Archive - Nov 2013

Despite Yellen, Bullard, and Evans on the tape, markets limped lower on the day. Of course, we had the standard POMO-based ramp but once again credit markets and VIX indicated more than a few were seeking protection rather than loading the boat at these all-time high round-numbers. Stocks had reached their 'richest' in 3 months relative to the Fed's balance sheet and so were perhaps due a little more turmoiling but Treasuries sold off all day (and not on growth expectations) to end unchanged across the curve on the week. The USD oscillated but ended lower (JPY unch on the week) and commodities dribbled higher (though all remain red on the week). Perhaps the most worrisome thing today was the total disconnect between stocks and FX carry after Europe closed...

Whoever bet money on the prop bet that Obama would finally blame the epic debacle that is Obamacare on the republicans can now retire.

OBAMA SAYS ONE REASON FOR ROCKY HEALTH CARE ROLLOUT WAS THAT REPUBLICANS ON "ONE SIDE OF THE HILL" WERE INVESTED IN ITS FAILURE

Because it was obviously the Republicans who sabotaged the 3+ year rollout of Obamacare, and handpicked the "outside" contractors who made healthcare.gov such a smashing success. At least Bush walked away unscathed.

Following the White House's ignorance of anything that could be going on at the Census Bureau (apart from knowing for sure that the report on jobs data manipulation was misleading), the Census Bureau itself has chimed in...

• *CENSUS BUREAU SEES NO 'SYSTEMIC MANIPULATION' OF JOBS DATA

So that's good then - just unsystematic? A single-manipulator, acting alone (from the book depository?)

Following yesterday's good-cop-bad-cop Bitcoin discussion, it is the turn of the Senate's Banking, Housing, and Urban Affairs committee to comprehend the benefits of the unregulated cryoto-currwncy and why the fiat-defiers should be crushed (for their own good of course). Law Professors, FinCEN Directors, and Bank commissioners in on corner, and the CEO of BitPay in the other... ding ding, Round 2."The Present and Future Impact Of Virtual Currencies - security and international trade and finance" We can only imagine the vol about to hit BTC prices following yesterday's fun and games...

"Behind the headlines, we have made real progress..." he advises all the CEOs who are not hiring, not spending on Capex, but instead have bought back shares and raises dividends...

To the DOJ, a $13 billion receipt is the "largest ever settlement with a single entity." To #AskJPM, a $13 billion outlay is a 100%+ IRR. And perhaps more relevant, let's recall that JPM holds $550 billion in Fed excess reserves, on which it is paid 0.25% interest, or $1.4 billion annually. In other words, out of the Fed's pocket, through JPM, and back into the government. Luckily, this is not considered outright government financing.

While operating earnings are widely discussed by analysts and the general media; there are many problems with the way in which these earnings are derived due to one time charges, inclusion/exclusion of material events, and outright manipulation to "beat earnings." Therefore, from a historical valuation perspective, reported earnings are much more relevant in determining market over/under valuation levels.  In this regard reported earnings increased from $24.87 to $25.04, a 0.6% increase, per share in the third quarter. The ongoing deterioration in earnings is something worth watching closely.  The recent improvement in the economic reports is likely more ephemeral due to a very sluggish start of the year that has led to a "restocking" cycle.  This puts overly optimistic earnings estimates in jeopardy of be lowered further in the coming months ahead as stock buybacks slow and corporate cost cutting becomes less effective.

Minutes ago, the Chicago Fed's Charlie Evans went dove-retard and tongue-in-cheekly announced that QEternity may have to be increased by 50% in the coming year!

#CharlesLEvans our purchases will continue to be open ended. We may need to purchase 1.5 trillion in assets until January 2015

— ChicagoFed (@ChicagoFed) November 19, 2013

Ignore the fact that the US deficit will be less than half this number in the coming year. More importantly, based on what everyone now knows is the only driver of US equity "market" performance, the Fed is implicitly announcing its 2014-year-end target for the S&P 500 of 2,220 - so BTFATH (because it's the fundamentals that matter).

Yesterday the US Senate held hearings on "virtual currencies" (meaning Bitcoin).  Meanwhile the "virtual currency" ran up above $800/USD and it was reported it got above $900.  It pulled back but as of now, is hovering above $700.

As everyone knows, and as we showed yesterday in our infographic du jour, Wall Street manipulates everything, EVERYTHING.... except gold. Which is why were absolutely floored by what just flashed on Bloomberg:

• GOLD BENCHMARKS SAID TO BE UNDER REVIEW BY U.K. AS PROBE WIDENS

More from Bloomberg: "The FCA review is preliminary and hasn’t risen to the level of a formal investigation, said the person, who asked not to be identified because the matter isn’t public. The person declined to say which gold benchmarks were under scrutiny. One of the key benchmarks is the London gold fixing, which determines the spot price for physical gold and is set twice daily by a panel of five banks."

No. That's not true. That's impossible.

Anyone expecting Obama to come out with his hands up following last night's story about the made up pre-election jobs numbers, and admit to everything... will be disappointed.

• STORY ABOUT RIGGED JOBS NUMBERS WAS MISLEADING: WHITE HOUSE

Ok everyone, back to your 29.5 hours a week job, because as everyone knows the White House would never lie to anyone about anything.

... Wait, wait, wait. What do you mean Best Buy isn't releasing the next retinest, fingerprintscanniest, NSA-trackingest, 6-8 inchiest gizmo and instead these people are simply taking a 10 day break from their highly paid, quality jobs just to wait in line for a $98 TV?

So over the weekend, the world learned that Tiny Turbo Tax Timmy Geithner had accepted a job with private equity giant firm Warburg Pincus. The news was about as much of a surprise as a lie popping out of Barack Obama’s mouth every time he opens it. Nevertheless, the move is particularly hilarious in light of a profile article of Geithner in New York magazine from January of this year, in which the king of cronyism tried to distance himself from Wall Street. Here’s the money-shot paragraph from the piece...

Depending on the time of day, Bitcoin is up 100% (or 200% or 300%) or down 50% as the crypto-currency swings violently around in what appears a death spasm only to transform into a Tesla-like phoenician rise. But there is another crypto-related bubble that is exploding - and showing no signs of stopping. As Russia Today notes, the so-called "Snowden Effect" has seen Freedom of Information Act requests filed with the National Security Agency increase 888% this fiscal year.

Standard microeconomic theory shows that deviations of a price from its natural level bring forth bad results. One of the easiest ways to grasp the pernicious effects of price controls is when it is phrased in terms of the minimum wage. Long story short, the minimum wage acts as a price floor which stops people from selling labour services at a price below the mandated level. The final result is an increase in unemployment, partly from existing workers who lose their jobs and partly from new entrants to the labour market looking for a job but unable to get hired. It’s really not a very difficult theory to comprehend. Yet I’m always surprised at how few are able to apply this basic lesson.