Archive - 2013 - Story

• Traders Seek an Edge With High-Tech Snooping (WSJ)
• Gold Drops Below $1,200 an Ounce for First Time Since June (Bloomberg)
• SAC Manager Guilty as Insider Focus Turns to Martoma (Bloomberg)
• Why Ukraine spurned the EU and embraced Russia (Reuters)
• Target confirms major card data theft during Thanksgiving (Reuters)
• Zuckerberg is no suckerberg: Company to Sell 27 Million Class A Shares While CEO Will Offer 41.4 Million (WSJ)
• Facebook, Zuckerberg, banks must face IPO lawsuit (Reuters)
• Swiss Christmas Trees Feel Chill as Franc Helps Rivals (BBG)
• Iran, six powers to resume nuclear talks after snag (Reuters)
• Dolphins Suffering From Lung Disease Due to Gulf Oil Spill, Study Says (WSJ)

Strategists were largely wrong about the yes taper in September, and then they were just as largely wrong about the no taper in December, and yet their opinion is just as largely gospel and people continue to listen to them (what else is there to be distracted by in a still very much centrally-planned market and economy). Which is why the below summary by Bloomberg of what global financial strategists and investors, also known as "they", are saying about how to trade assets in the post-taper world, should probably be taken, largely, with a grain of salt.

One truly unenlightened NSA official seemed to hold the press in particular disregard and stated: 

“I have some reforms for the First Amendment.”  

We're quite certain he has some reforms in mind for the 4th Amendment as well... Once again we ask, if they hold the U.S. Constitution and civil rights in such disdain; what exactly are they protecting us from?

... we learned what the difference between $85 billion and $75 billion is in the grand scheme of things. Or, in case we haven’t, here is a chart showing just how “vast” the impact of today’s announcement will be on the Fed’s balance sheet at December 31, 2014 when instead of printing well over $5 trillion at its old monetization pace, the Fed’s balance sheet will be only $4.9 trillion.

Last time it was trading faster than the speed of light in gold and stocks. This time, 50 seconds before the FOMC statement was officially released to the great unwashed, Nanex notes that the market exploded with activity reaching levels higher than during the actual FOMC news release. As they show in the charts below, approximately $106 Million of SPY and 3,700 eMini Futures contracts traded in 1 second. Gold - while less voluminous - was just as berserko in the minutes and seconds leading up the news release. What is going on here?

There are those who would blame the people who have chosen to live far beyond their means. They have a point. The financialization of America; where Wall Street con artists,shysters and swindlers rake in billions for shuffling paper and making risky casino bets; mega-corporations ship blue collar middle class jobs to Asia in an all out effort to increase quarterly profits; politicians spend future generations into the poor house in order to get re-elected; and the Federal Reserve purposefully creates monetary inflation to prop up the corrupt system; has systematically destroyed the working middle class and created generations of debt slaves. The American people have been foolish, infantile, and easily duped. But it is clear to me who the real culprits in our long downward spiral have been. Lord Acton stated the obvious, many years ago:

 “The issue which has swept down the centuries and which will have to be fought sooner or later is the people versus the banks.”

? John Emerich Edward Dalberg-Acton

As the US equity market embraces the suck of taper, the Chinese interest rate market seems a little upset. 1-Year rate swap just spiked their most in 5 months (16bps) to an all-time high 5.065% (above the June Taper Tantrum levels). Following its enforcement actions on Bitcoin last night (and coincident DDoS attack on its website), the PBOC has decided not to inject liquidity into Chinese banks today

*PBOC WON'T LIKELY CONDUCT REPO OPERATIONS TODAY: TRADER

Add to that the fact that the Indonesia Rupiah just dropped to its lowest in 5 years and we suspect more than little turmoiling this evening as the rest of the world figures out why taper is risk-on.

After having followed a zero interest rate policy strategy and facing a further deteriorating economy in an environment of falling prices (deflation), the Bank of Japan (BoJ) announced the introduction of QE on 19 March 2001 and kept it in place until 9 March 2006. The BoJ chose for a very orderly and gradual unwinding of its government securities portfolio, by continuing its regular purchases of these securities (i.e a taper and not sale).  The market rejoiced at the normalization for a week or 2... before dropping 24% in the following 2 months. Of course, that was a "policy mistake"; the Fed knows this time is different.

"...as an investor, nearly always if you buy panic and you know what you are doing, and then hold on for a number of years, you are going to make a lot of money.

You also have to be sure that your crisis or panic is not the end of the world, though..."

We have tried a number of times (here, here, and here) to explain the simple math behind the populist call for a higher minimum wage (that appears to be founding the President's new class warfare) but in the following clip, we hope, Peter Schiff visits a local Wal-Mart in the hopes of explaining that magic money trees are not real.

The effects of the massive monetary inflation of recent years are so far mainly reflected in asset prices. Modern art has become a major magnet for investors, whereby one gets the impression that this is truly a gargantuan bubble by now. Works of art are unique, so there is really no yardstick by which one could make sensible comparisons regarding their valuations, except to note that prices today are at multiples of the prices paid in the not-too-distant past. When a Japanese insurance company bought van Gogh's 'Vase with Fifteen Sunflowers' for $39.7 million in 1987, the world was shocked that anyone would shell out so much money for a single painting. It was rightly seen as an outgrowth of Japan's bubble excesses of the 1980s at the time. Today it actually looks like they made a great investment. No-one bats an eyebrow anymore at anything that is not sold for more than $100 million. So if you ever wonder whether there is really an inflationary bubble underway, the answer is clearly, yes, there is.

Presented with "no comment"...

Despite yesterday's governmental reassurance (a la Venezuela and Argentina) that there is no inflation in the US, the reality for the average man in the street is a little different. We have previously noted that gas prices are 25% above their average price of the last decade but it is another staple that is more worrisome for many in America. As CNSNews reports, the average price of ground beef hit an all-time high this week at $3.61 per pound (up from just $1.82 per pound in 1980). As both a home-cooked and fast-food staple, the price of ground chuck alone has risen 45% in the last 10 years. Nope, no inflation here...

There is a rising belief that when the Federal Reserve begins to taper that interest rates are set to rise.  It is believed that as rates rise due to stronger economic strength that the stock market will act as a hedge against falling bond prices. However, historically speaking rotating from bonds to stocks after the initial spike in rates has occurred was akin to jumping from the "frying pan into the fire."

The S&P 500 rallied well over 40 points (and the Dow up over 350 points) off the FOMC knee-jerk lows but bonds were largely unimpressed. USDJPY surged to new 5-year highs over 104. Bonds weakened, rallied,a nd then leaked back higher in yield to close almost unchanged from the FOMC announcement. VIX was smahsed back under 14% - its biggest drop in over 2 months.

*S&P 500 RISES 1.7% TO RECORD 1,810.79 AT CLOSE

DOW AVERAGE INCREASES 1.9% TO RECORD 16,171.12 AT CLOSE

We can only imagine what would have happened if he'd tapered $20 billion?