The Fed’s policy of financial repression sends the wrong signal. It punishes savers, such as pensions and retirees, while rewarding speculators and debtors. It is like giving my son ice cream after he yells at his mother and punches his brother. Many Fed policies have been, or have become, counter-productive. Events may certainly force the Fed to be ‘lower for longer’, but expecting some type of new stimulus measure is an exceptionally long way off. The explosion of market volatility has shaken the foundation of investor psyche. The unwind process has far to go.
The last time the stock market reached a fevered peak and began to wobble unexpectedly was August 2007. Markets were most definitely not in the classic “price discovery” business. Instead, the stock market had discovered the “goldilocks economy." But what is profoundly different this time is that the Fed is out of dry powder. Its can’t slash the discount rate as Bernanke did in August 2007 or continuously reduce it federal funds target on a trip from 6% all the way down to zero. Nor can it resort to massive balance sheet expansion. That card has been played and a replay would only spook the market even more. So this time is different. The gamblers are scampering around the casino fixing to buy the dip as soon as white smoke wafts from the Eccles Building. But none is coming. For the first time in 25- years, the Wall Street gamblers are home alone.
Netflix Obliterated After Guiding To Half Expected Q4 EPS, Streaming Adds Hit Brick Wall: Stock Down $100Submitted by Tyler Durden on 10/15/2014 - 16:16
Curious why Netflix is being obliterated after hours, plummeting to 5 month lows, down some $100, or 24% after hours after reporting earnings? The answer is highlighted in the Q3 investor letter, and specifically the red highlighted number, which is NFLX' guidance for Q4 EPS...
With each new piece of legislation being proposed in the Land of the Free, Atlas Shrugged seems to be ever more prophetic. While even the most terrifying elements of the book are coming true, so are the reactions. People and companies are leaving, refusing the put up with the looting of their efforts any longer. Despite politicians’ desperate attempts to stop it, Atlas is already shrugging.
If anyone wanted any confirmation that corporate earnings are always and only driven by the (very rigged) market, look no further than Wal-Mart, which moments ago did the inevitable: it just cut its sales forecast by nearly half, to just 2-3% from the prior forecast of 3-5%.
It would appear The Fed is in panic mode. According to two "people familiar with her comments" - who asked not to be named because the meeting was private last weekend:
- *YELLEN SAID TO VOICE CONFIDENCE IN EXPANSION AMID FOREIGN RISKS
Of course, this is now the last thing that markets want to hear since it means she is less likely to unleash QE4.
Last week we hinted at what was to come as Ebola fears spread across America. Today, we get confirmation. As The Daily Caller reports, one passenger at Dulles International Airport outside Washington, D.C. is apparently not taking any chances. A female passenger dressed in a hazmat suit - complete with a full body gown, mask and gloves - was spotted Wednesday waiting for a flight at the airport.
The health-care worker was not identified by public health officials, but family members told Reuters and the Dallas Morning News that her name is Amber Vinson, a nurse at Texas Health Presbyterian Hospital. She was part of a team that had cared for Thomas Eric Duncan, a Liberian man who flew to Texas and was diagnosed with Ebola last month, during his hospitalization in Dallas. Duncan died last week. Nina Pham, a nurse who also cared for Duncan, was diagnosed with Ebola on Sunday.
From 17,350 intraday highs "proving the recovery is here," we are 1500 points down just 3 weeks later. The Nasdaq just fell 10.5% from its highs, officially in correction. VIX broke above 30. Perhaps, just perhaps, the gap to fundamentals is finally about to be filled...
But, but, but they said it wasn't contagious unless you came into contact with bodily fluids. According to the CDC, the 2nd health-care worker infected with Ebola traveled on Frontier Flight 1143 from Cleveland to Dallas on October 13th and are asking all 132 passengers on the flight to get tested. One question... what about the thousands of people that those 132 passengers came in contact with in the last 2 days?
One would think that in today's abysmal tape, where as many have described the market moved in a way that has never been seen before, the most hated, most flawed, and thus most shorted stocks would be crashing far worse than the broader market. Well, no. Because here, once again, we get a great lesson in practical liquidity management. As the margin calls start to trickle in - and just wait until 3 pm when it will be a full blown margin call massacre - hedge funds are forced to release margin. They do that by covering all those stocks which they and their peers entered en masse as the most shorted hedge fund names.
Desk chatter confirms liquidations are occurring ahead of expected margin calls later in the day. This is evident in widely held stocks like AAPL which just plunged on very heavy volume and has dragged the "off the lows" bounced US equity indices back to their lows of the day...