Archive - Apr 2014

What did Janet Yellen do? Judging by the talking-heads or your favorite business media channel (or your friendly local asset-gatherer), she promised the Fed would hold everything up for longer and recovery (thanks to escape velocity growth at any moment) will be here any quarter... So what did she do that spanked all the high-growth hopes...

Has the United States ever experienced a time when a foreign nation has attempted to buy up so much of our land all at once? As Michael Snyder details below, it appears the Chinese are on a real estate buying spree all over America as they are now the dominat 'buyers' of investment green cards. This is occurring as private equity buyers and hedge funds exit the buy-to-rent business en masse and are, as Mike Krieger explains, are desperate to pitch American property to anyone willing to keep Housing Bubble 2.0 inflated... it seems Zillow is more than happy to enable that, "Zillow agreed to make its U.S. property listings available to Chinese consumers through a partnership with a Beijing-based website."

Tthe real backlash against HFT begins:

• INTERACTIVE BROKERS TO OFFER CUSTOMERS ACCESS TO IEX: CNBC
• INTERACTIVE CUSTOMERS CAN SPECIFY TRADE BE DONE VIA IEX: CNBC

And this is how the Goldman-backed IEX exchange proceeds to slowly take over lit markets, and take all important frontrunnable order flow - the lifeblood of HFTs of course- away from the vacuum tubes.

Banksters welcome...

Bill Gross lost "Bob" this week. The death of his cat sparked some longer-term reflection on the hubris of risk-takers, the mirage of magnificent performance, and the ongoing debate in bond markets - extend duration (increase interest rate risk) or reduce quality (increase credit risk). As the PIMCO boss explains, a Bull Market almost guarantees good looking Sharpe ratios and makes risk takers compared to their indices (or Treasury Bills) look good as well. The lesson to be learned from this longer-term history is that risk was rewarded even when volatility or sleepless nights were factored into the equation. But that was then, and now is now.

Having changed her Facebook profile picture to a "V...for Vendetta" face mask, the widow of former Zurich Insurance CFO Pierre Wauthier said she and her family cannot accept Zurich’s claim that his death wasn’t brought on by undue stress. As Bloomberg reports, Switzerland’s biggest insurer said in November that no “undue pressure” was put on Wauthier, who said in a suicide note that then-Chairman Josef Ackermann had created an unbearable working environment. But, his wife is demanding to know why her husband's former boss resigned if he had not accepted blame for the death, and why details of tensions at work were not made public. Her anger is clear, as she blasted "I am not worth talking to... or is it that I would raise unbecoming questions????"

Days after the US escalated, announcing it will be sending a Navy warship back into The Black Sea, and on the heels of NATO ordering its military planners to draft measures to beef up defenses amongst its Eastern European members, Russia is demanding answers for this escalation. As Reuters reports, Russian Foreign Minister Sergei Lavrov said any increase in NATO's permanent presence in eastern Europe would violate a 1997 treaty on NATO-Russian cooperation: "We have addressed questions to the north Atlantic military alliance. We are not only expecting answers, but answers that will be based fully on respect for the rules we agreed on." De-Escalation-Off.

Having successfully negotiated the exposure of a potential "false flag" attack on Syria, corruption probes, financial system chaos, court rulings of the ban's unconstitutionality, and a "successful" election, Turkey's Erdogan has decided to lift the ban on Twitter...

after shocking the world with its unilateral decision to halt Russian money transfers without a direct order from the administration, Reuters reports that JPM has folded and will process said payment from Russia's embassy in Kazakhstan to insurance agency Sogaz, easing tension after Moscow accused the U.S. bank of illegally blocking the transaction under the pretext of sanctions.

The last year or two has seen a deluge of Fed speakers pay lip-service to watching/monitoring/keeping-an-eye-on potential bubbles... but as yet having found none... That is all except one - Jeremy Stein - who explicitly called out high yield bonds as in a 'frothy' bubble last year... it appears he has grown weary of smashing his head against that wall...

• *FED SAYS STEIN SUBMITTED RESIGNATION LETTER TO OBAMA
• *YELLEN SAYS STEIN WAS 'AN INTELLECTUAL LEADER' ON FED BOARD

Stein plans to return to teaching at Harvard but in his resignation letter noted that more work is needed on the job market and that the financial market needs strengthening.

The risk that creditors, savers and bondholders, rather than taxpayers will bear the brunt of rescuing a bank in trouble form part of the first credit ratings given to 18 of Europe's biggest banks yesterday by new ratings agency, Scope.

We are adding one full percentage of growth back to our estimate of current quarter real GDP which is now 4.2%.

— Joseph A. LaVorgna (@Lavorgnanomics) April 3, 2014

Thanks to more jawboning promises of QE from Draghi this morning, peripheral bond yields in Europe have collapsed once again. Any minute now, Spain will be a lower-yielding bond than the US... and at this pace, you will have to pay Spain to lend it money within a few months... we are sure someone has figured out how entirely useless asset-purchases would be at these levels.. but for now, fight the fed in the US (they remind us that tapering is not tightening remember) but don't fight the promise of the ECB...

Markit's Services PMI missed expectations (55.3 vs 55.5 flash) and dropped from last month - as it seems an easing of the 'weather disruption' did nothing for pent-up services demand. Services employment growth slowed (suggesting a weak NFP) as did new business (very significantly) but optimism rose (so that's good). On the heels of that the ISM Services print missed expectations for the 4th month of the last 5 (53.1 vs 53.6) but rose modestly MoM.

"High-frequency traders are gaming the system, reaping billions in the process and undermining investor confidence in the fairness of the markets. It’s a growing cancer and needs to be addressed.  If confidence erodes further, the fuel of our free-enterprise system, capital formation, is at risk. We can’t allow that to happen. For sure, we still believe investing in equities is a primary path to long-term wealth creation, and we believe in the long-term structural integrity of the markets to deliver that over time for individual investors, which is all the more reason to be vigilant in removing anything that creates unfair advantage or undermines investor confidence... High-frequency trading isn’t providing more efficient, liquid markets; it is a technological arms race designed to pick the pockets of legitimate market participants. That flies in the face of our markets’ founding principles.