Archive - Oct 12, 2015 - Story

We noted previously that last week's face-ripping rally was the biggest short-squeeze sicne 2011, but, as SocGen notes, this "savage reversal" - as the biggest losers rebounded - was the worst price momentum whiplash since 2009. Bear market rallies are typically characterised by sharp reversals and elevated levels of volatility, and as SocGen warns there are several things which point to this being a technical bounce (rather than longer-term supportive value-seeking).

They are spending it on... gas.

Though emerging economies’ debts seem largely moderate by historic standards, it seems likely that they are being underestimated, perhaps by a large margin. If so, the magnitude of the ongoing reversal in capital flows that emerging economies are experiencing may be larger than is generally believed – potentially large enough to trigger a crisis. In this context, keeping track of opaque and evolving financial linkages is more important than ever.

"There were too many wounded, tens of dead, body pieces scattered around, and people screaming. The state wasn’t able to prevent a massacre right in the middle of Ankara. Instead, it enabled it."

For the first time since October 2010, VIX has fallen for 10 straight days (crashing from over 28 to under 17). The collapse in the 'fear' index has also broken it back below its 200-day moving-average for the first time since breaking above on August 19th.

• September 2013: EVANS; NO RATE HIKE UNTIL LATE 2015 (source)
  
• March 2014: EVANS: NO RATE HIKE UNTIL EARLY 2016 (source)
  
• October 2015: EVANS: MID-2016 BEST CHOICE FOR LIFTOFF

The cyclical fallout from the Great Financial Crisis and the secular deflationary “D’s” of excess Debt, tech Disruption, aging Demographics have been the major catalysts for deflation.

It appears Chinese authorities want to be the monopoly manipulator of their stock markets. Just a week after BlackRock suggested (and Hillary spewed) plans for transaction taxes in US markets to effectively kill high-frequency-trading (and all its ills), China's Securities Regulator Commission (CSRC) has proposed limiting the use of automated trading programs in the stock market. Of course, just as we saw last nght in China futures, we assume CSRC only wants to ban "selling" algos and not "spoofers" pushing stocks higher.

Since the economic downturn of 2008, the critics of capitalism have redoubled their efforts to persuade the American people and many others around the world that the system of individual freedom and free enterprise has failed. These critics have insisted that it is unbridled capitalism, set loose on the world, which is the source of all of our personal and society misfortunes. The political and economic crises through which the world suffers is not the crisis or failure of the free market. No, it is the crisis and failure of the interventionist-welfare state, and its anti-free market capitalist ideology.

"We don’t ask anyone’s permission to enhance our defense power or missile capability and will firmly pursue our defense plans, particularly in the field of missiles."

If it wasn't for Ben "the Hero" Bernanke's courage to print like a drunken Keynesian madman, none of this would have been possible, and by "this" we of course mean that the net worth of the top 0.1% of Americans is about to surpass the wealth of the bottom 90% of US households.

While the US bond market, if not equities, is enjoying the day off on a day in which there is no economic data just more Fed speakers including the Fed's Evans who on Friday uttered what may be the dumbest thing a central planner has ever said, the week's macro docket starts in earnest on Tuesday when China releases much anticipated September trade data. Here are the key events for the rest of the week.

Saudi Arabia, the recently crowned head of a UN human rights panel and close U.S. government ally, has now bombed two wedding parties in Yemen in just over a week. Yes, you read that right.

On Friday we said that "it is certain that any volume reductions by Glencore will be promptly taken advantage of by Glencore's competitors, because in a global deleveraging and commodity supercycle repricing, he who cooperates while others defect, always loses the game theory."And just as expected, overnight the world's second biggest mining company, Rio Tinto, warned that it will not cut copper production, saying it would be illogical to hold back output and leave space in the market for higher-cost rivals.

Despite its dubious track record, oil prices are stumbling after Goldman Sachs releases a report calling for oil prices to remain lower for even longer, calling for a drop to $50 within the next 6 months.