Archive - Mar 8, 2013

Bulls remain in control of the tape even if there are only a few of them. There is better economic data in the U.S. as the Employment Report indicates (236K vs 171K expected & prior 151K) while the headline unemployment rate dropped (7.7% vs &.7.8% expected & prior 7.9%). The latter is the headline number HFT & algo traders jump on and “away we go!” Jackie Gleason would shout. Inside the numbers there is less cheerful data but “da boyz” running the programs never pay attention to these like: “4.8 million unemployed greater than 27 weeks and only 63.5% of the workforce engaged in work”. The latter numbers haven’t changed much.

Venezuela is a place of severe contradictions. It’s the only country we found that ranked in the top ten regarding improvement in the UN Human Development Index since 2006, and also ranked in the top ten regarding intentional homicides per capita. Usually, these two things do not go together. Similarly, income inequality has been reduced, but has been accompanied by very high inflation. Chavez’ redistribution policies contributed to a large decline in Venezuela’s Gini coefficient since 2002, now the lowest in the region (lower implies less income inequality). However, Venezuela has also experienced the highest inflation in the world over the last 5 years (excluding Zimbabwe, of course), which suggests that Venezuelans have in part been made more equal by having their incomes inflated away. Despite all the challenges, Venezuela’s economic model may well survive given how high oil prices are; but, what no one knows is how much hard currency the government needs to spend to maintain support from the Chavistas.

We know that core and periphery are struggling under the same monetary policy sun as divergences grow wider. We also know that even in the core, the Franco-German divide continues to gape. However, for a 'union' that continues to promote itself as the utopian solution for 27 nations across Europe, it seems there is an even bigger chasm - the gender pay gap. On International Women's Day, Bloomberg's Niraj Shah notes that women earn on average 16% per hour less than men with Estonia (27% gap) and Austria (24%) at the worst end of the spectrum and Italy (6%) and Slovenia (2%) at the most equitable end. And finally, even with a woman running the show, Germany's gender-pay-gap is a surprising 22%.

What wasn’t said at the Senate hearings: too-big-to-jail is just part of the problem

When a group or organization seeks to establish any social policy, it helps tremendously if that group remains honest in their endeavor. If its members are forced to lie, tell half-truths or use manipulative tactics in order to fool the masses into accepting its initiative, then the initiative at its very core is not worth consideration. Propaganda is not simply political rhetoric or editorial fervor; it is the art of deceiving people into adopting the ideology you want them to espouse. It is not about convincing people of the truth; it is about convincing people that fallacy is truth. Nothing embodies this disturbing reality of cultural dialogue more than the ill-conceived movement toward gun control in America.

Will we ever see 'reality' again? Judging by CNBC's Rick Santelli's one-sentence epic rant this morning of the centrally-planned farce that we are living through... Liesman: "Why would you normalize rates?" Santelli: "Are we really that far down the hole that normalizing rates after this tremendous number - the huge drop in the unemployment rate - that you guys still wanna have the hammer-and-sickle on the flag" the short answer, it appears, is 'No'. But perhaps it is Rick's seething anger in a second clip that exposes the reality of "the apologists" for the Fed and as he notes: "This whole thing is a Parlor Game and the country deserves better than Fed experimentation." Before you go home - watch these two clips (and listen)!

The past week brought us history: on Tuesday, GETCO and Citadel's HFT algos were used by the Primary Dealers and the Fed to send the Dow Jones to all time highs, subsequently pushing it to new all time highs every single day of the week, and higher on 8 of the past 9 days: a 5ish sigma event. But there is never such a thing as a free lunch. And here is the invoice: in the past 5 days alone, total Federal Debt rose from$16.640 trillion to $16.701 trillion as of moments ago: an increase of $61 billion in five days, amounting to $198,697,068 for every of the 307 Dow Jones Industrial Average points "gained" this week. Because remember: US debt is the asset that allows the Fed to engage in monetization and as a result, hand over trillions in fungible reserves to banks... mostly foreign banks.

Holder’s Letter Raises More Questions Than It Answers

Another Friday, another green close (now ten in a row) as Treasuries suffer their biggest weekly yield rise in a year. Another new-er-er all-time nominal high for the Dow but Nasdaq was the winner on the week (+2.7%) against a cluster of the rest at +2.4%. Volume was sub-par at best, trade-size low, and market breadth diverged bearishly but that didn't matter. Financials, Consumer Discretionary (and builders) were the sectoral winners up around 4%. Away from stocks, things are moving quite seriously: the USD is up for 5 weeks in a row - its biggest 5-week run in 9 months (and highest in 9 months); WTI crude outperformed in commodities (despite the USD strength) back up to 6-week highs; JPY had its worst (which is good apparently) week in 23 months losing 2.5% against the USD back to almost 4-year lows; Silver and Gold had their best (and only positive) week in 5 weeks. Credit markets (like TSYs) played catch up and snapped tighter on the week (even though HYG tended to underperform). VIX did drift lower (-0.5 vols to 12.5%) but remains well north of where stocks would expect. The much-vaunted late-day ramp came as usual and lifted all the indices to their opening (post-NFP spike) highs. As a gentle reminder, the Dow is up 613 points in 9 days - that is all.

The Fed Doves are not thinking of that outcome. If they did, they would be not so confident on their ability to control the outcome. That, or they're bluffing.

The Dow Jones Industrial Average, one of the key benchmarks of the US stock market, has soundly surpassed its all-time high. And most of the investing world is toasting their collective success and celebrating the recovery. It’s a funny thing, really. Most investors only think in terms of ‘nominal’ numbers, i.e. Dow 14,000+ is 40% higher than Dow 10,000 (back in November 2009). But few think in terms of ‘real’ numbers... inflation-adjusted averages. Everyone knows that inflation exists. We can all look back on prices from the past and realize instantly how much more expensive things have become. Conversely, though, most people don’t think about the stock market like this. The reality is, though, that when you adjust for inflation, the Dow is well below its highs from over a decade ago. We thought we’d put this into a bit of perspective...

Be teased. 

In yet another day in which no matter how good or bad (and by bad we obviously mean very good) the news is the only outcome is the now endless levitation in the DJIA, here is something out of left field. "14 time zones away" field. Because who better to explain what is "really" happening in the new grotesque, surreal, absurd abnormal, where up is down, bad is good is better, Americans engaged in combat in the US can and will be blown up by remote controled US airplanes, and absolutely everything is centrally-planned, than Dennis Rodman.

Liquefied natural gas (LNG) technology - from LNG seaborne tankers and LNG trains to floating LNG facilities have quickly gone from concept to commercialization, opening up new possibilities in new frontiers and rendering the remote - well, much less remote. Analysts say FLNG terminals will become a major growth market within the next couple of years, as they offer more flexibility than stationary terminals. Liquefaction of natural gas is the process of super-cooling natural gas to minus 260 degrees Fahrenheit (minus 162 degrees Celsius) at which point it becomes much safer and easier to transport. After its been shipped to its destination, regasification plants at importing or receiving terminals return the fuel to a gaseous state. A lot of money is being dumped into LNG technology right now. It’s a major bet on the LNG market, but here’s why it’s solid...

While gold, silver, and platinum remain held in ranges, it appears China's NDRC comments on carbon emissions and improved energy efficiency have been taken seriously enough to drive Palladium prices to 18 month highs (and notably divergent from the rest of the PM group). Palladium is now up more than twice the 215% gain in gold since Lehman and leads the PMs.