Archive - Oct 17, 2013

As RealtyTrac observes in its latest flipping report, while home-flipping among high-end homes, or those reserved exclusively for the New Normal aristocracy which buys and sells with reckless abandon almost exclusively on an all cash basis, is up 34% over the prior year with flipping on houses priced between $2 and $5 million was up a ridiculous 350%, overall flipping activity is finally starting to subside and in the third quarter was down by a third from Q3 and over 10% down from the the prior year. Not surprisingly, the bulk of the ultra-luxury flips were limited to New York and the four core California bubble markets. "More than three-fourths of all high-end flips were in five markets: the New York metro area and four coastal California markets — Los Angeles, San Francisco, San Jose and San Diego.  Flips on homes priced between $1 million and $2 million increased 42 percent year over year, while flips on homes priced between $2 million and $5 million increased 350 percent year over year."

As we tweeted earlier, the mainstream media now has its headline for tonight. As earnings look likely to be a disaster, and with nothing but a 3 month can kicked to the next farce in Washington, it is likely becoming just too plain to see for the world that US equities rise on the basis of one thing and one thing only, and the Fed speakers today confirmed that the un-Taper is off the table (as gold confirms).

*S&P 500 CLIMBS ABOVE INTRADAY RECORD TO 1,730.12

Reflecting on the collapse of the USD, the surge in gold, the Chinese ratings agency downgrade, and the groundhog-day-like world in which the US government (and markets) live, DoubleLine's Jeff Gundlach warns that "America's credibility is slowly eroding." In his typical manner, Gundlach rapidly and efficiently covers a lot of ground in these brief clips; from the growing skepticism of the rest of the world towards the US' full faith and credit, to no end in sight for QE and reignition of bond inflows under an even more interventionist Yellen, to his views on Tesla, Google, and Apple.

One of our favorite indicators of leading "global growth" is the Goldman swirlogram released each month, for two reasons: i) it succinctly summarizes on one chart what the near-term state of the global economy is, and ii) it is rather silly. Regardless of ii), the methodology does look at the entire assortment of available global leading indicators (which in the case of the US isn't saying much(, to determine the current state of the world economy. According to the just released update, as a result of a plunge in leading indicator acceleration, the world has just had its most slowdown-y month in the past year.

IBM tried to come up with a panic-free explanation for the sudden collapse of hardware sales in China, but the Chinese government had warned of the coming fiasco in mid-August

U.S. prosecutors and SAC Capital agree in principle on insider-trading penalty exceeding $1billion. http://t.co/hNaBnT26jX

— WSJ Breaking News (@WSJbreakingnews) October 17, 2013

"Now that the government has reopened and this threat to our economy is removed, all of us need to stop focusing on the lobbyists, and the bloggers, and the talking heads on radio and the professional activists who profit from conflict, and focus on what the majority of Americans sent us here to do, and that’s grow this economy, create good jobs, strengthen the middle class, educate our kids, lay the foundation for broad-based prosperity and get our fiscal house in order for the long haul."

The chart shows dollars spent on entitlements for every dollar spent on non-defense discretionary spending (NDDS). This latter category includes education, infrastructure, energy R&D, law enforcement and a wide range of other things that affect the productivity and the general well-being of the US economy (see table), not just today but into the future. The entitlements-to-NDDS ratio is already at an all-time high, and is headed for the stratosphere during the next few years according to CBO projections.

Obama's message was heard loud and clear: one nation, under Bernanke, buying stawks.

S&P 500 RISES ABOVE RECORD CLOSING LEVEL TO 1,725.60

This is what panic buying looks like: a ramp of over 7 points per hour since the open. At this rate, the S&P should close around 1750, and hit 2000 by Halloween.

A broad look at the political and economic consequences of the govt shutdown.

Obamacare's health exchanges opened on October 1. Hopefully you weren't one of the unlucky guinea pigs who attempted to sign up with a system so crummy that even the Washington Post is calling it a disaster. It's been clear to anyone paying attention that the October "rollout" of Obamacare has been a turbulent, confusing mess. Sloppy IT systems and technological failures combined to cripple Obamacare's sign-up systems. Security flaws put Americans at risk for identity theft. Like a parasite taking over its host, Obamacare will commandeer almost 20% of our economy, crowding out private options. With 2014 fast approaching, what should we expect in its next phase?

While the stock bubble rages, and the E-mini is solidly in green territory, some are wondering why that is the case on a day in which even the hardcore bulls expected a sell the news event. The reason: the dollar has rightfully regained, much to China's delight, its position as the world's whipping currency, on expectations that the Fed will now not taper purchases until Q1 or even Q2 of 2014, coupled with the realization that the debt ceiling fiasco is set to repeat in another three short months. As a result, the prime broker carry traders are having a field day, shorting their USD-denominated excess deposits and ploughing proceeds into risk assets. But not only: as the chart of the 10 Year yield bond shows, there has been a buying spree in the 10 Year since yesterday's deal and moments ago we dipped below 2.6% for the first time in two weeks. So do your patriotic duty: kill the dollar and buy paper assets: after all the country that issues the "reserve" currency has not defaulted! And whatever you do: don't sell. Keith Alexander may be leaving soon but he is still in charge, and is carefully monitoring all those who dare to hit the sell button. For all of them, the NSA has three simple letters: IRS.

Some confidence tricks have characteristics that don’t quite fit the Fonz. Take the swindles known as Ponzi schemes. These are tricks that need an endless supply of participants to sustain confidence and stay alive. Once the participant pool depletes as it eventually must, the tricks are revealed as scams. Whereas Fonzies can persist indefinitely (at least in theory), Ponzis eventually collapse. Note that the U.S. has already passed its Ponzi point by Minsky’s definition. According to Minsky, borrowing qualifies as Ponzi finance whenever fresh issuance is needed to fund interest on existing debt.  Based on the common assumption that the U.S. would miss its interest payments without regular increases in the statutory debt limit, this is indeed the case

Yesterday, before the House vote, Obama's pre-GOP capitulation speech was technically Day Zero. In a few moments, the president will take his victory lap tour on the road for the next three months, at which point the next season of the government shutdown/debt ceiling soap opera returns. One notable difference between yesterday and today: then, he wasn't late; now, he is.

It is oddly appropriate for the BS New Normal, in which as the DOL showed earlier virtually every data point is made up, that moments after the Bloomberg Consumer Confidence Index showed a plunge in consumer expectations to the lowest leve in two years, that the October Philly Fed would come out with a six-month general activity outlook indicator of 60.8 (up from 58.2) and the second highest ever in the history of the series! One really can't make up the farce that biased, propaganda data "reporting" has become.