I am what many here (most especially myself) and elsewhere love to make fun of. I am a true blue Digital Dickweed. A Digital Dickweed has been defined by others as someone that is genuinely unemployed, in my case a government pensioner, errr, freeloader (100% disabled veteran), non high school graduate who lives in the basement of their parents home (or the spare bedroom of a family member’s home in my case) blogging. In essence, the old war veteran that sits on his front porch and watches the world go by, aka JAFO (Just Another Fucking Observer). So, let’s take a look see at the talk from off South Main Street. - Miles Kendig
Simon Black's Sovereign Man is currently covering a topic that will be near and dear to all Americans' hearts if the Fed gets its way: Zimbabwe. Attached are his most recent thoughts and observations from the (Zimbabwean) field, and a summary of the political, monetary and overal social chaos that currently rules in the latest (but certainly not last) country to succumb to hyperinflation. The lesson to be learned: prepare for anything. Because nobody in Harare expected to wake up one day and see all their wealth gone.
A few weeks ago, the Fed announced that the new $100 dollar note has been delayed, and will not make broad circulation by the February 2011 scheduled date. Contrary to prior rumors that either the Fed's printer had finally broken, or that all the ink had been used up, courtesy of William Banzai we now know the true reason. Over the past several months, using the smokescreen of QE 2, the Fed has been secretly contemplating two completely different monetary concepts, both very much appropriate for our Keynesian end-times. Since the Fed will shortly request public commentary on which of the two alternatives should be implemented, we present them to Zero Hedge readers first.
The latest currency war escalation does not come from any of the usual suspects (the Fed-PBoC-BOJ-ECB-SNB hate pentagongram) but from non-axis player Brazil. And it's a doozy - the country's top economic officials have decided to cancel their trip to Seoul in what is likely the first jarring demonstrating of defection from the G-20 cartel. The reason for this last minute defection from the Central Banking proletariat , as given by Finance Minister Guido Mantega and cited by Reuters, is, appropriately enough: "currency issues." Nuff said. And while Mantega has decided to pay a last minute cancellation fee, he is not alone - the president of the central bank Henrique Meirelles has also withdrawn from the list of attendees, due the totally unforeseeable event of monetary policy meetings to be held on Tuesday and Wednesday. Obviously those were unheard of when the G-20 was scheduling the time and date of its location. Next up on defection watch: Hildebrand and Shirakawa. It will go oddly elegant in addition to the (FX) suicide watch they have been on for about a week.
Brown Brothers Musings On The "Broken Cash Register" And Why Economic Prosperity May Never Again ReturnSubmitted by Tyler Durden on 10/18/2010 - 19:28
Some essayistic views from Brown Brothers Harriman on the current regime: in what is an elegent symmetry, BBH notes that the current collapse is merely the denouement of the earlier period of success, what the author dubs the Reagan-Thatcher model. "The current crisis is the breakdown of the Reagan-Thatcher cash register. Its own success seems to be the main culprit. It reached some logical conclusion. The leveraging and deregulation, and perhaps the sheer size of the capital stock, overwhelmed the US’s ability to absorb it and, in some quarters, raised Triffin Dilemma-like problems: the magnitude and persistence of the current account itself began undermining the cash register." Where the narrative is less elegant is the policy recommendation that China, which is perceived as the last great hope for the developed world should adopt the same failed Bismarkian model that is now in its death rattles across the entire developed world: "Ultimately the world economy must generate less surplus capital. The surplus countries need to reduce their savings by boosting consumption. One way China could reduce its incredible savings rate would be for the Chinese government to provide some of the basic public goods that most other countries provide their citizens, such as greater social security, unemployment compensation, and, yes, even national health care." In a sense, BBH suggests the US should export communism so that the oligarchy can enjoy a few more years of excess returns, after which, the flood. Yet even they realize it is likely too late to set off on such a course: "It is possible that the Reagan-Thatcher cash register cannot be salvaged. That would suggest a rather foreboding future. Yet, just as in 1971, it was impossible to have anticipated the features of the Reagan-Thatcher cash register, so too we may not be able to envisage a new one. Just like China would still have to confront its massive reserves even if they were to shift of out dollars, so too does the challenge of absorbing the vast world savings transcend national or regional focus of the more common dramatic narratives. While some semblance of recovery is possible, without a solution to this problem, economic prosperity may not return -- no matter the configuration of geopolitics." And this will be precisely the final outcome, no matter how hard the Krugmanites push for just another dance with the rotting corpse of John M Keynes.
Oil prices rebounded sharply on Monday, just as soon as we thought we had some conclusive technical indications that the oil complex might be headed lower. This has been an ongoing embarrassment for a number of us who have been watching this complex for most of our lives. Every time, we seem to see a fresh statistic or chart that tells us prices now want to move in one direction to the preference of the other direction, we see an immediate move in the opposite direction. On Friday, it looked like prices had made a top in this complex – to our eyes. Of course, by the end of the day’s trading, it looked like prices were back in a trading range - or might be turning higher, again. - Cameron Hanover
Lately, it appears, it has gotten trendy to bash the New York Fed's Permanent Open Market Operations (POMO), especially by various self-appointed godfathers of the blogosphere. The logic goes, or so we interpret the thinking, that any given POMO is nothing but yet another component of the various signals that enter into the "perfectly efficient market" and the Fed's intervention is something that is perfectly acceptable, should be a tradeable event, and is nothing of real significance (and, of course, the original narrative would come wrapped in 10 paragraphs or so of fluff). Whatever. Below, in collaboration with John Lohman, we show what the market would look like without POMO, versus a market that is predicated exclusively on FRBNY interventions. The bottom line: starting with the first POMO in 2005, when the S&P was at 1,200 and continuing through today, the broader market index would have been at just over 800 if performance from POMO days was excluded. Alternatively, purely POMO days would have had the effect of doubling the stock market in the past 5 years. We hope readers can decide on their own whether Fed intervention in this case implies causation.
The world's most traded security flash crashes. NYSE forced to unwind $500 million worth of shares. The market is a farce, wrapped in a joke, inside a tragicomedy.
150 funds are responsible for $177 billion worth of Apple's market cap. The question now is who, among the 150 below, in tried and true and neverfailing "game theory" will be the first to defect and bail, starting an avalanche in the price of the fad-focused retailer.
Funny thing about bubbles. They pop. HFTs playing a serious game of pass the hot grenade right now. Everyone please join us in prayer that Waddell and Reed does not decide to sell a block of 10 ES contracts right now, as the world could very well blow up.
Apple Halted As It Reports $20.34 Billion In Q4 Revenue, $4.64 In Earnings, Big Miss In iPad Sales ExpectationsSubmitted by Tyler Durden on 10/18/2010 - 16:33
Apple is halted as it beats top and bottom line: Q4 revenue USD 20.34BN vs. Exp. USD 18.90BN, Q4 EPS USD 4.64 vs. Exp. USD 4.10. Margins come weak, but that does not stop Steve Jobs from proclaiming: “We are blown away to report over $20 billion in revenue and over $4 billion in after-tax earnings—both all-time records for Apple.” Looks like ES is certainly not as impressed as the gaunt CEO, as the company undersells iPad by a big margin: Q4 iPads units sold 4.19mln vs. Exp. 4.81mln.
While the biggest near-term catalyst for the market will be the imminent earnings release from AAPL, which itself defines the market due to its massive weighing in various indices, stocks once again fizzled when priced in gold. The S&P for October continues to underperform gold, and today closed unchanged priced in non-fiat, which merely reaffirms that the loss in dollar purchasing power is not being compensated by the stock bubble. And yes, this happened even though it was a POMO day. As we have speculated, gold has become nothing less than a natural short hedge to stocks: one, which, however unlike traditional shorts, has no upside limit. As long as retail refuses to throw its hands up and join the ponzi orgy, the relative underperformance of stocks will continue. In the meantime, there is no POMO tomorrow.
As the ongoing strikes in France against austerity continue, and see increasingly more participation, the latest development is all too familiar to all those who travelled through Athens in the summer: huge lines for gas. About 1,000 gas stations across France have run out of fuel because strikers had blocked access to oil refineries and depots, Alexandre de Benoist, a Union of Independent Oil Importers official, told CNN on Monday. It gets worse: per the AP, the head of France's petroleum industry body said fuel reserves were "enough to keep us going for a few weeks." Jean-Louis Schilansky, president of the Petrol Industries Association, warned however that if the strikers continue to block fuel depots and if the nation's truckers join the movement, "then we will have a very big problem." Sure enough, truckers did join the fray on Monday, staging organized slowdowns aimed at snarling highway traffic. French TV showed images of cars and trucks on a "Snail Operation," driving at a snail's pace along the main highway between Paris and the northern city of Lille, with red union flags waving out the windows. Will Europe's little experiment with Austerity be doomed, as the continent realizes that there is no solution to the imminent insolvency of the PIIGS and soon everyone else, and should just enjoy it last months and days of the existing status quo?
Interactive Brokers' Peterffy Lashes Out Against The Broken Market, As Nanex Conclusively Proves HFT's Were Cause For Flash CrashSubmitted by Tyler Durden on 10/18/2010 - 14:47
A recent speech by Interactive Brokers' CEO Thomas Peterffy at the World Federation of Exchanges may just be the watershed insider conversion event that finally opens the eyes of all those who have been living for years with the delusion that modern markets are fair, honest and transparent. As the Interactive Brokers head says: "It is not so much anymore that the public does not trust their brokers. They do not trust the markets, the exchanges, or the regulators either. And why should they, given our showing in the past few years? I must confess to you that I was an ardent proponent of bringing technology to trading and brokerage. Unfortunately, I only saw the good sides. I saw how electronic trading and recordkeeping could be used to force people to be more honest, to make the process more efficient, to lower transaction costs and to bring liquidity to the markets. I did not see the forces of fragmentation and the opportunity for people to use technology to keep to the letter but avoid the spirit of the rules -- creating the current crisis. It is vitally important that we bring an end to this crisis of trust before it spreads any further; that we bring back order, fair dealing and trust in the marketplace." And if there is anything that the 23 sequential outflows from equities demonstrate, it is precisely that the average investor no longer has any trust in either the markets, or its regulator. Furthermore, the latest piece of evidence from Nanex, definitively confirms that not only was the Waddell & Reed's order not the catalyst for the May 6 flash crash, but it was the HFT buyers of this sell order, that "transformed
a passive, low impact event, into a series of large, intense bursts of
market impacting events which overloaded the system. The SEC report uses an
analogy of a game of hot-potato. We think it was more like a game of dodge-ball
among first-graders, with a few eighth-graders mixed in. When the
eighth-graders got the ball, everyone cleared the deck out of panic and
fear." At this point, to the SEC's chagrin, there is nobody left to watch how this particular game of dodgeball, or the latest propaganda scapegoating campaign for that matter, will end.
Just a brief intraday update on the USD. We have potential H&S formation in EURUSD, AUDUSD, and inverse H&S in DXY. Furthermore we are very close to the 61.8% retracement from the highs in AUDUSD at 99.26, and while in EURUSD the level is 1.4035, we have resistance around the highs of 10/0 and 10/10 between 1.4010 and 1.4031. Overall the USD if it must find support should ind it around here. AUDUSD chart shows massive saturation on the slow stochastic and the RSI is at levels where the market corrected both in May and October 2009. - Nic Lenoir