Archive - Dec 2013

Getting paid miserable wages? Don't fret - just buy the stock of your (hopefully public) employer, and hope and pray that this time is different, and that light at the end of the tunnel is the not the next latest and greatest (and likely last) stock market collapse, in the ultimate trade off of current pay for capital gains: 19 quarters in and Labor Compensation is flat with where it was when the Great Financial Crisis began but, more crucially, employee compensation is at its lowest on record relative to corporate profits.

"In order for currencies to be 'exchangeable' they have to be backed by something," is the remarkably ironic initial comment from none other than debaser-of-the-entirely-fiat-dollar Alan Greenspan when asked about the "bubble in bitcoin," by Bloomberg TV's Trish Regan. Unable to "identify the intrinsic" backing of Bitcoin (or see bubbles in equity, credit, real estate, or greater fools) Greenspan is, apparently, capable of identifying Bitcoin "as a bubble," because "there is no fundamental means of "repaying' it by any means that is universally accepted." The farcical double-speak continues as the Maestro does a great job of making Bitcoin (which Ron Paul earlier noted could be the "destroyer of the dollar") look even better than the readily-printed fiat we meddle with every day.

Back in September 2012 when we, correctly, suggested that one of the main drivers of demand (and increasingly becoming the only one) for US housing, especially in the mid and high-end, was foreigners - particularly of the oligarch persuasion - who come to the US to park their embezzled and otherwise ill-gotten funds, courtesy of the NAR's anti-money laundering exemptions, which means that they can buy any house, sight unseen, cash upfront (recall that a record 60% of all home purchases are all cash, which explains why mortgage bankers are being fired by the thousands left and right), no questions asked. One thing we made very clear, though, is that since one never actually buys the real estate, but merely rents it from Uncle Sam (or any other Development Market host nation), there is little preventing the host from cranking up the tax system, or outright changing it, when the need to raise funds strikes. After all what rights do criminal foreigners with multi-million homes in New York (or San Fran, or London, or any other major metropolis that is the target of offshore capital) actually have. Which is why, over a year after this prediction, we find that if not the US (yet) then certainly London, where the housing bubble is greater than anything seen in the US thanks to Russian and Asian hot money, is doing just this.

Overbuilding and overconsumption as models of "growth" have reached exhaustion. Various propaganda attempts are being made to air-brush lackluster holiday spending into a happy story of strong "growth," but the over-all picture is of stagnation, not "growth." The propaganda will soon shift to predicting "strong after-Christmas sales" and gift card redemptions in January; if after-Christmas sales are the foundation of "growth" and earnings, the U.S. economy is in real trouble. Santa, please, please, please strangle the idiotic fantasy that Americans buying a bunch of junk (or gift cards for after-Christmas purchases of junk) will "save" the U.S. economy.

While we are sure there are considerably more major events that deserved "worry" status in 2013, the following 10 'crises', as LPL Financial notes, represent the tempests-in-a-teapot that sum up the wall of worry in 2013. Of course, for your convenience, we provide a hint at what 'calmed' the anxiety as anyone fearful was instantly water-boarded by a pipe of Central bank liquidity the likes of which has never been seen...

That little "entertaining" cell phone in your back pocket, which you are so addicted to thanks to all its apps, videos, messaging function and all other cool bells and whistles, that you can't possibly live without? It is simply the definitive NSA tracking beacon used to find where you are at any given moment. The following infographic explains how the NSA does just that...

First things first. Losing 39% of your purchasing power over the course of 13 years is criminal. This was purposely created by Greenspan/Bernanke and the Federal Reserve. We're quite sure that most Americans have not seen their wages go up by 39% since 2000; therefore the average American has lost ground. No matter how you cut it, Federal Reserve created inflation slowly but surely destroys the middle class and benefits the ruling class. Ben isn’t working for you. His mandate of stable prices has been disregarded. He does not have it contained.

Everyone knows "you never go bull retard," but it seems Eclectica's Hugh Hendry, the hardiest of hardy Scots, has accepted that there is only one way for this farce to end. As Investment Week reports, the bear-turned-bull has bought 3D printing stocks as a play on trend-driven, QE-fuelled equity markets, and said the rise in the valuation of Bitcoin amounts to “the same thing”. Perhaps summing up the "trend-driven, QE-fueled" new normal better than anyone, Hendry added:"I say to my team 'don't tell me the valuations, it is trending'... This is the environment where Bitcoin could go to $1m. There is no qualitative reason, but it is trending. If I could own Bitcoin, I would.   It gets worse: Hendry is now chasing the biggest momentum trend of all, that of Bitcoin, which he now "expects" to rise to $1 million! As for his hedge - don't laugh - 3D printing stocks...  Sigh. We suspect, as he noted previously, he will be avoiding mirrors even more now. And yes, that this whole series now reeks of an Onion viral marketing campaign, is clear to everyone. Although sadly, we fear it is all too sincere, and a sad consequence of what happens when Bernanke's centrally-planned markets crush one after another talented asset manager and leave the E-Trade momo babies in charge.

This is the first 3-day losing streak at the start of a month since September 2011. Despite the best efforts of the machines to lift stocks into the green (which NASDAQ managed very marginally),  Bonds closed near their high yields of the day, the USD roundtripped with weakness in the US session leaving it unch for the week. S&P futures closed the day-session perfectly at VWAP as many noted the inversion of the VIX term structure once again (short-term 'fear' above medium-term 'fear'). The day's action was punctuated by 4 things - ADP beat (sell), ISM miss (rally-hard), Obama "inequality" (sell hard), BTFD (levered carry ramp 'blamed' on budget deal rumors) - which left the S&P entirely adrift from its relationship with FX carry and Treasuries by the close (amid the heaviest volume in a month). Precious metals had their best day in 7 weeks.

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...