Archive - May 2014 - Story

Having been described by Warren Buffett as "the best single measure of where valuations stand at any given moment," Advisor Perspectives' Doug Short is perplexed at Warren's recent note to his CNBC brethren that "markets are not too frothy." Perhaps, as the following chart will shockingly identify, it is time to listen less and study more as Buffett's "Market Cap to GDP" indicator has risen seven quarters in a row and is only trumped in its absolute bubble exuberance by the very peak in 2000. Maybe, despite all the talking heads trying to explain what he meant, Tepper is right to be concerned, that the market is "dangerous" and given his historical comments - looking at this chart - what would Warren do?

Wondering what Eastern Europe will blame its economic weakness on? No, not sanctions... but perhaps the second coming of Noah might slow things down a little. The overall death toll in the worst flooding in the Balkans has risen to at least 47 people. The images have to be seen to be believed.

Recently, Republican leaders in Congress unveiled a "tax reform" plan that they claimed would provide the American people with a simpler, fairer, and more efficient tax system. While this plan does lower some tax rates and contains some other changes that may make next April a little less painful for Americans, there is little in it to excite supporters of liberty. Sadly, politicians in Washington refuse to consider any tax plan that would decrease government revenue. This is because the prevalent attitude in DC favors protecting the welfare-warfare state over protecting our liberties. As the obsession with the Laffer curve shows, even many alleged supporters of the free market only pretend to support liberty as a means to enhance the well-being of the welfare-warfare state.

When it comes to stocks - "everyone" knows the "Tuesday effect". When it comes to volatility - "everyone" knows the "just sell you idiot" effect. But, as Citigroup's Richard Cochinos explains (and Bloomberg annotates in charts so simple a 5th grader can get it), there is now an FX trade for dummies...

It has been over two months since Malaysian flight MH-370 disappeared and still not a single credible trace of its final resting place has been found. Since then, there have been absolutely no actionable leads, and it increasingly appears as if the plane fell off the face of the earth.  In short: "nobody knows." Or so the conventional wisdom goes. One person, however, who thinks someone may know more than they are letting on is none other than the man who was the Prime Minister of Malaysia from 1981 to 2003, Mahathir Mohamad, and who in a blog post earlier today has some rather provocative questions and thoughts. His conclusion, after noting that "planes like MH370 "don't just disappear" is that CIA and Boeing may be hiding information about missing MH370.

As expected and discussed earlier in the day, Credit Suisse appears has become the first major bank to admit to doing anything wrong (though obviously unrelated directly to the financial crisis):

• U.S. FILES CRIMINAL CASE AGAINST CREDIT SUISSE IN FEDERAL COURT
• CREDIT SUISSE AGREES TO PLEAD GUILTY IN TAX CASE SAYS U.S
• CREDIT SUISSE PLEA WOULD END THREE YEAR U.S. INVESTIGATION
• U.S. ALLEGES CREDIT SUISSE AIDED U.S. CITIZENS IN TAX EVASION

Expectations are for a $2.6 billion settlement ($1.9bn to DoJ & $0.7bn to NY) - notably more than the ~$475 million CS has reserved for the settlement - but Eric Holder's due to speak at a press conference at 6pmET to cover the details (but will anyone go to jail?)

The clip-on camera company has filed for its IPO. GoPro, which will list on NASDAQ under the symbol GPRO, would, however, probably prefer you not focus too closely on its financials... sshh - EBIDTA -30% YoY for comparable quarter?

Having dramatically exposed the dismal state of JCPenney stores and the sad dismantling of Sears, Belus Capital Advisors' Brian Sozzi has gone north and found his another sad retail spectacle... in Target Canada.

The economic system in which we live today is a crony capitalist system or, we might say, a system of money socialism. And that’s Piketty’s greatest error: to blame capitalism for the negative effects of crony capitalism and money socialism. But perhaps it is no error. Perhaps, he only wants to be loved by politicians and the IMF. I think they love him already, though.

Last week we highlighted just how "rigged" the casino really is (real casinos - as opposed to the equity markets) and while that was shocking, the USA can be proud of another exceptionalism... As The Economist notes, at $119 billion in 2013, the United States was the biggest gambling loser in the world. However, on a per capita basis, Australia and Singapore top the list.

Equity volumes were abysmal today... (NYSE lowest in 2014) which means only one thing... a VIX-driven levitation. Bonds sold off at the long-end (30Y +4bps) but the short-end remained bid (5Y -1bp) but did get 5s30s back to 5 week steeps. USDJPY bounced off  its 200DMA (~101.25) but did not really support stocks higher. Credit markets did not buy the exuberance in stocks either. What today's ramp appears to have been was a gap-fill for VIX from Friday's dislocation on a day with no macro data to upset the algo stop-run procession. Gold and silver (along with all commodities) overnight but once the US day session opened, the selling began and PMs closed unch. The USD ended down 0.1% led by modest EUR strength (despite ECB jawboning) and AUD weakness (rumors of downgrades). "Most shorted" stocks rallied almost 3% from Friday's lows (when S&P bounced off its 50DMA) as once again a squeeze manufactures broad index pick-ups.

Forget international capital flows, forget central banks (even though the world's reaction to the ECB enacting such an extreme policy - QE- this far down the 'recovery' raises questions about the entire false state of the world), and forget positioning... Rick Santelli - stunned at the disconnect between stocks and bonds off the February lows... says there is only one number that matters for lower rates - Nasdaq 3996.

First there was "long social-media", then "short bonds", and now - as Credit Suisse notes - the next "pain trade" appears to be building in USDJPY (which is very worrisome for broad risk assets in general).