Archive - Jun 6, 2014

Everywhere you look, Americans appear to be extremely obsessed with wealth and money. As a society we love money, and we are not ashamed to admit it. In fact, there are times we absolutely revel in it. For example, Time Magazine published an article this year entitled "Science Proves It: Greed Is Good" and hardly anyone even raised an eyebrow. But where will America's sick obsession with wealth and money end? Could it end up destroying us?

K-Hen murdered the VIX

— zerohedge (@zerohedge) June 6, 2014

It is highly likely that bond markets come under pressure and interest rates rise within the next five years. Do you have an insurance policy against that?

Draghi & Co have embarked on the futile task of forcing more debt onto balance sheets that are saturated and more inflation into an economy that is shrinking in real terms. All of this silly kidstuff, in fact, is the work of Keynesian desperados in Frankfurt who embrace two propositions that are unequivocally and provably wrong. Namely, that the Euro area economy is floundering due to a tiny decline in non-financial credit and that “low-flation” is the great roadblock that prevents the wheels of credit and commerce from turning at a more satisfactory pace. In the end, however, perhaps the Keynesians in Frankfurt will do something useful. That is, elicit another crisis that will finally put the euro out of its misery.

This is your Federal Reserve on drugs...

US Banks enjoyed more or less steadily climbing, or rather soaring, deposits by Russian institutions and individuals, having tripled in just two years to $21.6 billion by February, according to the US Treasury... and then March hit... boomerang

For 5 years the correlation between the expansion of the Federal Reserve's balance sheet and the growth of the S&P 500 has risen dramatically. Since QE3 was unveiled, the correlation is converging on 1 which of course is just happy coincidence and nothing to do with the free and easy flow of liquidity that month after month of Fed largesse has created. The problem is we now know that the hurdles to a Fed un-Taper are very high and so we can extrapolate the end-point for the Fed's balance sheet and where stocks would trade at that point. The S&P 500's recent exuberance has priced in the total expansion of the Fed's balance sheet to the end of the taper, so how much more upside is there?

On June 6, 1944, Allied forces from the United States, United Kingdom and Canada launched the largest seaborne invasion in history by landing nearly 160,000 troops on the beaches of Normandy in a single day...

There was a moment of awkward levity during today's D-Day celebration when a cruel TV producer decided to show both Obama and Putin on the big screen at the same time. And the crowd, of course, goes wild.

While the bulk of the just announced Icahn activist foray into yet another company, this time Family Dollar, is cut and dry, we can't help but wonder: was Phil Mickelson the person buying all those FDO calls just after noon today?

Most commentators are of the view that the Fed’s massive monetary pumping of 2008 has prevented a major economic disaster. We suggest that the massive pumping has bought time for non-productive bubble activities, thereby weakening the economy as a whole. Contrary to popular thinking, an economic cleansing is a must to “fix” the mess caused by the Fed’s loose policies. To prevent future economic pain, what is required is the closure of all the loopholes for the creation of money out of “thin air.”

With The Fed tapering proceeding as scheduled and complacency having reached 11 on the Spinal Tap amplifier of over-confidence, Janet Yellen and her fellow PhDs have one last best hope... a second-half pick up to magically confirm escape velocity and 'prove' monetary policy is not simply the enrich-the-rich scheme we all know it is. For that reason, we suspect Yellen, Lew, Obama, and every bull out there will be screaming "move yr arse" to California Chrome in The Belmont on Saturday...During years when there is a Triple Crown winner, the U.S. economy has averaged 4.85% growth in real GDP.

This past week has been all about "anticipation." The markets made little headway during the first half of the week as traders waited in an almost breathless anticipation of the announcement from the European Central Bank. When the news was finally received, investors were initially disappointed but David Tepper stepped into the fray with his ever bullish optimism. The more we read, the clearer it becomes that the world's Central Banks have become caught in a "liquidity trap" which is entirely based on circular logic... Central banks must create asset bubbles in the hopes of stimulating economic activity. When the bubble eventually pops the economic activity evaporates which requires the creation of another asset bubble.

The US Dollar, gold, and oil closed the week unchanged... Treasury yields rose 6-8bps on the week... and the Russell 2000 had its best week in 2014... Sure, why not? VIX was crushed back to a 10-handle as managers lifted hedges and the Tepper-induced short-squeeze from yesterday followed through (+2.5% against a 1% rise in the S&P). The Dow and S&P 500 both closed at record highs (notably rich to the Fed balance sheet). Volume was 20% below average (and that was a payrolls day!). Copper tumbled over 2% - its worst week in 3 months as China's warehouse probe continues.  VIX closed at its lowest close since Feb 2007 (and once again the strange shadowy figure of massive after-0hours volume spikes in VXX appeared).