Archive - Dec 4, 2013

While hardly as spectacular as Hugh Hendry's supernova flameout, or the far more boring, slow motion conversion of the assorted other famous and less famous bears, a legendary hedge fund titan has decided he too has no use for excess capital in this broken market. No surprise then that Institutional Investors' Alpha reports that Baupost's Seth Klarman is returning $4 billion in capital to investors for only the second time in its history due to "a lack of investment opportunities." And watching how the epic farce that Bernanke's wealth effect known as the Stalingrad & Poorski trades in the last 30 minutes of every day nobody can blame him. And no, Klarman is not returning cash due to some hidden underperformance: "Baupost’s many partnerships were up 13 percent, on average, through the September quarter. Its annualized return since inception is in the high teens." This happens to push it in the top decile of all hedge funds in 2013.

Mission Accomplished

Must push EURJPY to at least 139 to preserve the wealth effect

— zerohedge (@zerohedge) December 4, 2013

With the almost extinction of 'bears' we noted last week, the bull-bear index has now crossed the Rubicon into a euphoria mode that marked the turning point before the last 2 major corrections in the US equity market. Of course, we are sure, this time is different; but hasn't the Fed 'always' had our back? Perhaps, as GenRe's CIO notes, "gravity will win," after all?

On December 5 2013, George Osborne will deliver the Autumn Statement, providing an update on the state of the UK economy. In the address, the Chancellor of the Exchequer will detail the coalition’s plans to reduce the budget deficit and extend the UK economic recovery into 2014. Saxo Capital Markets latest infographic outlines the changes in the economy since the coalition government formed in 2010. In 2010, the Chancellor projected that the coalition would slash the structural budget deficit to zero by 2016. Three years on, net public debt has risen as a consequence of the government’s measures to reduce the deficit. While there is some hope in the figures - and we are sure they will be projected in nothing but glowing glorious ways, Brits are drawing down savings at record rates to cover soaring costs of living and the UK's debt-load is surging. What happens if/when Carney lifts his foot even a little?

Pres Obama urges young people to spread the ObamaCare message on Facebook, Instagram, Twitter using #getcovered.

— Mark Knoller (@markknoller) December 4, 2013

Living up to its name once again, there is little here to raise any flags...

In the last election it was the Millennials (18-29 year olds) that brough President Obama home on his hope and change miracle tour; but now, just over a year later, a Harvard Institute of Politics poll finds that a stunning 57% of 18-29 year olds disapprove of Obamacare. As we noted before, this is a critical breakdown in making the Affordable Care Act 'affordable' but it seems less healthy customer are more likely to persevere through the techical obstacle to gain coverage than younger, healthier "customers" who feel less need for insurance (never mind the "easy" women and keg-standing men). The poll gets worse with 40% expecting the quality of their coverage to worsen, and as Bloomberg reports, even more troubling for the White House, almost half in that age group say they’re unlikely to enroll in insurance through a government exchange, even if eligible.

Whether it was President Obama's call for moar debt, less spending cuts, and a safety bid from his implicit end-QE comments, technicals from moving-averages, or reflections of the USD weakness; precious metals are surging this morning... Stocks are tumbling further (as are bonds) back to EURJPY-implied levels... call for gold bubbles in 3...2...1...

As we head towards NFP and discussion about tapering picks up again it is crucial to understand the Fed balance sheet report, where, at least in terms of the treasuries they own, they continue their Hunt Brothers impersonation. What this means is we would be very nervous about being too short treasuries here because in addition to steep curves and low inflation, you have the potential for a short squeeze as the free float of longer bonds is just small.

We've come a long way...

There’s no question here about identifying the oppressors and the oppressed. There’s no conflict between the internal exercise of your freedom to think for yourself and your external behavior. There’s no omnipresent social media, no cacophony of commercial voices, no GPS chips, no algorithms that can predict your likes and dislikes better than you can yourself. It’s just faceless soldiers with AK-47’s trying to impose their will on Patrick Swayze’s external behavior. It’s a movie that would have made as much sense (more?) in 1784 as it did when released in 1984. Our world isn’t “Red Dawn,” it’s “Invasion of the Body Snatchers.” Control over our behaviors isn’t as much physical as it is mental, not so much externally imposed as it is internally embraced. If you’re reading this note, the problem is not that you are in a dogmatic slumber and need to be woken up. The problem is that you know it’s in your best economic interest to act as if you’re still asleep. In a world overrun by pod people, the big losers are the people who can’t fake their pod-ness and ultimately get outed by Donald Sutherland.

Rebellious Fed head Lacker fired at “implicit guarantees” to bail out bank creditors. Covered liabilities, the size of US GDP.

Having "fixed" Obamacare, the President is ready to re-pitch American 'excellence' today as he addresses the state of the economy. Remember, good is bad and bad is good - do don't over-sell it... oh, and all the bad stuff - that's the Tea-Party's fault... Just don't show him (or anyone) this chart...

With the mainstream media inundated with tales of low paid workers demanding higher minimum wages (thus theoretically expecting to be paid more than a market rate for their services), we thought a look at the other end of the scale was worthwhile (where, some might argue, the following 10 CEOs are also paid above market rates for their 'ability')...