Archive - Oct 2015

We're all minions now of the stock market. By cowering in terror of a stock market tantrum, the Fed has surrendered everything: its vaunted (and completely phony) independence; its duty (yes, go ahead and laugh) to the nation and the real economy - everything. The Fed is nothing but an abject slave of the market.

Stop-running algos are panic-buying WTI crude this morning as a slightly disappointing GDP print must have triggered the "bad news is good news" function to horde oil with both hands and feet...

The long awaited inventory correction is finally arriving. Moments ago the BEA reported preliminary Q3 GDP, which at 1.49%, missed both sellside consensus expectations of 1.6%, and tumbled from the 3.9% reported in the second quarter as the quarterly volatility continues at an unprecedented pace. This was the second lowest quarterly GDP print since Q1 2014 excluding the "double seasonal adjustment" meant to cover up the collapse in Q1 2015 GDP.

The raw initial claims data rose 1k from 259 to 260k (beating expectations of 265k). But the less-noisy 4-week average of initial jobless claims has slid further this week - to 263.25, its lowest since Dec 1973 - as the divergence between "useless at this point in the business cycle" claims and 'real' job cuts has never been wider.

When it comes to the Fed's current "data dependent" thinking there is absolutely no agreement among the experts: it may or may not hike in December, or it may or may not hike in the 2016 election year. There is, however, much  agreement that what the Fed is doing can best be summarized with two simple words: "policy mistake" as the following chart showing the appearance of these two words in Bloomberg news stories confirms.

That didn't last long. You can fool all of the algos, and some some of the people some of the time.

As tipped earlier this month, Deutsche Bank just turned in a Q3 loss of €6 billion as a raft of writedowns hit the bottom line. The bank also announced more details of "Strategy 2020", which include layoffs and a corporate rethink that will see Europe's largest bank exit a multitude of markets. 

• Fed puts December rate hike firmly on the agenda (Reuters)
• Charting the Markets: A More Hawkish Fed Rattles Investors (BBG)
• China to modernize and improve fiscal and tax systems (Reuters)
• Deutsche Bank to Cut 35,000 Jobs in Overhaul (WSJ)
• Deutsche Bank Said to Near $200 Million Sanctions Settlement (BBG)
• Barclays profits drop as it abandons cost-cutting targets (FT)

While China had previously hinted that it's one-child policy is being phased out, most notably in 2013 when sources close to the National Population and Family Planning Commission said China may relax its one-child policy at end-2013 or early-2014 (read end) by allowing families to have two children, moments ago, during the Fifth Chinese Plenum, this 37 year old policy was formally scrapped and China will henceforth allow two kids for all couples in what is a clear bid to boost growth.

Based on the overnight market prints which are an oddly reddish shade of green, it took algos about 12 hours to realize that the reason they soared for most of October, namely hopes of an easier Fed which were launched with the terrible September jobs report and continued with increasingly worse US economic report in the past month, can not be the same reason they also soared yesterday after the announcement of a more hawkish than expected Fed statement which envisioned a stronger US economy and a removal of foreign considerations, which even more curiously took place on even worse data than the Fed's far more dovish September statement.

Gold’s biggest enemy is a brilliant Nobel Prize winning economist, university professor and columnist for the New York Times. Sadly, he is also a con man. 

Nearly all empires end due to over-extension. If brave people from Ottawa to Baghdad simply say “enough” within a brief space of time, hopefully this empire can dissolve relatively peacefully like the Soviet Empire did, leaving its host civilization intact, instead of dragging that civilization into oblivion along with it like the Roman Empire did. But beware, the imperial war party will not go quietly into the night, unless we in their domestic tax base insist that there is no other way. Russia’s entry into Syria has thrown all of the neocons’ schemes into disarray, as even Jordan, that favorite proxy force in Israel’s dreams of regional dominance, has begun coordinating with Russia, in spite of its billion dollars a year of annual aid from Washington. Et tu Jordan?!

"Debates in Turmoil" would have been an appropriate summary for tonight's free-for-all CNBC-sponsored screamfest in Boulder, Colorado. Argumentative moderators, mis-stated facts, time complaints, and general whining was everywhere but Trump still managed to come out the other side of this gauntlet unscathed. One major highlight included Santelli and Paul pushing 'Audit The Fed', calls for gold-backed currency,and exclaimed that The Fed "has been a great problem" in US society. However, what was odd was the apparent slights to Trump and Carson (questioned less directly) which resulted in an aberrantly low 'talking time' for the leading candidates; as Politico noted, the repeated bursts of anger and anarchy were prompted, in part, by questions from the moderators that veered, at times, beyond sharp into contentiousness.

"What does this mean for investors? It means that at some point in the next year or two, I think we are all going to have a Henry Hill “Goodfellas” moment, where we think that we understand the conversation going on around us, where we think that we’re engaged with our social system in the usual way … and then everything will go sideways in a split second, and we will suddenly and with extreme clarity realize that we don’t understand anything at all except that we’re sitting at a table with a maniac."