Archive - Sep 2013

Portuguese and Italian sovereign bond spreads have risen for four weeks in a row now (with Portugal +29bps this week alone and near 2013 wides) but the close today was unusual in its agression. Portugal had been blowing wider since yesterday, but minutes before the close today, Spain and Italy were slammed higher in yield/spread and lower in price (BMPS unwinding?) Of course European stocks didn't care - Greece up 5.6% on the week, Spain +3.3%, Italy +3%... "fixed"

A month ago, when we quoted an independent expert that "TEPCO has lost control of Fukushima" many took offense, despite all signs to the contrary. Perhaps the skeptics will reevaluate their position following today's news reported by AFP, which cited Kazuhiko Yamashita, who holds the executive-level title of "fellow" at Tokyo Electric Power, who finally admitted what those not mired in prejudice about the state of nuclear energy refuse to accept, that the nuclear plant was "not under control." This promptly led to the government, which last weekend learned it would host the 2020 Olympics and promised that Fukushima would not be a concern by then, to scramble and "reassure people on Friday that they have a lid on Fukushima." Unfortunately, the lies, like the radiation in the plant, are now finally seeping through and more are becoming fully aware of just how serious the catastrophe truly is, and drove yet another steak through the heart of the official narrative by Prime Minister Abe as they "flatly contradict" his assurances.

Anyone else get a sense of deja vu? Following CBOE's fail this morning, now BATS and NASDAQ have declared self-help against the CBOE...

• *CBOE HAS NO FURTHER COMMENTS REGARDING ITS COMPUTER SYSTEMS
• *CBOE INVESTING CURRENT DIFFICULTIES, SPOKESPERSON SAYS

As of 10:02AM CT, *CBOE’S C2 AND CBSX HAS HALTED TRADING

If he were a flavor of ice cream, what flavor would it be?

Still paying your 2-and-20, despite Stanley Druckenmiller's surprise that you would, for someone to pick stocks for you? Perhaps a glance at the following 3 charts will awaken the animal investing spirits in some (or just a 'fold' from many). This is what happens when there is only one economic market-driving factor (cough Fed cough) and too many coat-tail-clinging hedge fund managers (and newsletter writers) chasing too few real alpha opportunities. The correlation between the S&P 500 and hedge fund returns has never been higher and is approaching 1, excess return (alpha) is near its all-time lows, and, sadly, there is an extremely high correlation between styles and tilts. All your hedge fund alpha are belong to Ben.

This is the first consecutive monthly drop in 14 months and the largest miss vs expectations on record. Printing at 76.8 (against an expectation of 82.0), this is the lowest in 5 months and points to the picture we have been painting of a consumer increasingly affected by rising rates and soaring gas prices amid stagnant incomes. As Citi notes below, this is the exact same pattern we have seen play out in the last 2 cycles and suggest significant downside risk to US equities. The economic outlook sub-index collapsed to its lowest since January.

The collapse of Lehman Brothers, the risk of other large important banks failing in the coming months and the still significant systemic, macroeconomic, monetary and geopolitical risk of today shows the vital importance of real diversification and an allocation to physical gold.

Sept. 11, 2013, marked the anniversary of the attack on the U.S. Consulate in Benghazi, Libya, that left four U.S. diplomatic employees - including Ambassador Chris Stevens - dead. The anniversary saw new attacks in the eastern Libyan city, this one against a Libyan Foreign Ministry building (and this morning's awful attack in Afghanistan). The anniversary and recent attacks prompt a look at how the security situation in Benghazi has evolved over the past year, and at how the United States has tackled security issues worldwide since the consulate attack.

For those interested in seeing a standout example of the resource misallocation resulting from 5 years (and running) of central planning, we present the following pair of data sets: restaurant workers, which in August just hit an all time high of 10.4 million, and restaurant retail sales, which moments ago we found continued to slow on a year over year basis, and at this pace in a few months, will postits first Y/Y decline since early 2010.

The last time CBOE suffered an outage similar to this, it led to the NASDARK debacle and 3 hours of radio silence from the largest (and most liquid) exchange in the world:

The all important retail sales report, the final economic data point before next week's taper announcement, has just come and it was a disappointment, printing at just 0.2% for the month of August, down from an upward revised 0.4% in July, and below the 0.5% expected. Excluding the government loan-funded autos and volatile gas sales, retail sales barely rose, increasing at the lowest possible pace, or 0.1%, and below the expected 0.3% rate, and well below the revised 0.6% from July. General merchandise stores went so far to post a -0.2% dip. However, the most notable number is likely the -0.9% drop in building and garden material sales, which is a screeching halt to the recent upward bias in home renovation, and further evidence that the recent cheap-credit fueled housing bubble has finally popped. As for clothing retailers: with a -0.8% drop in August, don't expect a rebound any time soon. So much for retail strength. But hey: at least consumers have stocks they can buy... at all time highs.

Have a listen if you need a laugh this morning, but there is really nothing funny about this:

Earlier today, when we observed the overnight "news" floated by Japan's Nikkei we cautioned that the Nikkei is best known not for breaking news but for floating trial balloons. In other words, the report was merely leaked to gauge the market response. Sure enough, the response was gauged, and here comes the official news, shooting down this latest trial balloon.

• White House Is Saying Reports In Japanese Press That Obama Is Set To Name Larry Summers Are Wrong - Dow Jones

Sure enough, any modest USD strength accumulated on the overnight rumor, is now being promptly unwound.

No surprises here: Silver and Gold are the best, Banks and Greece - worst.