Archive - Oct 2014

I challenge the central banker, manager, trader, and investors to manufacture and financially engineer a safer and better alternative to the USD.

"If there's no water for people to live, and you don’t have the basic necessities of life, your population is going to leave," warns the emergency services manager of one California town, warning that as the drought continues (and is not set to ease anytime soon), "you could see the economy of this area just decimated." But as farmers face the catastrophe with "water levels dropping at an incredibly rapid rate in some places - like 100 ft a year - 10 times expected," there is another drain on the dry state's water sources. As The FT reports, "Marijuana cultivation is the biggest drought-related crime we’re facing right now," with up to 80 million gallons of water per day stolen by heavily armed marijuana cartels.

In yet another blow for the doctors fighting the spread of this deadly disease, AP reports, Mali's health minister says the West African country has confirmed its first case of Ebola. Despite every effort to close borders, quarantine areas, and now send US troops (to do... well we are not sure really), Mali becomes the sixth West African country to report an Ebola case. This dismal news comes just hours after the WHO director general said he had "reasonable confidence" that the Ebola virus plaguing three West African ountries had not spread into neighbouring states.

"I believe that the Last Great Bubble is bursting — faith in central banks to solve all problems."

Statement On Suspect Ebola Case From Dr. Howard Zucker, Acting Commissioner, New York State Department of Health

The only six charts you need to know why the Amazon dream is over and why AMZN stock is currently crashing after hours to fresh 52 week lows.

Way back on August 30, I did a post called Past Fear, Present Fear, which offered up an analog of the VIX  I followed up on October 9th with my Moment of Truth post, which was just before the markets started really falling hard. Thus - so far, so good. I've hacked together an update of the analog.

Buyback-manipulated earnings produced the low-volume opening face-ripper everyone wanted and stocks took off, recovering yesterday's late losses and not looking back.Trannies were the big winners, led by a resurgence in Airlines (as Ebola in US is fixed) and, despite drastically lower than average volume, stocks kept lifting after EU close on a bed of AUDJPY and USDJPY... until 1450ET (when NYC Ebola headlines hit). Airlines were hit hard, S&P futures dumped back to VWAP, VIX was whacked back above 17, and the exuberant day transformed into merely a great day for stocks. Weakness in Treasuries and the HY bond ETF (despite notable compression in HY spreads) had the smell of a lot of HY issuance being hedged and unhedged but TSYs ended the day up 6-7bps (off their highs post-NYC-Ebola headlines). The USD rose for the 3rd day in a row taking gold lower. Copper (China) and Oil (Saudi) rose on the day (oil unch on the week).

Maybe Frank Zappa was on to something?

If you thought an Ivy League education was beyond your reach financially, try jail in New York City...

130 banks are being tested. 12-18 will fail. And on top of that, almost a third of 130, that’s over 40, will pass while still getting their feet wet. That means anywhere between 40% and 44% of Eurozone banks either fail or are in bad shape.  If 40% of your banks are either dead in the water or barely floating, I’d say you have a major problem. We all know our world, be it politics or economics, consists almost exclusively of spin these days, but in the face of these numbers we very much wonder how many people will be willing to bet their own money that Europe can get away with another round of moonsmoke and roses come Monday.

While VIX pumped-and-dumped (in a manner never seen before in its history), 'real' volatility of the day to day moves across the major stock indices remains extremely elevated. For the Nasdaq and Dow Transports, the average true range over the last few weeks is the highest since the post-Lehman collapse...

What qualifies as true avant-garde? Degrowth qualifies - and very little else.

Why would one even look at a self-reported survey as an indicator of coincident activity: after all isn't it beyond obvious that every response will be full of confirmation bias and colored by the respondent's inherent optimism about the present and the future? Apparently it isn't, and neither is it obvious that for all business participants, hope dies last, something which always influences their responses. The problem is that in a world in which central banks have made a mockery of all other coincident signals, one has to dig very low. "We've used this measure less over the last couple of years as central banks have increasingly distorted the relationship between fundamentals and  valuation" says Deutsche Bank's Jim Reid. And as Jim Reid shows in the table below, the various regional PMIs have so consistenly overshot in their expectations of where the manufacturing and service sector of a given country is throughout 2014, that not even the market believes, well, Markit.