Archive - Jul 2015

The real reason why retail investors weren't impacted by the NYSE's halt is a hard truth... to retail investors, the NYSE is always dark

Where Do Retail Investor Orders Go? The simple answer: to the highest contracted bidder. Stock "wholesalers" or internalizers like Citadel or Knight pay retail brokers lots of cash to execute retail trades, essentially creating a "third market". Why? Because in a high frequency trading world, where stock prices have never been more fuzzy to the end user, but crystal clear to those that spend enormous sums on colocation and PhD employees, it's never been easier to print money (not unlike Bernie Madoff's scheme in the 90's). But that is the subject of a much, much longer story. Someone should write a book.

Sometime this fall, the Federal Reserve will begin a new tightening cycle. Publicly, Federal Reserve officials appear to be confident that the American labor market may be overheating or that inflation may be on the way in. Is this the case? In looking at Employment, Industrial Production, Consumer Prices, Capacity Utilization, Retail Sales, and the West Texas Intermediate price of oil, there's no evidence that the Fed should raise rates. What is the Fed worried about? Probably, and almost exclusively, it's financial asset price appreciation.

The moment everyone has been waiting for has finally arrived, by which of course, we mean the moment when the market cap of AMZN would finally surpass Wal-Mart.

Always a silver lining...

Speculative bubbles that burst are often followed by an echo bubble, as many participants continue to believe that the crash was only a temporary setback. But, echo bubbles aren't followed by a third bubble.

Earlier we asked in "one may wonder if NATO-member Turkey's land invasion of Syria, which many have said was long overdue following months of rhetoric and belligerent posturing, under the pretext of ISIS "liberation", has just begun." A following report from the WSJ largely answers our question: citing unnamed defense officials, WSJ reports that after months of negotiations, "Turkey has agreed to let the U.S. military carry out airstrikes against Islamic State fighters from a U.S. air base near the Syrian border."

Fast forward to this morning when in yet another Reuters piece, we "find" that the narrative has shifted once more and that now, "traders from Hong Kong to New York are pointing the finger at others for being behind the move while struggling to unmask the mystery sellers." In other words: the "hunt" for the great gold "bear raid leader" has begun.

Chinese Electricity Consumption year-to-date grew at 1.3% year-over-year in June. As China People's Daily reports, this is the slowest pace for mid-year in 30 years according to China Electricity Council.

Innovation in technology reduces the need for labor. More individuals are sitting outside the labor force increase the demand for available jobs. Increased competition for available jobs suppresses wage growth. It is a virtual spiral that continues to apply downward pressure on an economy based nearly 70% on consumption. Importantly, what small increases there have been in unit labor costs have primarily come at the expense of higher benefit and healthcare costs rather than an increase in wages. As discussed previoulsy, for roughly 80% of the working labor force, wages have declined over the last five years. Janet Yellen is right that wages will have a hard time increasing without a pick up in productivity. The issue is that innovation IS the problem, not the solution. That is unless we begin to include the productivity of robots.

Congress Votes Today to Override State Law and Block Americans’ Right to Know If Our Food Has Been Genetically Modified

In the middle of the biggest criminal scandal involving the Fed, but also an FT-owned expert network (an FT which until today was owned by Pearson), the expert network known as Medley Global Advisors just changed its owners, from the FT/Pearson to Japan's Nikkei, in a transaction advised by Rothschild for the buyer and Goldman, Evercore and JPM for the seller.

There could be trouble ahead....

The U.S. Strategic Petroleum Reserve (SPR), once seen as a cornerstone of America’s energy security, is losing its shine in Washington.

Junk-rated Chicago is paying nearly 8% to issue debt these days and although the city's fiscal woes are set to persist, some asset managers are taking the plunge ahead of a key court ruling scheduled for Friday.