Archive - Nov 6, 2014

Dozens of young people camping out at the front of a popular store... can only mean one thing?

Please don't claim anything changes if one party or the other is in the majority. Anyone clinging to that fantasy is delusional.

"Drop that plate right now!" – Florida police to 90-year-old WW2 vet Arnold Abbott as he tried to feed homeless people

It appears money can't buy happiness after all...

We cannot possibly make the following statement any more clearly or strongly: Policymakers and pundits, with rare and courageous exceptions, are marching (and looking) in precisely the wrong direction.

The recent spread of Ebola has led to a tragic loss of human lives and stands to devastate West African economies. As the situation has evolved, and despite the equity market's apparent belief that it's all over, Goldman has examined the global economic and market implications of the outbreak.

Following the release of the quarterly monetary policy report from the People’s Bank of China, it is becoming clear, as Goldman Sachs notes, that stimulus - via cuts to system-wide RRR and/or benchmark interest rates - is becoming less and less likely. The PBOC's introduction of a new facility called the medium-term lending facility (MLF) allows 'targeted' easing, and as one local economist noted, "it shows the central bank is very reluctant to loosen monetary policy." The PBOC has broadened its toolkit to arrest an economic slowdown, while seeking to avoid adding financial risks, as The PBOC said it would "continue to implement a 'prudent' monetary policy and use various tools to manage liquidity." Not the exuberant stimulus-fest the talking-heads are calling for reminding us, as Pettis previously concluded, "In China, it will be no different. Growth miracles have always been the relatively easy part; it is the subsequent adjustment that has been the tough part."

The Keynesian notions of “potential GDP” and “aggregate demand” have no basis in the real world. They are revealed doctrine. They are the religion of the state’s economic policy apparatus. Its bad enough that this destructive economic religion leads to the farcical forecasting games evident in the EC’s chronic updates and slow-walks of the GDP numbers down. The evil, however, is that the Keynesian apparatchiks will not desist in their destructive money printing and borrowing until they have suffocated free market capitalism entirely, and have monetized so much public debt that the financial system simply implodes.

There’s an odd-looking building in South Mumbai in India that looks like it’s under construction, only that it’s finished and furnished. And by how much. Called the Antilia, after mythical island in the Atlantic, the building is famous not for its odd structures of extra high ceilings and protruding floors; it’s the second most expensive house today at $1 billion. Barring the Buckingham Palace, which is valued at $1.55 billion, it would have been our most expensive house in our list, as Forbes.com has named it in 2014. In fact, Forbes cited that it’s the first house (other than palaces) to breach the $1 billion range.

The last 3 weeks have seen stocks surge at their fastest pace in years (on dismally low volume) but CNN's Fear & Greed-o-meter only got back to "Neutral". The simple reason is... the components of the index have never been more bipolar - Extreme Greed in stocks and options and Extreme Fear in junk bonds. We wonder who will be proven too 'extreme'.

Sanctions are just another form of warfare, where the weapons can inflict destruction and pain, and be just as explosive.  Their history can be millennially traced back, some with success, others with failure and a boomerang effect.  One thing we can be sure of in modern times: sanctions will prove to yield long term ill will, in many cases providing multiplying seeds of vengeance and terrorism which we may not confront now but our children and their children certainly will.

Despite the powerful rally over the last several weeks that brought the US equity markets back to their all-time highs, treasury yields are up only slightly and are well below mid-September levels. Meanwhile, as Gavekal Capital notes, speculators are still carrying a hefty short position in 10-year treasury futures and options contracts, implying that yields have further to fall yet. Simply put, if history is a guide we are going to have to observe a massive change in positioning before yields make a low.

As noted over the past week there has been a massive shortage of precious metals - most notably silver which as of this moment is indefinitely unavailable at the US Mint - as a result of the tumble in the paper price, and following 8 days of sliding and negative 1 month GOFO rates, today the physical metal shortage surged, as can be seen by not only the first negative 6 month GOFO rate since last summer's much publicized gold shortage when China was gobbling up every piece of shiny yellow rock available for sale, but a 1 month GOFO of -0.1850%: the most negative it has been since 2001!

Between Q4 2011 and Q3 2014 Bank of America produced "Net Income" of $15.9 billion. However, the amount of added back "one-time, non-recurring" legal expenses is a stunning $28.9 billion: two of every three dollars, non-GAAP as they may be, comes from Bank of America engaging in criminal activity... and that's just the stuff it got caught for.  And now we can add another $400 million of evil bank misdeeds because there was no actual carbon-based person behind these crimes. And as everyone knows by now, actually goes to jail for financial crime upon crime upon crime. Which also means that BofA has spent some $29.4 billion in just the past three years, to keep its 229,500 employees, but most the executives, out of prison: an insane amount of $128,104.57 per person.