Archive - Nov 2014

• The $9 Billion Witness: Meet JPMorgan Chase's Worst Nightmare (Matt Taibbi)
• Explains the midterm results: Optimism precedes job data (Reuters)
• EU Dream Ebbs Amid Weak Growth, Putin's Jets, 25 Years After Wall Came Down (BBG)
• SEC Probing Trading Activity at Apple Supplier GT Advanced (WSJ)
• Boehner touts bills to repeal Obamacare, build Keystone (Reuters)
• China Gold Buying Means Price Floor to Standard Chartered (BBG)
• High-Speed Ad Traders Profit by Arbitraging Your Eyeballs (BBG)
• Central Banks Can’t Be ‘Only Game in Town’ Boosting Economies (BBG) - less talking, more getting to work

European shares fall, reversing earlier gains, with the banks and tech sectors underperforming and basic resources, oil & gas outperforming. Companies including ArcelorMittal, Allianz, Swiss Re, Richemont released results. The Spanish and Italian markets are the worst-performing larger bourses, the U.K. the best. The euro is stronger against the dollar. Japanese 10yr bond yields rise; German yields increase. Furthermore, the pullback in the USD-index from overnight highs has also provided the commodity complex with some upside and thus has seen basic materials and energy name outperform to the benefit of the FTSE 100. Elsewhere, Allianz’s (+4.9%) impressive pre-market report has helped halt the move to the downside for the DAX which trades with modest gains of 0.3%. Fixed income markets continue to hold fire (albeit in marginal negative territory) with volumes exceedingly thin ahead of key risk events. And with that, all eyes move to today's Nonfarm payroll expected to print at 235K, after last month's 248K. Something to keep in mind: the average seasonal adjustment to the October data is almost exactly 1 million, so yet again the fate of the US and global economy, will be determined by an Arima X 13 "fudge factor."

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.