Archive - Oct 15, 2014

One would think that in today's abysmal tape, where as many have described the market moved in a way that has never been seen before, the most hated, most flawed, and thus most shorted stocks would be crashing far worse than the broader market. Well, no. Because here, once again, we get a great lesson in practical liquidity management. As the margin calls start to trickle in - and just wait until 3 pm when it will be a full blown margin call massacre - hedge funds are forced to release margin. They do that by covering all those stocks which they and their peers entered en masse as the most shorted hedge fund names.

Desk chatter confirms liquidations are occurring ahead of expected margin calls later in the day. This is evident in widely held stocks like AAPL which just plunged on very heavy volume and has dragged the "off the lows" bounced US equity indices back to their lows of the day...

Don't bother cancelling your next golf outing, clown face...what good will it do now?

You know its serious when President Obama cancels a fundraising trip to discuss Ebola. With the 2nd Ebola-infected healthcare worker having traveled around America symptom-free, we suspect Dr. Frieden will have a lot of calming down the public to do...

Think it's game over for Putin? Think again...

Despite manufactured earnings reports that apparently 'beat' US financial stocks are the worst performer today and down 9% from its highs in mid-September. Today's drop in XLF - the Financials ETF - is the biggest since Nov 2012, and is red for 2014 now. Of course, this should not be a total surprise since US financial credit spreads have been flashing a much less exuberant tone for a few weeks...

Greece (-6.5% today), Italy (-4.4%), Spain (-3.6%), and Portugal (-3.2%) all saw major stock price collapses today dragging the broad European Stoxx 600 index down 11.4% from its highs just 18 days ago... All European stock indices are now red for 2014

BOTTOM LINE: Business inventories rose less than expected in August. In light of the disappointing September retail sales report and slower-than-expected inventory growth in August, we reduced our Q3 GDP tracking estimate by three-tenths to +3.2%. We also moved our Q4 GDP forecast down a quarter point to +3.0%.

Remember that in addition to its primary function, which is to push stocks higher i.e., the "wealth effect", the Fed's Quantitative Easing has another just as important role: to monetize the US deficit. Which is why the news that was released moments ago from the Treasury, namely that the US deficit for Fiscal 2014 has just fallen to a meager $483 billion, or 2.8% of GDP (mostly thanks to the GSE inbound receipts which in turn were courtesy of the latest dead cat bounce in housing), and down from $680 billion a year ago, is hardly what the BTFDers were hoping for.

An artist's impression of the panic currently gripping global central-planning headquarters.

"In the first 15 minutes of trading the S&P 500 E-Minis traded below the S&P 500 cash index despite a fair basis, according to Bloomberg, of -6.72.  This is unheard of and something I have never witnessed in my near fourteen year career on the Street.  I can only conclude that many large institutions threw in the towel on the Open in wake of the dislocations in not only stocks but also treasuries." - FBN's Chief Market Strategist

Despite ex-CFTC-chief Bart Chilton's exclamation that "this is the safest market ever," Nanex's Eric Hunsader explains this morning's manic trading activity saw stocks suffer the most mini-flash-crashes since Summer 2012's Knight Capital collapse...

A quick summary of where we have been this morning: VIX > 27 (3yr highs); S&P 500 -0.4% year-to-date (6mo lows); 2Y TSY yield < 25bps (17mo lows); 10Y TSY yield < 1.90% (17mo lows); European stocks -3% (11mo lows) lows; US HY credit 410bps (15mo wides); WTI Crude $80.01 (28mo lows). So that can mean only one thing... PPT is in the house, courtesy of USDJPY... and ultra-low levels of liquidity.