Archive - Aug 17, 2015

According to the Savannah River site, a potential security threat is in progress that has caused emergency response. SRS says site barricades are closed to incoming traffic. SRS is the only hardened chemical separations facility still operating in the U.S. The primary mission of the H-Canyon Complex is to dissolve, purify and blend-down surplus highly enriched uranium from both within American borders and materials that come from other countries.

Will anything ever make a difference?

One doesn’t have to look very far to find evidence that the Fed’s monumental attempt to corner the Treasury market is producing all manner of distortions and anomalies. For example, one could point to episodic instances of acute collateral shortages manifested by "immensely" special repo rates. If that’s too esoteric for you, just go and have a look at a 10Y chart from October 15 of last year and ask yourself what happened there. With the evidence piling up, the NY Fed decided to take a look under the hood...

What does China's "surprise" move to devalue the yuan mean for "broken" EM currencies? Nothing good, Morgan Stanley says. In short, the path ahead is riddled with exported deflation and decreased trade competitiveness against a backdrop of declining global growth and trade.

August is the 2nd most volatile month in US equities with more daily swings of 1% or more than any other month (except October). As S&P Capital IQ's Sam Stovall notes, the current market's lack of direction may be deceiving as high beta stocks (which tracks the 100 companies in the S&P 500 that fluctuated the most relative to the index during the past 12 months) are plunging (in correction).

For the first time since March 2009, WTI Crude closed with a $41 handle. After an all-day levitation (along with stocks), it appears the world and their pet rabbit is now aware of the pre-NYMEX close ramp and thus outspoofed themselves and so WTI fell through a bidless vacuum to the lows of the day...

"Follow the trail here," veteran Washington Post journalist Bob Woodward told MSNBC, as he compared Hillary Clinton's private email account to the Nixon tapes. As The Hill reports, Woodward concluded that the fight over Clinton’s emails wouldn’t end soon: "This has to go on a long, long time...and the answers are probably not going to be pretty."

Another day, another lie/fib/untruth exposed in government. As WSJ reports, after initially admitting that a major security breach had gained unauthorized access to 100,000 US households tax returns, The IRS has now admitted that in fact more than 600,000 breaches (blamed on Russians) were attempted and an additional 390,000 taxpayers were potentially affected.

The nation’s largest privately held company, Cargill, has agreed to purchase Norwegian-based EWOS, one of the world's largest suppliers of feed and nutrition for farmed fish. The $1.5 billion deal signals Cargill’s entry into salmon and trout markets and is the company’s second aquaculture deal in the past two months after it announced a $30 million shrimp feed facility project in Equador with Naturisa. 

Greek PM Alexis Tsipras has lost the support he needs to win a confidence vote, setting up the possibility of snap elections. Meanwhile, German Chancellor Angela Merkel's bulletproof reputation will be tested on Wednesday when the Bundestag will be forced to vote on the Greek bailout without an assurance that the IMF will ultimately shoulder a portion of the burden.

The downturn in China is “our” downturn. All the recent happy talk, due to unsuitable extrapolation and nothing more, has melted away yet again. In short, the same trend dating back almost four years now is quite expectedly unaltered by whatever any central bank does or does not do. “Stimulus” is just noise against all that, at best; at worst it actively contributes to the instability of the decline.

We show the answer on the chart below: it shows the current price of the S&P energy sector juxtaposed with where the sector would be if one applied a 13.6x multiple to every EPS data point in its history. Not surprisingly, it reveals an energy sector trading at 262.3, about 50% below the current price. It means that the current energy sector price of 506, which is 93% higher to the implied price, has a long way to drop if and when multiple mean-reversion finally sets in.

Volumeless levitation against every other asset class... or QE4 pricing in?