Archive - Nov 2015

Vladimir Putin’s approval rating in Russia has soared to yet another all time high; leaving all those who don’t like Putin or were hoping for some sort of regime change in Russia continue to be out of luck. One reason why we are even posting about this is that the Western press has also reported on the event, employing a somewhat less neutral tone of voice. What makes the sour grapes style reporting in the Western media especially funny is that while it is true that the Kremlin exerts extraordinary influence on the media in Russia, one wonders in what way their reportage on Syria is different from the reporting in the happily self-censoring US mainstream media on the Iraq war, especially in the run-up to said war.

Confusion reigns... China's Manufacturing PMI is in contraction according to both the Official and Markit/Caixin measures (but the former was flat and missed while the latter rose and beat "confirming economic stability" according to the 'official' press). Following the largest strengthening fix for the Yuan in 10 years, both the onshore and offshore Yuan are weakening by the most since the August devaluation. Finally, having cliff-dived at the open, Chinese stocks have bounced back to unchanged on the Ciaxin PMI beat (but US equities drift lower still).

Things are getting crowded in the once-exclusive unicorn club...

The American public believes that homicides and gun deaths are increasing in the United States. Those who think violence is getting worse should probably watch less television and look around them instead. The murder rate in the US is currently similar to 1950s levels. Meanwhile, the number of privately owned guns (and gun commerce in general) in the United States has increased substantially in recent decades.

Despite the world seemingly exuberant at Turkey's fraud election, sparking the biggest rally in the Lira since Nov 2008 (confirming once again that "markets love totalitarian governments,") it appears the centrally-planned machinations of the US equity markets are not living up to their promises of wealth for all (and rate-hikes don't matter). US and Japanese equity futures are opening notably lower, erasing all of the post-Fed exuberance with Dow Futs down over 200 points from pre-BoJ hope highs. Finally, gold futures were hammered lower at the Asia open (on heavy volume) only to rip back to practically unchanged.

Succinctly summarizing the state of the mainstream media's cognitive dissonance at the state of 'real' America...

In an interview with Spanish newspapers that was published October 31st, U.N. Secretary General Ban Ki-Moon condemned U.S. President Barack Obama’s demand that Syrian President Bashar al-Assad be removed from office, and Moon said: “The future of Assad must be determined by the Syrian people." The U.N. Secretary General's detailed comments are implicitly blaming all of this - lots of blood and misery - on U.S. President Obama, and on the “many Western countries” who ally with him and have joined with him in demanding regime-change in Syria. Ban ki-Moon took a rare courageous position here: what he said was correct, though it’s virtually unmentionable in the West.

In all, while balanced mutual funds and risk parity funds are the ones which appear to have triggered the equity rally since the end of September, the rally was amplified at around mid October by CTA capitulation. The reversal of CTAs equity exposure from a short to a long position means that all four sectors, CTAs, Discretionary Macro hedge funds, risk parity funds and multi-asset or balanced mutual funds, are currently long equities.

"So again, I repeat, we're not considering any open-ended commitment. We're not considering any boots-on-the-ground approach."

Late on Friday afternoon, after recording its biggest monthly points gain in history, the S&P500 unexpectedly took a surprising swoon lower to close trading well in the red. This chart may be the reason why.

Central banks can’t afford a big correction to take place as it goes counter to their mandate, a stable growing economy, hence they interfere every single time a correction of size is about to unfold. And any threat to the global economy must be prevented. Now that fiscal year end mark-ups are over for many funds buyers have to prove how committed they are to driving markets higher. Price will ultimately confirm how this will play out, but altogether this chart is an amazing construct of symmetry and, as fans of structures and symmetry, it certainly has our attention. We can’t recall ever seeing such a precise structure.

"Russia and Iran have very similar objectives in that they both want to eject U.S. influence from Iraq. Any success that the militias have bolsters that goal."

While redistributive social spending in the US is indeed different from many other countries, the overall magnitude is actually greater (both proportionally and in absolute terms) in the US than in almost all other countries measured. One can argue that the way that the wealth is redistributed through public policy in the US is "wrong" or "suboptimal." But, to argue that there is less redistribution as a result of public policy in the US than elsewhere is simply wrong.

• There have been 606 global rate cuts since LEH
• $12.4 trillion of central bank asset purchases (QE) since Bear Stearns
• The Fed is operating a zero rate policy for the longest period ever (even exceeding the WW2 Aug’37-Sep’42 zero rate period)
• $6.3 trillion global government bonds currently yielding <0%
• $20.0 trillion global government bonds currently yielding <1%

In a shockingly quick confirmation of our gravest concerns, Admiral John Richardson, chief of naval operations, told The FT that the navy was reassessing its global posture in the face of the Russian activity, which stretches from the Black Sea and Mediterranean to the Pacific. Amid China's island-building in the South China Sea (30% of global trade), and Russia's highest level naval activity in 20 years in The Mediterranean (20% of global trade), Richardson warns, rather ominously, the "ambiguous motivations" of China and Russia raised fears about the health of a global system that ensures freedom: "It again perturbs that global system," he said, adding that "the current model... has been threatened?"