Archive - Jan 2014 - Story

It's just sad now: with every passing day bringing new (and previously unseen) cases of high frequency trading algo-generated market halts or crashes, that none of the regulators are willing to take a stand against this market scourge that we have written about for nearly 5 years now, is a clear indication that the HFT lobby is firmly in control of what were once "capital markets" and that the retail investor is once again, the sacrificial lamb. But while it was one thing for the high freak thugs to control marginal price action through momentum ignition, quote stuffing, hide not slide, flash trades, and all the other well-known manipulative techniques which seemingly are too complicated for the SEC to figure out, in equities where things get really bad is when HFTs start crashing, or at least halting, the bond market at key market inflection points such as during the most important monthly data release, the payrolls release. This is precisely what happened on Friday, when as Nanex clearly shows, a momentum ignition algo sent the ZF (5 Year T-Note future) soaring and resulting in a 5 second - an eternity in today's nanosecond age - trading halt during the actual release of the BLS report.

It would appear that there is even a limit for the Supreme Court as to what they will allow President Obama to get away with:

*OBAMA'S RECESS APPOINTMENTS QUESTIONED BY U.S. SUPREME COURT

As Bloomberg reports, justices across the ideological spectrum questioned whether President Barack Obama complied with the Constitution when he appointed three members of the National Labor Relations Board during a Senate break.

It was all looking so good. NASDAQ was green for the year (so were Trannies), stocks in general were rising and everyone on TV could proclaim how well the 'market' was handling the taper. Then Dennis Lockhart spoke...

*LOCKHART SEES `GROWING CONFIDENCE' IN 2014 OUTLOOK, U.S. ECONOMY ON `MORE SOLID' FOOTING
*LOCKHART BACKS $10 BLN TAPER AS CONFIDENCE IN 2014 GROWS

That's great news right? Wrong? Stocks didn't like it... and NASDAQ rapidly gave up its gains... Fun-durr-mentals remain in control eh? It shouldn't be a big surprise given what Goldman Sachs warned about over the weekend!

USDJPY's medium-term trend has turned from bullish to bearish. BofAML's Macneil Curry warns that the break of the old May highs suggest weakness should extend further with the 200-day moving avarege at 99.71 as a minimum downside target. Given the JPY's weighting in the USD Index basket, this does not have specific bearish USD implications but does have significant effect on equities as the JPY carry trade comes under pressure.

Just when everyone thought the infamous polar vortex is gone (if not quite forgotten, having dipped the temperatures in some part of the US to sub-Martian levels), it's baaaack. Sky News reports that America is set to be hit by another blast from the polar vortex although this time Niagara falls may not freeze, as temperatures are likely to be higher than last week's extreme conditions. "The polar plunge is expected to move south from Canada, bringing colder air and sub-zero temperatures to the US this week. Forecasters say it will sweep over the lower Mississippi Valley and Midwest on Tuesday and Wednesday, and then hit the East on Thursday. The main thrust of the cold air will follow up a couple of days later."

We noted Friday that the much-heralded Baltic Dry Index has seen the worst start to the year in over 30 years. Today it got worse. At 1,395, the the Baltic Dry index, which reflects the daily charter rate for vessels carrying cargoes such as iron ore, coal and grain, is now down 18% in the last 2 days alone (biggest drop in 6 years), back at 4-month lows. The shipping index has utterly collapsed over 40% in the last 2 weeks. We are sure this is just a storm in a teacup and that all the hopes and prayers of a global manufacturing renaissance will come true. Cue, "this is not a demand issue, it's an over-capacity issue" excuses in 3...2...1... now where would the container ships get their idea to increase capacity? (hint: central planner-based mal-investment)

Following this morning's smackdown, it appears low prices encouraged demand and in the last few minutes, gold and silver turned green for the day and surged on heavy futures volume back above $1250 and $20.25 respectively.

When in doubt... make it up.

With the Dow Transports pressing new record highs this morning (up 1% in 2014), the Dow Industrials are still lagging (down 0.8% year-todate). Despite a bid in Treasuries this morning (5Y and 7Y -2bps), stocks are jumping since the US open, helped by a lift in JPY crosses (USDJPY bounce off 103), dragging the NASDAQ into the green once again for 2014. Gold and silver have recovered the early losses but WTI crude continues to slide (back under $92).

Worried that Starbucks is running out of real estate? Concerned that McDonalds will be unable to fill its quota of minimum-wage employees as urban sprawl caps out? Have no fear for as the following map shows, there is plenty of room left in the world for the chains to expand... and of course, where there is a Starbucks there is mass affluence, right? Of course, extremes of heat and cold will require a little adaptation but that's what free easy money is for...

When it comes to forecasts and outlooks for 2014 (or 2013, or 2012, or 2011, etc), there is no way one can't be tired of the endless Keynesian drivel which the sellside bombards its gullible client base, which can be summarized as follows: "this is the year when the central bank strategies, which have failed to boost the global economy for the past 5 years, will finally work and the economy picks up - yes, this time will be different, we promise. Oh, and 'if' we are wrong (again), well just blame it on cold weather in the winter, or warm weather in the summer and if need be, delay the 'recovery" to the following year, while blaming the lack of insufficient stimulus - because $1 trillion in balance sheet expansion per year is obviously not enough." Rinse. Repeat. One would think spinning the same yarn year after year, they would get it right purely by luck at this point. Alas, they haven't. So for everyone tired of listening to the same old broken record, here is a completely different "Austrian" perspective, one shared by Scotiabank's Guy Haselmann.

Just when you thought bizarro world couldn't get any, er, bizarrer, here comes - who else - Dennis Gartman, who is now long gold.... in crude oil terms.

Further, we shall recommend owning gold in terms of crude oil, buying the former and selling the latter in equal dollar sums. Further, to eliminate the impact fo the Brent/WTI spread from this trade, we’ll do half of the oil trade in WTI and half in Brent.

Uhm, #Ref!

In the last 8+ years, housing has proceeded through a cycle of bubble-bust-echo-bubble: now the echo bubble is crumbling, for all the same reasons the 2006-7 bubble burst: a prosperity based on asset bubbles and low interest rates is a phantom prosperity that cannot last.

Over the weekend, the entertaining @HistoryInPix twitter account posted this distrubing photo of the cemetery where all the radioactive vehicles that were used in the Chernobyl cleanup went to die. One can't help but wonder: where is the comparable "cemetery" for the Fukushima disaster cleanup, and does the above photo have anything to do with the recently passed secrecy bill that was "designed by Kafka and inspired by Hitler"...

Following some early strength in the Asia session, which saw Gold over $1255 (its highest in a month), the European session has seen pressure on the precious metals leak lower. That 'leak' was then helped on its way by the almost ubiquitous 8amET volume dumptaking gold and silver down markedly (though not catastrophically for now). The only other asset class showing any real action is GBPUSD (with GBP being sold aggressively) with Treasuries flat and stocks down modestly but stable for now.