The slew of economic releases over the last couple of days have all had two things in common: 1) the data has been markedly improved which has given a silver lining to the economic storm clouds we have witnessed over the last several months; and 2) the fingerprint of Hurricane Sandy has been very visible. This is not a surprise. The question that needs to be addressed, however, is whether these surges are sustainable in the months ahead?
Forget Facebook; Bob Pisani would be cock-a-hoop. Imagine the euphoria and excitement from a Fed IPO? What better way for the rich to get even richer than to buy shares in the world's most profitable hedge fund. And for those saying this is preposterous and that central banks should never trade publicly we bring you exhibit A: The Bank of Japan
As BOJ Holdings Surpass ¥100 Trillion, It Gets An Ultimatum: "Stop Being Independent Or Lose Your Independence"Submitted by Tyler Durden on 12/23/2012 - 12:22
2013, which is still a week away, is already off to a 'crazy pills' bang. Because while the bulk of the politipunditry is shocked, shocked, that it was dead wrong about the Cliff outcome which is now set to ram the country front and center on January 1, the most amusement appears to be emanating from the land of the rising sun, where the brand new PM just issued an ultimatum to the central bank, which can be summarized as follows: stop being independent, or we will change the laws and take away your independence.
Yesterday, the man planted by Goldman to be Italy's unelected leader in November 2011, officially stepped down and shortly thereafter his government was dissolved in advance of the February 25, 2013 elections. Yet Monti, under whose helm Italy has been in deep recession since the middle of last year, where consumer spending is falling at its fastest rate since World War Two and unemployment has risen to a record high above 11 percent, and whose candidacy is vastly unpopular with the Italian population, moments ago generously offered to continue being Italy's unelected leader: just the way Europe's political masterclass and its central bankers want it, if not so much Italy's people.
The collapse of the Fiscal Cliff talks should come as no surprise to anyone (except, of course, for all those "expert" political commentators virtually all of whom saw a deal by December 31: a full list of names is forthcoming). The reason: a simple one - a House torn, polarized to a record extreme, and a political environment in which the two parties, in the aftermath of a presidential election humiliating to the GOP, reached unseen before antagonism toward each other. In this context, it was absolutely inevitable that America would see a replica of last summer's debt ceiling collapse, which mandated a market intervention, in the form of a crash, and the wipeout of hundreds of billions in wealth - sadly the only catalyst that both parties and their electorate, understand. We had prefaced this explicitly in early November when we said that "the lame duck congress will posture, prance and pout. And it is a certainty that in the [time] remaining it will get nothing done. Which means, that once again, it will be up to the market, just like last August, just like October of 2008, to implode and to shock Congress into awakening and coming up with a compromise of sorts." Which of course brought us to Thursday night's mini-TARP moment. With all that said, there are those forensic detectives who are addicted to every single political twist and turn, and who are curious just where and when the Fiscal Cliff talks broke down in the past week. In this regard, the WSJ provides a useful timeline.
Leaving the highly sensitive topic of "gun-control" aside for the time being, one can't help but wonder if it isn't time that the US government, seemingly hell-bent on regulating virtually everything in its quest to prove (to itself?) that America's population can no longer be trusted with making any responsible decisions on it own (and in the process becoming even bigger), shouldn't be more focused on "fat-control" instead. Why? Because while guns may or may not kill people, the bottom line is that of the 32K or so death attributed to firearms, roughly 20K, or two thirds were suicides, meaning firearm-based homicides were 11,015 in 2010. Putting this number in perspective, every year some 935,000 Americans suffer a heart attack, and 600,000 people die from some form heart disease: 1 in every 4 deaths. Net result to society: the cost of coronary heart disease borne by everyone is $108.9 billion each year. And of all proximal factors contributing to heart disease, obesity and overweight is the main one. But of course one can't make a media spectacle out of 600,000 hospital wards where people quietly pass away, in many cases due to a lifetime of ill decisions relating primarily to food consumption. In fact, some estimate that obesity now accounts for one fifth of the total US health-care bill (the part of the budget which no amount of tax increase can offset). Which is why if the topic of gun-control has managed to promptly tear the country into two (or three, or more), just wait until fat-control (far more than the recent tepid overtures into this field such as Bloomberg's NYC sugary soda ban) rears its ugly head and sends the already polarized (and weaponized) US society into a state of agitated hyperflux.
First it was Citi, then SocGen, now a third key investor has decided to pull their money from SAC - the once vaunted hedge fund which now everyone is now avoiding like the plague, and for which the only question now is "when" - when will Stevie close down shop, and will this happen before or after the paddywagons finally arrive at 72 Cummings Point road. The WSJ reports: "Titan Advisors LLC recently told clients that it had decided to withdraw its entire investment from SAC, said clients who received phone calls from Titan. "They've told us they still think SAC is a good firm but Titan doesn't need the headline risk, and we sure don't," said Tom Taneyhill, executive director of the Fire & Police Employees' Retirement System of the City of Baltimore, on Friday. Société Générale SA, which has client money in SAC through its Lyxor asset-management arm, also decided to pull its money from SAC, The Wall Street Journal reported earlier this month. At the time, an SAC spokesman declined to comment. Titan's departure is significant given SAC's long-standing relationship with one of Titan's founders. Titan co-founder George Fox began investing in SAC in the mid-90s, several years after Mr. Cohen started what became the firm in 1992."
Presenting Dave Collum's now ubiquitous and all-encompassing annual review of markets and much, much more. From Baptists, Bankers, and Bootleggers to Capitalism, Corporate Debt, Government Corruption, and the Constitution, Dave provides a one-stop-shop summary of everything relevant this year (and how it will affect next year and beyond).
How casually, how frighteningly, The risks are now dismissed. Spain’s fall to junk, Greek exit, The looming fiscal cliff. For recent years do demonstrate, The power of QE.What matters sovereign solvency, When you have OMT?
There is a reason why the monthly BLS JOLTS jobs supply/demand survey - which supposedly shows an "improving" labor picture because more people are willingly leaving their (temporary) jobs, and there are more job openings - is so laughable it is not even worth reporting. The reason is the following: practical, non-massaged reality, such as this report confirming how great the demand for any real job openings is. According to Bloomberg Delta, the world’s second-largest carrier, received 22,000 applications for about 300 flight attendant jobs in the first week after posting the positions outside the company. The applications arrived at a rate of two per minute, Chief Executive Officer Richard Anderson told workers in a weekly recorded message. Applicants will be interviewed in January and those hired will begin flying in June, for the peak travel season. Said otherwise, the previous few lucky hires will have overcome an acceptance ratio of 1.3%. Putting this into perspective, the acceptance ratio at Harvard, the lowest of any university, is 5.9%. In other words, it is 4.5x easier to enter Harvard than to get a job at Delta. As an attendant. And there is your jobs supply-demand reality in one snapshot.
"Finally, we must question the morality of Fed programs that trick people (as if they were Pavlov's dogs) into behaviors that are adverse to their own long-term best interest. What kind of government entity cajoles savers to spend, when years of under-saving and over-spending have left the consumer in terrible shape? What kind of entity tricks its citizens into paying higher and higher prices to buy stocks? What kind of entity drives the return on retiree's savings to zero for seven years (2008-2015 and counting) in order to rescue poorly managed banks? Not the kind that should play this large a role in the economy."
It seems left, right, and center we hear that fundamentals are currently supportive of equities. However, dismal earnings outlooks (and historicals) aside, we have seen the current pattern of macro-economic data 'outperforming' economists' expectations while stocks don't appear to fully play along before - it was mid-2008. As is clear from the chart below, the rapidity of the collapse in macro data should be greatly concerning to any and all who think there is even a possibility we go over the cliff - as, for sure, economic expectations are not priced for that at all (and stocks for at worst a modest macro weakening only).
Following Part 1 (History), and Part 2 (Interventionism), Part 3 provides a more technical look at the key features of the unadulterated gold standard. It could be briefly stated as a free market in money, credit, interest, discount, and banking. Another way of saying it is that there would be no confusion of money (i.e. gold) and credit (i.e. paper). Both play their role, and neither is banished from the monetary system. There would be no central bank with its “experts” to dictate the rate of interest and no “lender of last resort”. There would be no Securities Act, no deposit insurance, no armies of banking regulators, and definitely no bailouts or “too big to fail banks”. The government would have little role in the monetary system, save to catch criminals and enforce contracts.
On December 20, 2012, there was an Event in the eMini futures at 20:18:40 ET. The data exhibits many hallmarks of a HFT (High Frequency Trader) market maker absorbing sell orders up to their limit, and then turning around and dumping those contracts as fast as possible. Exactly what happened in the Flash Crash on May 6, 2010 (this documentary on youtube has a great explanation). Only in this case, the original seller appears to be much more aggressive than Waddell & Reed's algorithm. The drop came in 2 seconds, and halted trading for 10 seconds. The flash crash halted eMini trading for just 5 seconds. A mere 10,000 contracts (or $700mm notional) was enough to do all that damage - enjoy.