Archive - Mar 20, 2015 - Story

In the previous installments of this series, we discussed the hidden and often unspoken crisis brewing within the employment market, as well as in personal debt. The primary consequence being a collapse in overall consumer demand, something which we are at this very moment witnessing in the macro-picture of the fiscal situation around the world. Lack of real production and lack of sustainable employment options result in a lack of savings, an over-dependency on debt and welfare, the destruction of grass-roots entrepreneurship, a conflated and disingenuous representation of gross domestic product, and ultimately an economic system devoid of structural integrity — a hollow shell of a system, vulnerable to even the slightest shocks.

"As a society, we’ve become increasingly obsessed with youth, materialism, power and short-termism, tossing aside wisdom, real joy, soulfulness and connectivity. One of the symptoms of this unfortunate transformation can been seen in how we treat the least fortunate and most vulnerable around us, particularly the homeless."

As Chinese stocks rise for an eigth straight day hitting their highest levels since the crisis, China's securities regulator sees signs of froth and warns investors against adopting a foolish mentality. 

"This gap between the 1% and the rest of America, and between the US and the rest of the world, cannot and will not persist," warns renowned trader Paul Tudor Jones during his recent TED Talks speech, as he addressed the question - can capital be just? Hoping to expand the "narrow definitions of capitalism," that threaten the underpinnings of society, Tudor Jones exclaims, "we're in the middle of a disastrous market mania," adding "one of worst of my life." Perhaps most ominously, he concludes, historically this ends "by revolution, higher taxes or wars. None are on my bucket list."

For merchants in Italy, there's a tradeoff for putting up an awning that may end up casting a shadow on the sidewalk. 

Back in 2009, when aside from a few insiders, nobody had heard of HFT, Zero Hedge launched its crusade to expose the algorithmic scourge that has since then caused an equity, treasury and now US Dollar flash crash, and has been the subject of a Michael Lewis bestseller and resulted in countless market halts and failures. More importantly, there is now roughly 50 pages of just bibliography citing the evidence-based, academic research that has shown just how pervsavibely, maliciously and premeditatedly HFTs manipulate, destabilize, impair and otherwise destroy every single market in which they participate.

"Because the Bank of Japan gobbles up dramatic amounts of debt, the cost of financing government spending stays low. It’s been said that a country that issues debt in its own currency cannot go broke. Theoretically that may be correct: the central bank can always monetize the debt, i.e. buy up any new debt being issued. But in practice, there has to be a valve."

Since the number of people who still believe this lie has soared in recent months, it is our duty to conduct a public service announcement to show the truth. Here it is, from Credit Suisse:"Cash levels have slipped relative to assets, while free cash flow yields are nearly back to 2007 lows." and "Corporate cash levels in the US are still high relative to history, but have been worked down in recent years."

"Shipping freight rates for transporting containers from ports in Asia to Northern Europe fell 12.4 percent," for the week Reuters notes. This is seventh consecutive week of declines and puts us squarely back at levels last seen in 2013.

While the distraction that is the stock market continues to enthrall most Americans, the big shots in the global monetary which for now are taking place behind the scenes, are getting ever louder. One person who is paying attention to the failure of the US to grasp that the unipolar world of the 1980s is long gone, is Russia's Vladimir Putin, who earlier today proposed creating a "Eurasian" currency union which would have Belarus and Kazakhstan as its first members, which already are Russia's partners in a political and economic union made up of former Soviet republics.

"I was having lunch with a very dear friend of mine yesterday, who is also a very successful financial planner and advisor, who stunned me with an obvious question: 'Has the dumb money become the smart money?'"

This is what happened to the world's most valuable company in the last minutes of trading, when a few million shares in the last 10 minutes, and a volume slam in the last few seconds, sent the stock from just shy of $128 where it had been trading most of the day, to just over $125. A nearly $10 billion move in market cap in seconds.... on nothing. 

The only asset class that made any sense in today's quad-witching was the 10 Year, whose yield did precisely what it should do in a world in which the Fed slashed the economic outlook 2 days ago: it tumbled. Everything else was just algorithmic momentum ignition, stop hunts, and the other usual quad witching thriller which we said would happen first thing this morning.

University of California President Janet Napolitano wants students' voices to be heard — unless it means "listening to their crap."

In the aftermath of the ECB's QE announcement one topic has received far less attention than it should: the unexpected collapse of risk-sharing across the Eurosystem as a precursor to QE. This is what prompted "gold-expert" Willem Buiter of Citigroup to pen an analysis titled "The Euro Area: Monetary Union or System of Currency Boards", in which he answers two simple yet suddenly very critical for the Eurozone questions: which "currency boards", aka national central banks, are suddenly most at risk of going insolvent, and should the worst case scenario take place, and one or more NCBs go insolvent what happens then?