Archive - Oct 2014 - Story

A year after the Fed injected $1 trillion into the stock market, the US economy was supposed to show stable, benign inflation north of 2%, validating stable, benign "growth" and pushing yields well into the mid-3% range. It failed to do that, stumping many a Keynesian hack who can't explain how it is possible that inflation (at least the variety measured by the BLS, not the real type, like food, energy, tuition costs, and healthcare which is considered largely irrelevant) has so far failed to spring up. For all those hacks, here is the answer in one simple chart.

Two months ago, US and European equity markets exploded higher after RIA tweeted that Russia sought a de-escalation in Ukraine. Today, after an ugly week of higher volatility and even higher anxiety, RIA is at it again, tweeting the following - Kiev agrees to withdraw troops from several Eastern Ukraine cities – DPR leader Zakharchenko - and stocks have started to ramp...

In another well-funded research study, the New York Fed has, via its Liberty Street Economics blog, unveiled its explanation for why volatility is low (obviously missing the Kevin Henry-Citadel dark-pool VIX-slamming machinations that are so evident on an almost daily basis). Their findings are a little awkward for The Fed... the current volatility environment appears substantially different from what happened prior to the financial crisis. However, the Fed's conclusion, as Helen Thomas notes, is worrisome - low interest rates tend to mute volatility (something we already knew) - but if that is the case (from their findings) then implicitly: If low volatility is caused by low rates which in turn cause low volatility, what happens when rates go up?

AAL, ABB, ABX, ACI, ADI, AES, AG, AGCO, AIG, ALGT, ALK, ALU, AMID, ANR, ANV, ANV, AON, APA, APC, ARMH, ARP, ATEN, ATH CN, ATVI, AUY, AVP, BBEP, BHI, BHP, BMS, BTE, BTE CN, CAJ, CAM, CAT, CCE, CFX, CHK, CLF, CLR, CMC, CMRE, CNQ, CNQ CN, CNW, CNX, COG, COP, COS CN, COSWF, CPG, CPG CN, CR, CTCM,  CVE, CVE CN, CVX, CX, CXO, CYOU, DAL, DDS, DE, DOV, DRQ, DVN, EC, ECA, EMES, EOG, EPE, ERF, ERF CN, ESL, ESV, EVEP, F, FLR, FLS, FM CN, FMC, FR CN, FST, FTI, FWM, GG, GM, GOLD, GSK, GSS, GT, GWR, HAL, HAYN, HBM, HCLP, HES, HP, HSE CN, HSIC, HUN, IAG, IGM CN , IMG CN, INT, ITT, JCP, KEX, KGC, LGCY, LIF, LLTC, LOPE, LPI, LPX, LRE, MAN, MCEP, MDCO, MG, MGA, MMLP, MON, MT, NBR, NE, NEM, NGD, NGD CN, NLSN, NOV, NWSA, OAS, OXY, PAAS, PBCT, PCLN, PD CN, PGF CN, PGH, PPG, PTEN, PWE, PXD, QRE, RDS/A, ROK, ROSE, RPM, RPT, RTI, SAP, SAVE, SCCO, SCHN, SDRL, SLB, SLCA, SLW, SSW, STO, SU, SU CN, TAL, TCK, TCK/B CN, TCS, TEN, TGI, TLM CN, TLP, TMK, TOO, TXT, UBS, UNM, URI, UTX, VET, VET CN, VIP, VNO, VNR, VSH, WDR, WFT, WLK, WLL, WLT, WMMVY and ZNGA.

• It wasn't Obama this time: Pakistani teen, Indian activist win Nobel Peace Prize (Reuters)
• Surging VIX Shakes Bulls as S&P 500 Charts Go Haywire (BBG)
• Global shares hit six-month low as growth worries mount (Reuters)
• Police, protesters clash in St. Louis ahead of weekend of rallies (Reuters)
• We're Sitting on 10 Billion Barrels of Oil! OK, Two (BBG)
• Spain seeks answers as seven more enter Ebola isolation (Reuters)
• Iran will sell its oil to Asia in November at the biggest discount (BBG)
• Redefining honeypot: U.S. DEA 'most interested' in U.S. investors in Canadian marijuana firms (Reuters)
• UKIP Wins First Commons District With Conservative Defector (BBG)
• Fake Ebola Patients Help Hospitals Prepare for Next Case (BBG)

And just like that. everything is crashing. Whether it is Asia, Europe, or even US futures, an entire generation of traders are waking up to something few have seen in the past 6 years: a very rare sea of red only this time with the main difference that the perpetual backstop of all risk, the Fed and/or "Edward Quince", may not be there to halt the collapse.

Even Bob Pisani knows by now that the European Close seems to create a trend-reversal moment intraday that few machines (and even fewer humans) are willing to fight. Whether this is remnants of short-term cycles found due to POMO or just a drop in liquidity is unclear; but what is clear, it happens, and all too regularly... except today. After a notably weak start to the day, the machines were just getting revved up for the 1130ET reversal to kick in and lift the market back to VWAP when a curious thing happened... "someone" canceled-and-replaced orders for 666 contracts 26 times in the 1130ET to 1200ET period... and selling accelerated lower, no reversal, to close at the lows on heavy volume.

President Obama: "Chance of Ebola outbreak in US 'extremely low'"

CDC Director Frieden: "I've been working in public health for 30 years... The only thing like this has been AIDS. And we have to work now so that this is not the world's next AIDS."

SOUTHCOM Commander: "The nightmare scenario, I think, is right around the corner."

“I was bribed by billionaires, I was bribed by the Americans to report…not exactly the truth.” - Udo Ulfkotte, former editor of one of Germany’s main daily publications, Frankfurter Allgemeine Zeitung

This happened on a US Airways Flight 850 from Philadelphia to Punta Cana - October 8th 2014.

Foxconn workers are striking again - this time in Chongqing. But you have to look at the map to see why this is an event of extraordinary significance. In a word, these strikes mean that the rice paddies of China have been nearly drained of cheap, docile labor.

As American stock markets become CYNK'd with ever shorter horizons and ever greater aspirations of 'getting rich quick', we thought it fascinating that none other than E*Trade - that bastion of once day-trading prowess and now investing-for-retirement Type-E expertise - has been busted by the SEC for failing in their gatekeeper roles and improperly engaged in unregistered sales of microcap stocks on behalf of their customers. Remember, as the baby explains, "making a big investment is as easy as a single-click..." and so it was that E*Trade sold billions of penny stock shares for customers during a four-year period while ignoring red flags.

In terms of purchasing power, China now has the largest economy on the entire planet, but that is not the only area where China has surpassed the United States. China also accounts for more total global trade than the U.S. does, China consumes more energy than the U.S. does, and China now manufactures more goods than the U.S. does. In other words, the era of American economic dominance is rapidly ending.

Facing up to the pressures of responsibility as a member of the European Union - having been told their treaty-busting budget plan was unacceptable - it seems France is resorting to the worst case scenario - cut spending! As Bloomberg reports, the glory days of France’s welfare model may be behind it, as France, which hasn't had a balanced budget since 1974, admits "for 40 years we have lived beyond our means," but French PM Valls is "convinced [France] can make up for lost time." His plan - streamlining unemployment benefits, cutting bonuses for newborns, and pegging family allowances to household income (all of which amount to a de facto re-writing of France’s welfare rules), are being spun positively: "It's not the end of a generous system,” government spokesman Stephane Le Foll said yesterday. "It's the end of spending that wasn't useful - and that's in order to preserve a system that is a costly one." We wonder how much those 'slightly used' guillotines are going for on eBay now?

Earlier today, in addition to insult and injury, what everyone - and especially GTAT's shareholders - got was nothing short of a slap in the face, when the company argued it could not reveal why it filed for bankruptcy and asked a court to keep crucial documents sealed, something even Reuters dubbed a highly unusual move that may keep investors in the dark about its unexpected, and very spectacular implosion.