Draghi's Horrible Threat: "Are We Finished? The Answer is No"!

Draghi & Co have embarked on the futile task of forcing more debt onto balance sheets that are saturated and more inflation into an economy that is shrinking in real terms. All of this silly kidstuff, in fact, is the work of Keynesian desperados in Frankfurt who embrace two propositions that are unequivocally and provably wrong. Namely, that the Euro area economy is floundering due to a tiny decline in non-financial credit and that “low-flation” is the great roadblock that prevents the wheels of credit and commerce from turning at a more satisfactory pace. In the end, however, perhaps the Keynesians in Frankfurt will do something useful. That is, elicit another crisis that will finally put the euro out of its misery.

Giant Sucking Sound: Russian Money Yanked From US Banks

US Banks enjoyed more or less steadily climbing, or rather soaring, deposits by Russian institutions and individuals, having tripled in just two years to $21.6 billion by February, according to the US Treasury... and then March hit... boomerang

How Much More Upside Is There?

For 5 years the correlation between the expansion of the Federal Reserve's balance sheet and the growth of the S&P 500 has risen dramatically. Since QE3 was unveiled, the correlation is converging on 1 which of course is just happy coincidence and nothing to do with the free and easy flow of liquidity that month after month of Fed largesse has created. The problem is we now know that the hurdles to a Fed un-Taper are very high and so we can extrapolate the end-point for the Fed's balance sheet and where stocks would trade at that point. The S&P 500's recent exuberance has priced in the total expansion of the Fed's balance sheet to the end of the taper, so how much more upside is there?

Visualizing The Allied Invasion of Normandy

On June 6, 1944, Allied forces from the United States, United Kingdom and Canada launched the largest seaborne invasion in history by landing nearly 160,000 troops on the beaches of Normandy in a single day...

Awkward Friday: Obama And Putin On The Big Screen

There was a moment of awkward levity during today's D-Day celebration when a cruel TV producer decided to show both Obama and Putin on the big screen at the same time. And the crowd, of course, goes wild.

Do Any Of These Family Dollar Calls Belong To Phil Mickelson?

While the bulk of the just announced Icahn activist foray into yet another company, this time Family Dollar, is cut and dry, we can't help but wonder: was Phil Mickelson the person buying all those FDO calls just after noon today?

The Fed Won't Let the Economy Heal

Most commentators are of the view that the Fed’s massive monetary pumping of 2008 has prevented a major economic disaster. We suggest that the massive pumping has bought time for non-productive bubble activities, thereby weakening the economy as a whole. Contrary to popular thinking, an economic cleansing is a must to “fix” the mess caused by the Fed’s loose policies. To prevent future economic pain, what is required is the closure of all the loopholes for the creation of money out of “thin air.”

Why Janet Yellen Is Hoping California Chrome Wins The Triple Crown

With The Fed tapering proceeding as scheduled and complacency having reached 11 on the Spinal Tap amplifier of over-confidence, Janet Yellen and her fellow PhDs have one last best hope... a second-half pick up to magically confirm escape velocity and 'prove' monetary policy is not simply the enrich-the-rich scheme we all know it is. For that reason, we suspect Yellen, Lew, Obama, and every bull out there will be screaming "move yr arse" to California Chrome in The Belmont on Saturday...During years when there is a Triple Crown winner, the U.S. economy has averaged 4.85% growth in real GDP.

5 Things To Ponder: The Central Bank Edition

This past week has been all about "anticipation." The markets made little headway during the first half of the week as traders waited in an almost breathless anticipation of the announcement from the European Central Bank. When the news was finally received, investors were initially disappointed but David Tepper stepped into the fray with his ever bullish optimism. The more we read, the clearer it becomes that the world's Central Banks have become caught in a "liquidity trap" which is entirely based on circular logic... Central banks must create asset bubbles in the hopes of stimulating economic activity. When the bubble eventually pops the economic activity evaporates which requires the creation of another asset bubble.

Small Caps Surge To Best Week In 2014

The US Dollar, gold, and oil closed the week unchanged... Treasury yields rose 6-8bps on the week... and the Russell 2000 had its best week in 2014... Sure, why not? VIX was crushed back to a 10-handle as managers lifted hedges and the Tepper-induced short-squeeze from yesterday followed through (+2.5% against a 1% rise in the S&P). The Dow and S&P 500 both closed at record highs (notably rich to the Fed balance sheet). Volume was 20% below average (and that was a payrolls day!). Copper tumbled over 2% - its worst week in 3 months as China's warehouse probe continues.  VIX closed at its lowest close since Feb 2007 (and once again the strange shadowy figure of massive after-0hours volume spikes in VXX appeared).

 

Bottom-Up Breadth 'Bearish-est' In 19 Years

We recently noted that the average Russell 2000 stock is down over 22% and the majority of the broad equity market is well into correction territory as the rally is supported by fewer and fewer names (cough AAPL cough). However, as FBN's JC O'Hara notes, looking at the percent of stocks above their 200 day moving average in the S&P 500 vs the percent of stocks above their 200 day moving average for the Russell 2000, we find the spread is at its widest point in the history of our database. While we find breadth is not a proper market timing tool, a heightened reading often forewarned of troubles ahead. It was more common to alleviate a wide spread by the S&P pulling back to the Russell rather than the Russell playing catch up.

Consumer Credit Has Fifth Biggest Monthly Jump In History; Revolving Credit Soars By Most Since November 2007

A month ago we pointed out that with April US consumer savings plunging to levels not seen since Lehman, the only place where the tapped out consumer could find some purchasing power is by maxing out their credit cards. This is precisely what happened: moments ago the Fed released its April consumer credit report and it was a doozy: expected to print at $15.00 billion, down from a pre-revision $17.5 billion, the April total instead exploded to a whopping $26.85 billion. This was the fifth biggest surge in history, and was only surpassed by the 2010 "cash for clunkers" record, as well as previous one time outliers in 1998, 2001, and 2006.

Caught On Tape: Obama And Putin Are Talking Again

Rejoice: the second cold war appears to be over (after Russia skillfully annexed Crimea). How do we know? The following clip of Obama and Putin chatting has been released, by the official account of the French president no less. No blows were exchanged. Surely this in itself is enough to push the VIX to the upper (or middle, or lower) single digits and send the S&P to just about 20x 2014 GAAP P/E...

You Know It's A Top When...

For many months we have discussed the massive outperformance that buying the "most shorted" stocks has created. The 'alpha' generated fro buying the weakest balance sheet companies in preference of the stronger has enabled the dash-for-trash strategy (just as we saw yesterday when Tepper unleashed hell) to be the new meme. And so it is, like anything that is popular, ETFTrends reports that ETFis - a turnkey ETF provider - has filed with the SEC to launch an actively managed short squeeze fund...

No More Risk: VIX Plunges Below 11 For The First Time In Years

While the Fed's presidents are scratching their heads at the quandary that consolidated cross-asset volatility continues to tumble to never before seen levels, the NY Fed's trading desk, clearly rushing to get to the Hamptons, just sold enough VIX futs to push VIX not only 6% lower for the day, but to the lowest print since 2011. Next up: single digit VIX and the disappearance of all risk.