Archive - Oct 2015

Trick... No Treat!

In a "world of disappointments", where beta is king and where alpha has become a joke (or, now that equity is a risk-free asset and debt is risky, is outright punished) where growth no longer exists, drowning under the weight of $200 trillion in debt, and where value strategies have been all but forgotten replaced instead with "stories" about companies that have no cash flows but just might be "the next big thing" (one day), what should one to do? Why, engage in the most idiotic of strategies: chase momentum.

"We expect the Kingdom of Saudi Arabia's general government fiscal deficit will increase to 16% of GDP in 2015, from 1.5% in 2014, primarily reflecting the sharp drop in oil prices. Hydrocarbons account for about 80% of Saudi Arabia's fiscal revenues."

Americans are increasingly likely to respond positively to a placebo in a drug trial – more so than other nationalities. That’s the upshot of a recently published academic paper that looked at 84 clinical trials for pain medication done between 1990 and 2013. These findings, while bad for drug researchers, does shed some light on our favorite topic: behavioral finance. Trust and confidence makes placebos work, and those attributes also play a role in the societal effectiveness of central banks. That’s what makes the Fed’s eventual move to higher rates so difficult; even if zero interest rates are more placebo than actual medicine, markets believe they work to support asset prices.

While the Valeant soap opera has had constant, heart-pounding drama for weeks and following yesterday's report that it allegedly fabricated prescriptions, even an element of career-ending (and prison-time launching) criminality, so far one thing had been missing: an antagonist tied to Goldman Sachs. We are delighted to reveal the "missing link", one which ties everything together. Its name is Howard Schiller.

According to multiple reports, the Obama administration is set to send dozens of "military advisers" to Syria. They will serve in an "advise and assist" role in the effort to rout ISIS. Cutting through the obfuscation: Washington needs to figure out how to salvage its strategy in Syria - and fast. Make no mistake, this will be a disaster...

To believe this isn’t a bubble is to believe that all of the hot momo money from insti’s, high/biotech, flipper, flappers, fraudsters, and foreigners buying houses is fundamental and here to stay, which is exactly what everybody thought in 2006. Or, to believe that interest rates will keep falling 1% per year going forward, which would lend an element of support to prices.

The last time S&P 500 rallied at such a pace (from an extreme of oversoldness) and reached such an extreme level of overboughtness, things went south rather quickly...

Having crushed all in front of them to win The World Cup, the US women's football soccer team met with President Obama at The White House this week who just could not resist but pose for another selfie... adding that "this team taught all of America's children that 'playing like a girl' means you're a badass."

"His name is perhaps the strongest example of those who support anything that weakens nation states, they support everything that changes the traditional European lifestyle. These activists who support immigrants inadvertently become part of this international human-smuggling network."

Nearly a year after CNBC said it would no longer rely on Nielsen to measure its daytime audience (due to the collapse in viewership we had previously profiled), it has managed to do it again, only this time slamming not the financial cheerleading cable network but its Comcast affiliate, NBC News, whom its just cost hundreds of millions in advertising revenues after moments ago Republican National Committee Chairman Reince Preibus announced he was suspending the partnership with NBC News for the Republican primary debate at the University of Houston on February 26, 2016.

With inventories building, production limping lower, and prices tumbling (and spiking), Baker Hughes reported a 12 rig drop in the total rig count to 775 rigs (the 10th week without a rise in total rig count). However, the oil rig count tumbled 16 to 578, the 2nd biggest weekly decline in 6 months to its lowest since June 2010.

One would think the market is trading Elon Musk’s reputation instead of two utterly separate companies, considering how they look like clones.