Archive - Apr 12, 2012

Tyler Durden's picture

Why The Market Is Praying The Fed Does Not Plug Its Heavy Flow





As we have recently pointed out (here), the exponential level of global central bank one-upmanship has created a level of dependency in capital markets never seen so obviously before. Critically, though, it is not the sheer scale of the balance sheet (or STOCK of assets) that is good enough anymore - equity market performance is all about the marginal change in that stock (FLOW). Nowhere is this "It's The Flow Stupid" better highlighted than in the chart below showing the periods of central bank balance sheet expansion coinciding almost perfectly with the largest surges in equity market performance. Furthermore, as the flow fades so the performance starts to fade (unable to counter the natural tendency of retail to exit the risky markets perhaps) and as the Fed's balance sheet begins to actually compress marginally (as it has the last few weeks), so equity market performance has turned negative - and notably so. This leaves the Fed with the dilemma that it is not just about the size of the bazooka anymore but the frequency with which you are willing to use it - and as we are likely to see this week - jaw-boning alone will not do the trick (no matter what today's market might have been hoping for) as unless we see the balance sheet of the Fed expand again (which would mean a rise of around 0.4% - something we haven't seen since mid February), we should expect the rolling 4-week performance of equities to continue to fall.

 

Tyler Durden's picture

China GDP Misses Expectations By A Mile, Rises Only 8.1%, Slowest Pace Since September 2009





The number the market has been waiting for with bated breath arrives:

CHINA 1Q GDP GROWS 8.1% ON YEAR, EXPECTED 8.4%, and whispered at 9.0%
CHINA STATISTICS BUREAU SAYS PROBLEMS REMAIN IN THE ECONOMY
NBS: CHINA STILL FACES UPWARD PRESSURE ON INFLATION
NBS: CHINA FACES DIFFICULTY STABILIZING EXPORTS

And so the rumormill, which was expecting some ridiculous GDP print of 9.0% based on a third-rate research report released overnight, despite China posting some epic budget surpluses in the past few months, is stuck dumping risk in this late hour. Everything selling off as China's GDP posts the biggest sequential drop since March 2009 and the lowest sequential GDP rise since September 2009.

 

Tyler Durden's picture

Meat (sic) The Other Slimes





Because pink slime was just the beginning.

 

CrownThomas's picture

Classic Santelli Rant on the Buffett Rule





We cannot collect enough taxes to catch up with spending

 

Tyler Durden's picture

Was The SEC "Explanation" Of The Flash Crash Maliciously Fabricated Or Completely Flawed Out Of Plain Incompetence?





Regular readers know that since the beginning, Zero Hedge has been vehemently opposed to the official SEC explanation of the chain of events that brought upon the Flash Crash of May 6, 2010, in which the Dow Jones Industrial Average lost 1000 points in a span of seconds, and during which billions were lost when stop loss orders were triggered catching hapless victims unaware (unless of course, one had a stop loss well beyond a reasonable interval of 20%, in which case the trades were simply DKed). It is no secret that one of the main reasons why the retail investor has since declared a boycott of capital markets, which lasts to this day, and manifests itself in hundreds of billions pulled out of equities and deposited into bonds and hard assets, has been precisely the SEC's unwillingness to probe into this still open issue, and not only come up with a reasonable and accurate explanation for what truly happened, but hold anyone responsible for the biggest market crash in history in absolute terms. Instead, the SEC, naively has been pushing forth a ridiculous story that the entire market crash was the doing of one small mutual fund: Waddell and Reed, and its 75,000 E-mini trade, which initially was opposed to being scapegoated, but subsequently went oddly radio silent. Well, if they didn't mind shouldering the blame, the SEC was likely right, most would say. However, as virtually always happens, most would be wrong. Over the past few days, Nanex has one again, without any assistance from the regulators or any third parties, managed to unravel a critical component of the entire 104 page SEC "findings" which as is now known, indemnified all forms of high frequency trading (even as subsequently it was found, again by Nanex, that it was precisely HFT quote churning that was the primary, if not sole, reason for the catastrophic chain of events) with a finding so profound which in turn discredits the entire analytical framework of the SEC report, and makes it null and void.... The only open question is whether the SEC, which certainly co-opted the authors of the paper to reach the desired conclusion, real facts be damned, acted out of malice and purposefully fabricated the data knowing very well the evidence does not support the conclusion, or, just as bad, was the entire supporting cast and crew so glaringly incompetent they did not understand what they were looking at in the first place.

 

testosteronepit's picture

A Greek Impossibility





The 2 Millions Missing Jobs. Without them, nothing will work.

 

Bruce Krasting's picture

Three Conversations





So let's talk Greece, Paris and Natural Gas. 

 

Tyler Durden's picture

North Korea Launches Rocket, ABC Reports Launch Has Failed





Red headline time. From Yonhap:

North Korea launches rocket - S.Korea's YTN Television
U.S official confirms North Korea has launched rocket
Rocket launch took place at 7:39 local time - South Korea Defense Ministry,

Japan likely in full mobilization mode right about now. Or not: this just in:

ABC's Martha Raddatz reports the North Korean rocket launch has FAILED.

Somebody is about to be punished big time since local rockets no fly long time.

 

Tyler Durden's picture

CME Lowers Silver, Copper Margins





While it is unknown if this is merely a bull trap to get yet another bubble going, then to slaughter everyone with the same relentless barrage of margin hikes as we saw in the spring of 2011, or simply volumes in commodities have gotten so low that even the CME is willing to allow a little price appreciation in exchange for participation is unknown, but as of April 16 silver initial and maintenance margins will be 12.5% lower, while copper margins are declining by 20%.

 

Tyler Durden's picture

The "Buffett Rule" In Perspective





You have seen the trees. Now see the forest.

 

Tyler Durden's picture

Fed Doves Send Risk Soaring, Apples Dropping





More jaw-boning helped squeeze shorts as equity indices, credit, and precious metals all closed their highest since the NFP dive as QE3 hope is back on the table. The best day in four months for Materials (now the only sector green from before the NFP print) and Industrials, and the best two-day gain in financials and energy in four months but the S&P 500 remains around 1% off pre-NFP levels (but managed to fill the gap to the lows of last Thursday in S&P futures). Credit (both investment grade and high-yield spreads) managed - just as in Europe - to rip up to pre-NFP levels also (outperforming stocks). Notable divergence between AAPL and SPY started at 1045ET today - as GOOG volume picked up and accelerated which was also when ES (S&P e-mini futures) broke Tuesday's opening level and ran stops. Volume was average with higher average trade size coming in as we reached post-NFP highs (suggesting again professionals selling into strength as weak shorts are squeezed out in a hurry). The dovish comments sent Gold and Silver surging (and China rumors pushed Copper up - and WTI to around $104). VIX crumbled into the close - with its largest drop in over 5 months in percentage terms - though still higher than last Thursday's close. FX markets were noisy once again through Europe but USD ebbed higher in the afternoon - still very modestly lower on the week and day (with JPY leaking weaker today helping carry support risk a little). Treasuries also leaked higher in yield but remain at the immediate spike low yields post-NFP (pretty much in line with stocks generally) but between FX and TSYs, broad risk assets were not as excited as credit and equity markets specifically as we suspect this was weak recent shorts being shaken out suddenly. In context, the S&P 500 is down over 3% in gold terms from before the payrolls print.

 

Tyler Durden's picture

Google Reports Earnings, Beats EPS, Meets Ex-TAC Revenues, Announces 2:1 Stock Split And New Non-Voting Class





The headlines flow in:

  • GOOGLE 1Q REVENUE $10.65B
  • GOOGLE 1Q REVENUE EX TAC $8.14B, EST. $8.14B
  • GOOGLE 1Q ADJ. EPS $10.08, EST. $9.64
  • GOOGLE 1Q PAID CLICKS ROSE 39% VS YEAR AGO
  • GOOGLE 1Q TRAFFIC ACQUISITION COSTS $2.51B
  • GOOGLE 1Q COST PER CLICK DOWN 12%
 

Tyler Durden's picture

Largest US Teacher Pension Fund Underfunding Increases By $9 Billion To $64.5 Billion, Only 69% Funded





While the epically underfunded status of the US, by all definitions a ponzi scheme, whose combined liabilities have a net present value of about $100 trillion, is known to everyone, most can simply shake it off for too reasons: 1) it is a number too big to comprehend, and 2) by the time the ponzi blows up it will be some other generation's problem. However, it may not be so easy for California's retiring teachers. Minutes ago, CalSTRS, or the California State Teachers' Retirement System, with a portfolio valued at $152 billion as of February 29, 2012, and is the largest teacher pension fund in the United States, reported that its underfunding increased by a massive 15%, or from $56 billion to $64.5 billion, which happened despite the market being relatively flat over the past year. In fact this is supposed to be good news: as CalSTRS states, its underfunding was supposed to be even worse by $4.3 billion. So this is really good news. We wonder how good the news will be to tens of thousands of retiring and retired teachers once they understand that their obligations are only funded 69%. And dropping. But wait, there's more: new normal, no new normal, here is what CalSTRS did: it reduced "the assumed rate of investment returns from 7.75 percent to 7.5 percent, which increased the funding shortfall by $3.5 billion." In other words, if the market grows at a true New Normal of 1-2%, or worse, is flat over the long run, we wonder if the obligation coverage ratio would even be in the single digit percentage.

 

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