Archive - Feb 2014

As we have repeatedly pointed out, the one surest way to generate profits in these manipulated, broken markets is to take advantage of the one legacy trade that makes zero sense in a world in which the global central banks are the ultimate providers of downside risk protection: i.e., going long the most shorted names. We did just this most recently past Friday, when we listed the latest hedge fund long hotel, as well as the names most shorted by the "sophisticated" investors, saying "anyone going long these names is virtually assured to outperform the market over the next year." One day later and this "strategy" is already generating outsized alpha, with the most shorted names solidly outperforming the market. And as the case may, this latest bout of "most shorted" outperformance is set to continue for one main reason. As the CFTC reported last friday, institutional investors using Standard & Poor’s 500 Index futures turned bearish this month for the first time since September 2012.

The Russians had dangled their multi-billion euro carrot - then swiftly removed it pending further details of who is really running the show (demanding a crackdown on the extremists who are trying to establish power). The Europeans have promised an even bigger carrot - predicated on, we presume, total abdication of sovereignty. But now the Americans are jumping in - Treasury Secretary Jack Lew "urged" Ukraine's interim leader Yatsenyuk to start talks with the IMF as he and Lagarde agreed the fund would be the best foundation for advice and financing (if sought by a fully established Ukrainian government). And the winner is...

• *UKRAINE'S KUBIV PLANS TO INVITE IMF MISSION, UNIAN SAYS

Which means only thing - Russia is locked out and gas prices are about to take off.

When Arthur Levitt's SEC adopted Rule 2a-7 in 1998, it handed the TBTF banks and GSEs a mortgage monopoly on a silver platter.  

Many are confused this morning at the exuberance in US equities after dismal data and a bond market that is barely budging. Of course, the answer lies deep in the fun-durr-mentals of the JPY carry trade... but this time it's different as it would appear a note from BofA proclaiming "it's time to buy AUD" coincided perfectly with a ramp in AUDJPY and thus - new all-time highs in stocks...

This is about as funny as it gets, and certainly no commentary needed.

We are sure the President knows best as he addresses the National Governors Association this morning. Having explained to them all that he wants to "partner" with each governor, his week of action continues... “If there’s one thing in common in the moments like these, it’s that our cooperation is vital to make sure that we’re doing right by the American people,” Obama said. “That of course will require that we collectively take action on what matters to them — jobs and opportunity.”

The stages of a Man's/Ponzi Bubble's, life...

The Fed Is Very Political … And Serves the Big Banks and the Powers-That-Be

While BofAML's Macneil Curry is a long-term bull on Natural Gas (with expectations of a push to $7.33 and on to $7.80), he warns, for now, its' time to move to the sidelines as a medium-term top is at hand...

Last month's Dallas Fed print at 3.8 barely beat expectations of 3.7 to stall a 3-month missed expectations slump as the data basically has flatlined for 4 months. However, it appears the lack of snow in Texas did not help (though the word weather appears 7 times in survey responses) as Feb's data missed expectations by the most in 4 months and slumped to a 9 month low. What is perhaps most concerning is the outlook for 6-months foward dropped dramatically (with 11 sub-indices tumbling) and CapEx also slumped to a 5 month low. Of course, US equities are surging to new highs on this dismal news...

What others describe as the Deep State we term the National Security State which enables the American Empire, a vast structure that incorporates hard and soft power--military, diplomatic, intelligence, finance, commercial, energy, media, higher education--in a system of global domination and influence. One key feature of the Deep State is that it makes decisions behind closed doors and the surface government simply ratifies or approves the decisions. A second key feature is that the Deep State decision-makers have access to an entire world of secret intelligence. What would best serve the Deep State is a dollar that increases in purchasing power and extends the Deep State's power.

Prime Minister Dmitry Medvedev on Monday said Russia had grave doubts about the legitimacy of those in power in Ukraine following President Viktor Yanukovich's ouster, saying their recognition by some states was an "aberration". "We do not understand what is going on there. There is a real threat to our interests and to the lives of our citizens," Medvedev was quoted by Russian news agencies as saying. "There are big doubts about the legitimacy of a whole series of organs of power that are now functioning there."... Dmitry Medvedev said Monday, according to Russian news agencies, that the new authorities have come to power as a result of "armed mutiny," so their legitimacy is causing "big doubts."

Weakness in Asian data, check. Weakness in European data, check. Weakness in US data, check. USDJPY overnight sell-off primed for US day-session ramp, check... New highs for US stocks, check...

Ever since the weekend's coup d'etat (as he called it: remember, it isn't officially a coup until John Kerry deems it so - see Egypt), Ukraine's overthrown president Victor Yanukovych (despite signing an agreement with the opposition and blessed by Europe which foresaw new legitimate presidential elections sometime after September) has been in hiding, following an aborted attempt to depart the country by plane. This is understandable: after all a warrant has been issued for his arrest. Which perhaps explains why as Gazeta.ru, citing UNIAN.net, reports his latest location is the Russian military base in Sevastopol, the one place where the Ukraine government, legitimate or not, will never dare to tread. UNIAN adds that Yanukovich will "board a landing ship of the Black Sea Fleet of the Russian Federation, which the deposed president will use to go to Russia, according to TV channel ATR."

Since his historical track record has been spot on until now, we thought it useful to reflect on the wisdom of the maestro as he speaks this morning and his recent appearances. On the heels of the success of his un-best-selling book, Greenspan explains:

• *GREENSPAN SAYS 'NO DOUBT' BUBBLES ARISING IN CHINA'S ECONOMY
• *GREENSPAN SAYS OF BITCOIN: 'IT'S A BUBBLE'
• *GREENSPAN SAYS 'I DON'T SEE' SIGNS OF A BUBBLE IN STOCK MARKET
• *GREENSPAN SEES SIGNIFICANT RISE IN LONG-TERM RATES COMING

It appears he bubble-vision is strong and yet he notes that US income inequality is potentially harmful to the US political system and Dodd-Frank doesn't work; adding that the US needs 4% growth to fix itself.