Archive - Jun 1, 2015

It is time for another sacrificial gold market manipulation crackdown (the same gold market, mind you, which CFTC commissioner and HFT lobby sellout extraordinaire Bart Chilton said was completely unrigged). Only it's not Barcalys, JPM, Virtu, Citadel, the NY Fed, the Bank of England, or even the PBOC - i.e., the real market manipulators -  who is the receiving end of the CME's special breed of "justice." It is another "trade from his parents' home" Indian.

The banking system must be doing great... just days after JPMorgan announced mass layoffs, SkyNews reports that HSBC is preparing to announce a revised headcount target, which insiders said that it was likely to be between 10,000 and 20,000 job cuts.

The banking problems we see all over the world are a direct expression of the limits to growth, specifically the limits to debt creation. We can’t continue to borrow from the future to pay for our comforts and conveniences today because we have no real conviction that these debts can ever be repaid. We certainly wish we could, and the central bankers running the money system would like to pretend that we could by making negligible the cost of borrowing money and engaging in pervasive accounting fraud. But that has only served to cripple the operation of markets and pervert the meaning of interest rates — and, really, as a final result, to destroy any sense of consequence among the people running things everywhere.

If the Fed end its strategy of reinvesting TSY holdings, net supply of treasury paper will be close to a trillion dollar per year, for the next decade, as the gigantic pile of securities on the Fed balance sheet shrinks and interest rate expenses explodes.  

"Wall Street’s generous supply of funds to U.S. oil drillers helped create the American energy boom. Now that same access to easy money is keeping them going, despite oil prices that are languishing around $60 a barrel," WSJ says, proving that the era of easy money has in fact led to deflation.

Corruption Is Destroying Basic Science

With signs of cracks in the Equal-Weight S&P 500?s relative performance, we have more evidence that all is not necessarily as rosy as it may seem with the major averages near all-time highs.

s it any wonder Marin Le Pen's Front National Party is a) leading in the polls, and b) pushing for an EU in/out referendum? Whatever it is that France (and/or Europe) is doing, is not working. Despite all the promises, French unemployment has risen practically non-stop for 4 years and just hit a new all-time record...

Over the weekend, we first reported that none other than Nobel prize winner Robert Shiller said that in his opinion, unlike 1929, this time everything - stocks, bonds and housing - was overvalued. Curiously, none other than Goldman's chief equity strategist, David Kostin echoed this sentiment when in his latest weekly note to clients he said that "by almost any measure, US equity valuations look expensive. The typical stock in the S&P 500 trades at 18.1x forward earnings, ranking at the 98th percentile of historical valuation since 1976. For the overall index, the aggregate forward P/E multiple equals 17.2x, a rise of 63% since September 2011, compared with the median expansion of 48% during 9 previous P/E expansion cycles. Financial metrics such as EV/EBITDA, EV/Sales, and P/B also suggest that US stocks have stretched valuations. With tightening on the horizon, the P/E expansion phase of the current bull market is behind us."

Perhaps the most concerning is the fact that should a “systemically important” financial entity go bust, any deposits above $250,000 located therein could be converted to equity… at which point if the company’s shares, your wealth evaporates.

The latest data makes us wonder: is the Chicago manufacturing snapshot no longer an accurate indication of what to expect from the US manufacturing sector, or, the real question, is one of these two data sets not not seasonally-adjusted enough. (that's of course rhetorical: everyone knows that it is the worse data that always needs more seasonal adjustments).

"In a forthcoming report triggered by an Associated Press investigation, the top watchdog at the Social Security Administration found the agency paid $20.2 million in benefits to more than 130 suspected Nazi war criminals, SS guards, and others who may have participated in the Third Reich's atrocities during World War II," AP reports.

The ECB did just as leaked in advance. Moments ago the ECB released its latest QE purchase data in which we find that total bond purchases jumped by over 8% in the month of May, to over €51 billion, from the previous average over just around €47 billion. This was driven by a jump in German (+8.9%), French (+10%), Italian (+7.4%) and Spanish (+8%) purchases.

US Manufacturing PMI dropped to its lowest since January (54.0 May vs 54.10 April) but rose modestly from early month preliminary indications. So despite the harshness of the winter weather and the port strikes, US manufacturing is worse now than at any time since the peak of piss-poor-weatheriness. New orders rose at the weakest pace since Jan 2014 and input costs rose, and Markit suggests The Fed wait on rate hikes and despite Bill Dudley's utterances, Markeit notes the "survey provides further evidence that the strong dollar is hurting the economy." Against this weakness, ISM Manufacturing - in all its seasonally-adjusted glory, rose and beat by the most since Oct 2014 with new orders rising (umm?) and prices paid surging. And finally, construction spending - having not risen for 3 months - it recovered considerably, spiking 2.2% MoM - the most in 3 years.

When the "very serious people" start to admit that the entire house of cards was held together with nothing but bullshit and propaganda, it may be a time to panic...