Archive - Apr 9, 2014 - Story

This is Carey Wedler (the one with the Obama shirt) approximately six years ago, when she was, in her own words, a fervent "Obama girl" who believed the myth about "hope and change."... And this is Carey Wedler now, grown up, who has finally "googled the news", and having seen through the lies, realizes that Obama has "become exactly like the George Bush" that she "used to so vitriolically hate." 

"Mr. Obama - you are the biggest fraud that has ever been perpetrated on the American people and it's been a long time since I bought into it so I think it's about time to burn your shirt."

You’d think a guy like Rogers who aggressively lobs untrue accusations against a journalist trying to inform the American public about government criminality would have a squeaky clean background himself. After all, he was a former FBI agent. You’d think that, but you’d be wrong. Incredibly, Dick Morris points out that until recently Mike Rogers’ wife was the president and the CEO of the company that was contracted by the State Department to provide intelligence-based and physical security services. While this sort of crony capitalism is seen as “business as usual” in the cesspool that is D.C., the really crazy part of this story is that as Chairman of the House Intelligence Committee, Rogers is charged with investigating the adequacy of security at the Benghazi compound prior to the September 11, 2012 terrorist attack. You can’t find a bigger conflict of interest than that...

All the gains that Japan's Nikkei 225 futures had achieved in the post-FOMC-Minutes exuberance have been lost as first Japan (huge miss in machine orders) and then China (huge miss in imports and exports) hit the market with a disappointing data double whammy. US futures are relatively untouched for now (even as USDJPY tumbles back below 102). Asian equity markets are mixed (China/India down notably and Japan fading fast) as another Chinese bank has "delayed payment" on a bond. Copper prices have also reverted and given up post-FOMC gains (despite rumors of PBOC bailout buying).

"The message for strivers is that if you want to be very, very rich, start out very rich," is the wondrous conclusion Bloomberg BusinessWeek's Peter Coy has from delving into the details of the latest data on income growth in America. The richest 0.1 percent of the American population has rebuilt its share of wealth back to where it was in the Roaring Twenties. And the richest 0.01 percent’s share has grown even more rapidly, quadrupling since the eve of the Reagan Revolution.

Apparently doing away with diplomatic pleasantries, the Chinese have been directly clear with Chuck Hagel as he lays the groundwork for President Obama's Asia trip later this month (scheduled to visit Japan, Malaysia, and the Philippines - all in direct territorial conflicts with China). As Reuters reports, "Obama needs to pay serious consideration to this issue when he comes to Asia... China has already put this message across during the meetings with Hagel," said Ruan Zongze, a former diplomat with the China Institute of International Studies in Beijing, a think tank linked to the Foreign Ministry. "The United States is moving in a direction we don't want to see, taking sides with Japan and the Philippines, and China is extremely unhappy about this."

Echoing Charlie Munger, Oaktree's Howard Marks warns today's institutional and retail investors that "everything that’s important in investing is counterintuitive, and everything that’s obvious is wrong." These words seem critically important at a time when the world and his pet rabbit is a self-proclaimed stock-picking export. Be "uncomfortably idiosyncratic," Marks advises, noting thaty most great investments begin in discomfort as "non-conformists don’t enjoy the warmth that comes with being at the center of the herd." Dare to be different is his message, "dare to be wrong," or as Charlie Munger told him, "it’s not supposed to be easy. Anyone who finds it easy is stupid." While Marks philosophically adds that "being too far ahead of your time is indistinguishable from being wrong," he warns the lulled masses that "you can’t take the same actions as everyone else and expect to outperform."

In this day and age, it is imperative that we all learn how to think for ourselves.  The foundations of our society are crumbling, our economic system is failing and the blind are leading the blind.  If we do not learn to make our own decisions, we are just going to follow the rest of the herd into oblivion. In addition, we all need to start taking a long-term view of things.  Just because the economic collapse is not going to happen this month does not mean that it is not going to happen.  When you step back and take a broader view of what is happening, it becomes exceedingly clear where we are heading. Sadly, most Americans will never do that.

Having warned just 6 weeks ago that high-yield credit and small high-tech firms may be in a bubble, Fed Governor Tarullo, ironically speaking at the Hyman Minsky Financial Instability Conference, suggested that the recuction in share of national income for "workers" (i.e. income inequality) is troubling. Furthermore, he added, "changes reflect serious challenges not only to the functioning of the American economy over the coming decades, but also to some of the ideals that undergird the nation's democratic heritage." His speech, below, adds that since there has been only slow growth so far, expectations for a growth spurt are misplaced and that the Fed-policy-driven recovery has "benefited high-earners disproportionately."

According to a recent analysis by Goldman, in 2014 the US household is on track to withdraw a whopping $430 billion from US corporate stocks. i.e., sell. This will be the biggest net outflow by the Household group, which has constantly withdrawn cash from equities over the past decade, since the last market peak.

Yesterday, a retiring 38-year veteran trial lawyer's remarks shone a brighter light on the farce that the SEC has become in recent years. The SEC has become “an agency that polices the broken windows on the street level and rarely goes to the penthouse floors,” Kidney said, adding that his superiors were more focused on getting high-paying jobs after their government service than on bringing difficult cases. The agency’s penalties, Kidney said, have become “at most a tollbooth on the bankster turnpike.” As the full letter below shows, he had a lot more to add on just how the toothless agency should be run...

Citi's credit strategy team warns, for non-financial corporations - fundamentals have turned. Low interest rates hae helped keep debt service burdens low but, as they suggest, releveraging tends to sneak up on you. Leverage is as high as its ever been outside recession. This may not be a problem today, or tomorrow, but the leverage clock is ticking... and credit markets have no room for downside surprises (and, as we have vociferously explains, if credit spreads rise as the credit cycle 'cycles' then the underpinning for the entire buyback/dividend driven 'fudge' for stock valuations is removed)... and risks seem far higher in the US (than Europe) going forward. In the end we know this is unsustainable - the question is when (in 2007 it lasted 10 months or so...) but things change very quickly once collateral chains start to shrink. Perhaps this is why Carl iCahn called the top - because he knows the ability to re-leverage (his bread and butter trade) is over...

Following Russia’s annexation of Crimea and Sebastopol last month, Western leaders have been pondering how to get back at Moscow for its actions without starting a new world war. The situation is what the Brits may describe as a sticky wicket.  They want to get back at Russian President Vladimir Putin but at the same time they don’t want to upset him too much seeing that he controls much of the oil and natural gas that flows to Eastern and Western Europe via a number of pipelines. The options available to punish Russia for its actions are really quite limited when you think about it; but President Putin now has two new weapons which in some ways frightens some of the old Soviet republics and the Europeans even more than conventional and nuclear weapons

April 1: Gartman explains why experience tells him to stay bullish on stocks.

April 7: 'Scared' Dennis Gartman: "Get out of stocks"

And here is what happened next...

Investors, or perhaps algos, it appears are shocked that the Fed is just as dovish as it has always been (despite endless speeches since Yellen's six month comment - but will not tapering the taper) and today's minutes sparked a short-squeeze loaded VIX-slamming jerk higher to get the Dow back to unchanged from the FOMC statement (S&P back to unch on the month and Nasdaq back to unch on the year). Bond yields ripped lower (the best FOMC minutes day since the Fed announced QE3 expectations) with the short-end outperforming (unwinding only 50% of the flattening post-FOMC) and long-end selling off. Gold and silver had been fading early but rallied on the FOMC minutes (back above $1310). Oil pushed on to $103.50 and copper rallied back to unch (supported by PBOC buying rumors). Credit markets were diverging notably before the FOMC jerk but remain wider on the week. Just as the initial squeeze euphoria ("most shorted" stocks had their best day in 2 months) was fading, the 330 Ramp in JPY occurred and lifted stocks to the highs of the day.

Just over a year ago, people across Cyprus went to bed thinking everything was just fine. They woke up the next morning to a brand new reality: their government AND their banking system were flat broke. Cash withdrawal limits were imposed. Funds transfers were curtailed. Cypriots were even forbidden from doing something as simple as cashing a check. These destructive tactics are called capital controls. And one year later they’re still in place. Naturally, since this is an “emergency situation” in their view, they have to impose these “restrictive measures” in order to safeguard “public order and public security”. In other words, capital controls are for your own good.