Archive - May 2014

$250 Million homes in Europe, $150 Million homes in the US, and as Bloomberg notes Million-dollar homes in the U.S. are selling at double their historical average while middle-class property demand stumbles, showing that the housing recovery is mirroring America’s wealth divide. As CoreLogic notes, "the real estate market is the ultimate reflection of confidence, wealth and income," as purchases costing $1 million or more rose 7.8% in March, while sales of homes costing less than $250k plunged 12%, as "the same factors driving the income stagnation in the middle are driving the income momentum at the top." The luxury markets are indeed on fire as foreign (and domestic) super-wealth floods into real estate but as NewEdge's van Batenburg notes, echoing ur very words, "The American Dream is dead for everybody but the happy few who have enjoyed the tailwinds of the appreciating stock market."

Washington has no intention of allowing the crisis in Ukraine to be resolved. Having failed to seize the country and evict Russia from its Black Sea naval base, Washington sees new opportunities in the crisis.

From 110 slides of Ackman-inspired Fannie Mae bullishness to Tudor-Jones "Central Bank Viagra", and from Jim Grant's "Buy Gazprom because it's the worst-managed company in the world" to Jeff Gundlach's housing recovery bearishness and "never seeing 1.5 million home starts ever again"... there was a little here for every bull, dick, and harry at the Ira Sohn conference. Perhaps noted behavioral psychologist said its best though: "be careful about the quality of advice you get."

Economist John Maynard Keynes described the effects of inflation citing Vladimir Ilyich Lenin this way: “Lenin is said to have declared that the best way to destroy the capitalist system was to debauch the currency. By a continuing process of inflation, governments can confiscate, secretly and unobserved, an important part of the wealth of their citizens.  As the inflation proceeds and the real value of the currency fluctuates wildly from month to month, all permanent relations between debtors and creditors, which form the ultimate foundation of capitalism, become so utterly disordered as to be almost meaningless; and the process of wealth-getting degenerates into a gamble and a lottery. Lenin was certainly right. There is no subtler, no surer means of overturning the existing basis of society than to debauch the currency. The process engages all the hidden forces of economic law on the side of destruction, and does it in a manner which not one man in a million is able to diagnose.” This is why governments love inflation so much and hate gold.

April was supposed to be, if only based on history, the strongest month for stocks. Instead, it ended up being a hedge fund bloodbath. Of the 40 or so brand name hedge funds we track, only 3 outperformed the S&P, and 33, or over 75%, generated a negative return. Which is to be expected in a month in which the highest beta stock blew up, and an entire industry which now clearly uses alpha and beta interchangeably (as long as it means following the leader right into the comfortable confines of the hedge fund hotel), is stuck with the bill.

Holder is "Too Big To Jail"

It appears Russian military activities are picking up around the world. As AP reports, the commander of U.S. air forces in the Pacific is reporting a significant increase in activities by Russian planes and ships in the region; adding that "there had been long-range Russian air patrols to the coast of California ... and a U.S. F-15 fighter jet intercepted a Russian strategic bomber that had flown to Guam."

Ukrainian soldiers have nothing. People had been donating money to support them. While the West's injection of career politicians only replaced the head - Yanukovich - what is going on now is the corruption the people were revolting against is still in  the first place. Money donated to the soldiers has not been getting to them. Now the Ukrainian people are simply bringing food to their own troops because the corruption takes the money. Ukraine's soldiers have taken to Facebook to ask for help...

Thanks to the miracle of VIX slamming, USDJPY-stop-running, CBOE breaking, US equity market opening, "we're not worried about no stinking Ukraine civil war or Chinese economic collapse", low volume levitation, stocks knee-jerked off early dumping lows to recover comfortably into the green today. Not everything was exuberant though (as Trannies and the Russell 2000 ended red - bouncing once again off its 200DMA). Gold gained almost 1% today (back over $1310) for its best 2-days since January. The USD closed unch (with notable weakness in SEK). USDJPY ranged down below 102 and rammed stops to lead the charge higher in stocks (even with Japan closed for 2 days). Stocks tracked JPY but benefitted from a dead-cat-bounce in Treasury yields. VIX closed higher on the day (unable to regain the late-slam from Friday). AAPL regains $600 and Biotechs bounced 4.5% - so everything's fixed.

This time is different - check; Moral Hazard - check; Easy Money - check; Overblown growth stories - check; No valuation anchor - check; Conspicuous consumption - check; Ponzi finance - check... and, of course, Irrational exuberance: check!

There comes a point in the destiny of a failing nation when official lying is no longer distinct from official stupidity. We’ve crossed that boundary in the USA. It pays to remember that societies get what they deserve, not what they expect.

Ongoing military operations in Slavyansk have left at least 20 rebels dead and dozens more civilians injured according to Interfax.

*SLOVYANSK CLASHES KILL 20 REBELS, MANY CIVILIANS WOUNDED: IFX

As RT reports, fatalities are on both sides with little progress reported one way or the other. The White House says it's "extremely concerned" by the deteriorating situation in southern Ukraine. Perhaps more important for the average American citizen, Klitschko has decided to postpone his planned wedding to Hayden Panettiere due to the conflict... now it's getting serious!!

The last time the intellectual titans of the San Fran Fed, which have made a living out of asking probing, kindergarten-level questions and then spending tens of thousands of taxpayer funds to answer them, performed in depth inquiry into a topic was about a month ago when it asked "How Important Are Hedge Funds In A Crisis." To its dismay, it found the answer to be "very." Today, the intellectual titanism continues when the regional Fed, which Janet Yellen called her home for so many years, asks (and answers), "Is It Still Worth Going to College?"

6 Years After the Financial Crisis Hit, The Big Banks Are Still Committing Massive Crimes

France's Economy Minister Arnaud Montebourg (of Titan tires debacle fame) has written to GE's Jeff Immelt explaining that his offer for Alstom is "unnaceptable",

• *MONTEBOURG SAYS GE-ALSTOM BID UNACCEPTABLE IN CURRENT FORM: AFP

We can opnly imagine the additional terms the French will require. On the bright side, Montebourg did not call GE's offer "ignorant and insulting" like he did Titan's CEO.