Archive - Nov 12, 2014

As US QE has come to an end, depriving the world of US$1 trillion printed dollars a year, SocGen's Andrew Lapthorne warns, there are still plenty of things for investors to be concerned about. Indeed with asset prices where they are, investment returns look paltry from here on, as not only is there a long list of macroeconomic issues to worry about, but bottom-up firm level indicators are also flashing red. Valuations, as measured by median price to cash flow ratios, are near historical highs, and the spread of company valuations within the market is near historical lows. The implication is that downside risks are mispriced.

Spot the banana republic:

• Nation #1 spends and issues tens of trillions in taxpayer funds and debt, crushing the growth potential of future generations, just to bail out a banking sector full to the brim with criminal "riggers" (as today's settlements once again prove), where bubble mania was so pervasive not a single bank would have survived absent a global central bank bailout, and where bank executives wouldn't bend over for anything less than a million.
• Nation #2 just sentenced two senior officials of a bank that collapsed under (a measly by New Normal standards) $1 billion in debt to 15 years in prison each for embezzlement and fraud.

Nation #1 is, of course, the US (or any other western nation). Nation #2 is Afghanistan.

If you are willing to put in another 30 minutes work per day... perhaps get that round of golf in after 1130ET and then come back for the close... in 17 of the last  21 days (14 of 14), the S&P 500 has rallied from 1530-1600ET...

The vice will close on some cities and states sooner than others, but it will eventually squeeze every city and state with declining revenues and rising fixed costs into default.

"It used to be called Black Friday, then it became Thursday, now it’s a week long...Maybe we should just call it November."

Putting Things In Context ...

The next time stuff hits the fan, will the world be as trusting in Central Banker proclamations? Will we continue to believe these folks are omnipotent? Or will their phony promises accomplish nothing?

A day of contrasts: on one hand, the world just managed to land a human-created vessel on a comet. On the other hand, two window washers are hanging helplessly from the 68th Floor of WTC1.

"The banks have been allowed to investigate themselves," one source familiar with the investigation told Reuters. "The investigated decide what they want to investigate, what they admit to, and how much they will pay."

Presented with no comment...

By now, the world and his pet rabbit is aware of the 'odd' ramp in US equity markets as the European Close looms each day. Today - once again - was no exception, so we thought it worth quantifying this magical - and now self-fulfilling 'pattern'. In the last 4 months, if you bought the S&P 500 at 1100ET and sold at 1130ET, you would have won 55 times (garnering 129 points of profits) and lost 31 times (losing 70 points) for a total profit of over 59 points. This compares to the 53 point gain in the S&P 500 if you had just 'buy-and-hold'-ed over that period... and a quick glance at the chart tells you all you need to know about volatility...

While there was some selling of 10 Year paper following today's earlier 52-Week Bill auction which came in week, today's refunding of $24 billion in 10 Year paper was a snoozer. Closing moments ago at a 2.365% high yield (33% allotted at high), this was a 0.1% bp tail to the 2.364% When Issued. It was almost nearly identical to last month's 2.381% auction, although the small decline in yield means this was the lowest yield for the On The Run security since last June. The internals were also tame, with the Bid To Cover of 2.52 a carbon copy of last month's 2.52, if a little weaker than the TTM average. Finally, 42% of the allotment went to Dealers, or 4% above the 12 month average, while Indirects took down 44.7%, again nearly an identical amount to last month's 44.4$, and Directs, traditionally the domain of Pimco, were left with 13.4% of the auction. It is unclear if the Total Return Fund was the big bidder here now that Gross is long gone.

Would it be that bad? Of course it would, he’s is a communist.