It appears that not only we are tracking the phaseout in equity inflows, all of which are simply the reversal of the massive $220 billion surge in bank deposits in the month of December due to fears of Fiscal Cliff dividend and capital gains tax increases (explained previously), and which as today's ICI update indicates have trickled down to just $683 million - the lowest weekly inflow year to date. Among the others who are keeping track of the weekly reduction in inbound capital euphoria, in addition to the six companies which priced equity offerings on Monday as was shown previously, are these fine corporations and existing stakeholders, including Apollo, KKR, Carlyle, Blackstone, Thomas H. Lee, and Bain, who just can't wait to get out while the getting is good, split once again evenly between secondaries and follow ons.
Following on the heels of the dumbing down of the State of the Union speech we noted yesterday, we thought a simple visualization of just how stunningly poor our nation's reading skills really are would be useful. One in five Americans lacks the basic reading skills beyond a 4th grade level - are you one of them?
It’s getting impossible to keep track of all the new spy tools being rolled out by the police state in the name of “fighting terrorism”, aka spying on innocent American citizens unconstitutionally. I thought that I had my hands full the other day with ARGUS: The World’s Highest Resolution Video Surveillance Platform, but this “Stingray” system is already being deployed illegally in cities throughout the United States. As the EFF states: “The Stingray is the digital equivalent of the pre-revolutionary British soldier.”
Despite so much pent up hope that Japan would post a 0.4% annualized growth (and a 0.1% rise Q/Q) in its Q4 GDP, finally exiting that pesky triple dip recession it has been stuck in for the past five years, moments ago the Cabinet Office reported that contrary to optimistic expectations, in the 4th quarter the economy again contracted for the third straight quarter, this time by 0.4% annualized, and 0.1% on a Q/Q basis. This was driven by a whopping 14% SAAR implosion in exports, which should not come as a surprise to those who have been tracking the ongoing destruction of Japan's trade balance (and current account surplus). "Japan's economy may show some weakness for the time being. But it is likely to resume a moderate recovery thereafter due to the Bank of Japan's monetary easing, the effect of an emergency economic package, as well as an expected moderate recovery in the global economy," Economics Minister Akira Amari said in a statement. True: there is hope. And there is the reality that all the BOJ is doing is desperately trying to offset the loss of the Chinese export market, which courtesy of the ever escalating foreign relations snafu involving a few islands close to a massive gas field, remains as shut as ever. And as long as China refuses to assist Japan in its trade and current account deficit predicament, Amari can hope, and hope, and hope.
How GETCO Went From HFT Trading Giant To Dwarf, And Raked Up Over $50 Million In T&E Expenses Along The WaySubmitted by Tyler Durden on 02/13/2013 - 17:57
There was a time back in 2009 when GETCO was the absolute titan of the high frequency trading arena, printing money with the reckless abandon of a Federal Reserve on full tilt. It even got its own profile piece in the WSJ in the summer of 2009: "Meet Getco, High-Frequency Trade KingMeet Getco, High-Frequency Trade King." However, the good days were not to last as shortly thereafter we got a flash crash, then we got three + years of Ben Bernanke's (and every other bank's) central planning and some $10 trillion in combined exogenous liquidity to prop up the market, both of which resulted in the complete loss of faith in a standalone stock market by the retail investor (and once the current unwind of the December rotation from stocks into savings accounts over capital gains tax fears ends, the outflows will resume especially as latest ICI data shows with the smallest inflow into domestic equities to date in 2013). And since retail orders no longer would feed the frontrunning, sub-pennying, quote churning, flash crashing juggernaut that is HFT, that meant less revenue and profit for algo master GETCO. How much less? A whopping 82% less in the nine months ended September 30, 2012 compared to a year prior, and 92% less when annualizing 2012 results compared to the firm's heyday in 2008, the year in which it made a record $430 million in net income. Getco's net income as of September 30, 2012: a tiny $25 million.
There are underlying options on the S&P 500 that trade on exchange or OTC (depending on size and strike and margin package - arb or outright). On top of that set of options lies a world of futures and options on a 'created' VIX (that are predicated on the implied vols of the underlying S&P options). And to top it all off - the wonderful world of Exchange Traded Products (ETPs) overlays various levered and unlevered short and long products for retail (and professionals) to speculate on (and some have their own compound options). As you can tell - there is a large amount of 'flow' impacting up and down the chain in this vol landscape.
At some point, absorbing more information about the unsustainability of modern society yields diminishing returns. It becomes emotionally draining and thus counterproductive. Part of this exhaustion results from recognizing our powerlessness within the Status Quo, where independent thinking and structural innovation are intentionally winnowed out as threats to existing institutions and industries. Another part arises from the burden of knowing that the supposedly permanent Status Quo is far more vulnerable than generally believed. This is the psychology of knowing what lies ahead in The Burden of Knowing. These 'burdens of knowing' can diminish the small but real joys of the present - anti-thesised by an attitude such as “don’t worry; be happy.” And it certainly makes sense when life is still comfortable and enjoyable. But the philosophy of “thinking about the future is a downer, so I live in the present” ultimately rests on a false confidence that the future will take care of itself. Though Keynesian economists argue that nations are not like households, in truth debt/financial fragility is scale-invariant, meaning that rising debt, a high cost basis, and zero savings/investment lead to fragility in households, enterprises, communities, and nations alike.
Chronicling the collapsing Greek socioeconomic reality would be an interesting business school case study of what a zombie monetary regime kept alive at all costs does to the "weakest link(s)" (most recently "Greek Economy Grinds To A Halt As New Construction Implodes By 66.6%"), if only there weren't real men and women suffering as a result of the stupidity and greed of a few entrenched individuals who will stop at nothing to see their paper wealth preserved at all costs. The latest salvo of the utter misery Greek society finds itself in comes from Nielsen research, which reports that Greeks are now the most pessimistic consumers on the planet, with the Greek consumer confidence index dropping to 35 points in the last quarter of 2012. That is the lowest level among a total of 58 countries surveyed and 11 points lower than the same period last year in Greece. It gets worse. As Kathimerini reports: "Four out of 10 Greeks told the same survey that they no longer have any disposable money left after covering their basic needs, which is the highest rate ever recorded in Greece and the biggest in the October-December period in Europe. A year earlier (in Q4 2011) that rate had stood at 34 percent and in Q4 of 2010 it had been at 25 percent." Obligatory spin: once nobody has any disposable income, things can only get better. Unless, as Rajoy might add, they get much worse.
Volumes were pitiful once again and while the range picked up a little (after yet another top-side stop-run) average trade size remains falling as equities appear all gung ho on the surface but the S&P 500 has closed the day session in a 2 point range for the last 4 days - 1518, 1517, 1519, 1518. All this as Treasury yields have actually been bleeding higher (+6-8bps this week), USD flat, Oil up 1.5%, and Gold and Silver -1.5%. Homebuilders remain in a high-beta world of their own +3% on the week with all the other S&P sectors between -0.25% and +0.75% (as Tech is dragged lower along with AAPL again). S&P 500 futures saw quite a drop intraday (9 points high to low) which is sad to get excited about but the ubiquitous VWAP ramp into the close saved the day and limped us into the green on the day (which was oddly accompanied by a huge sell block volume in AAPL). VIX pushed back up to 13% and credit made some more correction back up to stocks right at the close. The last 3 days in ES have seen the lowest aggregate volume in six months - not exactly the new bull market meme?
Something totally bizarre has happened in the last three years. Oil in America has become much, much cheaper than oil in Europe. Oil in America is now almost $30 cheaper than oil in Europe. Why? The ostensible reason for this is oversupply in America. But there’s something fishy about this explanation...
"The financial problems of the Postal Service are getting bigger every year," is how US Postmaster General Donahoe tried to convinced Congress not to block the bill the end Saturday delivery of mail. Raising the specter of mutually assured destructive bailouts in the future, the CEO rattle lawmakers (and other stakeholders) as NBC News reports, Representative Darrell Issa noting "It's very clear that ultimately, either the rate payer or the taxpayer will have to pay the $20 billion in debt of the Postal Service." Indeed Mr. Issa - so by our reckoning the plan to tax emails was a non-starter and so we compare the 73.5 billion pieces of mail handled by the USPS and the $20bn budgetary gap, it would appear the answer is simple - the current 46c stamp will have to rise in value by 27c or 60% in order to meet the shortfall. The problem of course is the legal limit on increasing stamp prices is bounded by what the BLS' official annual inflation report is, and which as the Fed is happy to reminds us, is at best 2% per year. Luckily, every problem, in this case too little inflation, has a solution: in this case hyperinflation.
The rise in energy prices; the surge in food prices; and the march higher in nominal stock market indices - all symptoms of one thing - central bank (or government) policy; and CNBC's Rick Santelli is calling them to task for their two-faced ignorance. "What is the difference between outright currency manipulation versus the collateral damage to one's currency based on central bank programs?" he rhetorically asks, "in my mind, very little, but obviously, in the minds of many leaders of G-7 developed economies, there's a huge distinction." And therein lies the rub. As Japan follows Bernanke's decade-old plan to reflate by literally printing money into existence - just as every other developed fiat currency nation - their argument is that they are fighting deflation - or stimulating growth - when, in fact "The distinction between collateral damage and outright manipulation is absolute malarkey." Now that the currency wars have gone global - no matter what well-placed op-eds will try to convince otherwise - Santelli sums it all up perfectly, "in the end when you don't have a standard and you have printing and fiat currency, what level of value is real?" We remind those bullish Japanese stocks that the 11% rise in the NKY since the holidays has created 0% wealth for a USD investor thanks to the JPY destruction - ask the Zimbabweans how wealthy they felt.
One of the fundamental creeds held by the proponents behind every new technology and gizmo market, including cell phones, smart phones, tablets, Sony Walkmen, 8-tracks, VHS tapes, juice extractors, tape rewinders, etc., is that their growth rate (and by implication the consumers' discretionary income), is completely dissociated with gravity and will grow at a far faster pace than global economic growth virtually in perpetuity. This is the case until empirical evidence reminds them, and everyone else, that gravity eventually always wins. Which is precisely what happened with global mobile phone sales, which in 2012 posted their first decline since the cataclysmic 2009. Gartner reports that the global cell phone market declined by 1.7% in 2012, down from 1.78 billion devices sold in 2011 to 1.75 in 2012. "Tough economic conditions, shifting consumer preferences and intense market competition weakened the worldwide mobile phone market this year," the report says.
On Monday we reported that a car bomb with Syrian plates had exploded at the Turkish-Syrian border crossing. The aftermath included the death of nine people, major devastation, and the latest sharp deterioration in Turkish-Syrian relations. We now have the dramatic footage from this explosion, which we present below courtesy of Reuters. Expect more such explosions as every attempt is made to drag Syria into war with one or more of its neighbors.
It was well-known that today's 10 Year auction would price somewhere north of 2.00%, for the first 2%+ print since April of 2012, it just wasn't known where. Sure enough, moments ago the US Treasury priced $24 billion in 10 Year paper at a high yield of 2.046% (38.76% allotted at high), the highest since last March when we had a 2.076% 10 Year auction (and a carbon copy environment in which every pundit was screaming about a great rotation out of bonds), only to see the April and especially May auction tumble in yield when Europe once again became unfixed. What was notable about today's auction is that it tailed the When Issued modestly, which was bid 2.039% at 1 pm, implying a 0.7 bps tail. Also notable: the Bid to Cover dropped to 2.68, below January's 2.83, and well below the 12 month TTM of 2.99. Dealers took down 47.7% of the auction, Directs as has recently been the case ended up with a sizable 24.2%, while Indirects took only 28% of the auction, higher than the December 24.2%, yet worse than all other auctions going back all the way to April 2009. For those confused - don't be - we have been here in 2012, and 2011, and 2010, when risk assets were surging, and when yields were sliding, only to see a modest subsequent pick up in inflation, mostly in China, but certainly Europe, at which point the global liquidity glut ceased and the economy (if not the centrally-planned market) resumed on its downward glideslope.