Archive - Aug 22, 2013 - Story

The warning signs were all there. Long, long ago they were all right there. Reading this article from the New York Times, published thirty years ago, brings forth emotions of frustration, disappointment and even a sense of resentment. Resentment that many of those that came before us knew about all of this and basically did nothing.

Just over three hours ago, when discussing the NASDARK 3 hour trading halt, we asked: "what was it about Apple's locked Bid and/or Ask that caused the NASDAQ freak out, and was all the Tape C trouble at the NASDAQ purely a function of a locked order originating at NYSE Arca?" Moments ago, we got one half of the answer courtesy of the WSJ, which reports that "Nasdaq OMX Group Inc. executives internally on Thursday pointed to a "connectivity" problem with competing electronic exchange NYSE Arca as the trigger to technical issues that led to a three-hour halt in trading of Nasdaq-listed stocks, according to people familiar with the matter." Of course, Zero Hedge readers already knew that.

Almost three years ago we warned of the consequence of the disincentives for the working man in the US at the lower-income level. Then, last November we noted the dismal fact that 'work is punished' in America for a large majority of the non-elites. And now, as the part-time new normal becomes more and more understood in the mainstream, we ask once again... If you could stay home and relax all day and actually make more money than you do at your current job, would you do it?

Poverty has an impact on the mental health of all Americans. Those living below the poverty line are three times more likely to have serious psychological distress as compared to those living above the poverty level. The following infographic provides some shocking statistics on how this has accelerated in recent years.

A steady rise in leverage in recent years means Corporate Asia now has the most leveraged balance sheets globally. As Morgan Stanley's Viktor Hjort notes, with Fed liquidity anticipated to slow, now the cycle turns more adverse. Asian corporate balance sheets face a combination of slower growth and higher funding costs. Slower economic growth is putting downward pressure on earnings growth and rising real rates is putting upward pressures on funding costs turning bad macro into even tougher micro. Asian banks are tightening lending standards in their procyclical way but Asian credit markets are facing a fundamental environment that for many corporate borrowers will feel like a recession.

As we pointed out first, the Nasdaq outage can be directly and indirectly traced to action in Apple stock from mere minutes (when it suddenly dropped to under $500) to just over an hour before the Tape C halt was announced. And while the plunge below $500 may have been the proximal cause for the lock up that crippled the Nasdaq in a historic three hour episode of unprecedented humiliation, Nanex, which also uncovered the real quote-stuffing reason behine the May 2010 flash crash (and which the SEC tried to pin squarely on Waddell and Reed) has just disclosed that Nasdaq was already demonstrating explicit "glitches" in the trading of Apple well ahead of the 12:21 pm trading halt.

So what does Ben Bernanke do? According to these two perfectly spot-on Australians, "he makes statements... very, very, very, very, very, very, very, very, very, very, very, very, very, very careful ones..." And when he does there are safety procedures, "get under your desk, in a doorway... somewhere safe." But, they go on, "What would happen if companies improve on their own? Well that would be an even bigger disaster... because Ben might turn off the easing tap." It's funny, coz it's sadly true...

• NASDAQ SAYS WILL WORK WITH OTHER EXCHANGES ON `GLITCH'
• NASDAQ STATEMENT SAYS 'TECHNICAL ISSUES RESOLVED'
• NASDAQ SAYS TECHNICAL ISSUES WERE RESOLVED IN FIRST 3O MINUTES
• NASDAQ SAYS IT COORDINATED WITH OTHER EXCHANGES FOR REOPENING
• NASDAQ SAYS THAT PRICE QUOTES WEREN'T BEING DISSEMINATED BY SIP
• NASDAQ SAYS BALANCE OF TRADING WAS DAY WAS FINISHED IN NORMAL COURSE
• NASDAQ SAYS IT SUPPORTS ANY STEPS NEEDED TO ENHANCE PLATFORM

From the historical perspective, concentrating virtually all systemic risk into the state is a Grand Experiment. Cheap, abundant oil, expanding working-age populations and rapidly increasing productivity conjured the illusion that the state was large enough and powerful enough to absorb infinite risk with no real consequence. The problem is the state's ability to tax/print/borrow money to cover payouts and losses is not infinite. Having transferred virtually all systemic risks to the state, we presume the state is so large and powerful that a virtually limitless amount of risk can be piled onto the state with no consequences. Offloading risk onto the state does not make the risk vanish; it simply concentrates the risk of collapse into the state itself.

Well, that was fast.

From Indian leases to negative GOFOs, from Chinese physical demand to Western bank paper gold deleveraging, and from practical mining cost floors to the ongoing playing out of the grandest experiment of monetary policy in history; there are a plethora of drivers for the price of the precious metal. But, for now, the only thing that counts is the 100-day moving average as gold prints its first positive closing breakout of 2013.

We have yet to see secondary confirmation of the following breaking news from the second largest French newspaper, Le Figaro, but if accurate, it means the Nobel Peace Prize winning president has just engaged in yet another unsanctioned by Congress war.

The Dow has its best day since August 1st but its the NASDARK that takes the biscuit with a 1.4% gain - its best day in 6 weeks. S&P 500 futures ramped all the way to recent highs, snagging stops all the way to its 50DMA once again. Trannies were the big short-squeeze high-beta muppet-killers today though +2%!! While the topic du jour will be the total farce that US equity markets have become, there was action away from stocks that bears noting. The refunding news sent the Treasury market diverging with the belly getting smacked higher in yield as the long-end rallied (the forward curve's biggest drop in 4 months). That won't help NIM but, of course, financials didn't care as the so-called 'market' lifted stocks with abandon. Commodities in general rose with WTI best breaking back above $105 (and Gold above $1375 - closing above its 100DMA). The USD ended modestly higher as JPY pushed weaker all day. AAPL had quite day, losing $500 and then regaining on the back of Icahn's save (perfactly tagging VWAPs all the way). BTFH!!!!

Wondering why the ES is soaring? Because the NYSE just broke too.

• NASDAQ HAS DECLARED SELF HELP AGAINST NYSE ARCA (ARCA)
• NASDAQ DECLARES SELF HELP AGAINST NYSE ARCA AS/OF 15:26:42 E.T
• NYSE ARCA HAVING DIFFICULTY PROCESSING OUTBOUND TAPE C QUOTES

And BATS too:

• BATS HAS DECLARED SELF-HELP AGAINST ANOTHER MARKET CENTER
• BATS SAYS ROUTING TO NYSE ARCA HAS BEEN SUSPENDED AS OF 15:39

An absolute circus meant only to preserve confidence in a rigged, manipulated system based on incorrect electronic trades.

The Nasdaq was so desperate to rush and "fix" itself, somehow in the process it forgot all about the NBBO and that the bid has to be below the ask.