Archive - Jan 2013
January 31st
HFT Infographic
Submitted by CalibratedConfidence on 01/31/2013 23:47 -0500You know how we feel about special order-types and expert networks. I'll save you the long-winded paragraph so you can keep selling AMZN. Here is an HFT infographic
Chevron Whacked By Record Fine, But Might Not Notice
Submitted by testosteronepit on 01/31/2013 23:00 -0500To teach Chevron an excruciatingly painful lesson for its “serious willful” violations that caused 15,000 people to seek medical treatment. But a rounding error?
The Vulnerability Of The Elites
Submitted by Tyler Durden on 01/31/2013 21:54 -0500
In a post-financial crisis world, the lack of viable international leadership is potentially troubling. In 2013, the WEF believes, this breakdown of international coordination will go increasingly local: in such a world, governments will focus more on their domestic agendas, which will create new risks in and of itself. Most importantly, the growing vulnerability of elites makes effective public and private leadership that much more difficult to sustain. Leaders of all kinds are becoming more vulnerable to their constituents, generating more reactive and short-term governance. Whether one looks at the dismal approval ratings of the U.S. Congress or the impact that more open flows of information is having on the Chinese ruling elite, it is clear that people are becoming more and more uninspired by their governments. When it comes to unemployment, the widening disparity of wealth, or environmental degradation, highly complex or even intractable issues set politicians up for failure in the eyes of their constituents. Underperformance erodes elites’ legitimacy, making it that much harder for them to lead effectively. Against this backdrop, a host of key 2013 risks and opportunities takes shape.
Guest Post: Is Germany Preparing For Future Capital Controls?
Submitted by Tyler Durden on 01/31/2013 21:13 -0500
On the surface, it may seem innocuous for Germany to move some pallets of gold closer to home. But most economists can't see the bigger implications and frequently miss the forest for the trees. What your friendly government economist doesn't reveal and the mainstream journalist doesn't report (or doesn't understand) is that in the event of a US bankruptcy, euro implosion, or similar financial catastrophe, access to gold would almost certainly be limited. If other countries follow Germany's path or the mistrust between central bankers grows, the next logical step would be to clamp down on gold exports. It would be the beginning of the kind of stringent capital controls Doug Casey and a few others have warned about for years. Think about it: is it really so far-fetched to think politicians wouldn't somehow restrict the movement of gold if their currencies and/or economies were failing? Remember, India keeps tinkering with ideas like this already.
The Consolidated "Currency Wars" Chart
Submitted by Tyler Durden on 01/31/2013 20:40 -0500
While we have pointed out various divergences among risk assets, the deterioration in macro fundamentals, the dismal earnings picture, and the potential for various geopolitical hotspots to ignite, there appears to be only one chart that the US equity market is willing to pay any attention to, for now - that of global central bank balance sheet size. The ongoing competitive devaluations of developed market currencies is a by-product of policymakers’ attempts to (repress) lower real bond yields and, as Credit Suisse notes, has an important (and potentially vicious) element of contagion to it (as Europe is finding out currently): currency appreciation continues until the deflationary pressures associated with an overly strong currency become too large and the country is forced to join in the trend of central bank balance sheet expansion. For now, it appears stocks are 'allowed' to rise, gold is suppressed, and balance sheets are expanding, but as we saw in Q4 2012, there comes a time when reality interjects (albeit briefly).
Clash of Federal vs. State Laws: US completely Arbitrary
Submitted by EconMatters on 01/31/2013 20:05 -0500The current government stance on Marijuana and Online/Casino Gaming is making their position from a legal standpoint look completely arbitrary and lacking in credibility.
How The Stock Market Became The "Food Stamps" for the 1%
Submitted by Tyler Durden on 01/31/2013 20:03 -0500
Food stamps are just a payoff to the poor. It keeps them off the streets. It’s an unspoken bribe plain and simple. The oligarchs do not want angry, roving, hungry masses on the streets while they strip mine what’s left of the economy. However, the oligarchs have another problem to deal with - the huge group of people that resides in between them and the poor. The average person can feel themselves getting poorer despite the nonsense spewed by the mainstream media; and this is where the stock market comes into play. More than any other group, the 1% has been convinced that the stock market represents some sort of leading indicator of wealth and prosperity. A rising stock market today is actually a leading indicator of the destruction of the middle class, cultural destitution and a society in collapse. The stock market is like slop in a pigpen. It is a key instrument used to keep the 1% from getting antsy. Unlike the middle class (a group that isn’t falling for any of the tricks), many of the 1% work on Wall Street or related industries and own stocks. They must be kept quiet as the coup that started in 2008 is brought to fruition. So as the 1% sits around analyzing a casino, the poor collect food stamps and the middle class dies.
The Tearing Of Europe's Social Fabric
Submitted by Tyler Durden on 01/31/2013 19:20 -0500
We have long-discussed the growing concerns of a rising level of social unrest in Europe. Our go-to chart has been youth unemployment - and it still reigns supreme as the scariest chart for European leaders (no matter what they publically claim). JPMorgan's Michael Cembalest shares our concern as he opines on the potential for a tear in the social fabric in Europe. While there may be increasing cracks in the social fabric, so far, concrete political manifestations have been limited. Could it be that the social fabric in Europe is stronger than many perceive it to be, and that 'Europeanization' has advanced a lot since 1992? Perhaps; but Michael is equally tempted to believe that Europeans simply recognize the financial and economic dangers of immediate dissolution, and remember the words of Benjamin Franklin: “We must all hang together, or most assuredly we shall all hang separately!”
Guest Post: The Linchpin Lie: How Global Collapse Will Be Sold To The Masses
Submitted by Tyler Durden on 01/31/2013 18:46 -0500
The globalists have stretched the whole of the world thin. They have removed almost every pillar of support from the edifice around us, and like a giant game of Jenga, are waiting for the final piece to be removed, causing the teetering structure to crumble. Once this calamity occurs, they will call it a random act of fate, or a mathematical inevitability of an overly complex system. They will say that they are not to blame. That we were in the midst of “recovery”. That they could not have seen it coming. Their solution will be predictable. They will state that in order to avoid such future destruction, the global framework must be “simplified”, and what better way to simplify the world than to end national sovereignty, dissolve all borders, and centralize nation states under a single economic and political ideal?
Don't Be Fooled, Real 4Q12 GDP Was Even Worse Than 0.14%
Submitted by Phoenix Capital Research on 01/31/2013 18:24 -0500
As we noted in yesterday’s article, the Fed is already splintering on the benefits of QE. For the US to print such an ugly GDP number right after QE 3 and QE 4 were announced doesn’t bode well for more aggressive policy from the Fed. But then again, we are talking about the Fed here, so they could very easily claim that the bad GDP print is because QE 3 and QE 4 are not big enough.
Crunching Complex Concepts In The Corner - Caption Contest
Submitted by Tyler Durden on 01/31/2013 18:11 -0500
Is this what tax season prep looks like when you have a Congressionally-imposed ban from using TurboTax? We will let readers decide...
The Fed's Ten Year-Equivalent Holdings Hit A Record 29% Of The Entire Treasury Market
Submitted by Tyler Durden on 01/31/2013 17:39 -0500With the Fed purchasing $45 billion in Treasury securities across the curve each month, keeping a consistent picture of Ben Bernanke's consolidated, risk-adjusted holdings can be somewhat problematic: the best way to do this is to represent the Fed's $3 trillion balance sheet, of which $1.7 trillion is in Treasurys, in the form of ten year equivalents. A ten-year equivalent is the amount of 10-year notes that must be held by the Fed in order to remove the same amount of interest rate risk from the market as its current holdings. This allows for a uniform representation that eliminates the duration variance along the curve. Looked in this light it may come as a surprise to some that as of this moment, the Fed now owns some 29% of the entire amount of marketable ten-year equivalents outstanding in the entire US bond market.
Santelli To Forecasting 'Fail' Fed: "Let Market Forces Reign"
Submitted by Tyler Durden on 01/31/2013 16:51 -0500
While cogitating on yesterday's weak GDP print, CNBC's Rick Santelli confirmed his view that forecasting is complex (at best) and impossible (most likely). The 2010 view of the Fed was that 2012 growth would be 3.5-4% - quite a destructive miss as it turned out; and while Santelli is not attacking the Fed for its ridiculously bad forecasts, he makes a critical point. Forecasting such a massively complex and dynamic system as the global economy is foolhardy but attempting to control a few of the pieces (and not all of the pieces - which is akin to herding cats) is insane. His suggestion, "maybe [the Fed] should look at what has worked in the past; that is market forces." Indeed, two minutes of sanity...
S&P Clings To Best January Since 1989; Credit Ends Wider
Submitted by Tyler Durden on 01/31/2013 16:17 -0500
From the close on Dec 28th (pre-fiscal-cliff), the Dow is up over 7% (for its best January since 1994), the long bond is down 3.3% in price, gold is up marginally and the USD is down marginally. From around November 2012, the current in stocks is eerily reminiscent of the same run from November 2011's dip and co-ordinated easing. It would appear that if 2011/2 was the world normalizing to ZIRP, 2012/3 is the world's central banks fighting currency wars with their ever-expanding balance sheets (and while Europe won last year in stocks, the ECB's fading balance sheet is leading its stocks to underperform a renewed Fed expansion). Credit markets are notably not buying this risk-on move (and nor is VIX) in January but JPY-cross-based carry is leading the way, so the world better hope that no one doubts the BoJ's ability top unilaterally 'win' the currency wars. Energy and Healthcare are the month's winners as JPY loses 6.4% on the month and EUR gains 2.7% against the USD. ES clung to VWAP into the close. with a second down day in a row
Shorting The Market On These POMO Days May Be Hazardous To Your Health
Submitted by Tyler Durden on 01/31/2013 15:38 -0500The central planner's policy tool formerly known as "the stock market" has experienced unprecedented levitation in the past two months on the heels of what, as shown previously, is some 38 countries concurrently pursuing negative interest rates and monetizing their debt, while flooding the market with record liquidity. Furthermore, as we said back on January 9, now that the Fed is back to full scale unsterilized market injections in the form of good old POMO, anyone who wishes to challenge the Fed directly may want to reconsider doing so via stocks (buying precious metals on FRBNY, BOE and BIS-facilitated 8:00 am crashes is always encouraged). Below is a chart of what happened next: it shows the stock market's performance and whether or not there was POMO on that day. In brief: of the 15 POMO days since January 9, the market was up 13 of them, or an 87% hit rate. Those who did not short January POMO at least did not lose money. And since Goldman's Bill Dudley was kind enough to release the February POMO schedule, during which the Fed will add another $44 billion to Primary Dealer dry powder, not to mention some $40 billion in MBS, and since there is no stock market and hasn't been since 2008, we urge everyone to stude the POMO table below and to not short the S&P on the highlighted POMO days unless they absolutely must.








