Archive - Feb 2014 - Story

Gold has risen 6 of the last 7 days, breaking back over $1,275 and closing at three-month highs as the last 3 days have seen stocks and precious metals bid. Silver is on a 7-day win streak holding above $20 for the last 3 days. Despite fading back from highs today, gold outperformed stocks and bonds (on a flat USD day) and gold remains the best-performing asset (+3.75%) from the December Taper.

"Government often NEEDS war because when the people get angry, they go after government.

In self-defense, government ALWAYS needs to blame some other country or group."

Last year we exposed the reasoning for the extremely predictable cyclicality in US macro-economic surprise data. Each year of the last few, the third quarter has exhibited unusual "strength" surprising 'economists' - thanks to government agencies executing their final budgets to use up all their allotments - only to stabilize in Q4 and the fade rapidly in Q1. 2013 was "different" as we had the government shutdown which threw the seasonal pattern off... but once the agencies were re-opened, the spice did flow and we got what is now clearly not a sustainable 'surprise' in growth but a lagged cyclical bounce. However, the lag introduced by the shutdown is now catching up to us - so it is different this time (2mo. lag) but the same...

"Equities are set to top and roll over," and BofAML's Macneil Curry remains bullish US Treasuries despite today's stability (so far) from recent stock gains. He remains negative on risk assets and believes US equities are posied for another leg lower (with perhaps tomorrow's Yellen testimony the un-taper punchbowl removal catalyst) and warns  bond bears that a break below 2.657% on the 10Y would indicate the downtrend in yields has resumed. Elsewhere Curry adds "gold is coming to life."

"I think Bitcoin will face serious challenges in the long run, although I believe such digital currencies could have a place in the economy in more well thought-through structures with values better linked to real assets."

Just as we predicted it would happen, here it comes:

• OBAMACARE EMPLOYER MANDATE TO BE DELAYED FOR SOME COMPANIES

Specificaly, according Bloomberg, businesses with 50-99 workers have until 2016 before being penalized for not providing health-care coverage to full-time workers, according to final regulations released by Treasury.

US equity markets traded in a narrow range ahead of tomorrow's Yellen testimony with Trannies underperforming and Nasdaq outperforming. Cross-asset-class correlations picked up from their negligible levels on Friday as JPY (and increasingly 5Y bonds) are linked at the hip with stocks. The S&P cash tested almost up to 1,800 (but failed at 1799.94) then faded. Notably from the European close, equity handily outperformed credit markets - which ended closing near their wides of the day. Treasuries ended the day modestly bid (30y -2bps) but T-Bill yields are starting to reflect debt-ceiling concerns. The USD closed unch - drifting lower from overnight strength - but gold and silver rallied on the day (though faded of early highs). Late-day ramp efforts got the S&P green but failed to cross 1,800... and VIX decoupled on the ramp.

2013 is in the history books, and with it so are all those strategies that worked last year. As much can be seen in the performance of the marquee hedge fund names, whose performance so far in 2014, undoubtedly taking a cue from the market which in January was turmoiling over tapering and EM fears, is decidedly mixed, with about half generating negative returns, and the other just barely beating the flatline. Some notable exceptions: the woefully named Tulip Trend Fund which is already down -8.5% YTD, as well as the Keynes Leveraged Quantitative Strategies fund, down 2.9%, while on the other side Pershing Square is no longer Perishing up  4.1% through the end of the month, undoubtedly driven by the plunge of HLF in January, a move which may or may not last and likely depends on whether in the aftermath of AAPL, iCahn decides he has had enough of his game with Ackman as well.

Earlier today, the non-profit organization Better Markets did what so many others have only dreamed of doing - they sued JPMorgan. We wish them the best of luck, as in a "crony jsutice" system as corrupt as this one - perhaps best described, paradoxically enough by the fictional movie The International - where the same DOJ previously implicitly admitted it will not prosecute "systemically important" firms like JPM to the full extent of the law and instead merely lob one after another wrist slap at them to placate the peasantry, any hope for obtaining true justice is impossible.

Sad affairs have been heating up in the tiny Alpine republic in the center of the European Union. While Austria experiences record unemployment at record growth rates and tax revenues  have fallen behind optimistic projections, the looming bankruptcy of a mid-sized regional bank, Hypo Group Alpe Adria (HGAA), may propel the country to the disdained position of being the catalyst for a new round of bank failures due to interwoven banks risks on both the domestic and the international level. On Monday Austrian financial market authority FMA publicly said what the official Austria never wanted to hear as it is now confronted with a widening public discussion on a problem it had surrealstically hoped to brush under the carpet. Austria's banking woes look eerily similar to the failure of Creditanstalt in 1931 that was the fuse for the last European Kondratieff winter.

In light of its 19th quarter of losses in a row, calls for a Federal bailout, and recent consideration of adding a Bitcoin exchange to its non-bank financial services (via a "postcoin"), we thought a glimpse how "postal" the USPS is set to become was useful. Some will call it progress of course but as the following chart shows, the number of US Postal Service employees has fallen to 50-year lows (and would and could be more) - "The Postal Service is doing its part within the bounds of law to right-size the organization,"  blaming federal mandates that restrict how it can conduct business and excessive funding requirements for its employee pension plan.

Trust is gone and credit is going and debt is sitting between a rock and a hard place with its grubby hands pressed together, praying that it will be forgiven, forgotten, or overlooked a little while longer. By the way, the reason trust and credit are gone is because oil is no longer cheap and world economies can’t grow anymore. They can’t afford to run the day-to-day operations of a techno-industrial society. They can only pretend to afford it. The stock markets are mere scorecards for players who can only lie and cheat now to keep the game going. Somewhere beyond all the legerdemain and fraud, however, there remains a real world that is not going away. We just don’t know what it will look like when the smog of fraud clears.

Switzerland's surprise decision in favor of curbing EU immigration, was greeted by UKIP's Nigel Farage as "wonderful news for national sovereignty and freedom lovers throughout Europe." With 50.3% of Swiss voters backing the "Stop Mass Immigration" bill proposed by right-wing populists, AFP reports that Farage (who has been outspoken over immigration and sovereignty problems in Europe) added "a wise and strong Switzerland has stood up to the bullying and threats of the unelected bureaucrats of Brussels." As we noted previously, with the EU elections rapidly approaching non-centrist status quo parties are quickly gaining attention as 'the protest vote' gains traction.

On the back of more subsidies, this time from China, TSLA shares are storming higher today. Up over 6% today to new record highs just below $200, we thought it fascinating that as debt-laden GM sees its Enterprise Value slide, TSLA's enterprise value is now 66% of GM's. We are sure this all makes sense somewhere deep in a growth investor's mind. When TSLA was birthed into the public markets in 2010, GM was over 20-times it size, now it is just 1.5 times...

We have looked at US markets since Independence and Western Markets since The Middle Ages; but to really comprehend how far we have come, we need to press back to the dawn of civilization. 5000 years of interest-rates and commodity history and a trend is very clear as epochal events drive volatility.