Archive - Apr 3, 2014 - Story

Despite te best efforts of a late-day ramp, the total collapse in Biotechs and high-growth momentum stocks was just too much for the Dow to manage its first green close for 2014. A late-day panic-buying scramble, sparked by an initial bounce off Nasdaq's 50DMA, was leveraged higher at 330ET once again by a JPY-based momentum-ignition (whocouldanode?) and managed to get the Dow into positive territory for th eyear - but it failed by the close. Draghi's early promises sparked EUR weakness and that USD strength held all day. Oil prices surged back over $100 as gold and silver stabilized post-Draghi (after falling overnight). Treasuries rallied shortly after the US open (on weak data) and then ebbed back higher in yields (30Y -3bps).

Wall Street has come a long way from Jesse Livermore's "money is made by sitting, not trading", "It takes time to make money", and "nobody can catch all the fluctuations." Now we have HFT "flash boys" who only make money 'trading', in milliseconds of time, capturing every fluctuation...

The bitter battle between a spied-upon Senate panel and the sanctioned spiers (CIA) over interrogation techniques and deleted files just escalated...

• *SENATE PANEL VOTES 11-3 FOR DECLASSIFYING INTERROGATION REPORT
• *FEINSTEIN SAYS CIA REPORT CHRONICLES 'STAIN' ON HISTORY
• *FEINSTEIN SAYS CIA MADE 'SERIOUS MISTAKES' THAT HAUNT U.S.
• *SENATE INTELLIGENCE VOTE ASKS OBAMA TO ISSUE REDACTED REPORT

Of course, some might see this as a distraction pre-elections (a baffle 'em with Bush-shit moment) but that would be a conspiracy 'theory'...

“At some point in time the chickens are going to come home to roost on the HFT game,” said one Goldman insider.

"Hitler took over the Sudetenland with such methods," warned German Finance Minister Wolfgang Schaeuble over the weekend, drawing parallels between Putin's push into Ukraine and the start of the Nazi occupation of Europe. This did not go down well in Moscow and German Ambassador Ruediger Freiherr von Fritsch was summoned to the Russian Foreign Ministry as the Russians lodged an official protest. Merkel was quick to distance herself from the remarks (which Russia calls a "trick") demanding that "a high-ranking official should take more responsibility for his words."

From Goldman's just released annual shareholder letter:

The quality and breadth of our client franchise are a direct by-product of our ability to attract and retain high-caliber professionals. As an investment bank, our main asset is our people and the advice and solutions that they provide to our clients. Great people build great relationships. And, we are fortunate to have a diverse group of young people from around the world who continue to view Goldman Sachs as a great place to begin and sustain their careers. For our latest analyst class, more than 43,000 candidates applied for 1,900 positions. We accepted about four percent of those applicants and of those receiving offers, more than 80 percent accepted.

Or a lower acceptance ratio than Harvard with 23 applicants for every open position. Something tells us the hourly wage offered at Goldman is higher than that for line cooks, or for anesthesiologists for that matter.

What did Janet Yellen do? Judging by the talking-heads or your favorite business media channel (or your friendly local asset-gatherer), she promised the Fed would hold everything up for longer and recovery (thanks to escape velocity growth at any moment) will be here any quarter... So what did she do that spanked all the high-growth hopes...

Has the United States ever experienced a time when a foreign nation has attempted to buy up so much of our land all at once? As Michael Snyder details below, it appears the Chinese are on a real estate buying spree all over America as they are now the dominat 'buyers' of investment green cards. This is occurring as private equity buyers and hedge funds exit the buy-to-rent business en masse and are, as Mike Krieger explains, are desperate to pitch American property to anyone willing to keep Housing Bubble 2.0 inflated... it seems Zillow is more than happy to enable that, "Zillow agreed to make its U.S. property listings available to Chinese consumers through a partnership with a Beijing-based website."

Tthe real backlash against HFT begins:

• INTERACTIVE BROKERS TO OFFER CUSTOMERS ACCESS TO IEX: CNBC
• INTERACTIVE CUSTOMERS CAN SPECIFY TRADE BE DONE VIA IEX: CNBC

And this is how the Goldman-backed IEX exchange proceeds to slowly take over lit markets, and take all important frontrunnable order flow - the lifeblood of HFTs of course- away from the vacuum tubes.

Bill Gross lost "Bob" this week. The death of his cat sparked some longer-term reflection on the hubris of risk-takers, the mirage of magnificent performance, and the ongoing debate in bond markets - extend duration (increase interest rate risk) or reduce quality (increase credit risk). As the PIMCO boss explains, a Bull Market almost guarantees good looking Sharpe ratios and makes risk takers compared to their indices (or Treasury Bills) look good as well. The lesson to be learned from this longer-term history is that risk was rewarded even when volatility or sleepless nights were factored into the equation. But that was then, and now is now.

Having changed her Facebook profile picture to a "V...for Vendetta" face mask, the widow of former Zurich Insurance CFO Pierre Wauthier said she and her family cannot accept Zurich’s claim that his death wasn’t brought on by undue stress. As Bloomberg reports, Switzerland’s biggest insurer said in November that no “undue pressure” was put on Wauthier, who said in a suicide note that then-Chairman Josef Ackermann had created an unbearable working environment. But, his wife is demanding to know why her husband's former boss resigned if he had not accepted blame for the death, and why details of tensions at work were not made public. Her anger is clear, as she blasted "I am not worth talking to... or is it that I would raise unbecoming questions????"

Days after the US escalated, announcing it will be sending a Navy warship back into The Black Sea, and on the heels of NATO ordering its military planners to draft measures to beef up defenses amongst its Eastern European members, Russia is demanding answers for this escalation. As Reuters reports, Russian Foreign Minister Sergei Lavrov said any increase in NATO's permanent presence in eastern Europe would violate a 1997 treaty on NATO-Russian cooperation: "We have addressed questions to the north Atlantic military alliance. We are not only expecting answers, but answers that will be based fully on respect for the rules we agreed on." De-Escalation-Off.

Having successfully negotiated the exposure of a potential "false flag" attack on Syria, corruption probes, financial system chaos, court rulings of the ban's unconstitutionality, and a "successful" election, Turkey's Erdogan has decided to lift the ban on Twitter...

after shocking the world with its unilateral decision to halt Russian money transfers without a direct order from the administration, Reuters reports that JPM has folded and will process said payment from Russia's embassy in Kazakhstan to insurance agency Sogaz, easing tension after Moscow accused the U.S. bank of illegally blocking the transaction under the pretext of sanctions.

The last year or two has seen a deluge of Fed speakers pay lip-service to watching/monitoring/keeping-an-eye-on potential bubbles... but as yet having found none... That is all except one - Jeremy Stein - who explicitly called out high yield bonds as in a 'frothy' bubble last year... it appears he has grown weary of smashing his head against that wall...

• *FED SAYS STEIN SUBMITTED RESIGNATION LETTER TO OBAMA
• *YELLEN SAYS STEIN WAS 'AN INTELLECTUAL LEADER' ON FED BOARD

Stein plans to return to teaching at Harvard but in his resignation letter noted that more work is needed on the job market and that the financial market needs strengthening.