Archive - Feb 2014 - Story

For the second night in a row, China, and specifically its currency rate which saw the Yuan weaken once more, preoccupied investors - and certainly those who had bet on endless strenghtening of the Chinese currency - however this time it appeared more "priced in, and after trading as low as 2000, the SHCOMP managed to close modestly green, which however is more than can be said about the Nikkei which ended the session down 0.5%. Still, the USDJPY was firmly supported by the 102.00 "fundamental" fair value barrier and as a result equity futures, which had to reallign from tracking the AUDUSD to the old faithful Yen carry, have been propped up once more and are set to open at all time highs. If equities fail to breach the record barrier for the third time in a row and a selloff ensues after the open in deja vu trading, it will be time to watch out below if only purely for technical reasons.

As Taiwan’s legislature prepares to review the controversial Cross-Strait Services Trade Agreement with China next month, apprehensions over the island’s growing economic reliance on China continue to rise. A recent anti-dumping case initiated by a U.S. trade commission, and subsequent decisions on legal representation, highlight the dangers — economic and political — that can arise from a further integration of the two economies.

From April to September of 2013, as Bloomberg reports, TEPCO admits that levels of radiation measured from water samples around the destroyed Fukushima nuclear reactor were "significantly undercounted."  We assume it was mere coincidence that during this very time Shinzo Abe proclaimed the 2020 Olympics would be safe and used many of these readings as evidence. In addition to this debacle, The BBC reports, the likely scale of the radioactive plume of water from Fukushima due to hit the west coast of North America should be known in the next two months; and rather stunningly, The Japan Times reports a new study finds the lifetime risk of developing cancer has risen among 1-year-old girls in an area affected by the nuclear crisis at the Fukushima No. 1 power plant. But apart from that, everything's great.

"The conscious and intelligent manipulation of the organized habits and opinions of the masses is an important element in democratic society. Those who manipulate this unseen mechanism of society constitute an invisible government which is the true ruling power of our country. We are governed, our minds are molded, our tastes formed, our ideas suggested, largely by men we have never heard of..." - 1928

As a society we have fallen asleep at the wheel. We’ve allowed ourselves to be lulled into complacency, distracted by minutia, mesmerized by technology, turned into consumers by corporations, pacified by financial gurus and Ivy League economists, and fearful of our own shadows. Surveillance, censorship and propaganda are the tools of the oppressive state. Free speech and truthful revelations about the Deep State are a danger in the eyes of our oppressors.

Fundamentally oriented investors tend to think that quants, like blondes, have all the fun. As ConvergEx's Nick Colas notes - it all looks like easy money - scalping trades with lightning fast computers, front running news with preferential access to press releases, or managing leveraged portfolios with thousands of small but profitable positions – but quants face their own significant challenges. Finding common rule sets that work in a wide array of stocks is not easy, and markets adapt quickly to close opportunities that seem historically profitable - the number of potential signals is seemingly endless; and regulators are now aware of quantitative investing and, in some cases, don't like what they see. Here are 10 reasons why why "it's not easy being a quant."

Global Economics is not as complicated as the Ivy-league-trained Keynesian economists would have you believe. As Goldman Sachs gleefully illustrates, the world is presently divided into two financially warring camps... The Emerging Markets (EM) who have Inflation problems and The Developed Markets (DM) that have a Disinflation to Deflation problem. All of this has placed the world on a destructive path towards what can best be termed a "Globalization Trap" and eventually a global fiat currency crisis.

In a desperate attempt to distance itself from the widening corruption scandal linking the Vatican's bank accounts to fund (and allegedly bribe) a 2007 acquisition by Monte dei Paschi of Antonventa, the Pope has taken an unprecedented step in open the Vatican's finances to public view. As Reuters reports, Pope Francis on Monday revolutionized the Vatican's scandal-plagued finances by appointing an auditor-general with wide oversight powers "to conduct audits of any agency of the Holy See and Vatican City State at any time," a statement said. Francis decreed that the changes have "immediate, full and stable effect," abrogating any existing rules not compatible with them.

Economics is not a difficult subject, unless you try to learn it from an economist. Common sense is all that is required to be a good economist. Unfortunately, in order to get your union card, you must pretend to have none. Belief in fairy tales like more spending and “free lunches” is also necessary. But that is of little import in regard to the title – How to identify economic zombies... The test to determine whether you or your friends are zombies is simple. Answer the following question: How would you live if debt/credit were outlawed?

Just when the latest wave of litigation against banks seemed to be calming down with one after another fraudclosure-related settlement (which have cost JPM alone some $30 billion in the past four years), here comes the Senate Permanent Subcommittee chaired by Carl "Shitty Deal" Levin, and blows up the peace of Zurich's nighttime air with a bombshell of a 175-page report which put Switzerland's second largest bank, Credit Suisse, front and center in a brand news tax evasion scandal... not that there is anything inherently wrong with that: the last thing the US government needs is to be enabled to be even bigger, plus any money the Treasury needs, the Fed will simply print on its behalf. However, it is considered illegal, at least in polite company. And so among the accusations listed in the report, seen by FT, is that "Credit Suisse made false claims in US visa applications, conducted business with clients in secret elevators and shredded documents to help more than 22,000 American customers avoid US taxes, according to a scathing report by a US congressional committee.

1840's Gold Rush or 2014 Dot-Com 2.0?

"Despite the amazingly high cost of living and the extraordinary opportunities fr frittering away money, everyone in early San Francisco was supremely confident that he would soon be able to return home with an incalculable amount of [wealth]...

Bank of England Governor Mark Carney surprised his audience at a conference late last year by speculating that banking assets in London could grow to more than nine times Britain’s GDP by 2050. These may be reasonable assumptions, but the estimate was deeply unsettling to many. Hosting a huge financial center, with outsize domestic banks, can be costly to taxpayers. In Iceland and Ireland, banks outgrew their governments’ ability to support them when needed. The result was disastrous. Quite apart from the potential bailout costs, some argue that financial hypertrophy harms the real economy by syphoning off talent and resources that could better be deployed elsewhere.

Take an exchange named for "Magic: The Gathering", add some "currency" which in its most tangible form is an electron fluctuating between 0 and 1, and you get this...

Today's pump-and-dump that failed to hold the S&P 500 in the green for 2014 was an almost perfect deja vu all over again of yesterday's. However, today saw a very rapid after-hours 6 point melt-up in S&P 500 futures thanks to a WTF-inspiring collapse in VIX (from 14.4% to 13.7%!!)

Retirement funds, home equity, family assets--these are the financial equivalent of seed corn. Once they're cashed out and spent, they cannot be replaced. So how much of the recent "growth" in GDP results from our consumption of seed corn? It is difficult to find any data on this, something which is unsurprising as the data would reveal the entire "recovery" story as a grandiose illusion: we as a nation are consuming our seed corn in great gulps, and there will be precious little left in a decade to pass down to the next generation. We face not just an impoverishment in consumption but in expectations and generational assets.