Archive - Feb 11, 2014 - Story

The ideal system for middlemen is the exact opposite of an open competitive market: low-risk fat profits flow to monopolies or cartels that obscure costs, and turn sellers and buyers into involuntary participants who have no other choice but to give money to the middlemen. The Internet is enabling sellers and buyers to bypass the predatory State and the parasitic middlemen the State enforces. Banks--no longer needed. Sickcare cartels--no longer needed. Higher education cartel--no longer needed.

While January was a bad month for the market, it was certainly one which the majority of hedge funds would also rather forget as we showed yesterday. So with volatility, the lack of a clear daily ramp higher (with the exception of the last 4 days which are straight from the 2013 play book), and, worst of all, that Old Normal staple - risk - back in the picture. what is a collector of 2 and 20 to do (especially since in the post-Steve Cohen world, one must now make their money the old-fashioned way: without access to "expert networks")? For everyone asking this question, here is Deutsche Bank with its take on which will be the best and worst performing strategies of 2014. So without further ado, here is the Deutsche Bank Asset and Wealth Management's forecast of hedge fund performance matrix...

Bill Ackman helped rescue General Growth Properties (GGP) - the US 2nd largest shopping mall operator - from bankruptcy in 2009/10 as the company collapsed in the financial crisis. Ackman  "turned $60 million into $1.6 billion" in the process but, according to Bloomberg, has now exited his entire position, dumping his final 28 million share back to the company via a buyback. The spin, of course, is that it's right to take profits and that GGP is now 'a much different company than it was then." However, given Ackman's knowledge of JCP (and perhaps RSH), we can't help but wonder, given all the exuberance about Fed tapering must mean the recovery is here and sustainable - just why Ackman would unload it all at such a pivotal time in the US economy...?

The German Constitutional Court’s recent decision to refer the complaint against the European Central Bank’s so-called “outright monetary transactions” to the European Court of Justice (ECJ) leaves the scheme’s fate uncertain. What is clear is that the economics behind OMT is flawed – and so is the politics. The line between audacity and hubris is a fine one. Rather than constituting a great success, OMT may well be remembered as an error born of expediency. Worse, it could undermine the ECB’s hard-won independence and credibility. That is an outcome that the eurozone might not survive.

Having folded (twice) once again, a growing number of Republicans are increasingly disavowed with Speaker Boehner. As WaPo reports, the Senate Conservatives Fund (a Tea Party group) is calling for the Speaker's job, noting "unless we install a new leader who will actually go on offense, Democrats will never fear us and we will never have any leverage." The group is launching a petition that seeks to encourage at least 15 House Republicans to refuse to support Boehner for speaker...

While on the surface today's auction of $30 billion ion 3 Year paper was unremarkable, pricing at 0.715%, through the 0.72% When Issued at 1 pm, and a Bid to Cover to 3.450, which was above last month's 3.255, and above the TTM average of 3.318, what was perhaps most notable about the auction was the surge in Indirect demand, when the takedown by the investor class soared from 28% in January to 42%, the highest percentage since the month of the last real debt ceiling crisis - August 2011 - when it was 47.9, and was offset by a plunge in the Dealer bid, which was left with just 41.3% of the auction, well below the 52% TTM average, and the lowest also since August 2011. What was so special about today that makes the August 2011 comparison palpable? Perhaps that as we reported a few hours ago, the GOP is about to fold completely on the debt ceiling issue and kick it back to 2015. Aside from that who knows.

Yellen proving she is as dovish as Bernanke (and a 200 pip rally in USDJPY) has supported the S&P 500 to its best 4-day swing since January 2013 (+4.4%)... make sense? Interestingly, emerging market FX has worsened notably in the last 3 days.

While we realize that newsflow over the past few years has taken a decided turn for the surreal, we are sad (or, alternatively, delighted) to announce that we are dead serious when we report that Illinois governor Pat Quinn has now tapped The Onion - that would be the famous satiric website - to sell Obamacare. Perhaps we should not be surprised: after we previously revealed that The Onion served as the mystery source of economic insight by such intellectual economist titans as Paul Krugman and Larry Summers, the time may have come come to surrender to the great wave of absurdity that has washed over this nation, and admit that when it comes to pitching idiotic policies, self-referential satire may be the only option left in the arsenal of the central planners.

We are sure they have lots to learn from one another -  

*OBAMA SAYS FRANCE, U.S. STAND `SHOULDER TO SHOULDER'
*OBAMA SAYS U.S., FRANCE AGREE ON CONTINUED IRANIAN SANCTIONS

Spot the Socialist...

The potential for a golden age of gas comes along with a big “if” regarding environmental and social impact. The International Energy Agency (IEA) - the "global energy authority" - believes that this age of gas can be golden, and that unconventional gas can be produced in an environmentally acceptable way.

Having decoupled entirely for almost 30 minutes after the Yellen testimony was released, USDJPY and the S&P 500 have now rejoined their delicate fun-durr-mentals-based dance. From the moment she started speaking, stocks began to rise. The S&P 500 cash index opened above 1,800 and has now surged back above the key 50-day moving average (thanks to USDJPY hitting 102.50). Bonds continued to leak higher in yield (5Y +5bps). Gold is surging off kneejerk lows (+$14 from post-Yellen lows). VIX is back under 14.5%.

The one man who singlehandedly generated over 10,000 pips in FX profits for Zero Hedge readers who faded his each and every call over the past 5 years, is finally gone.

• GOLDMAN CHIEF FX STRATEGIST STOLPER SAYS HE'S LEAVING FIRM
• GOLDMAN'S THOMAS STOLPER SAYS HE'S SETTING UP OWN VENTURE

It appears that the muppets have spoken up and advised Lloyd they no longer enjoy being run over by a steamroller. What do we mean? The following sampling of historic headlines should explain it...

Forget throwing Molotov cocktails; don't worry about throwing stones or hand to hand combat with the Police... the real trouble for Turkish protesters appears to be "insults" and "tree-hugging":

• *TURKEY PROSECUTOR REQUESTS JAIL FOR TREE-PLANTING STUDENTS: NTV
• *Turkey Protesters Given Jail for Insults to Erdogan

The punishments vary from 2-years to 14 years in jail!!

Wholesale inventories missed expectations and rose at their slowest rate since July 2013 at a mere 0.3% MoM. However, the more concerning aspect (aside from the inventory build in Q4 that is now over and means GDP downward revisions to come for Q4 on) is that 2013 saw the weakest growth in inventories since 2009's collapse. At a mere 3.96% YoY, 2013's wholesale inventory growth is the 2nd slowest in a decade.

A week ago, we reported that unlike on previous occasions, this time Boehner decided to fold like a lawn chair early in this year's debt ceiling hike debate, and sure enough moments ago Politico confirmed as much when it reported that "House Republicans are abandoning their plan to lift the debt limit and restore military pension cuts due to flagging support from the rank and file. The announcement was made Tuesday morning in a private GOP meeting." As we also predicted, Politico adds that "now, the GOP will have to pass a so-called clean lift of the debt ceiling — one without policy strings attached. But even that won’t be easy. Senior Republican lawmakers and aides are openly wondering just how many of their members will vote for a clean debt ceiling — Democrats will have to bear the brunt of passing the bill, GOP insiders say." And the punchline for the vote, which is set for Wednesday, "Senior GOP sources wonder if they’ll be able to get 18 Republicans to vote for a debt ceiling increase — the bare minimum for passage if every Democrat votes yes."

To summarize: the GOP may have trouble being more Democrat than the Democrats.