Archive - Mar 8, 2015

While Russia's envoy to NATO notes that statements by the deputy head of NATO testify to the fact that the leaders of the bloc want to intervene in Russia’s internal politics, and are "dreaming of Russian Maidan," Washington has a bigger problem... Germany. As Der Spiegel reports, while US President Obama 'supports' Chancellor Merkel's efforts at finding a diplomatic solution to the Ukraine crisis, hawks in Washington seem determined to torpedo Berlin's approach. And NATO's top commander in Europe hasn't been helping either with sources in the Chancellery have referred to Breedlove's comments as "dangerous propaganda."

Suddenly everywhere you look, one after another, a story is making its way into the main stream press (albeit a trickle but that’s a tidal wave in comparison) that we may be, in fact; experiencing a “bubble” in stock prices. Even those who still believe in unicorns and rainbows (cue CNBC) are finding it harder and harder to hold onto the magic. Anyone with just a smidgen of common sense knows what’s being presented as “a miracle of economic intervention” has been nothing more than a grand escapade only made possible through the use of monetary smoke and mirrors.

With more than USD 200bn of Treasury securities held by the Fed due to mature in 2016, the Fed will have to make meaningful monetary policy choices in advance. Fed VP Stanley Fischer commented on SOMA maturities in his speech last Friday, but it appears very few have taken notice as yet and even fewer comprehend the challenge soon confronting The Fed. Many believe that Twist had pushed maturities farther “into the future”. The “future” is Q1 2016. (Note: a shrinking balance sheet is a defacto tightening)

Convenient? While two North Caucasus men have been formally arrested and charged for the murder of Boris Nemtsov (and three others arrested as suspected accomplices), The Telegraph reports a sixth suspect decided to blow himself up with a grenade when police surrounded his home in Chechnya. The suspects are the suspected hitmen, according to officials, who added that the masterminds behind the murder are still at large.

Since 1969, when the U.S. U-3 unemployment rate has hit a 6-year low while the stock market is at a 12-month high, the market has been lower 1 year later 12 out of 13 times by a median 14.8%...

Think the current S&P forward PE multiple of 18.1x (which has been higher in the history of the market on only 1% of all observations), and especially when factoring for AAPL which has become the largest contributor to S&P earnings growth on the back of essentially one product, is too high? Unable to find any value in a market which trades where it does only thanks to $13 trillion in central bank liquid "generosity"? Don't be concerned, because Goldman has a trade idea for you. Sell the S&P 500 and instead go "deep value" by buying... the Nasdaq.

Sometime next year Social Security’s $150 billion disability-insurance program will become insolvent. Congressional loosening of benefit requirements, and more-importantly allowing people to remain on disability effectively for life once they gain it (less than 1% of the people on disability return to the workforce in any given year) make the problem one that is utterly intractable without major changes. And so Congress' bipartisan Social Security Advisory Board has urged change...like shifting funds to the Social Security disability fund from the Social Security retirement fund.

How much does a ________ cost in ________ ?

Following a speech at Delft University in Holland, Eurogrpup head Jeroen Dijsselbloem was confronted by a calmly-spoken, rational-thinking Greek student, who explained the misery and insanity of what the EU is doing to Greece... "1000s of Greek have committed suicide because of your policies... you keep on giving loans to Greece to pay back the same loans... its like going one loan shark to another loan shark to get more loans to pay back another loan shark."

Do derivatives confuse you? Do you hate bond math? We feel the same way! So we simplified your life with headache free QE math. Compounded rates, equivalent rates, production functions: who needs old math?

Biotech stocks continue to make new highs on the back of aggressive M&A and pre-revenue IPOs. Bloomberg suggests the bubble may be about to burst.

With all eyes squarely on the ECB as Mario Draghi prepares to flood the EMU fixed income market with €1.1 trillion in new liquidity starting Monday, Soc Gen’s Albert Edwards reminds us that “another type of QE” is drying up thanks largely to the relative strength of the US dollar. "The bottom line is that in a world of over-inflated asset values, the strength of the dollar is resulting is a rapid tightening of global liquidity as emerging economies (and indeed the Swiss) stop printing money to buy the US dollar. This should be seen for what it is — a clear tightening of global liquidity. Investors ignore this at their peril."

The divergence is not just between the US and Europe/Japan, but also China.  

The US population grew from February 2008 to February 2015 by 16.8 million persons, or a 5.5% increase in total population, and on a net basis, not a single one of those 16.8 million persons got a FT (full time) job… while a net 2.7 million were lucky enough to get a (or multiple) PT (part time) job.

"...the creation of money could be an important step for ailing economies"