Archive - Nov 20, 2013 - Story

Meet Jessica Sanford. Upon the rollout of Obamacare she was 1 of maybe 5 people in the entire nation who was able to access the website and actually sign up through one of the state exchanges. In her case, it was the Washington exchange. She was so thrilled about her purchase that she wrote a letter to President Barrack Obama expressing her undying gratitude. Since her letter was quite possibly the only positive letter the Administration received, the President proudly read it aloud during his Obamacare speech on October 21st.

The only problem is that a few days later she was repriced out of Obamacare. So she’s now uninsured again...

The following Top Ten Market Themes, represent the broad list of macro themes from Goldman Sachs' economic outlook that they think will dominate markets in 2014.

1. Showtime for the US/DM Recovery
2. Forward guidance harder in an above-trend world
3. Earn the DM equity risk premium, hedge the risk
4. Good carry, bad carry
5. The race to the exit kicks off
6. Decision time for the ‘high-flyers’
7. Still not your older brother’s EM...
8. ...but EM differentiation to continue
9. Commodity downside risks grow
10. Stable China may be good enough

They summarize their positive growth expectations: if and when the period of stability will give way to bigger directional moves largely depends on how re-accelerating growth forces the hands of central banks to move ahead of everybody else. And, in practice, that boils down to the question of whether the Fed will be able to prevent the short end from selling off; i.e. it's all about the Fed.

A decision by the FHFA requiring the GSEs to finally release detailed information on loans they acquired and guaranteed uncovers an ugly truth about the GSEs that many should be aware of (as we noted the exuberance here). The release was only required on 35 million fully-amortizing, full documentation, 30-year fixed rate mortgages, which means as JPMorgan's Michael Cembalest notes the underwriting histories on another 20-30 million loans (e.g., the riskier ones) remain a mystery (and likely will forever). As Cembalest concludes, some people made up their minds on all the factors causing the housing crisis in 2009, and others in 2011. As long as new information keeps coming out, it seems premature to close the book on it, he adds, first, the private sector descent into underwriting hell took place well after the multi-trillion dollar GSE balance sheets had gone there first; and second, there are many reasons to wonder how bad the former would have been had the latter not preceded it.

With such a spectacular source of impeccably timed, if always wrong, FX trading recommendations as Tom Stolper, who has cost his muppets clients tens of thousands of pips in currency losses in the past 5 years, and thus generated the inverse amount in profits for Goldman's trading desks, the last thing we expected to learn was that Goldman's currency traders, who by definition takes the opposite side of its Kermitted clients - because prop trading is now long forbidden, (right Volcker rule?) and any prop trading blow up in the aftermath of the London Whale fiasco is not only a humiliation but probably illegal - had lost massive amounts on an FX trade gone wrong. Which is precisely what happened.

China's HSBC Flash PMI missed expectations rather notably (50.4 vs 50.8 exp) and dropped its most MoM since May as the hope-mongering of a China-led renaissance in global growth is dashed on the shores of liquidity reality. It was a mixed bag - providing just enough for everyone under the covers. New exports orders dropped to 3-month lows and employment flipped into the deteriorating camp but manufacturing output rose to its highest in 8 months (sure, why not - the "if we build it then we'll vendor finance it" model worked before, right?) Market reactions are generally bad-news-is-bad-news with US equity futures down and the Hang Seng extending losses.

At this point it is incredible that there are any Americans that still trust anything that comes out of the administration's collective mouth.  And of course it is not just Obama that has been lying to us.  Corruption and deception are rampant throughout the entire federal government, and this has been the case for years.  Now that some light is being shed on this, hopefully the American people will respond with overwhelming outrage and disgust. Aside from the now "fake" employment data, the following are five massive economic lies that the government has been telling you... Our financial system is far more vulnerable than we are being told.  We are in the terminal phase of the greatest debt bubble in the history of the planet, and when this bubble bursts it is going to be an absolutely spectacular disaster. Please don't believe the mainstream media or the politicians when they promise you that everything is going to be okay.

While we hope that the attached Bloomberg chart showing the best paying jobs for people without a high-school diploma will be of no use to our readers (for the simple reason that we assume Zero Hedge readers are well-educated in anything but conventional economics - that subset will likely be found at the end of a Krugman column), as more and more Americans finds themselves questioning not only the utility of a university education (and especially the associated loans) but the educational system in general, the reality is that there are many well-paying jobs available regardless of one's educational level, most of which pay above the median US income. Some notable omissions - any position on Wall Street. Some notable inclusions - tapers. Maybe this is why the Fed never wants to mention the "trimming the pace of asset purchases" by its true name.

That the Fed has a problem is increasingly well known - despite the blather from the mainstream media that QE monetization can continue ad infinitum. Their problem, of course, is running out of government-provided liabilities to monetize (as deficits shrink and their ownership of the entire Treasury complex surges). They face other problems (as we have noted before) but the admission that they are boxed in would have major ramifications in the market's faith. So, how does the Fed, faced with the knowledge that they have created asset bubbles, broken the bond market, and are boxed in by their own excess still meet the market's undying desire to keep the flow going? Bill Dudley just, perhaps inadvertently, dropped a hint of the next 'market/scapegoat' for monetization - Student loans.

After meeting today with Pres Obama, National Assn of Insurance Commissioners warns of possibility of higher premiums for consumers.

— Mark Knoller (@markknoller) November 20, 2013

Economics is all about making rational decisions given some set of likes and dislikes. It doesn’t presume to tell you what you should like or dislike, and it assumes that you do in fact know what you like or dislike. Or at least that’s what economic theory used to proclaim. Today economic theory is used as the intellectual foundation for a political stratagem that goes something like this: you do not know what you truly like, and in particular you do not know your economic self-interest, but luckily for you we are here to fix that. This is the common strand between QE and Obamacare. The former says that you are wrong to prefer safety to risk in your investments, and so we will fix that misconception of yours by making it extremely painful for you not to take greater investment risks than you would otherwise prefer. The latter says that you are wrong to prefer no health insurance or a certain type of health insurance to another type of health insurance, and so we will make it illegal for you to do anything but purchase a policy that we are certain you would prefer if only you were thinking more clearly about all this.

Days after being granted omnipotent "decree" powers, and a week after the Venezuelan president wielded his mighty Marxist sword and jailed 100s of "bourgeois, barbaric, capitalist parasites"; Maduro has unveiled his latest "keep the masses happy" trick...

*VENEZUELA TO SPEND $100M ON SAMSUNG IMPORTS: RAMIREZ
*VENEZUELA TO IMPORT 400,000 SAMSUNG PRODUCTS, RAMIREZ SAYS

Why didn't AAPL get the nod? As Maduro explained yesterday, 15-30% margins are "enough"... Of course, the US is disappointed in the decision to grant Maduro "decree power" - perhaps as they didn't think of it sooner (though they do have the Obamaphone?).

John Fichthorn and his $500MM Dialectic Capital hedge fund may not be household names, but in a time when "fighting the Fed", i.e. trading on fundamentals and not on the Fed's balance sheet, is heresy, John may be the biggest bear around, maybe even bigger than Faber. He revealed as much in an interview earlier when he said that the current trading environment may be the shorting opportunity of a lifetime. To wit:  "we think the [shorting] opportunity with any kind of reasonable timeframe now is really the best we've seen since starting our firm ten years ago, and really since i've been doing this since 1995, and i was a short seller in the middle of the internet bubble, and in many ways, this is more compelling because it makes less sense."

Pardon, that would be taper, but the picture below is quite indicative of what the market thinks of even the most tentative Fed plans to pull the punchflow (because by now even the Top 5 Under 5 traders know the Stock is irrelevant and only the Flow matters) away.

Considering Jan Hatzius and NY Fed's Bill Dudley are close Pound & Pence drinking buddies, when it comes to assessing what the Fed "meant" to say, one should just throw the embargo-minutes penned Hilstanalysis in the garbage and just focus on what the Goldman chief economist thinks. His summary assessment: the minutes were relatively neutral, March is the most likely first taper date although "December is still possible."

The "aggregate demand is God" Keynesian Cargo Cult fetish of focusing on holiday sales is worse than meaningless--it is profoundly misleading. Counting on strong holiday retail sales to "boost the economy" is like eating triple-paddy cheeseburgers and fries to lose weight. The last thing a debt-dependent economy needs is more borrowing to buy excess consumption, and the last thing an economy that imports most of the junk being purchased needs is empty-headed economists declaring that the purchase of more low-quality, mostly needless junk is anything other than a waste of money and resources.