive liquidations as countless collateral chain margin calls spread, counterparty risk soars all over again, and as the scramble to obtain the true underlying assets finally begins.

Comments: 330
Reads: 31,375

Where's The "Buy The Dip Mentality" Today?

Submitted by Tyler Durden on 05/24/2013 - 10:18

While yesterday saw the mainstream media cock-a-hoop at the fact that we pulled 'off-the-lows' with the phrase "buy the dip mentality" parrotted prayer-like every minute of the afternoon. Overnight shenanigans saw that BTFD mentality come and then quickly go and now the US market is fading fast. USDJPY has broken below 101 and US equity markets are testing below yesterday's lows... Treasury yields are now low on the week for the long-bond; gold and silver are holding up as JPY strength is weakening the USD broadly. Meanwhile, European peripheral debt is getting monkey-hammered (worst 2 days in 8 months)...

Comments: 85
Reads: 8,511

These Are The Stocks Most Hated By Hedge Funds: Let The Squeeze Begin

Submitted by Tyler Durden on 05/24/2013 - 09:50

In a world in which the bipolar, schizophrenic markets are dominated by Mrs. Watanabe's daily gyrations of the USDJPY (in response to Kuroda's daily jawboning) which in turn has become the primary signal feeding ES algos now that fundamentals are no longer relevant and that the EURUSD-ES correlation is dead and burried, there continues to be one, almost assured way to generate alpha for those so inclined to gamble with the fastest of the vacuum tubes out there: going long the most shorted stocks, which have become the most convex way of betting that Ben Bernanke will continue to dominate the hedge fund league tables as the world's most accomplished portfolio and risk manager. Indeed, using our previous representations (Q3 2012, Q4 2012) of the most shorted stocks to generate a "long basket" and sitting it out, has generated some 40%+ annualized returns without fail. Which is why it is now time to look at the most recent roster of stocks most hated by the hedge fund community, which slowly but surely is converting into the much maligned "long onlies" as abandoning hedges is the only way to at least catch up with the market, if not overtake it.