Archive - Dec 17, 2015

"Rising rates and falling profits are not a good combination for asset prices, so we will turn sellers of risk in early 2016."

Please meet the “worst economic forecasters” ever. And while the mainstream media quickly laps up the optimistic outlook of the Fed, you might want to consider their own record of forecasts when making long-term investment bets. Based on statistical history combined with the current underpinnings in the market, the outlook really isn’t as bright as Ms. Yellen suggests.

Take note, these charts signal that the bull markets of the last six years are ending. The markets are primed for another Crash, just as they were in 2000 and 2007.

In America, we often joke that what we post on the internet might land us in prison, but for the time being - though perhaps not for long - we are generally safe to say what we like about the government. We worry mostly only about the “slap on the wrist” of probably being placed on a watch list. A man in Thailand, however, faces 37 years in prison for criticizing the king’s dog on the internet, as well as allegedly insulting the monarchy.

A French court ordered the orange-skinned IMF head to finally face trial over her alleged role in the Tapie payout scandal. What is most unexpected about this outcome is that France's top prosecutor had recommended in September that investigations against Lagarde in the case be dropped.

“After reviewing his email practices earlier this year, the secretary believes that his previous, occasional use of personal email for work-related business, even for routine administrative issues and backed up to his official account, was a mistake."

Yesterday’s hike still leaves U.S. monetary policy extremely loose, and Fed officials have signaled they will act cautiously from to nurture a very tenuous recovery indeed.

"Obviously, if we know where they’re producing the propaganda, we should be doing everything we can to destroy their facilities."

Yes, "obviously."

Natural-gas fell to the lowest ever inflation-adjusted price in its history of NYMEX trading on Wednesday as extremely warm weather continues to limit demand. As we recently explained, the glut in nattie is worse than that facing the crude complex, and while the glut in oil is expected to continue for the next year or so before balancing in late 2016, the pain for liquefied natural gas (LNG) could be just beginning. As one trader warned "this market is in real trouble...just wait for the bankruptcies."

In what appears to be an orderly process, The NY Fed's first Reverse Repo operation since The FOMC 'raised' rates released $105.185 billion of Treasury collateral to 49 banks at a rate 25bps, draining the same amount of system liquidity.  This is being greeted as good news by many as no major disprutions appear to have occurred... aside from, of course, a 6bps plunge in long-end bond yields, 250 point drop in The Dow, and notable weakness in high-yield bonds. While some had feared up to $1 trillion would need to be withdrawn to achieve The Fed's goals, the size of this initial RRP suggests there is considerably less excess liquidty in the system than many would believe... indicating a notably more fragile system than we are being led to believe.

Eren Erdem, the Turkish opposition lawmaker who says ISIS obtained deadly sarin gas from Turkey and who also claims to have proof of Erdogan's role in Islamic State's lucrative oil smuggling business is now under investigation for treason. Just another day in Erdogan's thriving, NATO-backed democracy. 

Cynical short-sellers are targeting some of Wall Street's most famous short-sellers. Amid plunges in the stock prices of David Einhorn's Greenlight Capital and Dan Loeb's Third Point reinsurance entities, Bloomberg reports that bearish investors have piled in pushing short interest (as a percent of shares outstanding) to its highest since 2009.

"The party's over and bond investors who always tend to be more sober types, realize this and have headed for the exits whereas equity investors are so intoxicated they haven't realized that the music has stopped. Equity investors are still gyrating around the dance floor - just as in 1999 and 2007... I believe the Yellen Fed will soon be treated with the same contempt the Greenspan Fed was in the aftermath of the 2008 financial crisis. And they will deserve it."