Archive - Apr 16, 2015 - Story

Here is Bernanke's new job: to make sure that Citadel's 7.4x leverage only keeps rising, and that its "true" regulatory assets of $175.8 billion follow. Because if there is one thing Bernanke has experience with, it's lots and lots of leverage.

Fed vice-chair Fischer speaks and markets must show that what he says is important. Shortly after uttering the following:

*FISCHER: MARKETS CAN'T DEPEND ON FED STAYING ON HOLD FOR EVER

Bond yields spiked and gold and silver prices tumbled (because it's all about the signal). Stocks initially ignored his comments, but are starting to lose ground now.

After crashing from November to January (oh that's just weather), the Philly Fed factory index has failed to do anything but limp higher in the last 3 months. Printing at 7.5 in April (slightly better than the expected 6.0, Philly Fed continues to hover around 1 year lows. The post-weather rebound is entirely missing as New Orders plunged to 2 year lows (though employment surged) with more firms reporting price decreases than reporting price increases.

Conformity and being able to navigate stifling bureaucracies no longer creates value or helps employers solve real-world problems. This is why college graduates can send out hundreds of resumes and not even receive a single reply, much less an interview or job offer. An entire new feedback loop of accreditation is needed...

You know it's over when the bookies are closing their markets...

As hopeful US investors buy everything oil-related on the back of a lower than expected crude build this week (after the biggest build in 30 years the week before), The Kingdom has stepped up overnight and ruined the dream of supply-restrained price recovery as it announced a surge in production output in March to yet another record high. The nation boosted crude output by 658,800 barrels a day in March to an average of 10.294 million a day, which as Bloomberg notes, is about half the daily production from the Bakken formation. WTI Crude prices have slipped by around 2% from yesterday's NYMEX Close ramp highs as it appears Saudi Arabia is not willing to just let this effort to squeeze Shale stall.

Moments ago the Department of Commerce reported March starts and permits data, which after the February collapse was expected by everyone to rebound strongly because, well, it didn't snow as much in March as it did in February. Apparently it did, because not only did Housing Starts miss massively, and just as bad as in February, printing at 926K, on expectations of a 1.040MM rebound from last month's revised 908K.

After last week's plunge to cycle lows, initial jobless claims jumped 12k from a revised 282k to 294k, back above the average for the year. The trend of falling claims has now ended as it appears the end of government fiscal year and QE3 signalled the end of the claims collapse.

"Greek officials have made an informal approach to the International Monetary Fund to delay repayments of loans to the international lender," FT reports. Knowing it faces the rather untenable choice between paying the IMF or paying public sector wages and pensions, Athens attempted to "shuffle" its payment schedule around to no avail. Yields on GGBs spiked as the now openly insolvent Greece stares into the drachma abyss. 

The one TBTF "bank" which unabashedly admits it is just a taxpayer backstopped hedge fund printing money for its owners (while supervising the NY Fed and all other central banks with various former employees in charge) with no actual lending or depository operations, Goldman Sachs, just hit it out of the park, when moments ago it reported Q1 earnings that smashed both top and bottom-line expectations, with revenues of $10.62 billion, up 13.8% from last year, and EPS of $6.00 printing far above the expected $9.31bn and $4.26. This was the best revenue generating quarter for Goldman since Q1 2011, or in four years.

• Euro zone bond yields sink to historic lows (Reuters)
• Clinton Foundation to Keep Foreign Donors (WSJ)
• Russia says U.S. forced it to act on Ukraine (Reuters)
• Bankers to China's Rescue (BBG)
• Saudi Arabia Adds Half a Bakken to Global Oil Market in a Month (BBG)
• Valuations of Hong Kong's stock market operator go interstellar (Reuters)
• Switzerland Attracts Fewer Firms as Politics Hurt Business Image (BBG)

Just as the S&P appeared set to blast off to a forward GAAP PE > 21.0x, here comes Greece and drags it back down to a far more somber 20.0x. The catalyst this time is an FT article according to which officials of now openly insolvent Greece have made an informal approach to the International Monetary Fund to delay repayments of loans to the international lender, but were told that no rescheduling was possible.  The result if a drop in not only US equity futures which are down 8 points at last check, but also yields across the board with the German 10Y Bund now just single basis points above 0.00% (the German 9Y is now < 0), on its way to -0.20% at which point it will lead to a very awkward "crossing the streams" moment for the ECB.

Several years ago, Zero Hedge first, and to our knowledge only, reported that when it comes to unofficially executing trades in the equity market the NY Fed - through a slightly more than arms-length arrangement - does so using Chicago HFT powerhouse Citadel. In other words, while Citadel was instrumental in preserving the smooth, diagonal ramp in stocks since 2009 and igniting upward momentum just as everyone else stared to sell when the Markets Group of the NY Fed called, it was also paid handsomely: after all, nobody checks the Fed's broker commission statement. In fact according to some, indirect Fed compensation to what is the world's most leveraged hedge fund has been in the billions over the past decade. Well, now it's payback time, and as the NYT reported overnight, the Brookings Institution favorite blogger, former Fed Chairman Ben Bernanke, has joined none other than Citadel as an advisor.