Archive - Oct 28, 2013 - Story

The National Republican Senatorial Committee has laucnhed a bumper sticker campaign to "remind Americans of the same error messge they are seeing each day when trying to log on to Healthcare.gov."

One has to wonder if somewhere deep down a change is occurring in America. While stock prices soar to record highs, it is clear a growing number of 'real' people are realizing the nonsense that watching a 'market' as anything indicative of reality has become. The latest 'shift' is the appearance on New Orleans local TV of a two-minute primer on an "alternative" school of economic thought - Austrian Economics. While the anchor is careful to add the caveat that the mainstream economists think the world would be a terrible place if they didn't help us along, the brief clip begins with some useful common sense, "the market alone should decide the value of products and services. If a company is not successful, it should go bankrupt." Indeed...

To summarize:

In just the first 9 months of 2013, DM countries have injected $1 trillion in liquidity sourced exclusively by central banks; EMs have injected another $2 trillion driven by bank loan demand.
The total global M2 is over $66 trillion, growing at an annualized pace of over 6%.
The amount of excess liquidity, i.e. the infamous "liquidity bubble" in the global fungible system is "the most extreme ever in terms of its magnitude"

And that's really all there is to know: the monetary music is playing and everyone has to dance... just don't ask what happens when the music ends.

The recent strong rise in the so-called CBOE SKEW index is yet another among the various divergences that make the stock market's current advance suspect. Skew measures the perceived tail risk of the market via the pricing of out-of-the-money options. Generally, a rise in skew indicates that 'crash protection' is in demand among institutional investors. An unusual move in the skew index (which historically oscillates approximately between a value of 100 and 150) is especially interesting when it diverges strongly from the VIX, which measures at the money and close to the money front month SPX option premiums. Basically what a 'low VIX/high skew' combination is saying is: 'the market overall is complacent, but big investors perceive far more tail risk than usual' (it is exactly the other way around when the VIX is high and SKEW is low). In other words, a surprising increase in realized volatility may not be too far away.

Ohio said on Monday that it does not have enough of the lethal injection drug pentobarbital to carry out a scheduled execution next month. As Reuters reports, Ohio is the latest U.S. state to face a scarcity after the European manufacturer banned its sale for lethal injections of prisoners sentenced to death. The European Union is opposed to the death penalty (physical as opposed to economic) and has put pressure on US States to stop the practice. If only there was an anonymous online exchange where 'drugs' could be bought and sold to meet the demands of those looking for a quick fix (or multiple executions) despite the oversight of various freedoms by governments.

With even the Federal Reserve throwing doubt on the veracity (or usefulness) of the 'official' unemployment data (having finally caught on to the reality we have highlighted for a number of years), Petr Pinkhasov has created a more 'real' unemployment index reflecting the reality of every day for the average American...

The last time a Tesla Model S struck an object in the road and burst into flames, it resulted in a rather dramatic stock price demise and a hastily put together PR blitz explaining that "there is nothing to see here, move along." We wondered at the time how soon we would hear the second 'crackle' of battery packs exploding and sure enough, less than a month later, Jalopnik reports (as the clip below shows) another Tesla Model S has caught fire in a Mexico city following a crash. How many Fiskers went up in flames before people started doubting that company's reassurances?

While on the surface today's bond auction of "only" $32 billion in 2 Year paper (last month and previously it was $33 billion or more, which is now declining alongside the dropping US deficit and net funding needs, if not the absolutely flat amount of debt monetized by the Fed), was uninspiring, there was some stirring beneath the surface. Specifically, the high yield of 0.323% was through the When Issued of 0.328%, while the Bid To Cover of 3.32 was above last month's 3.09, and was the highest since the 3.63 in April. Has the trend of declining Bids to Cover finally ended? Looking at the internals shows a return to some recent normalcy, namely that the Directs took down a substantial 30.97%, the highest since February, Indirects had a modest 29.02% allocation leaving just 40% to the Dealers, which was also the lowest Primary Dealer take down since October of last year. Perhaps most importantly, the flatline in the yield which has been in the 0.3% range since August 2011 indicates that absolutely nobody belives the Fed will hike rates any time before 2016.

In these climax years of industrial technocratic society, two opposing forces shape the destiny of government: the desperate effort to control everything versus the decline of the ability to carry out that effort. The result will be the loss of legitimacy and the collapse of government from the highest levels, moving downward until the real power to make anything work re-sets at a feasible and appropriate level — probably very local. This dynamic is seen very clearly in three spectacles du jour: the “national security” (spying) mess, government-sponsored accounting fraud in finance, and the ObamaCare rollout.

In the paradoxical New Normal media world in which the legacy creators of original content (even if most of it is designed to suit a specific agenda) are hopelessly burning cash at an ever faster pace, while those who (at least for the time being) are profitable and cater to the "social network crowd" do so on the backs of kittens, slideshows and headlines designed to attract the lowest common denominator, what is one to do? One suggestion, as the following XKCD table shows, is to rewrite history, while focusing on the only thing that matters: trolling for reads, bobbing for CPM and clickbaiting, of course.

With 'spies like us' who needs enemies. With the world upset at what Obama now claims is all Bush's doing, the installation of a new FBI Director (James Comey) may just have some irony to it; especially since the White House has specifically noted he will be making some 'remarks'. Of course, the hope is that President Obama will use this opportunity to answer a few questions from an uninspired press corps...

This is a topic that has been on our radar screen for a while, but one that very few Americans seem to be paying attention to despite the egregious revelations concerning NSA spying that have emerged recently.The latest push for tracking devices in cars is being sold as necessary in order to raise funds to pay for the nation’s decayed highway infrastructure. For example: As America’s road planners struggle to find the cash to mend a crumbling highway system, many are beginning to see a solution in a little black box that fits neatly by the dashboard of your car. This is simply idiotic. There is already a tax per gallon on gasoline, so people are already being taxed based on how much they drive. Only a control-freak, moronic government bureaucrat would come to the conclusion that the solution to this problem is to install Orwellian tracking devices in people’s cars.

To Bill Gross @PIMCO: If you really want to do good, why not join http://t.co/nn6jp9E2ch like Gates, I and many others have?

— Carl Icahn (@Carl_C_Icahn) October 28, 2013

One of the prevailing themes in recent weeks has been that Spain has transformed out of Europe's economic basket case into a success story. This was further exemplified today by the following quotes by DieselBOOM:SPANISH RECOVERY IS ON TRACK;SPAIN COULD BE FRONT RUNNER OF EURO-AREA RECOVERY. It could, if one listens to bureaucrats peddling snake oily hope, but certainly not based on actual dynamics in its housing market, where mortgage apps have tumbled 90% from all time highs... and certainly not based on loan to companies or households, which continue to be the worst in the Eurogroup.

Last month was all ponies and unicorns as hope was extrapolated that a 19-month high in the Dallas Fed meant this time was different and not entirely cyclical as we have pointed out again and again. Once again it seems the government-budget-based hope has collapsed as even optimism for the future dropped to its lowest in 4 months. This is the biggest miss of expectations on six months and the lowest print in 5 months. Reflecting the margin pressures that we discussed previously, prices received dropped dramatically as price paid soared.