Archive - May 19, 2015

"Yes, The Fed is feeding inequality; but it has to keep rates low for the good of the economy" - Robert Reich

London’s property market is still hell bent on going crazy as if it has overeaten and become over inflated yet again.

Around 1537ET YHOO shares began a flash-crash-like free-fall with ascending volume on an accelerating plunge in price. BABA did not snap until 1544ET when it cracked lower and the arbs desparately tried to keep the two firms tied together somehow. Initial chatter was import tariff news from China (which may have explained the huge divergence between the two) but soon after Bloomberg reported that the U.S. Internal Revenue Service is considering a rule change that might complicate YHOO efforts to exit its BAB stake 'efficiently'.

Presented with no comment (but a big shrug of the shoulders)...

If you happen to be particularly adept at wielding a sword and believe strongly that stiff penalties for crime play an important role in deterring future misdeeds, you might consider joining Saudi Arabia’s Ministry Of Civil Service as a “Perpetrator Of Retribution.”

With over $4 trillion invested in Russell index-linked products, this year’s rebalance combined with the “Will they/won’t they” Fed rate increase debate could make for an eventful start to summer.

When US Macro data started to crumble after QE3 ended last year, and with it US equities, The Fed unleashed Jim Bullard to suggest that QE4 was possible if things deteriorated... and in that moment, everything broke. The last few months have seen expectations of a European recovery dashed as macro data has disappointed greatly - now weaker on the year. So what is Draghi to do? Easy - Fed playbook: unleash Benoit Coeure to suggest moar QE sooner and maintain the illusion of future success in stock prices (even as data collapses)...

• A tendency to examine too few alternatives; A lack of critical assessment of each other’s ideas;
• A high degree of selectivity in information gathering; A lack of contingency plans;
• Poor decisions are often rationalised; The group has an illusion of invulnerability and shared morality;
• True feelings and beliefs are suppressed; An illusion of unanimity is maintained;
• Mind guards (essentially information sentinels) may be appointed to protect the group from negative information.

For the last 9 days in a row, no matter what is occurring in the markets, US Treasuries have begun to sell-off at 1330ET... Some have suggested this points to funding issues being a driver of recent weakness, with the USD up by the most in 2 days since oct 2011, we shall see if the need to sell down USTs is there for the 10th day in a row...

The largest problem with the data sets below is that they are all subject to large historical revisions. This is why the NBER is ALWAYS well after the fact in pronouncing the start and end of recessions in the U.S. economy. Given the ongoing interventions from the Federal Reserve and the current administration, it is likely that many of the statistics, and seasonal adjustment metrics, have been skewed in recent years. In the quarters ahead it is likely that we could see rather sharp adjustments to historical data which may suggest the economy has been far weaker than headline statistics have suggested.