Archive - Apr 1, 2014 - Story

According to The White House, 7,041,000 people have signed up for Obamacare (though it's unclear how many have paid as of yet and what the mix of enrolees actually is). While this will be proclaimed as mission accomplished and spun for all it's worth, wasn't Obamacare supposed to reduce the ranks of the 45 million uninsured in America? Still, it seems like a long way to go to meet CBO projections, as WaPo notes, "the CBO and Joint Congressional Committee on Taxation in February projected that 13 million previously uninsured people would gain coverage in 2014." We suspect the President will be over the moon and blame Republicans, Twitter, and YouTube for the number not being higher...

Japanese data (double) miss, check! Chinese data miss, check! US data miss, check! Investor trust in US equity at record lows, check! All-time record highs for US equities - you betcha! Stocks broadly pumped and dumped once again today but the start-of-the-month exuberance over April's seasonality was enough to leave gains that accelerated into the close as the long-bond sold off and short-end rallied (biggest 2-day steepening in 5 months). USDJPY was in charge for much of the day but when it went limp in the last hour, it was VIX-clubbing time (to 10-week lows ahead of the ECB and NFP?)  Oil prices slumped intraday (back below $100) as gold slipped but copper and silver flatlined. Wondering what fueled today's panic buying spree? "Most shorted" stocks tripled the market's performance on the day...

While the topic of HFT-assisted "price discovery" has been beaten to death on these pages, and courtesy of Michael Lewis is now a household, and soon FBI, topic, what is more notable is that in addition to a better than expected jump in March car sales, GM also confirmed that the post-bankurptcy company has never had a greater difficult in liquidating warehoused inventory. As the chart below shows, dealer inventory of GM autos on US lots, aka Channel Stuffing, just rose to a new all time high, of 815,492 units, up from 805,769 last month, and up 15% from the 743.8K units parked at dealer lots a year ago. So 15% increase in unpurchased inventory vs a 4% increase in sales. Someone smarter than us can probably do the math here.

The purpose of Quantitative Easing is to support the balance sheets of a few over-sized banks and to finance the federal budget deficit at an artificially low rate of interest. In other words, QE supports failed banks and federal fiscal irresponsibility. In order to successfully carry off this blatant misuse of public policy, the price of gold, a measure of the dollar’s value, must be suppressed. The Federal Reserve’s lack of integrity speaks volumes about the corruption of the US government.

JP Morgan blocked money transfer from #Russia diplomatic mission in Kazakhstan "under pretext" of sanctions, says Foreign Ministry

— Thomas Grove (@tggrove) April 1, 2014

The clearly agitated BATS CEO came out swinging, blasting Katsuyama and Lewis "Shame On You," for apparently telling the truth of what occurs in the stock 'market and letting everyone in on it'. The tension grows when he presses Katsuyama on whether he really believes it is rigged... who then erupts "I believe the markets are rigged.. and that you are a part of the rigging." Then the gloves come off "you wanna do this, let's do this!" and then it got worse (or better)...

So, to summarize... mere months after Mary Barra took over the reins of GM from a somewhat surprising Dan Akerson exit, she is faced with record high inventories of unsold vehicles of dealer lots, a sales halt, a recall of 2.53 million vehicles (some of which have been alleged to be responsible for at least 12 deaths), potential bankruptcy fraud inquiries (from non-disclosures), and now a Congressional hearing that is rather uncomfortably titled "The GM Ignition Switch Recall: Why Did It Take So Long?" The phrase "under the bus" comes to mind though we wonder just how many times the so far entirely plain-spoken Barra will 'plead da fif' today.

CNBC's last hour is likely the most-watched in a decade (perhaps because after 5 years of delays HFT is finally getting the exposure it has deserved from day one... and covered right here on this website since April 2009). From the HFT lobby explaining that "there is no front-running going on in HFT," to Michael Lewis explaining the "skimming" amd why "HFT is a tax on your investment dollars," the following clips are stunning in their total failure to calm an uneasy investing public. Howevere, when asked by the CNBC anchors whether his comment on the market being rigged was exaggeration he summed it all up perfectly... "Are you really under the illusion that the individual investor trusts Wall Street... the financial crisis wiped out any residue of trust for Wall Street even if they ever had it."

Considering the rancorous debate currently going on between Michael Lewis (we will have more to say about it shortly), DirectEdge CEO William O'Brien and IEX employee and latest HFT whistleblower, Brad Katsuyma, on CNBC, we decided that this would be an opportune moment to remind readers how BATS, which currently owns DirectEdge, IPOed, or rather how it failed to IPO, when it crashed and burned in its attempt to go public on March 23, 2012, when a rogue algo destabilized the order book and promptly sent the indicative price from around $16 to 0... in less than a second - perheps the perfect testament to just what HFT really does.... and just so readers have an objective perspective of how "unrigged" the market truly is.

Quiz - 1. How much natural gas is the United States currently extracting?

(a) Barely enough to meet its own needs
(b) Enough to allow lots of exports
(c) Enough to allow a bit of exports
(d) The United States is a natural gas importer

Quite frankly, we are stumped...

• *WAL-MART SUED BY TRINITY CHURCH WALL STREET OVER GUNS, MUSIC

And rock'n'roll?

Suleyman Aslan is the CEO of Turkey's second largest bank; so imagine how shocked police were when, as Bloomberg reports, they raided his home and found $4.5 million cash stashed in shoeboxes and bookshelves. When asked why the funds weren't deposited at the bank he ran, he said that would mean declaring their origin and registering them officially...something he clearly preferred not to do. Add to this a massive 44% surge in non-monetary gold exports (and who knows how much gold smuggled - once again preferring not to explain its origin) and it appears increasingly clear 'wealth' is being extricated from the increasingly totalitarian nation before confiscations begin following the 'successful' elections this weekend for the ruling AKP party.

Though many blame the Global Crash of 2015 for the loss of faith in stocks, others say the erosion dated back to at least 2014...

The market may still be amused by Amazon's latest forward P/E boosting gimmick in the form of its entertaining (and stock price boosting if only briefly) proposal to deliver packages (some of which haven't even been ordered) by drone, but some US towns, tired of this endless invasion of just in time violators, are already taking aim at the messenger. Case in point: Deer Trail, Colorado, a city of 563, which Bloomberg reports, may approve today a measure that allows the town to issue hunting licenses for unmanned aerial vehicles, i.e., drones. Apparently some luddites people still place civil rights over the potential of bottom line profits achieved through increasingly more intrusive technology. People like Phillip Steel, a 49-year-old welding inspector, who wrote the proposed law as a symbolic protest after hearing a radio news report that the federal government is drafting a plan to integrate drones into civilian airspace, he said. The measure sets a bounty of as much as $100 for a drone with U.S. government markings, although anyone who shoots at one could be subject to criminal or civil liability, according to the Federal Aviation Administration.

We’ve chronicled the saga of “buy-to-rent” for well over a year now. From some of its most exuberant phases to its now epic retreat (investment firm property purchases are now down 70% year-to-date). It seems as if the pullback of private equity and hedge funds from this asset class is even more brutal in certain regions, with Blackstone now reporting its purchases in California down a staggering 90% this year. Not to worry, we're quite certain unemployed and deeply indebted recent college graduates will soon pick up the slack due to the anticipated resurgence of subprime lending.