Archive - Nov 6, 2013 - Story

Over the past year there has been some confusion about whether Ben Bernanke has managed to not only completely break the stock market (which, if one harkens back to hallowed antiquity used to discount good or bad news in the future, and "trade" accordingly), but also invert it fully. The chart below from Guggenheim will once and for all put any such confusion to rest. As Guggenheim's Scott Minderd points out "The 52-week correlation between S&P 500 returns and the change in the Citigroup Economic Surprise Index has plunged from 0.45 to -0.13 over the past 12 months. A negative correlation indicates that weak U.S. economic data tends to push equity prices higher, while strong economic data tends to send them lower."

With only 3 of 70 economists surveyed by Bloomberg expecting a rate cut at tomorrow's ECB press conference, Credit Agricole's Frederik Ducorzet suggests seven signals to watch for from Draghi that could signal ECB easing ahead. Crucially, as BofAML puts it, "further euro appreciation is a problem, particularly for the periphery," and with empirical Phillips curves in hand, there is little room for further compensation via wage reduction. In other words, if Draghi stands pat (or doesn't offer up some sacrificial forward guidance hint of easing being likely), the drumbeat of social unrest in the periphery will grow ever louder.

Chris Martenson explains why it's easier to start than to stop quantitative easing: "A lot of what we hear is the Fed's exit strategy … what most people don't know is that this thing doesn't work in reverse very well at all." In this excellent interview with RT, Martenson explains why Bernanke & Co. found it relatively simple to start their money printing, but why they will have a hell of a time getting off the runaway QE train.

Applications for mortgages for the purchase of a home plunged at nearly the fastest pace in 9 months this week, dropping to their lowest since the Christmas week 2012 - and lowest since February 2012. Now down over 20% from their May highs, the plunge is a problem - since as BofA's CEO noted earlier:

*MOYNIHAN SAYS HOME PURCHASES, NOT REFI, BOOST THE ECONOMY

So just another indicator that all is not well in the 'economy'. What is perhaps most worrisome is that this is the lowest level of mortgage purchase activity for this time of year in a decade.

Wondering who you will flip your IPO allocation to? Meet 56-year-old admin assistant, Deborah Watkins... "I messed up by not buying any Facebook, so I want to get some Twitter."

While the public's attention has been focused recently on revelations involving currency manipulation by all the same banks best known until recently for dispensing Bollinger when they got a Libor end of day print from their criminal cartel precisely where they wanted it (for an amusing take, read Matt Taibbi's latest), the truth is that manipulation of FX and Libor is old news. Time to move on to bigger and better markets, such as physical commodities, in this case crude, as well as Interest Rate swaps. And, best of all, the us of our favorite manipulation term of all: "banging the close."

Forcing young workers to pay into a Ponzi Scheme is generational injustice on a vast scale.

Yes... a rating agency - the same entity that enabled the last housing market crash - just warned of a housing bubble. How the times have changed - maybe it is different this time?

Ah Silvio, never change or, if possible, resign: the comedic world of Italian politics will never be the same without you. The latest soundbite by the billionaire with a penchant for easy, underage women comes by way of an interview conducted by Italian television journalist Bruno Vespa for his latest book, and summarized by Reuters. To wit: "Former Italian prime minister Silvio Berlusconi said his children feel persecuted just as Jewish families did in Nazi Germany because he is being hounded by the country's magistrates who want to eliminate him politically."

Earlier in the year we unveiled the most 'epic' Chinese over-capacity bubble chart. Of course, China bulls shrugged at such inconvenience as demand and supply imbalance (even as Michael Pettis destroyed many of their hopes and dreams as all that debt - to over-build and over-supply - has to be repaid). Fast forward to today, on the eve of the nation's Third Plenum, and Chinese leaders are facing the music. As AP reports, leaders have ordered local officials to stop expanding industries such as steel and cement in which supply outstrips demand. The call, via video conference, saw planning officials warn local leaders to stop ignoring orders to reduce overcapacity in industries including steel, cement, aluminum and glass, "Those who still violate discipline will be heavily punished." One chief engineer exclaimed, "the scale of overcapacity is unprecedented."

Credit Suisse's head of US rates, Carl Lantz, is a usual suspect when it comes to dispensing bond market commentary. What we did not expect him to do, is also analyze last night's off-cycle political results. He does both in the note below: "Perhaps this is the start of the Democrat version of the Tea Party - both are reactions in some measure to widening income inequality and a frustration with politics as usual. The proposed solutions couldn't be more different, however, and it seems that despite talk of a victory for moderates the country remains very polarized"... and ... "we prefer steepeners into the refunding auctions next week - announcement at 8:30AM today. We wrote this up on Monday and have seen interest in the trade which has moved about 1.5bps in our favor. Steepening during the sell-off yesterday was a reasonable indication that supply is starting to weigh as generally speaking 7s and 10s lead moves to higher yields."

And so another conspiracy theory, that Palestinian leader Yasser Arafat was poisoned with Polonium, becomes non-conspiracy fact.

Having been "on fire" for most of the year - managing a simply remarkable (Venezuela stock market-like) 472% gain from the start of the year to September highs; it appears the momentum stock of the year is 'running out of gas'. Now down over 22% from its highs, Elon Musk's experiment in exuberance has entered a bear market. Indices most levred to the momo mayhem are struggling this morning also with NASDAQ leading the 'charge' lower. At 3-month lows, TSLA is now up 'only' 335% YTD...

HHS Secretary Sebelius faces up to the self-described "debacle" that is Obamacare in fron the The Senate Finance Committee this morning. We should expect much "mid-November"-ing as the new replacement for "plead da fif."

Because those record offshore (tax-haven arbitraged) corporate cash balances will not grow themselves, obviously.