Archive - Nov 2014 - Story

Getting 'shellacked' in the Midterms, coming 2nd to Putin as the world's most powerful person, and now, as AP reports, The Supreme Court agrees to rule on insurance subsidies in a new challenge to ObamaCare. Simply put they will judge whether subsidies for middle- and lower-income people are legal... As Think Progress warns, "if it succeeds, the likely result will be a “death spiral” where higher premiums cause healthy consumers to drop out of the insurance market, which will cause higher premiums, which will cause more consumers to drop their insurance."

• Barclays PLC
• HSBC Holdings PLC
• Royal Bank of Scotland Group PLC
• UBS AG
• Citigroup
• J.P. Morgan Chase
• Bank of America Corp. Bank of America

What really matters... "It's time to be invested... the correction is over... we've got good jobs number [which was a miss], GDP is there [which is being revised lower each day], earnings are there [which have been revised drastically lower for the rest of 2014 and 2015]... and even if we do get a dip down, we've got Mr Bullard to come in and reassure the markets..."

In the space of the last 3 weeks, Japanese stocks have swung from the most overbought in 18 months to the most oversold in 3 years to the most overbought in 18 months again. This is the fastest and most violent swing in TOPIX on record as ever-more-desperate hot money chases central bank actions around the world. As Bloomberg reports, “Japan is a very unnerving market because it behaves like an uneducated brat,” said Mikio Kumada, Hong Kong-based global strategist at LGT Capital Partners, which manages about $50 billion. Following the double-whammy of GPIF allocations and BoJ expansion, he warns "you don’t know what it’s going to do in the next moment and in many ways it’s unpredictable."

Presented with no comment....

In reality, there is nothing surprising in Matt Taibbi's latest piece since returning to Rolling Stone from the Intercept, as it tells a story everyone is by now is all too familiar with: a former bank employee (in this case Alayne Fleischmann) who was a worker in a bank's (in this case JPM) mortgage operations group, where she observed and engaged in what she describes as "massive criminal securities fraud" and who was fired after trying to bring the attention of those above her to said "criminal" activity. The story doesn't stop there, and as Carmen Segarra already showed, when she revealed that Goldman runs the NY Fed, once Alayne was let go and tried to "whistleblow" on the house of Jimon from the outside, she found the that US Department of Justice headed by Eric Holder is just as, if not more, corrupt, and in his desperate attempt to prevent discovery and bring JPM et al to justice, he would stretch the statue of limitations on frauds committed during the crisis long enough to where nobody had any legal recourse any more, up to and including the US taxpayer.

Speaking from The Bank of France is crap-covered Paris, Janet Yellen stated that "bond purchases have ben effective", and encouraged Mario Draghi to print moar, noting "central banks need to be prepared to employ all available tools, including unconventional policies, to support economic growth and reach their inflation targets," but warned from the other side of the her two faces, that, "policy normalization will lead to heightened volatility."

The 'miss' on nonfarm payrolls but 'beat' on the unemployment rate appear to have been the perfect anti-goldilocks - not bad enough to warrant Fed speakers to discuss resurrecting QE and not good enough to confirm the growth meme... Having initially tumbled, Treasury sellers came in quickly after the NFP print, but since that BTFD, yields have collapsed 9bps... As we warned here, the market is still notably short bonds and liquidity is anything but strong.

Of the whopping nearly 700K increase in October jobs according to the Household survey, a whopping 528K jobs were as a result of (seasonally-adjusted) workers aged 16-24 finding a job. This is shown in the chart below: it is also the biggest monthly jump in young workers in the past decade, and one of the highest in history.

In October the US economy added the most waiters and bartenders in over a year. In fact at 42K, one in every five jobs "created" in the US economy went to a bartender, or a waiter.

The central planners are in a state of fear and panic.  They are trying everything and anything to create market validation for their policies, watching with trepidation as their favored economic metrics fail to respond to all of their frenzied efforts. They are so far over the tips of their skis right now that there's nothing they won't do.  By the time a central bank is behaving as recklessly as Japan, it's time to edge towards the exit, because the chance of a flash fire in the building has grown uncomfortably high. That is, instead of providing comfort, these most recent moves should invoke greater worry for those of us alert enough to see them for what they are: acts of panic.

Having promised that he would not run again if unemployment rates remain high, French President Francois Hollande faces not just record low approval ratings but feces-flinging-farmers. In a show of protest against expressing their anger at collapsing prices (due in part to sanctions against Russia), increased environmental regulations, cheap imports, and high costs, thousands took to the streets, dumping pumpkins, potatoes, and carrots, burning cars, flinging apples, and spraying shit all over a government building in Toulouse. The French are not amused...

A week ago the Russian Ruble exhibited intraday volatility that makes the JPY look quiet when it crashed to record lows then soared dramatically on intervention hopes. Since then we have had a Russian Central Bank disappointment and some jawboning which did nothing press the Ruble to record-er lows against the USD. Then today, last week's volatility in the Ruble was dwarfed when USDRUB blew past 48.5 only to be sent soaring (USDRUB lower) below 46 on hope of intervention. Russia is not alone. The Saudi Riyal has seen massive vol in recent weeks and Nigeria, another oil-producing nation, saw the Naira collapse yesterday then soar 8 handles this morning on what is confirmed intervention by the nation's central bank. It appears the strong dollar is becoming an issue for the world's oil-producing nations...

Treasury yields were leaking higher into the print then collapsed on the headlines. Stocks smashed higher on the 'good' news of a lower unemployment rate then read the details and have plunged. Silver prices smashed higher, futures were halted, then tumbled back. Total and utter chaos in the liquid markets... Is "good" news now bad news?

Following last month's total collapse in the participation rate, dropping to 36 year lows, this month there was a modest improvement in the composition of the labor force, with the Household Survey suggesting the ranks of the Employed rose by 683K people, while the Unemployed actually declined by 267K, leading to a drop of the people not in the labor force to 92.378MM from 92.584MM. In other words, a little over 101 million Americans are unemployed or out of the labor force. Still, if only looking at this metric, the Fed would likely have no choice but to proceed with a rate hike in the first half of 2015.