Archive - Dec 2013

As we noted here, October 2013 NYSE margin debt stood at a new record high of $412.5b (up from $401.2b in September) and exceeded the prior high from April of $384.4b and net investor worth dropped to a record low. However, as BofAML notes, NYSE margin debt and the S&P 500 have +0.76 correlation using a 48-month (4-year) correlation as of October 2013. This is the highest correlation in our data history back to 1964. A positive correlation means that margin debt and the S&P 500 tend to move together; which as they helpfully note means - as long as the market rises, margin debt is not a risk. Better keep BTFATHing, it's the patriotic thing to do.

Renting and leasing of consumer products with the intention of testing them out or keeping them after a specific period is nothing new, and has been the basis for viable business models in the US, and around the world, with companies such as Rent-A-Center and Aaron's for decades. However, renting and leasing clothes is something that only a materially cash strapped people would engage in. Such as those of Europe, where the depression has been going on for five years and has manifsted itself in record unemployment month after month, and youth unemployment that in many cases is well over the 50% mark. In this context one has no choice but to live thrifty, even if that means renting, and leasing, second-hand clothing.

Even if you don't have a Nobel Prize, it should be glaringly apparent to anyone with half a brain - the financial markets have been soaring while the overall economy has been stagnating. Despite assurances from the mainstream media and the Federal Reserve that everything is just fine, many Americans are beginning to realize that we have seen this movie before.  We saw it during the dotcom bubble, and we saw it during the lead up to the horrible financial crisis of 2008.  So precisely when will the bubble burst this time?  Nobody knows for sure, but without a doubt this irrational financial bubble will burst at some point.  Remember, a bubble is always the biggest right before it bursts, and the following are 15 signs that we are near the peak of an absolutely massive stock market bubble...

Annualized auto sales spiked their most MoM in almost 3 years reaching their highest level since May 2007 and beating expectations by the most since cash-for-clunkers in 2009. Inventories are at record highs, GM channels are almost the most-stuffed on record, and incentives are surging once again... the "field of dreams" economy rolls on... what could possibly go wrong?

It seems some among the mainstream media believe "the economy is improving." In the interests of clearing up that little misunderstanding, we hope the following chart will clarify which "economy" is improving...

When former Tyco International CEO Dennis Kozlowski was convicted for stealing $150 million in company money in 2005 on 22 criminal counts including grand larceny, conspiracy, securities fraud/sales and falsifying business records to a prison term of 8.33 to 25 years, he became the poster child for corporate greed. Shortly thereafter the entire financial system nearly collapse when everyone on Wall Street became a poster child for corporate greed and nobody went to jail. As such it became a moot point to make anyone a symbol for "corporate greed" since the Department of Justice itself admitted there is a brand new category reserved for the uber-greedy ones, also known as Too Big To Prosecute. Which is why moments ago, news broke that Kozlowski was granted parole after serving 100 months in jail, exactly nobody was surprised.

Despite the double-POMO, US stocks fell with the highest volume in 2 weeks today. The S&P 500 and EURJPY were joined at the hip for entire day exchanging the leadership role with each momentum ignition rally faded at VWAP. No deer today but with VIX's move and stocks down 3-in-a-row, some are starting to worry (which with a 1.4% from the highs drop in the S&P is kinda pathetic). Treasuries rallied (but remain 2-4bps higher on the week) mirroring the move in the USD (which sold off back to unchanged on the week as EUR strengthened). Despite an early blip, gold flatlined but silver slid lower as WTI crude surged further (closing +3.7% on the week back over $96). VIX closed off its intraday highs but at 2-month highs as it seems hedgers unwound into underlying sales.

Also:

Mass Die-Off of West Coast Sealife: Fukushima Radiation … Or Something Else?

Walmart today announced that Cyber Monday 2013 was the biggest online sales day in its history. The five-day period from Thanksgiving to Cyber Monday is the highest five-day stretch in online sales for the retailer to date, and Walmart.com processed more than one billion page views during that period. Somehow WMT managed to process all this traffic without having to spend $1 billion in taxpayer funds to "fix" it website or having to retain Google and Oracle to comb through its 500 million lines of flawed code. So what were WMT's online shoppers spending most of their money on?

Faith in the current system is as high as it has ever been, and folks don't want to hear otherwise. If you're one of those people who thinks it prudent to have intelligent discussion on some of these risks -- that maybe the future may turn out to be less than 100% awesome in every dimension -- you're probably finding yourself standing alone at cocktail parties these days. A helpful question to ask yourself is: if I could talk to my 2009 self, what would s/he advise me to do? Don't put yourself in a position to relearn that lesson so soon after the last bubble. Exercise the wisdom to look like an idiot today.

Bitcoin is on fire. Mainstream media coverage is everywhere. No doubt, digital currency is a growing trend in Latin America… particularly in neighboring Argentina where the government has been nationalizing everything that isn’t nailed down. As a result, Bitcoins in Argentina frequently trade for more than 30% higher than in neighboring countries… presenting a rather interesting arbitrage opportunity. With all the mainstream attention, though, Bitcoin has been building its share of detractors. Most of these pieces roll out the same tired points– that nobody knows anything about the mysterious programmer who put it together… that it’s too volatile… etc. But, for the US investor, there is one big issue that remains entirely unclear...

With November in the books, a month in which the S&P rose 2.85%, and a centrally-planned 27% year to date, it is time to check how the most prominent US hedge funds are doing heading into the home stretch. As usual - it is not pretty. And yes, while hedge funds don't benchmark to the S&P, after 5 years of underperformance, their LPs sure start asking themselves why do they pay 2 and 20 at a time when one can buy the SPY for free and thanks to CIO Bernanke, outperform 98% of all hedge funds?

The broad-based measure of Treasury bond volatility - MOVE - has broken higher, and, as BofAML's MacNeil Curry notes, confirms a base and change in trend (to higher or more volatility). With the month of December traditionally a strong month for the MOVE Index and Treasury volatility in general, Curry warns there are two ways the volatility can move higher - either higher rates or lower equities.

Since Friday's holiday-shortened session, US equities have tried and failed to sustain the exuberance of the month, quarter, year. Volume is heavy but postive breadth is becoming narrower with fewer and fewer names leading the rise and the break in EURJPY is weighing heavily on the overall markets as stocks catch down to recent indications from bonds, the USD, precious metals, VIX, and credit that the Fed taper may be coming sooner than many hoped. And it's a double-POMO Day... get to work Mr. Henry.

Amid proclamations of hundreds of thousands accessing the "fixed" website (though no details on who is signing up), admissions that work continues to be needed, delays, and broken promises; President Obama has deemed it fit to utilize his lectern to market the Affordable Care Act once again.

*U.S. SAYS OBAMACARE WEBSITE ERROR RATES ARE 'AT LOW LEVELS'; but
*BOEHNER SAYS OBAMACARE IS 'FUNDAMENTALLY FLAWED'

From "easy" women to keg-standing kids, there is something for everyone in this special one-time offer... grab your popcorn...