Risk eVIXeration Sends Stocks To New Record-er Highs

The USD is unchanged; Commodities are unchanged; and Treasury yields are up only 2-3bps... but that didn;t stop July 1st from being a banner day for US equity markets (on the back of missed PMI and ISM data). The Dow, Russell 2000, and S&P closed at record highs but sadly the Dow missed out on 17,000 by a mere 1.5 points (despite the best VIX and AUDJPY manipulation $189 billion of repo liquidity free money can buy). Stocks got their start with yet another epic short squeeze at the open then ramped higher thanks to carry to record-er highs; stalling when it seemed Dow 17,000 was elusive. VIX traded with a 10-handle once again.

US Auto Sales Reach Highest In 8 Years

US auto makers just printed an annualized 16.98 million sales - dramatically beating expectations for the 2nd month in a row and the highest since July 2006. As we warned earlier, the reason is clear (massive extension of credit to the lowest credit quality sector of the market). With the government also taking major fleet sales and sponsoring the subprime purchasers, what more do you expect? We can only imagine the mal-investment boom that this unsustainable burst will create in the next few months - and right as the Fed's taper comes to an end.

"Optimism Bias" & "Nervous Stasis"; The Sell-Side Fears "It Feels Like 2007 All Over Again"

As with any drug addiction, the first step is admitting you have a problem (or waking up naked in Glasgow train station). It seems HSBC - among a number of other sell-side strategists - are starting to wake up to their undying 'faith' and 'hope' that, based on the world's addiction to free money, there will be a return to the old normal status quo. As HSBC's Chief economist Steophen King notes, "there is an optimism bias, largely reflecting an attachment to pre-crisis growth trends which, post-crisis, have mostly remained out of reach," and they are finally facing up to the fact that "the world economy has succumbed to a lower structural rate of economic growth." But it is RBS that is waving the red flag as they warn of a "sense that this nervous stasis is dulling our perceptions about risk... it feels like 2007 all over again."

How T-Mobile Made Hundreds Of Millions Charging Customers For "Bogus" Services

In yet another case of corporate malfeasance (which we are sure will see heavy jail sentences and sever punishments), the Federal Trade Commission is charging T-Mobile with making hundreds of millions of dollars by placing charges on mobile phone bills for purported "premium" SMS subscriptions that, in many cases, were bogus charges that were never authorized by its customers. Content such as flirting tips, horoscope information or celebrity gossip was charged to customers unknowingly and even when customers figured it out, T-Mobile failed to provide consumers with full refunds. Is it any wonder Telcos are doing so well?

Only Half Of Office Space Vacated Since Lehman Has Been Reoccupied

One would think that with the economy, allegedly, growing at above-trend rates as Goldman has wagered for the second time in 4 years (the first time Hatzius was dead wrong), with jobs being added at what the BLS would have the market believe is a healthy 200K+ monthly clip, and of course with the S&P500 at record all time highs now on a daily basis, that the US business services sector would be humming along nicely, with little to no slack. One would be wrong: according to the WSJ even with all the alleged economic activity and all post-Lehman job losses having now been recovered, "employers have only reoccupied about 52% of the 142 million square feet that went vacant amid the economic downturn."

The Sham Boom

What last week’s figures tell us is there is no real recovery. Just a sham boom created by easy money. We’ve now got two months of figures for the second quarter. They tell us the same thing the first quarter’s numbers told us. Consumers aren’t spending like it was 2007. They’re spending like it was 2009... or 2010... or 2011. In other words, they’re spending as though they were reasonable people who have realized how the system works. The Fed creates a world where its friends and cronies can borrow at below the rate of consumer price inflation. The 1% gets richer. The other 99% struggles to keep up with the bills. Six years of “stimulating” the economy by giving it more of what it least needed has produced no real recovery... just more debt. It has also produced a corrupt money system in which almost every race is fixed. The 1% wins every time. The consumer is barely able to limp around the track.

Record $189 Billion Injected Into Market From "Window Dressing" Reverse Repo Unwind

When we reported yesterday's record reverse-repo surge, driven entirely by collateral-strapped financial entities scrambling to "window dress" their balance sheets with rented Fed-owned Treasurys for regulatory purposes, we said "Expect total reverse repo usage tomorrow to plunge by at least $150 billion as the banks will have fooled their regulator, which also happens to be the Fed, that they are safe and sound. Rinse, repeat, until the entire financial system collapses once again and people will ask "how anyone could have possibly foreseen this." Moments ago the Fed reported the daily reverse repo use. It turns out we were optimistic: it wasn't $150 billion, it was $189 billion. Following yesterday's $339 billion allottment, today this number tumbled to just $151 billion, meaing nearly $200 billion in fungible cash had to quick find a new home away from the Fed.

Growth Scare, What Growth Scare? Russell 2000 Screams To New Record High

Despite 2014 consensus GDP now languishing at 2.2% (below its 2.9% hope in March, and gas prices near record highs for the time of year; it seems the Q1 growth scare that saw small caps, momos, biotechs, and half the Russell 2000 collapse has been all but forgotten as the favorite index of short-squeezes and algorithmic ignition has just recovered all its losses and regained its all-time record highs from March. Mission accomplished? Bear in mind that over 600 of the Russell 2000 names are still 20% below their 52-week highs.

The Circle Is Complete - Robots To Write The Earnings "Reports" Read By Robots

Has Skynet become self-aware? It seems the 'robots' that run the US equity markets (HFT/algo trading dominates what little volume there is left) have decided to cut out the middle man in the market as Associated Press reports this morning that it will employ the story-writing software by start-up Automated Insights to automate the production of U.S. corporate earnings stories. To be frank, given the copy/paste nature of most mainstream media 'analysis' of earnings, we thought this had already occurred but AP notes, "We are going to use our brains and time in more enterprising ways during earnings season." Does that mean that anyone but Zero Hedge will be discussing cashflows or GAAP earnings? It seems the circle is complete, machines write the stories that machines trade on; why not just do everything in binary - it's not like humans have a chance to react anyway before the robots.

GoPro +100% From IPO (In 3 Days)

Averaging over 20% gains per day since the IPO, and set for options trading on Monday, GoPro has now managed a 100% gain from its $24 IPO 3 days ago... Is camera-on-a-stick the new Pets.com?

Putin Slams US $9 Billion Fine Against French BNP As "Blackmail" For Russian Warship Deal

Recall that about a month ago we reported that shortly after France was stunned to see its largest bank slammed by its bestest buddy, the US, with a record $9 billion fine, "France responded to the fine by announcing it will train hundreds of Russian seamen to operate the French-Made Warship", the Mistral. In other words, for all the angry rhetoric of sanctions against Russia, France was merely the latest country to admit that it too can't exist without Russian business (not to mention natural gas) even if, or especially if, it means incurring US wrath which is taken out on its banking institutions. After all, if the US is engaging in scorched earth tactics France needs a stable trade partner, especially if it is one who turns on the gas, so to speak. However, it turns out that was only a small part of the story.  Earlier today, when speaking to Russian diplomats in Moscow, Vladimir Putin accused the U.S. of blackmailing France to scrap a contract to sell Russia Mistral warships by offering to cut a record $8.97 billion fine against BNP Paribas.

500 Years Of Dutch Bond Yields

Day after day we are told that stocks are the place to be and that bonds are a disastrous bet as "rates must rise" but it appears that, increasingly, the world's developed (and debt-laden) economies are turning Japanese (with German 2Y rates at 2bps for example). But, for some context as to how low rates really are, Deutsche's Jim Reid unveils 500 years of Dutch (European) interest rates... and we have never been lower. Are bonds wrong? Or do they see a world where growth is permanently stifled by the drag of interest expense?

Fooling All The Experts With Seasonal Adjustments, All Of The Time

In summary: the actual, and unreported, New Orders number dropped from 60.5 in May to 57.5 in June, which also was the weakest print since January...  some improving trend. Compare that to the seasonally adjusted New Orders number of 58.9, the highest of 2014. That's right: thanks to seasonal adjustments what was otherwise a downward sloping trendline, and a print that was the weakest in 5 months, magically was transformed to the best print of the year!

Subprime 2.0 Spreads To Cars: OCC Warns Of Auto-Loan Risks

It would appear that the exuberance over today's better-than-expected car sales data should be tempered significantly. Confirming our warnings, as the Office of the Comptroller of the Currency (OCC) explains, across the industry, auto lenders are pursuing growth by lengthening terms, increasing advance rates, and originating loans to borrowers with lower credit scores. With average loan-to-value rates above 100%, they have an ominous warning: "risk in auto-lending is beginning to emerge." We are sure this will be dismissed (just as the BIS' warning has been), but with surging charge-offs and increased repackaging (CLOs), and banks holding a lot of this debt, this 'bubble-financing' has all the ingredients for subprime 2.0 contagion.

Equities Spike To Record Highs As US Macro Hits 2-Month Lows

Treasury yields are up 1-2bps; the USD is flat; gold and silver are up modestly; but stocks are screaming higher to all-time highs in the Trannies and S&P. All of this is occurring as PMI and ISM missed expectations this morning and the US Macro Surprise index in the US (worst of all nations year to date) is at 2-month lows. What's behind it? FOMO, POMO, YOLO? All we can say is the S&P has never been this far above the Fed balance sheet (over 50 points rich) since QE began.

FINRA Unleashes Dark Pool Fury On Goldman Next With Whopping $800,000 Fine

In case there is still any confusion on whose behalf the US regulators work when they "fine" banks, the latest announcement from Finra should make it all clear. Recall the spectacle full of pomp and circumstance surrounding NY AG Scheinderman's demolition of Barclays after it was announced that the bank had lied to its customers to drive more traffic to Barclays LX, its dark pool, and allow HFT algos to frontrun buyside traffic. Yes, it was warranted, and the immediate result was the complete collapse in all buyside  Barclays dark pool volume, meaning predatory HFT algos would have to find some other dark pool where to frontrun order flow. Such as Goldman's Sigma X. Which brings us to, well, Goldman's Sigma X, which moments ago, in a far less pompous presentation, was fined - not by the AG, not by the SEC, but by lowly Finra - for "Failing to Prevent Trade-Throughs in its Alternative Trading System."  The impact: "In connection with the approximately 395,000 trade-throughs, Goldman Sachs returned $1.67 million to disadvantaged customers." The punchline, or rather, the "fine": $800,000.

ISM Manufacturing Drops, Misses By Most Since January

On the heels of Markit's US PMI missing expectations but rising to its highest since May 2010 (with notable inflation signals and domianted by weakness in small business) despite new export orders tumbling; ISM printed at 55.3, down from May and missing expectations. Only 50% of survey respondent s expect to increase jobs - the lowest number in 2014. New export orders also fell in ISM. Following last month's utter SNAFU, we are not exactly sure whether this is real yet. So far the market reaction is positive to this bad news so we do not expect a revision...

Record GM Recalls Lead To Best June Since 2007

GM sold more cars in June 2014 than any other June since 2007. Just imagine if GM had killed more people, recalled more cars, been busted for more lies, and had more congressional hearings. As GM's head of sales exudes, this was "the third very strong month in a row for GM... in fact, the first half of the year was our best retail sales performance since 2008, driven by an outstanding second quarter." We can only imagine the depths of FICO scores, terms of financing, and margin-crushing incentivization that dealers were subsidized into offering to sell this many 'kevorkianesque rolling sarcophagus." How did they do this? Government (+14%) and Fleet sales (+48%) - sound sustainable?