Archive - 2012

Bigger Tax Payer Bank Bailouts Cometh? If You Think Taxes Are Gonna Be Higher You Ain't Seen Nothing Yet! I welcome one and all to show me how it will not be so.

Time to crack some nuts...

Steve Jobs' EUR150mm yacht has been confiscated by a court in Amsterdam following Jobs' heirs decision not to pay the designer of the boat. As Holland's Nu.nl reports, the famous designer Philippe Starck had an 'agreement' with Steve Jobs that he would receive 6% of the price (or EUR9mm) of creating the yacht as his payment for designing the epic 80-meter, 27-iMac-controlled behemoth. Unfortunately, the 'agreement' was not on paper as the two men were 'friends' and so the heirs to Steve Jobs fortune have decided that the EUR6mm that Starck has received is quite enough. The yacht remains moored in the Port of Amsterdam under bailiff control. Must be a tough life eh?

"Interconnections serve as shock-ampliers, not dampeners, as losses cascade. The system acts not as a mutual insurance device but as a mutual incendiary device." - Andrew Haldane

As all the rumors predicted:

OBAMA SAID TO NOMINATE KERRY AS SECRETARY OF STATE TODAY

Time to salute Kerry, John "Swiftboat" Kerry.

We noted the VIX divergence (and most importantly the 14-month flatness of the term-structure - which is following the 'debt ceiling' path perfectly!) yesterday and pointed out how illiquid markets were. Critically, those that could were selling into strength and those that couldn't (due to size and illiquidity) bought protection. Overnight the flash crash recoupled S&P to VIX but this morning has seen more protecction buyers step in, driving VIX towards 20% (5 month highs). Given the recent correlations (and managers knowing full well they can't unwind their exposure into the cash market as the avalanche will be too large), VIX implies the S&P at around 1370. Interestingly, this level of S&P is also approximately what a 2% rally in the USD would imply (the FX implication we suggested yesterday of a failed cliff resolution in the short-term).

After theatrically soaring to a 5 year high in November, when the UMich confidence final print rose above the 82 level, the final UMich consumer confidence number just tumbled by a whopping 10 point down to 72.9, well below the expected 75.0 print, and below the preliminary read of 74.5. This was the biggest percentage slide since February 2007. So much for the great pick up in confidence, driven by the foreclosure stuffed subsidized "recovering" housing market. Perhaps it's time to get a seasonally adjusted confidence number?

Maybe the Mayans had it right all along…..

This should be good. Part apology, part job interview, part finger-pointing; Speaker Boehner is set to speak at 10ET to explain how this is all going to be ok... or not...

2 days ago US Treasury 10yr yields were 10bps cheap vs stocks.  Well, not anymore.  US Treasuries now have both technical and cyclical forces on their side for the next 1-2 weeks.  Let us explain how...

If you were wondering why the Argentinian leadership were unwilling to pay off a few 'annoying' hedge funds with a few billion dollars (and were pissed about losing one yacht), then perhaps this report from the BBC will enlighten. Argentina authorities have sent hundreds of troops to the southern city of Bariloche after a spate of looting. Critically, Bariloche is not some shanty-town, it is one of the nation's most popular ski resorts and 'relatively' affluent. The following clip sums up the dangerous situation the nation finds itself in, despite the government's assurances that this is a "false picture of social and political collapse." Looks real to us?

The Leuthold Group constructs their Risk Aversion Index (RAI) with a combination of market based indicators,  including credit and swap spreads, implied vol, currency moves, and commodity prices. No doubt quantitative easing is repressing market fear. They also note that periods of low risk aversion tend to run longer than streaks of elevated risk aversion. How long this time? We don’t know but we’re going to think long and hard over the holiday about the potential macro swans in 2013. Here are eight starting thoughts we will be contemplating...

Fiscal cliff, fiscal cliff;
     Politics in play!
The only thing they have in mind;
     Is the next election day! Hey!
Fiscal cliff, fiscal cliff;
     Isn’t politics great?
They've left us now in such a mess;
     We’ve no choice but to inflate.

It's no secret that high-frequency traders and those who employ bad or manipulative algorithms are swimming in pools of money.  Most of these guys making complex statements for computers to follow aren't even financially inclined, most are physicists, aeronautics engineers, and quants looking to impose math upon the world instead of deriving it from the world.  This form of trading has reversed the flow of finance.  At one point the stocks that make up an ETF would move before the ETF.  Now because of the speed at which computers can freeze the stock prices, calculate wh