Archive - May 2014

We don't know what is more disturbing: that the largest 50 hedge funds (in a universe of about 777) account for some $716 billion in long equity assets or more than half the total (this number does not include non-equity long positions and, don't laugh, shorts of any kind), or that as we reported over the weekend, the investment thesis creativity across the hedge fund world has completely gone down the drain (considering the most popular stocks over the past three years have been Apple, GM and Google). What we do know is that when it comes to the epic pissing contest that are hedge funds, size matters. So for all your pressing questions whose is biggest... long equity book that is... here is the answer.

Forget well-roundedness... if you really want to get on in this world... study math betterer is the clear message from CareerCast.com's rankings of the best and worst jobs in America. As WSJ reports, it’s no secret that quantitative skills are in high demand on the job market; and as one analytics recruiter noted: workers who can’t crunch numbers may ultimately face a "permanent pink slip." Mathematician is the 'best occupation' in 2014 according to their report and Lumberjack the worst (with Newspaper reporter second worst).

The inevitable shuttering of at least 3 billion square feet of retail space is a certainty. The aging demographics of the U.S. population, dire economic situation of both young and old, and sheer lunacy of the retail expansion since 2000, guarantee a future of ghost malls, decaying weed infested empty parking lots, retailer bankruptcies, real estate developer bankruptcies, massive loan losses for the banking industry, and the loss of millions of retail jobs. Since we always look for a silver lining in a black cloud, we predict a bright future for the SPACE AVAILABLE and GOING OUT OF BUSINESS sign making companies.

All parties with a collective interest in seeing the North Dakota oil experiment succeed need to work together because, right now, the boss at the largest stakeholder in the Bakken shale says opponents are drawing a bead on the region. And it's not just exploration and production that's a concern.

If bigger is better then the following infographic is indeed the best that man has got...

There’s a long and comprehensive To-Do list that has been waiting for us since at least 2008, when the nation received one forceful blow upside its thick head. We refuse to pay attention.

When 2014 started, expectations were sky high and as Saxo Bank's Chief Economist Steen Jakobsen notes, policymakers and their support organisations like the OECD, the International Monetary Fund and the World Bank were all quick to call the crisis over and project a true recovery. Now just five month into the year we have seen nothing but disappointing data both relatively speaking but certainly also in absolute terms. As the following presentation outlines, Jakobsen believes we will see new low yields in this cycle this year and that 2014 will also be the year of the low in terms of: inflation expectations, wage/salary, velocity of money, loan demand, lack of reform, and innovation reforms.

As Americans celebrate the Memorial Day holiday, we should remember that though the VA’s alleged abuse and neglect of US veterans is scandalous, the worse abuse comes from a president and a compliant Congress that send the US military to cause harm and be harmed overseas in undeclared, unnecessary, and illegal interventions. The best way to honor the US military is to honor the Constitution, and to keep in mind the wise advice of our Founding Fathers to avoid all foreign interventionism.

We have discussed the 'downside' of America's "black gold" rush and the town of Williston, North Dakota is the poster child for the costs and benefits of this exuberance. But, as The BBC reports, there is some silver lining for those willing to deal..."Strippers can earn $2,500 per shift here," says a bouncer, "but the men here are 100% worse. It's horrible. They're animals."

UPDATE: Gold swung from $1,292 at futures close to $1,312 and is now trading at $1,275 - un-rigged!

Gold futures stopped trading at 1300ET for the Memorial Day holiday... seconds after that Spot Gold prices exploded higher from $1291 to $1312... of course liquidity is extremely light but it seems someone was anxious to get their hands on the real thing... Gold has breached its 200DMA, 100DMA, 50DMA, as well as the crucial $1300 (that Morgan Stanley said would never be seen again).

It's called a stereotype for a reason...

Earthquake?  What earthquake?  

The recent public outcry over high frequency trading is pointless. Solutions exist. Virtually every comparable market in the world uses them already. But, some electronic exchanges may not willingly adopt them. Doing so may disrupt their current business model. The incentives are misaligned, and competitors or regulators may need to force the issue to see change. Luckily, the issue to be forced is far simpler than most think. It’s time to add quality to the matching process.

On this day when we should never forget, we are sure President Obama, fresh from his surprise snubbing of Karzai in Afghanistan, will try his best to remember who was in charge (and ultimately accountable) when the VA scandal broke.

It appears the tit-for-tat cyber-spying debacle between China and the US is escalating (unless it's all curious coincidence). Having blasted the US as a "mincing rascal" and "high-level hooligan" in the Chinese (state-run) media, The FT reports that authorities have ordered state-owned enterprises to cut ties with US consulting companies such as McKinsey and Boston Consulting Group because of fears they are spying on behalf of the US government. Furthermore, the crackdown is worse as, in the face of the "US hacker empire," China’s leaders announced on Thursday that all foreign IT products and services sold in China would be subject to a new security screening process. So it seems China has entered both the currency war (CNY weakness) and protectionism racket... now how has that ended for the world in the past?