Archive - Nov 2014

The financial, economic and political system has been captured by corporate fascist psychopaths. The Federal Reserve has aided and abetted this takeover. Their monetary manipulations have resulted in this deformity. The American middle class has been murdered. Decades of declining real wages have left them virtually penniless, in debt up to their eyeballs, angry, frustrated, and unable to jump start our moribund economy by buying more Chinese produced crap. Yellen, her Wall Street puppeteers, and the corporate titans should enjoy those record profits and record stock market highs. The artificial boom will lead to a real depression. Luckily for the oligarchs, most middle class Americans are already experiencing a depression and won’t notice the difference.

Overnight weakness from Japan (NKY -3%) and USDJPY slowly leaked away as Europe was bid - bouncing higher on Draghi's SovQE "whatever it takes" comments (and multiple broken markets), but once he stopped speaking stocks faded to the lows of the day at the European Close. Once it was just the American algos playing, the S&P and Dow ripped back to green. However, Small Caps, Nasdaq and Trannies were not playing along, nor was VIX or HY Credit. The USD surged 0.45% (on EUR weakness) which stalled the bounce in commodities. Gold flatlined through the US session (-0.25%) with Silver -1% (bouncing this afternoon). Oil prices slipped 0.5% again (but above Friday's lows) at $75.50. Treasury yields rose 1-2bps on the day (but 5-6bps off the overnight lows as Europe opened) but flatlined during US session. Most notably, it seems many feel like Carl Icahn that a major correction is coming and hedging via VIX and HY credit was significant.

"I, JEREMIAH W. (JAY) NIXON, GOVERNOR OF THE STATE OF MISSOURI, by virtue of the authority vested in me by the Constitution and Laws of the State of Missouri, including Sections 44.010 through 44.130, RSMo, do hereby declare a State of Emergency exists in the State of Missouri.

I further direct the Missouri State Highway Patrol together with the St. Louis County Police Department and the St. Louis Metropolitan Police Department to operate as a Unified Command to protect civil rights and ensure public safety in the City of Ferguson and the St. Louis region."

Four years ago, bankers, politicians, and traders were patting themselves on the back after Petroleo Brasiliero (Petrobras) raised a stunning $70 billion in the world's largest share sale, as Bloomberg reported at the time, investors bet on its plans to double output within a decade by tapping offshore fields. Things haven't worked out so well...

While Wall Street is certainly free to broken record that Michael Lewis' hugely popular story about HFT and market rigging did not impact the natural course of events, the reality is it did: the collapse in Barclays' dark pool LX (shown in the bolded red line on the chart below), in the aftermath of the NY AG case against the British bank, has been documented in the past, and is just one example. An even more vivid case study comes from the surge in popularity of upstart dark pool IEX (green dotted line below), the protagonist of Lewis' Flash Boys book, and which out of nowhere, has just tied with Lavaflow's dark pool for fourth spot in ATS trading with just over 200 million shares in the week ended October 27. The catalyst? Norway's sovereign wealth fund just said not to HFT parasites.

"The market has been dodging boomerangs, not bullets, and they are likely to come back harder for it." Importantly, rich valuations here cannot be “justified” by appeals to current interest rates or profit margins unless that justification carries with it the assumption that both zero interest rate policy and cyclically-elevated profit margins will be sustained for decades, coupled with the assumption that economic growth will proceed at historically normal rates.

The Dow and S&P have shrugged off any belief that yet another Japanese recession will impact the invincible American economy... but Small Caps, Nasdaq, and Trannies are a little more concerned. However, if everything is so awesome in the US, then why are credit and equity market professionals buying protection hand over fist?

Words, numbers, earnings and more at one time had a believable meaning. But that was a very long time ago. So long – even the news media seems to have forgotten what the meaning of words like business, free markets, capitalism and others once meant. Now it's nothing but a televised version of crony styled capitalism cheerleaders rolled out one after another in such procession P.T.Barnum would be proud. The problem is the more they talk – the more people tune out. For no amount of words stated matter any longer. Nor do the myriad of “charts” “reports” or so-called “facts” they hold up as evidence. No one is listening or watching. And what’s worse? Nobody now cares.

As the generational war heats up, we should all remember the source of all the bubbles and all the policies that could only result in generational poverty: the Federal Reserve.

People blame human nature as the source of our global problems, but they rarely see themselves as part of the problem. And yet there they are, smack dab in the middle of the mess, demanding someone else clean it up.

JPMorgan Cazenove's global equity strategy group has decided enough is enough - the underperformance of the Eurozone is getting stretched (they note), and are upgrading Euro equity allocations to Overweight at the expense of an Underweight in US stocks. Here are the fives reasons why they made the shift...

Plummeting oil prices are a symptom of terrible mounting instabilities in the world. After years of stagnation, complacency, and official pretense, the linked matrix of systems we depend on for running our techno-industrial society is shaking itself to pieces. American officials either don’t understand what they’re seeing, or don’t want you to know what they see. The tensions between energy, money, and economy have entered a new phase of destructive unwind. The global economy has caught the equivalent of financial Ebola: deflation, which is the recognition that debts can’t be repaid, obligations can’t be met, and contracts won’t be honored. Financial Ebola means that the connective tissues of trade start to dissolve, and pretty soon blood starts dribbling out of national economies.

It’s amazing to watch, particularly when you consider that it is now public information that Draghi actually didn’t have a plan when he first claimed this and is effectively making up policy on the fly.

The return of  the Statist Fascionistas...