Archive - Nov 2015

In a world where every market is rigged and manipulated - either by central banks, by algos, or by human actors eager to "get rich quick" - we doubt many will care that the New York Attorney General has finally figured that the FX market was also rigged by spoofing (something we have pointed out since 2013), and yet this latest development is worth pointing out. The reason for that is not so much the companies which are named in this latest crackdown on widespread manipulation in the world's most important market (now that all central banks are engaged in currency warfare) but which are not.

2015 ends with the market cap of Amazon & Google exceeding that of every single Chinese company in the MSCI China index… the US stock market a mere 107 trading days away from becoming the 2nd longest bull market of all-time, with equity leadership driven by “growth” (longest duration of outperformance ever) & “quality” (at all-time relative high)… and $6trn of negatively-yielding government bonds, $17trn of bonds yielding <1%, and the Fed expected to raise the Fed funds rates for the 1st time since 2006.

A reasonable argument can be made that the temperament of the USA is worse than that of Germany in 1932. We’re more foolish, feckless, and savage, our politics more ridiculous, and the wave we’re riding is much more dangerous.

Authorities in Belgium have extended threat level 4 (the highest) for Brussels on Monday which presumably means that a "serious and imminent" threat still exists. One of the 15 people arrested over the weekend was charged in connection with the Paris attack and the going assumption is that police are still looking for two unidentified men, one Jihadi John accomplice, and Salah Abdeslam. 

As usual, S&P was late, but just over three months after our explicit warning, the rating agency finally came out with the catalyst we have been expecting when moments ago it said that it had "placed its 'BBB-' long-term corporate credit rating on Hong Kong-based supply-chain management service provider Noble Group Ltd. and the  'BBB-' issue rating on the company's senior unsecured notes on CreditWatch  with negative implications." In other words, Asia's Glencore is about to be junked.

The Federal Reserve has been telegraphing to markets that they are going to raise the fed funds rate by 25 basis points next month at its December Fed Meeting.

Since 20 March 2015 a new gold price fixing organized by the London Bullion Market Association has been in operation. It has replaced the previous price determination process, which was in place for more than a century and became subject to criticism as it was highly vulnerable to manipulation. Has manipulation now ceased?

Treasury yields are at the lows of the day (despite relative equity strength) as this morning's triple whammy of weak data (CFNAI, PMI, and Existing home sales) confirms fears of Fed policy errors. The extreme short-positioning across the entire Treasury complex is likely making a few nervous as 30Y yield breaks back below 3.00% for the 3rd time in 3 days... and the 2s30s curve breaks to 7-month lows.

Just an hour after Bernie Sanders exclaimed that the Pfizer/Allergan merger would be a disaster for Americans who already pay the highest prices in the world for prescription drugs, Hillary Clinton has come out swinging in her most populist manner lambasting Republicans for "enabling tax inversions" and vowing to "crackdown" on companies moving abroad to "avoid paying their fair share."

Perhaps at a yield of just under 1%, the highest since May 2010, there is an increase in relative value demand. Nowhere is this more visible than when looking at the German 2 Year Bund, which earlier today hit a new record low, just shy of -0.40% (yes, negative).

Amid all the singing and dancing over Spain's miraculous recovery and Europe's renaissance on the back of Draghi's money-printing machine, it appears - just like in America - that below the glossy veneer of engineered equity and bond prices, all is not well. As Xinhua reports, the average wage in Spain has fallen to its lowest level since 2007, according to figures released by the Spanish Ministry of Finance, and after peaking at 19.3 million in 2009, the number of workers is also collapsing. It appears Catalan is righty to want out...

The American people have been forced to pay untold millions for a ten-year CIA and Pentagon program to undermine and overthrow the Syrian government, and now we are supposed to pay millions more to provide welfare for the refugees Obama created. If Obama wants to take in refugees from the chaos in Syria, there are probably plenty of vacant rooms in the White House.

From an intraday high of $97.64, Valeant shares are down 10% this morning as the last few days' short squeeze and hope-fueled stability in the hedge fund hotel has given way to more 'first mover advantage' across the levered trading community. As we noted here, this is what hedge fund panic looks like.