Archive - May 9, 2014

Lifted by a continued surge in Asian gold sales, consumer demand for gold reached an all-time high in 2013 at 3,893 tonnes. Amazingly, 54% of this demand came from two places: India and China. However, it is only recently that the East has dominated global demand for the yellow metal. In this infographic, we look at India and China specifically to see why demand keeps expanding in the East.

Where you exist in your family’s birth order can profoundly inform your path in life, whether because of genetics or simply the way that family members tend to treat firstborns vs. middle children vs. youngest children.  Psychologists have been debating the “Why?” since the 1800s, but, as ConvergEx's Nick Colas notes, the outcome is certain regardless of the cause – the effects of birth order last for a lifetime... If you had to size up a stranger and you could only ask them one question, what would it be?  For me, the answer is simple: "Where are you in the birth order of your siblings?" Are you a first/only child, or a later born? The answer is quite telling. By virtue of genetics or childrearing (the debate rages there), birth order matters a lot to the person you become.

With the very largest and most experienced of hedge fund managers vociferously commenting on the "Truman Show" mirage of the markets, the danger of currently policies (there is no way to tell exactly how it all will end. Badly, we guess), and the need for stock-picking prowess, we thought the following chart might highlight the dawning of the death of an entire substrata of so-called hedge-fund managers (and not just the $0 AUM newsletter publishers) who appear unable to "stockpick" their way out of a Fed-provided paper bag. Since Q4 2010, Long/Short funds are down 6% while the immutable low-cost levered wealth creation policy vehicle of choice for the Fed (the S&P 500) is up almost 50% (dividends aside).

The New York Fed's historical appreciation society has looked back at what was likely the US' first crash and foud that Alexander Hamilton's actions in 1792 which they claim "appears to have effectively managed the crisis with little or no long-term spillover to the economy," has now become the blueprint for manipulative intervention until this day by the central planners who know far better than 'us' collectively... but there are some lessons that Bagehot has that are worth remembering...

The debate over just how rigged algos have made the market may be raging, but when it comes to riggedness, there is no debate that nothing beats Las Vegas where in the long (and not so long) run the house always wins. But how much does it win, and what games provide the house with the biggest profit? The following two charts answer these pertinent questions for anyone who may be planning a trip to the city of Lost Wages.

With global growth expectations for 2014 having just collapsed to new lows, and on the heels of mixed inflation data last night in China (and stubbornly low-flation in Europe), Saxobank's Steen Jakobsen explains in this brief clip how, thanks to massive over-building and now over-capacity, China is in fact exporting its deflation to the rest of the world - most problematically Europe. What is more worrying for all the optimists, Jakobsen argues that both the Eurozone and China are at the centre of a slowing world economy which will see stagnation for the immediate future and ECB action, or lack of it, can't do a thing to change the status quo.

With various extremely well paid sell-side economist slashing Q1 expectations for growth even further, we though it would be worth a glance at the ever-rising estimates for Q2 (that Goldman started this morning). Consensus for Q2 has now spiked to +3.3% (its highest since tracking began) as the Keynesian hockey-stick-believers have gone full bounce-tard now...

Never in a million years did we think we’d ever use an article by Andrew Ross Sorkin as the basis of a blog post, but here we are. While probably entirely unintentional, his article serves to further solidify as accurate the prevailing notion across America that former head of the New York Federal Reserve and Obama’s first Treasury Secretary, Timothy Geithner, is nothing more than an addled, crony, bureaucratic banker cabin boy. Simply put, "Geithner is so bad, he actually makes Larry Summers look good."

For weeks, months, and even years now, 330RAMP CAPITAL (the ironic phrase used to indicate the oh-so-visible hand of 'someone' that decides te last 30 minutes of the US trading day is the perfect liquidity time to slam VIX lower and panic-buy stocks). However, as Gavekal notes, recently we have seen an increasing number of weak-ish stock market closes.

Atlanta, Georgia suffers the greate income inequality of any city in the US - closely followed by New Orleans. According to Bloomberg, which ranked 300 U.S. cities with populations of at least 100,000 based on their level of income inequality and identified the 50 with the greatest inequality. What is stunning is that while top-down many are focused on the widening gap overall, in these 2 cities alone, over one-quarter are in poverty (earn less than $4,020), while 60% are in the nation's top quintile for household income. Interestingly, the median income does not correlate well with the inequality.

Surprise: Putin punked everyone again. But it's all good because the fake de-escalation allowed the rigged Dow Jones to close at a new all time high inspiring Americans full of "confidence" so they can go ahead and spend money they don't have to boost US Q2 GDP: after all it has a ways to go to hit Goldman's 3.9% quarterly target.

As another week passes by the markets have made no real movement in months. News flow, outside of Yellen's testimony, was also rather slow as first quarter's earnings season begins to come to a close. However, there were a few articles that we read this week that we thought you might find interesting as well... from the dangers of hidden leverage (in the re-burgeoning CDO markets) to the history if bubbles (and their lack of logic) and the demise of the US small business.

Every day this week saw early weakness (the dump) succumb to a rampathon (pump) but as those dump-and-pumps progressed the gap between small-cap/high-beta and large-cap/blue-chip widened and widened. The Russell (and the S&P) had its worst week in a month but the Dow (and just Trannies) managed to close the week green and new record highs. Homebuilders were the worst sector on the week (-2.5%) and Staples best with a modest gain. Away from stocks, the USD surged 0.55% on the week (its biggest jump in 7 weeks) led by EUR weakness (250 pips on Draghi promise). The biggest news was in bond-land where the 30Y yields exploded post-Yellen (+10bps on the week) and the short-end rallied (-4bps) for the biggest steepening in 20 months. Gold closed the week at its lowest in 3 months. Much was made of the shift lower in VIX today (back under 13) - especially ahead of the Donetsk referendum - but given the market's relative underperformance it would appear hedges were lifted and positions derisked simultaneously.

For the longest time we thought it was impossible to flip a tank simply by driving it. Then this Ukrainian operator nearly proved us wrong...

By now everyone knows that a $17 trillion economy has no greater nemesis than snow... in the winter... which in the first quarter of 2014 managed to lob off some $50 billion in growth from the world's largest economy, and instead of allowing the US to expand at its priced to ultraperfection 3.0% rate, resulted in a screeching halt in growth. But did you know that the one thing that the economy of the centrally-planned world can't stand more than cold is... heat. That is what Italians found out today when they read daily publication Ansa which "explained" that March industrial production declined by 0.5% because of, drum roll, "earlier than expected warm weather."