Archive - 2014

While America is preparing to usher in the coldest days of the 21st century, some other places around the globe are hardly as worried. Below is a photo from Rio's Ipanema beach over the weekend, where temperatures hit 51 degrees. Celsius.

Faced with dramatically declining demographics, sliding macro fundamentals, cost pressures on firm margins, slumping support among the people, and a recently rising JPY, Shinzo Abe, Japan's Prime Minister has decided an Op-Ed is the way to go to unveil his 'government knows better' concerted effort to raise Japanese worker's pay. The collective denial is strong among the leadership - no better expressed than this gem: "Abenomics, I am proud to say, has been successful in a more fundamental sense: we have rebooted Japan’s collective psyche." However, Abe's approval rating has never been lower - falling dramatically in the last month or two.

With Trader Monthly magazine having, ironically, gone out business long ago, all those traders whose egos demanded that their insider trading connections put them at least in one of the iconic "Top X under X" league tables, pardon, rankings, had to bide their time in expectation of one day when their prowess to frontrun others or move markets with repeated calls to 555-7617 (with or without references to Anacott Steel) would be appreciated by such sterling Wall Street "experts" as Anthony Scaramucci. Well, for this year's crop of some 30 traders under 30, the day has arrived. And while Forbes may not be Trader Monthly, the amusement, the hubris and the behind the scenes dealing to appear in such a list, sure are still the same...

The Media Needs to Point Out the Hypocrisy of These Blowhards

Velocity Logic is designed to detect market movement of a predefined number of points either up or down within a predefined time. Velocity Logic introduces a momentary suspension in matching by transitioning the futures instrument(s) and related options into the Reserved/Pause State. When a lead month futures instrument is placed in the Reserved State, the following actions occur in the corresponding options markets: Options auto-reserve functionality automatically pauses matching in the associated options and options strategies markets. All resting mass quotes are canceled when the auto-reserve functionality is initiated. This Reserved State is maintained for a few seconds after the futures instrument has resumed trading. During the reserved period, customers can submit, modify and cancel orders. Mass quotes are rejected. Allowing the user community this momentary opportunity to enter, modify, or cancel orders in this situation provides the ability to re-establish the proper market prices. The market data Security Status (tag 35-MsgType=f) message is used to communicate the instrument status during the Velocity Logic event.

US equities, despite the Bernanke bounce on Friday afternoon and the first POMO of the year today, are in trouble (relatively speaking). The last 3 days in the S&P are the worst since pre-Taper and take stocks back to 10-day lows.  Trannies are the most troubled, down over 2% from the 2013 closing highs. Gold and silver are back in the green (up for the 3rd day as stocks drop for the 3rd day in a row). Treasuries are well bid (10Y at 2.95% - 10-day low) while the USD is being sold this morning (on JPY strength which is carrying stocks lower).

So far, city employees of bankrupt Detroit have stoically withstood all direct and indirect eliminations of their entitlements and retirement benefits, which was to be expected: after all as per a recent finding, they are merely an unsecured claim in an insolvent entity. However, following the latest shot across the bow from Detroit's emergency manager Kevyn Orr, which freeze pension plans for all non-uniform employees, said stoicism will likely be acutely tested.

UPDATE: Gold futures are back in the green for the day... (and Bitcoin is back under $1000)

Rumors of a 'fat finger' abound from the gold futures pits but the precious metals complex just collapsed instantaneously... and the market was halted for the now traditional 10 seconds as circuit breakers were triggered, only this time instead of Stop Logic the event was "Velocity Logic" or lack thereof. Of course, the timing is perfect as it occurs right before the first POMO of the new year.

First it was the Manufacturing ISM posting its first drop since September, and now it was the Services ISM's turn to not only record its second miss to expectations (of 54.5) in a row, but drop from 53.9 to 53.0, for the lowest print since June. However, the most notable development in today's release in addition to the slide in Inventories from 54.0 to 48.0 (impacting Q4 GDP) was the tumble in New Orders down from 56.4 to 49.4 - back to contraction territory: this was the first contraction in the New Orders index since July 2009 after 52 consecutive months of growth. Is it time to start worrying about the Untaper yet?

Just when funds thought it was safe to buy short-term Treasuries and rehypothecate them to immeasurable leverage, yields on Bills due after the February 7th debt-ceiling suspension ends are lifting significantly in recent days. Since the year-end liquidity squeeze, yields on the March bills have developed a hump indicating concerns beginning. Of course, levels remain very low for now but the 'kink' is notable.

Bai Zhongren, the president of state-run China Railway Group - the state-owned engineering giant behind many of the country's largest railway projects - committed suicide over the weekend. As SCMP reports, Bai is among several senior railway officials and executives who have committed suicide since corruption scandals implicating the senior railway officials began to come to light three years ago. However, there have been no direct links between China Railway Group and the corruption cases (yet) but Chinese courts are about to hand down verdicts on several very senior executives.

"It's a very straightforward result," UCSD professors Joseph Engleberg calmly states, hospitalizations rise on days when shares fall, and "people are hospitalized disproportionately for mental conditions." Equity-market losses appeared to induce 3,700 market-related hospitalizations a year in California, which implies visits add roughly $650 million a year to U.S. health-care costs when data from the most-populous state are extrapolated nationally - another additional cost of QE? The findings, Bloomberg reports, show a one-day drop in equities of around 1.5% is followed by about a 0.26% increase in hospital admissions on average over the next two days.

Unstable eurozone states are particularly vulnerable to default because they no longer have their own sovereign currencies, putting them in a similar position as emerging countries that borrowed in U.S. dollars in the 1980s and 1990s.

In 2013, corporations injected roughly half of the total POMO cash used by the Fed to push the S&P straight-line higher.

The rise in equities does not mean stocks "buy" more commodities in the real world - they buy less.