Archive - Oct 9, 2014 - Story

Following yesterday's diuscussion of the fact in the Land of The Free, Property Rights rank 36th in the world, we thought it fascinating that, as Rasmussen finds, 70% Oppose Police Seizure of Property Without A Criminal Conviction - Americans strongly believe someone needs to be convicted of a crime before their property can be seized, even though that’s contrary to current federal law and police practice. Which means a rather stunning 30% of Americans believe it is fine...

First a secret "Doomsday book", and now this?

"Global growth is really bad! Hooray!" That was the verdict of US markets yesterday, as the Fed minutes “revealed” (to use the breathless phrasing of mainstream financial media) a “growing concern” with the damaging impact of European torpor and a stronger dollar on US growth, and it’s a perfect example of why I’ve called a top in the Narrative of Central Bank Omnipotence. What’s interesting to us though is not this latest success of the Narrative of Fed Omnipotence. No, what’s interesting to me is this week’s failure of the Narrative of ECB Omnipotence.

WTI Crude oil has now entered a bear market, down over 20% from its June highs (and energy stocks are not off the lows) edging closer and closer to 28 month lows. Meanwhile, gold prices have risen for 4 days in a row - the longest winning streak in 7 months...

It's different this time... and not in a good way. Real intraday range volatility over the last 2 weeks is breaking out - at its highest in 3 years...

UPDATE: Nevache confirmed that the "suspicion was over" and the people were allowed to leave

Following news of the death of a British man in Macedonia from Ebola, RTL reports that 60 people are locked inside a Department of Medical and Social Coordination (DASS) building in Cergy-Pontoise (on the northeast edge of Paris) following Ebola-like symptoms in 4 people who returned from Guinea.

Regarding the two violent selloffs this week: there is no mystery. Recall that Deutsche Bank warned late in the summer this would happen for one simple reason: there are just three more weeks of POMO left after which the Fed's balance sheet flatlines, and with it, the S&P500. The only question is whether those who "sell ahead of everyone else", manage to take the S&P far below "unchanged", as prior QE ends have done, proving once again that it is all about the flow not the stock, and as a result the Fed will once again have to resort to even more QE.

If yesterday's 10 Year auction was very weak, despite the market reaction post the Fed minutes ramping the paper to highs not seen since last May, moments ago the Treasury concluded this week's auctions by selling another $13 billion in the August 30-Year reopening, in another relatively weak issue, which priced at 3.74%, a small 0.2 bps tail to the 3.72% When Issued. In any event, the high yield of just over 3% was the lowest since the May 2013 Taper Tantrum freak out. As a reference, the lowest the 30 Year has sold at auction was 2.58% in July 2012 at the peak of the European debt crisis and just before Draghi uttered the magic words "whatever it takes." The internals were also somewhat weak, with the Bid To Cover dropping from 2.67 to 2.404, just below the 2.44 TTM. And yet, unlike yesterday's 10 Year when the Direct takedown crashed to multi-year lows, today's Direct allotment was a decent 21.5%, well above the recent average, and in line with some of the higher Direct bids in recent years.

Just yesterday evening, the exuberance was palpable (in stocks)... today, with WTI collapsing (under $85) to 18-month lows, Energy stocks are being monkey-hammered across the board (S&P Energy sector -4% from yesterday highs)...

To everyone expecting material upside surprise in terms of company earnings, guidance, balance sheet improvement, and/or capital spending, Goldman has one word: don't: "We expect a disappointing quarter for revenues. Weaker macro data and dollar strengthening increase the likelihood of sales misses. We also anticipate increased negative earnings guidance as companies quantify the FX headwind."

Who could have seen that coming?

Despite all the 'promises', all the 'whatever it takes', all the jawboning... actions and words appear unable to shift the world away from its disinflationary spiral that Central Bankers are so afraid of... US forward inflation expectations have cratered in recent weeks (to levels that in the past have triggered money-printing largesse) but it is European forward inflation expectations that have collapsed to record lows leaving Draghi caught between a deflationary rock and a Bundesbank-bating, Treaty-busting sovereign QE hard place that he knows deep-down-inside (given the cleasr evidence from the US and The Fed) simply does not work how it is supposed to (in the textbooks). As Deutsche Bank warned, "QE in Europe will be ineffective, but it will happen anyway - it is the only tool the ECB has to protect its mandate."

Curious how Bill Gross feels in his new digs at Janus Capital (aka old digs in Newport Beach)? Curious how much money he is managing now or how he will manage it? Curious why he has a band aid under his right eye? All should be revealed in the Janus Capital live webcast going on now.

Because humor like this obviously costs money. As always, from the one and only Dennis Gartman: "Down 35 points one day; up 35 points the next! The Bulls were taken out and shot Tuesday; the Bears were shot yesterday and all we know for certain is that the upward sloping trend still holds and that weakness is to be bought with the Fed still behind the market."