Archive - Apr 2014 - Story

Last week BTFD failed for the Nasdaq and that class of talking-heads that we like to call asset-gatherers promulgated that there was no need to worry... this is a small segment of the market dragging down a high-beta index, rotate to bigger caps. The S&P has not failed the BTFD brigade since QE4EVA began... until today. For the first time, the S&P 500 cash index was unable to make a new high after bouncing off the 50DMA (in fact making a new cycle low)... now what?

And scene: "A lot of our rules were written for people and not necessarily for computers." - SEC

Obamacare has been such a smashing success that the US Health Secretary Kathleen Sebelius just couldn't wait until days after its "successful" rol out to get the hell out of dodge. "Kathleen Sebelius, the health and human services secretary, is resigning, ending a stormy five-year tenure marred by the disastrous rollout of President Obama’s signature legislative achievement, the Affordable Care Act.  Mr. Obama accepted Ms. Sebelius’s resignation this week, and on Friday morning he will nominate Sylvia Mathews Burwell, the director of the Office of Management and Budget, to replace her, officials said. The departure comes as the Obama administration tries to move beyond its early stumbles in carrying out the law, persuade a still-skeptical public of its lasting benefits, and help Democratic incumbents, who face blistering attack ads after supporting the legislation, survive the midterm elections this fall."

The Fed’s transmission mechanism to the household sector is blocked. The business credit expansion channel to higher GDP is blocked, too. The flood of demand by which the Fed endeavors to “pull” idle and underemployed workers back into production cannot be activated if the US economy has reached a condition of peak debt, as we strongly believe to be the case. Indeed, when the credit expansion channel is broken and done, all the Fed’s liquidity “accommodation” flows into the Wall Street finance channel where it pulls up the price of existing financial assets, not the employment rate of idle labor. This much is obvious, yet Yellen and her monetary politburo keep on attempting to flood the nation’s macroeconomic bathtub with more “demand”. Worse still, they fail to note that even if they could induce business and households to bury themselves deeper in debt that it wouldn’t necessarily have a salutary impact on the “labor market”— the ostensible target of their strenuous ministrations.

Curious what the fate of the petrodollar is? Look no farther than this Interfax update blasted moments ago by Bloomberg: "Gazprom Considers 'Symbolic' Yuan Bond Issue, Interfax Says."

With 30 year bond yields set to close their lowest in 10 months, CNBC's Rick Santelli is concerned at the signals that the Treasury yield curve is sending.If yesterday's minutes from the Fed were supposed to walk back their 'hawkish' tone, then Santelli slams they are "gonna need a really big billboard" because the term structure is still flattening. "When 'flattening' is the theme, that is not painting a rosy outlook for the long-term economy," and as Santelli warns, this is when the Fed is pulling out of its extraordinary policies. Santelli screams, "the entire monetary policy side has to be under review... and the only way you can keep the fallacy alive is "if you sell it as a 'deflationary' issue, where you can keep trying the same thing that isn't working."

At first we though this is AP's version of Thursday humor however upon close examination it turned out to be all too real. Moments ago a woman was taken under arrest after throwing what she described as a shoe at the person who may well be America's next president, Hillary Clinton, during a Las Vegas speech.

Today, as we plumb the depths of the US economic food-chain in that last bastion for the improverished US consumer, dollar stores, we find that that staple for low-cost "everything" Family Dollar, which operates 8,100 stores around the country, will be shutting down 370 stores "as it tries to reverse sagging sales and earnings." It was not clear immediately how many thousands of workers would be affected by the store shuttering. We assume "many to quite many." And what do they say? Why, that "the US economic recovery is obviously stronger than ever" of course!

Let's call the strategy of picking all the low-hanging fruit in an economy Plan A: you know, expanding credit, lowering interest rates, building infrastructure, fueling speculative frenzies, all the good stuff that fans the flames of "growth." Now that the central banks and political leadership of the U.S. and China have plucked all the low-hanging fruit, they have no Plan B.

But the pretty people on TV said the Fed Minutes proved they were the most dovish ever and initial claims hit recovery lows... What a total disaster - Equity markets peaked within a few minutes of the open and never looked back - yesterday's "Fed Cat Bounce" gave way to Really Red Thursday... with the Nasdaq and Russell 6.5% from their recent highs (and the S&P 3.5% off), we suspect a "markets in turmoil" special on business media any moment...

With mere weeks to go until millions descend on the Carnivalic streets of Rio for The World Cup, it seems the term "to get a brazilian" has a new meaning. As this poor woman discovered, while being interviewed live on Brazilian TV, while complaining in the clip about the lack of police presence near the station, a would-be mugger approaches her from behind and rips off what appears to be a gold necklace. Welcome to the safe streets of Brazil, world...

One of the phrases which we have done our best to bury over the last few years has been the absolutely idiotic statement "money on the sidelines" (and right behind it "more sellers|buyers than buyers|sellers"). Sadly a group of persistent, if clueless bobble-headed automatons still insist on using it. So be it. Today, however, we will focus on yet another absolutely idiotic phrase: "a stock picker's market." Leaving aside the linguistic stupidity of this expert "assessment" (because nothing says fundamental equity analysis like picking non-stocks), the mere facts flat out refute any suggestion that there is any material, or frankly, any dispersion, i.e., the proverbial stockpickeryness. But don't take our word. Here is Goldman's.

Someone was in a hurry - paging Waddell & Reed? The volume surge occurred right as VIX broke above 16 and the Biotech Index (-6.25% today) has hit bear market territory. The Nasdaq is getting slayed- down over 3% and all but Trannies are red YTD.

"I think it's very likely that we're seeing, in the next 12 months, an '87-type of crash," warns a somewhat excited sounding Marc Faber, adding that he thinks "it will be worse." The pain is just getting started as Faber notes that "the market is slowly waking up to the fact that the Federal Reserve is a clueless organization." Internet and Biotech sectors (growth stocks) are "highly vulnerable because they're in cuckoo land in terms of valuations," and fully expects the selling to spread as The Fed "have no idea what they're doing. And so the confidence level of investors is diminishing," and that means we will see a major decline.

It was less than a month ago that we reported on the surprise resignation of Canada's finance minister which while officially attributed to a wish to begin "another chapter" in his life, we said "there is rife speculation that it was indeed his health that was the reason for this unexpected resignation." Sadly, today it was proven that it was indeed Flaherty's health that had forced this surprising decision, following news that the former finance minister has passed away.