Archive - Oct 3, 2013

Stocks have fallen for 9 of the last 11 days since the Un-Taper and the S&P has falen 3.7% from its highs. Volume today was above average (as we note CBOE SPY options volume set an all-time record yesterday) and thanks to a 1% or so rally off the lows on the back of a restatement that Speaker Boehner doesn't want to see carnage, the S&P managed to scramble back above the 50DMA. A late-day collapse (what no VIX pumpathon today?) closed us below that crucial level for the first time in a month. VIX rose 1 vol to 17.6% by the close (off its highs). Treasuries rallied in general (but the 30Y ended the day unch as the curve steepened notably). The USD fell some more  (-0.65% on the week) as JPY and EUR strength didn't help but gold and silver closed unch, oil and copper down 1%.

The situation in DC is fluid, but here is the most coherent narrative so far from NBC Washington DC: "A woman opened fire near the U.S. Capitol after trying to ram her car into the White House gates Thursday afternoon; she was then shot. A U.S. Capitol Police officer was injured in the event, though it is not clear that the officer was shot. The incident began at about 2:30 p.m. at the White House gates at 15th and E streets, NBC News confirmed. The driver tried to ram the gates but failed, and then was pursued by Secret Service. She bailed out of her car near the Capitol building and began shooting, NBC News' Pete Williams reported. Some reports said that as many as 10 to 15 rounds were fired. The injured officer was airlifted to an area hospital. The U.S. Capitol building was on lockdown after the shooting, though that lockdown has now been lifted. Parts of Pennsylvania Avenue are still closed." According to Fox reports the woman was 18 years old and there also a child in the car. The child is said to be unhurt.

It would appear that the almost $1bn capital raise secondary that JCPenney successfully completed last week - inspite of the lies - has done absolutely nothing to resolve market fears as JCP 5Y CDS surges 80bps to 1280bps (equivalent), a record high (and 1Y protection at 1210bps) and the stock price falls another 3.6% to $8.40 - the lowest since 1982. Just as Goldman had warned, liquidity remains a major concern and anyone who had bought the protection made up their losses on the stock they bought from Goldman on the secondary. The credit markets imply around a 25% chance of default within the year and 70% within 5 years.

U.S. CAPITOL POLICE HAVE REPORTS OF SHOTS FIRED AT 2ND ST AND CONSTITUTION AVENUE N.E., SEVERAL INJURED

FEMALE SUSPECT REPORTED DEAD ON SCENE AT US CAPITAL: SOURCE

CAPITOL SHOOTING STARTED WHEN WOMAN TRIED TO RAM GATE AT WHITE HOUSE, THEN FLED. WAS SHOT WHILE TRYING TO HIT OFFICER. CBS.

CHILD FOUND UNHURT IN CAR OF SUSPECT, ABC TWEETS

When it comes to Central Banks, there are doves and hawks - though in recent times, the two have become confused as to just what they think. However, it is becoming clear that in spite of their incessant need to print money (liquidity) into existence to maintain the status quo, some (but not all) are realizing there are very real costs to this insanity. Compare:

• ECB - *COEURE: LIQUIDITY INTERVENTION CAN INTERFERE WITH PRICE STABILITY
• ECB - *COEURE SAYS CRISIS SUPPORT CAN LATER HAVE "PERVERSE EFFECTS", GENERATE MORAL HAZARD

and

• FED - *WILLIAMS SEES UNCONVENTIONAL STIMULUS FOR NEXT FEW YEARS
• FED - *FED ZERO-RATE MOVE DIDN'T COMPROMISE POLICY

It seems central bankers believe what they want to believe.

If 4% of voters broke away from dysfunction and voted for independents, that "vital few" would influence 64% of all voters. Next election, join the 4% who will eventually influence the 64%. Voting for incumbents is like not voting at all: either way, you're throwing away your vote.

The US government is shut down, which means only essential spending is permitted. So what does the US government, or rather its Central Intelligence Agency decide to spend precious, mission-critical taxpayer money on? Why arming the Qatari-supported Al-Qaeda "rebels" in Syria of course. WaPo reports that the CIA is expanding a clandestine effort to train opposition fighters in Syria amid concern that moderate, U.S.-backed militias are rapidly losing ground in the country’s civil war, U.S. officials said.... “It’s basic infantry training,” the former U.S. intelligence official said. “How to have some discipline hitting a target, how to reload a magazine, how to clear a room. They’re not marching. They’re learning basic infantry procedures." So let's get this straight: 800,000 non-essential workers are furloughed, but the CIA, in its infinite wisdom, is now, when the government is shut down, doubling down on spending to make sure Al-Qaeda insurgents have even more lethal training (for that inevitable moment when they turn on their sponsor as they tend to do), and even better weapons?

Update: Boehner spox says Boehner "has always said the US will not default on its debt but cuts and reforms" also needed. In other words, nothing new in what appears to be a planted NYT piece designed to reduce Boehner's leverage.

Take the following report from the New York Times with an epic grain of salt, although for the time being, the following unsourced post in the NYT has pushed stocks off their lows. "With a budget deal still elusive and a deadline approaching on raising the debt ceiling, Speaker John A. Boehner has told colleagues that he is determined to prevent a federal default and is willing to pass a measure through a combination of Republican and Democratic votes, according to one House Republican"... Would the anonymous lawmaker happen to be Peter King, one wonders?

What would the world be without Tom Stolper FX recos? Very confusing, with no sure money to be made, and without anyone to fade, that's what. Which is why we are happy to bring the Goldman muppet slayer's latest FX "recommendation" In short: "We recommend going short $/JPY at current levels of about 97.30 for a tactical target of 94.00, with a stop on a close above 98.80." In even shorter: Goldman is now buying USDJPY from its clients. The only question we have: will the length of time before Stolper is once again Stolpered out be measured in days, or hours?

Presented with a stunned level of WTFness... the Obamacare Help-Line - available 24/7 is 1-800-318-2596 as we have been told a number of times by the President... it seems someone did not do their due diligence on what that telephone number's mnemomic is...

1-800-F U-CKYO

Indeed, Mr. President, 1-800-318-2596 to you too.

The Mother of all Deficits...

Gross: Don’t run for the hills b/c of the #shutdown or the debt ceiling – Run b/c the economy is slowing by itself.

— PIMCO (@PIMCO) October 3, 2013

Remember all those headlines about the "milions" of people swamping the new Obamacare exchange sites and how that explained why the "glitches" appeared and how this proves the American people are so desparate for the insurance... well, the truth appears to be leaking out. As Politico reports, California’s health insurance exchange reported - wrongly - that it had received 5 million hits on its website the first day of Obamacare. State officials said the real number was only about a tenth of that, or 645,000. Is it any wonder that fewer Americans trust other Americans than ever before?

Obama said "It's Different This Time," so will the BTFD'ers come back or not?

Something very curious caught our eye in today's Non-manufacturing ISM. It wasn't the "unexpected" drop in the data, which we reported on previously, but what one of the respondents said far in the back of the report. It was the following:

• "The federal government's spending is increasing greatly as agencies execute their final budgets and utilize fiscal year 2013 appropriated funds prior to their expiration on September 30th. This has  caused a major increase in procurement activity for goods and services.  Budgets are uncertain for fiscal year 2014, so some items requiring funding in future years are not being purchased." (Public  Administration)

This begs the question: is the only reason why the economy tends to pick up momentum dramatically as the summer ends just a function of a surge in government spending permeating the broader economy as agencies scramble to spend all the money they have before the end of the September 30 Fiscal Year End (just so they get allocated the same or greater budget in the coming fiscal year), which subsequently plunges or is outright halted as the case may be right now?