Archive - Dec 2013 - Story

It seems US sailors aren't the only ones who three short years after the Fukushima disaster are being stricken by cancers and other radiation-induced diseases. For once, the media blackout surrounding the Japanese nuclear power plant tragedy appears to have crumbled, and at least a portion of the truth has been revealed. Hong Kong's SCMP reports that fifty-nine young people in Fukushima prefecture have been diagnosed with or are suspected of having thyroid cancer. All of those diagnosed were under the age of 18 when the nuclear meltdown occurred in 2011 and while "experts" are divided over the cause, Okuyama University's head of oncology stated "the rate at which children in Fukushima prefecture have developed thyroid cancer... is several times to several tens of times higher [than average]."

UPDATE: Un-Taper didn't work - 7-day repo just hit 9% as (just as we warned) the small banks are left wth scraps

For the first time in 3 weeks, the PBOC un-tapered and added CNY 29 billion liquidity (via reverse repo). Despite the Chinese governments denial of any liquidity crisis, the decision to "fold" reflects a clear indication that, as Monex strategist Eimear Daly notes, "China's attempting to incrementally liberalize markets and to allow instabilities to unwind with minimal damage; and spikes in interbank lending rates show authorities are struggling to manage this task." The liquidity was provided at 4.1% (not a particularly low rate but well off the highs of the last week) but 7-day repo rates (though down 3.5%) remain high at 5.5% (150bps above the 'normal' levels of July to October). The night is young though as we suspect, just as yesterday, the big banks will soak up the first juice and leave the small banks (who need the most) floundering...

With most stock indices breaking record highs (and even the NASDAQ back to 13+ year highs), we thought a time of reflection and giving (as opposed to receiving Fed liquidity) required a look at the bigger picture. The following 13 charts of the last 13 years cover everything from collapsing SAT scores to record high prices of alcohol and from surging gun background checks to record high food stamp recipients, this is not your great grandma's depression-"recovery"...

There are plenty of valid criticisms of Bitcoin, and a clear and thoughtful expression of those criticisms can only help the marketplace improve free-market crypto currencies in the future. Yet the irrational, ramblings of a statist who clearly hasn’t taken two minutes to objectively analyze Bitcoin is of no use to anyone and a disgrace to a supposedly highbrow newspaper like the New York Times.

While global currency wars have esclataed over the last 4 years (as we noted here), the potential return to fund outflows triggered by the Fed taper, combined with higher demand for funds ahead of Chinese New Year, means there will be continued pressure for China’s money market rates to stay high heading into January. With China's reform and rate liberalization plans, it seems 2014 may be the year of the Taper Wars.

This morning's incredible 6-month-range busting, 11-sigma, so-called "fat finger" in Treasury futures markets was brushed under the carpet by most of the mainstream media since it had no effect on what is important - US equities. However, as the following detailed charts from Nanex show, it looks like anything but an 'accidental' fat finger and merely highlights just how fragile the world's largest (and supposedly most liquid) markets have become. Still, with Virtu's CEO doing so well, how will it ever stop?

Everyone knows that the most parasitic form of trading, that would be high frequency trading for those who may not have followed this website since 2009, is very profitable. Well, it is certainly profitable for those who operate the momentum-igniting, quote churning, HFT firms in control of what's left of the "market", if not so much for anyone else. Just how profitable is it? Judging by the house that Vincent Viola, head of Virtu Financial, one of the largest high frequency electronic trading and market making firms, which according to Cifu accounts for more than 5% of US equities volume and over 10% of the of the average daily volume of MSFT, and which tried to expand even more aggressively with a failed bid for Knight Capital last year, has just put on the block.

As students vie for 2014 internships, Bloomberg finds a fraternity-based network whose Wall Street alumni guide resumes to the tops of stacks, reveal interview questions with recommended answers, offer applicants secret mottoes and support chapters facing crackdowns. Despite apparent crackdowns on cronyism, nepotism, and fraternism; it seems nothing has changed as "secret handshakes" and the fraternity pipeline helps undergraduates beat odds three times steeper than Princeton University’s record-low acceptance rate... "People like people who are like themselves," notes one recruiter, seemingly proven by the fact that JPMorgan employs 140 Sigma Phi Epsilon members with BofA and Wells Fargo even more.

"The new year should be very exciting for EURUSD bears," BofAML's Macneil Curry explains. Historically, January is the worst month of the year for the currency pair. Since 1971 (interpolated data pre-1999) it has averaged a return of -1.27% (excluding carry) and fallen 62% of the time. With EURUSD having just confirmed a top and bearish turn in trend, this January should be no exception to the historical norm. EURUSD bears should be salivating for the start of the new year.

Here's a question-- if you're in the Land of the Free, do you think those green pieces of paper in your wallet are dollars?

They're not. A US dollar was defined by the Coinage Act of 1792 as 416 grains of standard silver. No, those green pieces of paper are Federal Reserve notes. "Notes" in this case meaning liabilities to the central bank of the United States. That makes you, me, and anyone else holding those green pieces of paper essentially creditors of the Federal Reserve, whether we signed up for it or not.

New 52-week highs reached 2-month highs (and lows at 1-month lows) as stocks ruged to new record-er highs once again today. Aided by AAPL, the NASDAQ outperformed but the ridiculousness was not limited as TWTR continues its exponential rise (up over 59% in the last 2 weeks). Today's range was small in stocks (except for a strange - likely rebalancing related - 6% rise in the Russell at the open) and volume barely above the lowest of the year. Bonds sold off modestly with 7s and 10s worse at +3.5bps following ths morning's un-fat-finger idiocy in Treasury Futures markets. VIX was banged lower (with a late flourish) to 1-month lows. The USD slipped modestly lower on the day but rallied from the US open but correlations to JPY crossesd were not great for stocks once again. Commodities were quiet with Silver up and gold down (back under $1200).

While the full impact of CMHC on the Canadian housing and banking sector remains debatable, one thing can be said: next to the Bank of Canada, it is perhaps the most critical entity in preserving the nation's financial stability. And with a key player responsible for the perpetuation of the status quo having departed Canada recently, namely Goldman's Mark Carney leaving the BOC and heading to the Bank of England, some were wondering just who would supervise thing up north if and when things turned sour. Those questions were answered on Friday, when Canada named the next chief executive officer of the government-owned housing agency. His name is Evan Siddall, and, what we assume will came as a surprise to nobody, he was formerly a banker at, drumroll, Goldman Sachs.

While tapering in the US has had only good consequences (so far); in China it has crushed money markets. Of course, some might argue this is merely a coincidence, but since both the US and China appears to have launched their tapering together, the question is what will break to force China to pull back, since for the Fed it is all roses.

December 23rd, 1913 is a date which will live in infamy.  That was the day when the Federal Reserve Act was pushed through Congress.  Many members of Congress were absent that day, and the general public was distracted with holiday preparations.  Now we have reached the 100th anniversary of the Federal Reserve, and most Americans still don't know what it actually is or how it functions.  But understanding the Federal Reserve is absolutely critical, because the Fed is at the very heart of our economic problems. Since the Federal Reserve was created, there have been 18 recessions or depressions, the value of the U.S. dollar has declined by 98 percent, and the U.S. national debt has gotten more than 5000 times larger.  This insidious debt-based financial system has literally made debt slaves out of all of us, and it is systematically destroying the bright future that our children and our grandchildren were supposed to have. The truth is that we do not have to have a Federal Reserve.  The greatest period of economic growth in U.S. history was when we did not have a central bank.  If we are ever going to turn this nation around economically, we are going to have to get rid of this debt-based financial system that is centered around the Federal Reserve.  On the path that we are on now, there is no hope.

Gross:Part 1of 2: We live not in a new gilded age but a bitcoin age where artificial money (from central banks) creates temporary prosperity

— PIMCO (@PIMCO) December 23, 2013