Archive - Feb 2014 - Story

Let's hope not...

The death of the middle class in America has become so painfully obvious that now even the New York Times is doing stories about it.  Millions of middle class jobs have disappeared, incomes are steadily decreasing, the rate of homeownership has declined for eight years in a row and U.S. consumers have accumulated record-setting levels of debt.  Being independent is at the heart of what it means to be "middle class", and unfortunately the percentage of Americans that are able to take care of themselves without government assistance continues to decline.  In fact, the percentage of Americans that are receiving government assistance is now at an all-time record high.  This is not a good thing. Anyone that tries to tell you that the middle class is going to be "okay" simply has no idea what they are talking about.  The following are 28 signs that the middle class is heading toward extinction...

Last week it was the largest equity outflow in over two years. This week, following the Monday drubbing which had the temerity to push the S&P to an "unprecedented" 5% from its all time highs, the timid retail investor said enough, and ran for the hills resulting in the largest equity outflow. Ever.

A leaked recording of a telephone conversation allegedly between US assistant secretary of state Victoria Nuland and the US envoy to the Ukraine, Geoffrey Pyatt discussing who should be in Ukraine's next government has, according to The FT, threatened to fuel east-west tensions over the troubled nation's future. In apparent frustration with the EU – which has failed to join the US in threatening sanctions against Ukraine’s leaders if they violently crush the protests – the voice resembling Ms Nuland at one point exclaims "Fuck the EU". As the two US diplomats decide whether "Klitsch" or "Yats" should be 'in' or 'out', listeners will be reminded (uncomfortably) that the governments of Ukraine and Russia previously alleged that the protests are being funded and orchestrated by the US.

How long can economic growth continue in a finite world? In simplest terms, our problem is that we as a people are no longer getting richer. The reason we are getting poorer is because hidden parts of our economy are now absorbing more and more resources, leaving fewer resources to produce the goods and services we are used to buying. The promised collapse, from 1972's The Limits of Growth, is practically right around the corner, beginning in the next year or two. In fact, many aspects of the collapse appear already to be taking place, such as the 2008-2009 Great Recession and the collapse of the economies of smaller countries such as Greece and Spain. How could collapse be so close, with virtually no warning to the population?

As the US practically decrees a Maserati in every garage, it would seem the Venezuelan version of socialism is not encouraging its wealth redistributed, price-managed, margin-controlled, centrally-planned citizens to buy cars... January saw the lowest volume of car sales ever on record at 722 (not '000s) having dropped 87% year-over-year. At least they have record high stocks and toilet paper... oh wait...

The following chart shows that we’ve turned the economic development process inside out. Ideally, advanced economies would stick to the disciplined financial practices that helped make them strong between the early-19th and mid-20th centuries, while emerging economies would “catch up” by building similar track records. Instead, advanced economies are catching down and threatening to throw the entire world into the kind of recurring crisis mode to which you’re accustomed if you live in, say, Buenos Aires. Here are eight reasons why things got so bad!

Yesterday it was Twitter, today it is LinkedIn. Moments ago, the professional social network reported EPS that just barely beat at $0.39 vs expectations of $0.38, while revenue printed at $447.2 MM vs $437.6 MM expected. However, it is this excerpt from the LNKD release that is causing the stock to be TWTRed 10% after hours.

Early volatility around Draghi's lack of easing (and a subsequent surge in EURUSD) gave way to excess exuberance as USDJPY ramped over almost 100 pips (on absolutely no news whatsoever) on the day dragging the S&P 500 25 points higher from the day's lows, back over its 100DMA and back to unchanged to the December taper. Trannies topped the taper (+1.5% on the day) but stocks remain red on the week. All this re-risking ahead of tomorrow's major noise-soaked jobs data... Bonds sold off once again but from 10amET, which coincided with the end of the initial JPY ramp, Treasuries, gold, and the USD all trod water as stocks and JPY pushed on ahead. Systemic cross-asset class correlation surged on the day to well over 0.9. S&P and Dow have best day since Mid-December; Trannies almost best day since October - and all this before tomorrow's crucial weather-impacted jobs report - make sense to anyone? TWTR -24% at $50.

While Washington debates over what is the proper explanation of the CBO's report which explicitly states that millions of workers will drop out of the labor force over the next decade thanks to Obamacare, Obama himself may have finally thrown in the towel, realizing that the longer the full implementation of Obamacare is delayed, the longer the myth that it is a viable Ponzi scheme - as opposed to non-viable - can persist. Perhaps this explains why AP reports that the White House is now considering an extension of the president's decision to let people keep their individual insurance policies even if they are not compliant with the health care overhaul, according to two top industry officials.

Presented with little comment aside to note that 9 of the last 10 Januaries have seen negative surprises...

According to a 2001 Fortune interview, Warren Buffett believes that Market-Cap-to-GDP is "probably the best single measure of where valuations stand at any given moment." As Doug Short shows in the following charts, we suspect Warren is a little more than worried about the valuation of his portfolio (unless of course, it's different this time). Both the "Buffett Index" and the Wilshire 5000 variant suggest that today's market is at lofty valuations, now above housing-bubble peak in 2007.

Money on the sidelines? EM fixed? Expectations of a terrible jobs number tapering the taper? One thing we do know for absolute certain - this ramp in stocks has nothing whatsoever to do with fun-durr-mentals... as USDJPY 102 takes the S&P back to unch on the Taper and above its 100DMA.

And so the most lucrative insider trading case in history has just resulted in a criminal conviction.

• EX-SAC FUND MANAGER MARTOMA FOUND GUILTY OF INSIDER TRADING
• MARTOMA CHARGED IN MOST LUCRATIVE INSIDER SCAM IN U.S. HISTORY
• EX-SAC FUND MANAGER MARTOMA FOUND GUILTY ON ALL CHARGES
• MARTOMA ACCUSED OF ILLEGAL TRADES TIED TO ALZHEIMER'S DRUG

Hopefully Steve Cohen's alleged hush money which bought Martoma's allegiance and silence will be worth it (and still there upon release) to make Martoma's stay in Federal pound me in the ass prison - up to 25 years - more pleasurable...