Archive - Apr 2014

High Frequency Nemesis...

UPDATE: *FIRST TSUNAMI WAVES REACH CHILE COAST, RADIO COOPERATIVA SAYS

At shortly after 1945ET,  a massive 8.2 (revised up from 8.0) earthquake hit close to the coast of Chile:

*MAGNITUDE 8.0 QUAKE HITS OFF COAST OF CHILE, USGS REPORTS
*CHILE QUAKE MAGNITUDE REVISED UP FROM 8.0 TO 8.2 BY USGS
*FLASH: TSUNAMI WARNING ISSUED AFTER MAGNITUDE 8.0 QUAKE HITS OFF
*QUAKE CUTS ELECTRICITY SUPPLY TO MUCH OF ARICA, CHILE: TVN

The BBC reports the quake was shallow (which means it felt more powerful) and the tsunami wave's arrival is imminent. Copper prices are jumping on the news as the region is an active mining area.

We know what you're thinking... why didn't Virtu Financial's CEO Chris Concannon ban Twitter and YouTube? It seems that is the only thing the HFT firm is incapable of as just too much public scrutiny from various fact-full blogs and a major expose of the reality of the US stock 'market' was too much for even the greatest fools in the market to be fooled by:

• *VIRTU SAID TO DELAY IPO AMID FUROR OVER MICHAEL LEWIS BOOK

As we warned previously, it was only a matter of time before the hubris of VRTU's own trading perfection swung around and crushed it: "Simply put, first it was their boastful trading record that got the NYAG involved, and then Lewis slammed the door shut."

And by 'greatest fools' we mean sovereign wealth funds that stand ready to soak up any and every heavily-marketed pitch that comes their way...

To think all it took to wake up not only the FBI (which generously provided a phone number to all interested parties so others could do its work for it) but the porn-addicts at the most corrupt, complicit and clueless, not to mention bought and paid for, "regulator" in US history, the SEC from a five year slumber - yes, we started warning about HFT in April of 2009 - was one Michael Lewis book. Moments ago we learned that the SEC, with a five year delay, has opened several investigations into HFT.

No, this is not Tuesday Humor or an April Fool. As the WSJ's China Real-Time blog reports, this is also not a scene from Spaceballs. In the smog-ridden city of Zhengzhou, a Henan-based travel company shipped 20 bright blue bags of fresh mountain air to show oxygen-deprived city residents what they’re missing. Of course, as we have noted previously, the canned-air idea is hardly unique to Henan: Rags-to-riches Chinese tycoon Chen Guangbiao began selling such cans in 2012.

European leaders may have felt a momentary brief lapse in the wary feeling of disdain that has existed between them for years now, but that was once exacerbated by the financial crisis and the entire PIGS- story that ensued, with the debt crisis.

While QE may have tapered to a "measly" 55 billion per month, on just the first day of April risk assets experienced the additional benefit of over two full months of QE injected into the stock market in one single day!

Suddenly the world is a buzz with the revelations that High Frequency Trading (HFT) may be doing more than actually harming the markets, it might be destroying the illusion they still are markets. This past Sunday the world at large was introduced that maybe, just maybe, something was amiss in the financial markets. Between the Federal Reserve's massive QE experiment amplified by the arms race of algorithmic technologies (aka HFT) to shave off a piece of that pie for themselves, the last few years have been nothing less than breathtaking. The only good thing that has come out lately on this whole issue of HFT is maybe for the first time in years the cover has been thrown off exposing the parasitic beast that’s been living just beneath the surface passing itself off as a symbiotic entity, rather than the pernicious monster its grown to be. Now the only question left to ask is: Can they invoke the death penalty for this creature... Without killing the patient?

Just last week we asked "Is college waste of time and money?" It appears, based on the latest data from the BLS, that for all too many, it absolutely is. As CNN Money reports, about 260,000 people who had a college or professional degree made at or below the federal minimum wage of $7.25 last year.

With Goldman's Thomas Stolper having gone the way of JPMorgan's Tom Lee, we thought it worth tracking the performance of the other market "seer" that reared his ugly head recently. Since the Crimea Referendum, Russian stocks are up over 16% (greatly outperforming US) but as investors began their great rotation back into EM, The White House's Jay Carney issued a "strong sell" recommendation on Russian stocks... since his suggestion, Russian stocks have risen over 6%...

Considering that Europe’s problems took years to unfold, despite the clear evidence that its banking system was virtually insolvent, the fact that things appear calm in Europe today doesn’t really say much about the true state of affairs over there.

According to The White House, 7,041,000 people have signed up for Obamacare (though it's unclear how many have paid as of yet and what the mix of enrolees actually is). While this will be proclaimed as mission accomplished and spun for all it's worth, wasn't Obamacare supposed to reduce the ranks of the 45 million uninsured in America? Still, it seems like a long way to go to meet CBO projections, as WaPo notes, "the CBO and Joint Congressional Committee on Taxation in February projected that 13 million previously uninsured people would gain coverage in 2014." We suspect the President will be over the moon and blame Republicans, Twitter, and YouTube for the number not being higher...

Japanese data (double) miss, check! Chinese data miss, check! US data miss, check! Investor trust in US equity at record lows, check! All-time record highs for US equities - you betcha! Stocks broadly pumped and dumped once again today but the start-of-the-month exuberance over April's seasonality was enough to leave gains that accelerated into the close as the long-bond sold off and short-end rallied (biggest 2-day steepening in 5 months). USDJPY was in charge for much of the day but when it went limp in the last hour, it was VIX-clubbing time (to 10-week lows ahead of the ECB and NFP?)  Oil prices slumped intraday (back below $100) as gold slipped but copper and silver flatlined. Wondering what fueled today's panic buying spree? "Most shorted" stocks tripled the market's performance on the day...

While the topic of HFT-assisted "price discovery" has been beaten to death on these pages, and courtesy of Michael Lewis is now a household, and soon FBI, topic, what is more notable is that in addition to a better than expected jump in March car sales, GM also confirmed that the post-bankurptcy company has never had a greater difficult in liquidating warehoused inventory. As the chart below shows, dealer inventory of GM autos on US lots, aka Channel Stuffing, just rose to a new all time high, of 815,492 units, up from 805,769 last month, and up 15% from the 743.8K units parked at dealer lots a year ago. So 15% increase in unpurchased inventory vs a 4% increase in sales. Someone smarter than us can probably do the math here.