Archive - Oct 4, 2013 - Story

Be it BBQ judging, investing, picking out an outfit, or even choosing whether or not you’re going to show up for work tomorrow – ConvergEx's Nick Colas notes that there’s a decision making process occurring.  Quite simply, decision making is the cognitive process resulting in the selection of a final choice among several alternative scenarios.  Final choices can be opinions (as in “This brisket is an 8”) or actions (such as “I will invest in tech stocks”), and decisions are both conscious and unconscious.  For investors, financial decisions and how we tend to arrive at them are of particular importance.  The following is a cautionary tale of the 'Top 10' common biases that creep into the decision making process.  Recognizing and eliminating these biases from your financial choices will make you a sharper and smarter investor... or BBQ judge... or whatever it is that you do.

Trading Halt - Extraordinary Event Halt

"Trading is halted because FINRA has determined that an extraordinary event has occurred or is ongoing that has had a material effect on the market for the OTC Equity Security or the security underlying an OTC ADR or has caused or has the potential to cause major disruption to the marketplace or significant uncertainty in the settlement and clearance process."

Wondering what drove stocks higher? Assumed it was all the "hope" for a deal this weekend after Boehner's comments (which were absolutely not conciliatory)? Think again - Only one thing that matters...

The EUR is dumping as EURUSD cracks back to unchanged relative the "shutdown" level from 09/30/13 midnight. Treasury yields are above those levels as are stocks with gold below as it appears (for now) that hope of a weekend deal in DC is priced into markets. Of course, the USD strength could actually be a safe-haven repatriation on fears this goes on longer but when the algos are in charge a rise in AUDJPY is all that is needed to levitate stocks...

Billionaires and political lackeys alike have been falling all over themselves in the rush to praise the Federal Reserve's unprecedented monetary intervention since 2008. That billionaires and political hacks, apparatchiks and toadies cannot laud the Fed's Cargo Cult enough is no surprise: the billionaires and the government that feeds them both gained handsomely from the Fed's policies. As the Fed-induced asset bubbles in stocks, bonds and real estate follow the inevitable Supernova track to implosion, that we've reached Peak Federal Reserve will be obvious - in hindsight.

This chart from Citi's Matt King pretty much sums it up.

Berlusconi's bye-bye (and hope from Draghi) seems to have trumped all else as European macro data continues to slide but stocks and sovereign bonds surge higher amid the US turbulence. EUR jumped 0.65% on the week as it seems anxiety sent hot money into the highest beta muppetry in Europe. Greek stocks +3.6% on the week, Italian stocks +3.7%, Spain +2%... Germany -0.6%. Bunds bid - outperforming Treasuries by 4bps on the week but the "safe havens" of Portugal (-50bps - the 3rd best week of the year), Spain (-21bps), and Italy (-20bps) saw heavy bids. Amid all this exuberance, Europe's VIX rose 16% to 19.6%.

It was all going so well... restating the same old news that Boehner would not end the world was working for a few more points every time and managed to get the S&P up to "shutdown" levels to run the stops. But then, reality hit...

*BOEHNER SAID TO TELL MEMBERS HE WON'T PUT CLEAN CR ON FLOOR
*BOEHNER SAYS 'THIS ISN'T SOME DAMN GAME', HE HAS NO INTENTION OF `ROLLING OVER' ON SPENDING

And sure enough stocks start to tumble...

So "no end of the world", *BOEHNER SAID TO TELL REPUBLICANS HE WON'T ALLOW U.S. TO DEFAULT

but "no clean CR",*BOEHNER SAID TO TELL MEMBERS HE WON'T PUT CLEAN CR ON FLOOR

Riddle us that...

• *BOEHNER SAYS REID TOLD HIM NO NEGOTIATIONS UNTIL `WE SURRENDER'
• *BOEHNER SAYS HE HAS NO INTENTION OF `ROLLING OVER' ON SPENDING

The long-delayed vote has finally come:

• Italy Senate Panel Recommends Berlusconi Expulsion
• Italy Senate panel head Stefano speaks in Rome.
• Panel decision follows Berlusconi’s definitive conviction for tax fraud in August; the former premier has always denied any wrongdoing

So unless Sylvio has some other card up his sleeve, it may be a final goodbye for Italy's legendary ex-leader.

Twitter (TWTR), Tweeter (TWTRQ), what's the difference. Just buy, buy, buy.

If one wants to see what it looks like when the Federal Reserve has enabled the US government to become completely irrelevant in a world in which fiscal policy is completely meaningless and all that matters is how high the S&P500 is on any given day courtesy of trillions in monetary policy injections stimulating "confidence" and the wealth effect, then look no further than this article by Politico recapping the bad blood in Congress among the four feuding leaders.

News yesterday that Radioshack was planning to seek new debt financing in order to give suppliers more confidence - which in itself is kind of ironic that suppliers would find an even-more-levered company a better credit risk - sent the stock spiking higher by 10% in mere seconds as the machines took the headline and ran with it. Sanity was restored moments later as the stock hit the exchange limits and was instantly reverted back to unchanged. While the firm faces its own fireworks over employees punching customers "for being sarcastic," the stunning charts below show the real fireworks that the machines started...

Until yesterday, all the action in T-Bills - that was creating anxiety in the credit markets - was focused on the end-of-October bills. But now, despite the Boehner restatement of his desire not to end-the-world yesterday that realistically said nothing new, the mid-November Bills are starting to blow higher in yield. It seems confidence in a short-term solution to the shutdown/CR/Debt-Ceiling debacle is not expected. The 11/14/13 bill is up 8.5bps to 13.5bps this morning...