Archive - Oct 14, 2015

First The Bank of Japan destroyed the Japanese bond market, and then, back in May we warned that The Bank of Japan had 'broken' the stock market. Now, it appears the all too obvious consequences of being the sole provider of buying power in an antirely false market are coming home to roost as Nomura reports the "temporary suspension" of new orders for 3 leveraged ETFs - the largest in the world - citing "liquidity of the underlying Nikkei 225 futures market."

Between the plunging market-implied rate-hike probabilities and Fed-Whsiperer Jon Hilsenrath's WSJ piece this evening strongly hinting at no hikes in 2015, the 'relief' rally in Asian FX (and Japanese stocks) is - in a word - insane. If the world's central banks mandates are "price stability" in whatever format they believe that to manifest, they have well and truly failed. The Won has jumped most since 2011, Ringgit and Rupiah are soaring over 2%, and Nikkei 225 is up over 400 points from the US session close...

ILLINOIS WILL DELAY PENSION PAYMENT BECAUSE OF CASH SHORTAGE

Allen Dulles, the CIA director under presidents Eisenhower and Kennedy, and younger brother of Secretary of State John Foster Dulles, was the architect of a secretive national security apparatus that functioned as essentially an autonomous branch of government. In a Cold War-era world full of spy games and nuclear brinkmanship, in which everyone is either a good guy or a bad guy, Dulles - who deceived American elected leaders and overthrew foreign ones, who backed ex-Nazis and thwarted left-leaning democrats - falls firmly in the latter camp.

Now that it is election season, we have all sorts of politicians running around proclaiming that America is the greatest nation on the entire planet. And just this week, Warren Buffett stated that “America’s great now — it’s never been greater“. But is it actually true? Is the United States still a great nation?

In the world's most populous communist country where jobs used to be guaranteed - by definition - to anyone, in any walk of life, it has suddenly become next to impossible to progress up the career ladder, something which will result in great social angst and instability in the coming years.  According to China Daily, competition for white-collar jobs became fiercer in the third quarter, with more than 35 job seekers contending for the same position on average. This is a jump from 26 and 29 in the first and second quarters this year, a Chinese human resources website said on Tuesday.

"While it is human nature to think and expect along linear lines, our World just doesn’t work that way. Instead, everything moves in cycles, some short and shallow, while other cycles are long and deep. What we are experiencing today is the likely turning point in a very long cycle of borrowing, borrowing and then borrowing some more."

It only makes sense in this "good news is bad news" market that the best outperformance this year has been achieved by being ultimately contrarian and fading the crowd. As BofAML warns, 2015 is another year of position-driven alpha as selling the 10 most-overweight stocks held by active managers and buying the 10 most-underweight stocks crated a stunning 17 percentage point spread this year...

"When I read that the report on the downing of the Malaysian airliner over Ukraine was being put in the hands of the Dutch, I knew that there would be no investigation and no attention to the facts. And there wasn’t."

Some of Russia’s international partners have “oatmeal in their heads” --Vlad

In the four or so weeks after the August 11 China deval, all anyone wanted to talk about was FX reserves. Goldman has endeavored to tally up currency intervention as a percentage of reserve money in Asia during what they’re calling the “China tantrum”. Note the rather scary looking figure for Malaysia.

The single most important “unknown unknown” today is any random event that may unexpectedly cause global central banks to withdraw their stated support of markets. Moral hazard has contributed to a significant build up in short and leveraged volatility creating a shadow ‘volatility gamma’ that reinforces the current trend in volatility direction. Rising volatility is followed by more rising volatility and vice versa. The pattern is creating a pro-cyclical monster of short volatility that, if left unchecked will contribute to a repeat of the May 2010 Flash Crash or 1987 Black Monday Crash. August 2015 was just an appetizer.

"First off, the premise of the question, I would argue that anybody selling into the industrial market is not selling into a non-recessionary environment. The industrial environment is in a recession - I don’t care what anybody says, because nobody knows that market better than we do. You know, we touch 250,000 active customers a month.

The Kremlin is adopting a “slightly” different strategy when it comes to combatting terror in the Mid-East than that adopted by the US and its Western and regional allies...

For over 3 years we have pointed out that the surging youth unemployment was Europe's (if not the world's) scariest chart, because the last thing Europe needs is a discontented, disenfranchised, and devoid of hope youth roving the streets with nothing to do, easily susceptible to extremist and xenophobic tendencies: after all, it must be "someone's" fault that there are no job opportunities for anyone. Well, as Bloomberg reports, The World Bank has an unsettling message for young people around the globe: unless we create 5 million jobs a month, the situation is going to get worse.