Archive - Feb 2015

First it was ruthless snow (in the winter), then we got a port blockade (caused by well-paid US workers demanding even more), and now, unveiling the last pillar of the holy trifecta of economic disappointment scapegoats, earlier today the secretary of the Department of Homeland Security, aka the "Department of Fear", Jeh Johnson said that in a video the Al Qaeda-linked terrorist group al Shabaab called for attacks on US shopping malls, specifically citing the Minnesota mall, and that the agency is taking this threat against the Mall of America “very seriously” and that people should be “particularly careful” when visiting the mall in Minnesota. It was unclear just how being "careful" would protect one from ad hoc explosive detonations and other mass murder event, but that's a bridge the Department of Fear will cross when it gets to it.

Thanks to global disinflationary pressures driven by the savings glut, an oil glut, and universally high (peak) debt levels (crushing the transmission mechanisms of textbook economists), central planners have gone full ease-tard in 2015. From a 'balanced' 10 easing, 9 tightening bias (~1:1) in December, Morgan Stanley illustrates in the following chart there are now 16 central banks easing and only 4 with a tightening bias (4:1) as it appears the one-trick pony brigade are trying moar of what didn't work the first, second, and last times in an effort to prove this time is different...

After U.S. State Department Spokeswoman Marie Harf announced that the long-term strategy in the fight against ISIS was to create jobs for potential jihadists, countless terrorists began filling out applications. Here are a few examples (along with a blank application for potential jihadists on the job hunt)...

When it comes to the ongoing Greek question, I see a lot of people eagerly jump to conclusions, after the ‘debt deal’, that I don’t think are justified; certainly not yet. The overall conviction in the press seems to be that Syriza has given in on just about all fronts, and Germany and Dijsselbloem are the big winners. But since that may well be the exact position Syriza wants ‘the other side’ to be in, where they think they have prevailed, one will have to try and think a few steps ahead before judging the situation. There’s far more grey area here than many pundits seem to assume, easily 50 shades of it.

Maybe one day investors, or at least the 1%-ers, will finally grasp that in a centrally-planned world in which the central banks themselves assure that there is "no risk", there is also no point in paying billionaire hedge fund managers 2 and 20 to "hedge" away risk, since there simply is none left.  However, since most people are too lazy to do any work (this includes hedge funds themselves), and would rather piggy back on other people's work (such as the rating agencies back in 2005-2007) that day is still far away. So for the time being, to satisfy everyone's natural curiosity why hedge funds continue to suck so bad, here are their biggest long, and far more importantly short, positions.

Geopolitically, China has tweaked its model, but the West, especially the US, has barely noticed it. Essentially, the Beijing leadership finally got fed up with trying to manage a possible reset of the China-US strategic relationship, and be treated as an equal. Exceptionalists don’t do equality. So Beijing came up with its own response to the Obama administration’s political/military “pivot to Asia” – originally announced, and that’s quite significant, at the Pentagon. This is not as much a Chinese pivot to Asia as a Chinese pivot to selected nations in the Global South; and based on a “new type of international relations centered on ‘win-win’ cooperation” – not the bully-or-bomb exceptionalist approach.

Revenue growth that has finally turned a historic corner, because while on the last day of 2014 there was still some hope that S&P500 sales will still grow even if at a very muted pace, as of Friday - for the first time since Lehman - full year revenue growth is now projected to turn negative!

A modern Sisyphus...

This will increase the official gold import numbers...

As the divergence between Syriza's leadership perspective on debt talks - "success...won the battle" - and the Greek voters - "It looks to me that nothing has changed" - grows ever wider, and on the heels of apparent near mutiny last week, there is growing division in the ranks of the newly elected party. Syriza MEP Manolis Glezos penned a stunning rebuke of the party's apparent U-turn and asks his electorate for forgiveness... "Pity, and pity again... I apologize to the Greek people because I have contributed to this illusion... before it is too late, let us react!"

Over the last five years the signal given by investor positioning in options and futures contracts on the 30-year treasury bond has proven prescient. Each time commercial traders have moved to a long position in the long bond rates have been near a peak. Over the last few weeks the commercials have shifted their positioning dramatically, moving from one of the largest short positions to a net long position for the first time in almost a year.

While it is unclear if it is directly related to the recent surge in tectonic activity, overnight another radioactive water leak in the sea was detected at the crippled Fukushima nuclear plant, the facility’s operator TEPCO announced. Contamination levels in the gutter reportedly spiked up 70 times over regular readings. The levels of contamination were between 50 and 70 times higher than Fukushima’s already elevated radioactive status, and were detected at about 10 am local time (1.00 am GMT), AFP reported. After the discovery, the gutter was blocked to prevent leaks to the Pacific Ocean.

Greece moves off front burner. Markets can turn attention to 1) strength of deflationary forces, 2) state of cyclical recoveries, and 3) outlook for Fed policy.

Diversity and the divergent thinking that arises from diverse perspectives are the most important teachers of critical thinking, and critical thinking, in turn, is the most important teacher of realizing the truth about almost all matters in life. We should all make a concerted effort to embrace as much diversity as possible in all facets of our lives.

Apparently it is beneficial to have Dick Grasso (former NYSE Chief Executive and Chairman) along with Jack Sander (former CME Chairman) and General John Abizaid (former head of US Central Command) on the company payroll.