Archive - Apr 2013

Now that the 3:30 pm pump has been exposed to the world, and having been priced in and frontran (such as yesterday) it changed to the 3:30 dump, algos are desperately searching for another daily calendar trading opportunity. It appears the opening of Europe and Japan for trading are just these two much needed "fundamental" catalysts. As the charts below show, it appears there is nothing more bullish for the two key carry pairs, the USDJPY and the EURUSD, than Japan opening at 8pm Eastern, and then Europe opening next, at 3:30 am Eastern.

“Mad Dog” Bluff Based on Fear of U.S.-South Korean War Games Turning Into Real Invasion

Sometimes you just have to sit back, gaze at some charts, and say WTF...

In the past, I have corresponded with a few survivors of communist despotism, and what I have found is that most if not all immigrants that actually lived in a collectivized state with a disarmed population fight harder to defend the U.S. Constitution than half of the people who were actually born here.  There are a lot of overgrown children in this country today who have NO understanding of the consequences of the path our society has been set on. Some people know.  Some people have lived it.  Some people have experienced the consequences first hand.  And, for anyone with the intelligence to listen, this is what they have to say about gun control and the path to tyranny...

While previous US-offensive campaigns around the world traditionally had a face and pulse, and thus a narrative and an appropriate popular (and populist) reaction, recent years have seen most US military "intervention" devolve to the intangible world of video games: an operator in Nevada controlling predator drones half way around the world with a joystick, and launching bombs and missiles with the push of a button. In the process any aspects of the humanity (or complete lack thereof) of traditional warfare were completely lost, and the US has succeeded in engaging in countless offshore campaigns without a single peep from a population that would otherwise have long since succumbed to war fatigue. Alas, while technological superiority means little risk while imposing Pax Americana (if only in the most underdeveloped defensively nations), it certainly does not mean fewer casualties on the other side. So just to make sure that what is out of sight, is not out of mind, below we present an interactive tracker of all casualties in Pakistani drone strikes since 2004.

Conventional thinking and reporting has it that Japan is conducting a larger version of the same monetary experiment they’ve been running for about 15 years.  The implication here is that we can safely analyze what Japan is up to through the same monetary lens, as always, but with a slightly wider aperture. In truth, what Japan is running is as much a massive social experiment as it is a monetary experiment.  It has such enormous implications to everyone, but especially the Japanese people, that we should all be paying very close attention. The early results, with a manic pulse in the Nikkei coincident with arrhythmic gyrations in the Japanese government bond market, suggest that something has been shaken loose in Japan.

Back in late 2010, there was much hope that as a result of the unfolding robosigning "Linda Green" scandal, not only would banks would be forced to fix their ways by incurring crippling civil penalties (because not even the most optimistic hoped any bankers would ever face criminal charges for anything), but that the US housing market may even reprice to a fair price as for a brief moment there nobody had any idea who owned what mortgage. Ironically, what did end up happening was to provide banks with a legal impetus to slow down the foreclosure process to such a crawl that an artificial backlog of millions and millions of houses at the start of the foreclosure process  formed, bottlenecking the foreclosure exits even more and in the process providing an artificial, legal subsidy to housing prices manifesting itself best in what is erroneously titled a "housing recovery" for many months now. What this did was to allow banks to aggressively reprice the mortgage-linked "assets" on their balance sheets much higher, and in the process unleash much capital, primarily for bonus and shareholder dividend purposes. Yet this epic self-benefiting act did not come without a cost. Yes, it turns out the banks will have to fork over some out-of-pocket change to put not only the robosigning scandal behind them but the indirect housing subsidy from which they have benefited to the tune of hundreds of billions. That quite literally change, which is what the final cost of the release and bank indemnity amounts to, is roughly $300 for each of the affected borrowers!

Now is the time to think about how you would live your life if your real value was appreciated and fairly compensated.

It is all too easy to look admiringly at levitating nominal stock prices, stick your head in the sand, and believe that Abe and Kuroda have it all under control (by "it" we mean everything that has happened and that Zero Hedge predicted would happen two years ago). But for those unwilling to take the BoJ's word for it that "the economy has stopped deteriorating," we ask one simple question. After looking at the following four charts of Abe's 2-2-2-2 Plan, "is it sustainable?" You decide...

Bitcoin has been all the rage lately. The stuff, or lack thereof, runs on peer-to-peer technology, is fully decentralized, has no patents, and is open source. Currently, there are almost 11 million bitcoin units in existence and the maximum amount of bitcoin units that will ever be created by the logic of its design are 21 million. While bitcoins are designed so that they cannot be hyperinflated in name, they certainly can be hyperinflated in substance. There is no doubt that bitcoin is a spontaneous answer to the monetary instability that we see all around us today. On one side of the pond people are worried about the glorified currency peg known as the Euro and on the other about the amount of damage that Bernanke is willing to inflict upon the world’s reserve currency. However, let us not become so enamored of an innovative stateless solution that we forget Austrian economics and hitch libertarianism’s wagon to something heading for a crash.

Anyone who wants to get to the truth behind the inflationary threats to their wealth should ignore everything the Central Banks say about inflation and look instead at their actions.

"The stress is beginning to show," Kyle Bass warns during a wide-ranging interview with Bloomberg TV. "The beginning of the end," is here for Japanese government bonds as he notes that while quantitiavely it is clear they are insolvent, "the qualitative perception of participants is changing." But away from Japan specifically, there is a lot more on the Texan's mind. "Things go from perfectly stable to completely unstable," very quickly; even more so after 20 years of exponential debt build-up and Keynesian cover-ups; and it is this that he warns complacent investors that it is "really important to think about the capital at risk in your strategy." For this reason he prefers to hold gold rather than Treasuries, as, "when you think about the largest central banks in the world, they have all moved to unlimited printing ideology. Monetary policy happens to be the only game in town. I am perplexed as to why gold is as low as it is. I don't have a great answer for you other than you should maintain a position." His discussion varies from housing's recovery to structured credit liquidity "money is being misallocated by the printing press" and the future of the GSEs, concluding with the rather ominous, "at some point in time, I would much rather would own gold than paper. I just don't know when that time is."

The KMPG partner at the heart of today's Herbalife/KPMG fiasco was unknown for several hours, until finally his name resurfaced. Per Reuters: "Scott London, a partner at accounting firm KPMG, was the lead auditor for Skechers USA Inc who resigned after allegedly leaking insider information to traders, said Skechers Chief Financial Officer on Tuesday. In an interview, CFO David Weinberg said he was surprised to learn late on Monday from partners at KPMG that London had admitted to the allegations and was leaving the firm."

The 'down-up' streak is over, long live the next streak. Precious metals had a big day with Silver and Gold surging 1-2% (among the biggest moves in 7 months); Treasuries pushed higher in yield from the open but faded rapidly into the close to end unchanged ay 1.75%; Commodities in general were bid on the back (supposedly) of China's lower inflation print; IG credit was bid while HY credit (spreads not the HYG ETF) rolled over into the close. What was most evident was the total and utter failure of the 3:30pm Ramp - it seems our discussion of the farce last night brought a world of front-runners to the game and ruined the Algos day as instead rallying S&P 500 futures dropped 4 points in the last 30 minutes - this is the biggest 3:30-to-4:00 loss in six week (and 3rd biggest of year). The world was celebrating another new all-time high in the Dow and the S&P gave back half its gains to close +4 points; but the Dow Transports closed -0.3%, and the Russell 2000 (for so long Bernanke's policy tool) ended -0.23%.