Archive - May 18, 2015 - Story

The widespread riots, looting, and indiscriminate arson may have subsided in Baltimore, but the violence has not. As The Washington Post reports, "from mid-April to mid-May, 31 people were killed, and 39 others were wounded by gunfire. Twice, 10 people were shot on a single day."

Old age and treachery will always triumph over youth and skill. At least, that is the way it looks.

According to Tobin's Q, which compares stock prices to the replacement value of companies' underlying assets, equity markets have become detached from reality to a degree only witnessed on two occasions in history: the tech bubble and 1929. 

Many people seem to think that America has lost its sense of purpose. You don’t have to seek further than the USA’s sub-soviet-quality passenger railroad system, which produced the spectacular Philadelphia derailment last week that killed eight people and injured dozens more. Six days later, we’re still waiting for some explanation as to why the train was going 100 miles-per-hour on a historically dangerous curve within the city limits. The condition of our trains is symptomatic of the shape of the nation.

Curious about the economic fate of the US? Here it is:

Q. Steve Liesman: Who is your favorite economist?
A. Nat'l Economics Challenge participant #1: Keynes. I just love Keynes.
A. Nat'l Economics Challenge participant #2: I do too, because he spends a lot of money.

And proud we are of all of them.

In a stunningly honest turn of events - though likely self-preserving - a number of senior financial services executives are reportedly urged authorities around the world to bolster their crisis-busting arsenals amid fears that ultra-low interest rates have increased the risks of financial instability. As The FT reports, the heads of companies including HSBC, UBS and BlackRock will on Monday release a joint statement demanding policy-makers "address emerging market inefficiencies in the financial system, such as over-exuberance within asset classes." Policy-makers must “lean against something that is making people feel good but is actually going to give them a hangover they will find difficult to cope with."

The punchline from the most recent San Fran Fed "research" paper is that since Glenn "double seasonal adjustment" Rudebusch is one of Yellen's favorite hometown economists, she now has the green light to completely ignore the weakest economic print since last Q1, and to focus entirely on the best economic print in the US: the surge in part-time senior citizen workers, pardon, the "zero slack" unemployment rate of 5.4%. She also has the justification why to ignore it: the bad data wasn't seasonally adjusted enough (the good data was seasonally-adjusted just right).

Who could have predicted this? Wall Street's consensus crowd of perennial optimists have taken the machete out to Q2 GDP growth expectations (just as they had to when Q1 showed them all for the worse weather forecasters ever). The tumble in Q2 expectations brings Wall Street once again, closer to where The Atlanta Fed's GDPNow model forecast is... a mere 0.7% growth... and drags total 2015 growth well below trend.

"What happened in each of those episodes was a short-run break in the system, collapse of confidence and flight to gold.  What I think we are facing now is a terminal phase of a monetary system that isn’t viable, stable or sustainable.  Therefore gold has but one characteristic - massive upside in the years ahead."

Episodes of “corrections” are apparently happening more frequently according to BofAML's credit strategist Barnaby Martin and given the extremities of liquidity, profits, technological disruption, regulation, and income inequality, BofAML warns 'gently' that the potential for a cleansing drop in asset prices cannot be dismissed. Most likely catalysts: Consumer, Rates, A-shares, Speculation, High Yield. "We advise selling risk into strength, buying volatility into weakness, advocate higher than normal levels of cash and would add some gold."

If Carl Icahn, whose $6.8 billion in AAPL holdings makes him nearly a 6x bigger holder of the stock than the Swiss National Bank, is correct and AAPL is truly worth $240/share today, or about $1.4 trillion, roughly equivalent to 9% of US GDP, then this is how AAPL would rank if it were a sovereign nation...

"Warren Buffett highlights how his Berkshire Hathaway Inc. utilities make massive investments in renewable energy. Meanwhile, in Nevada, the company is fighting a plan that would encourage more residents to use green power," Bloomberg reports, in the latest example of the world's ultra-rich not practicing what they preach.

Hello, Twitter! It's Barack. Really! Six years in, they're finally giving me my own account.

— President Obama (@POTUS) May 18, 2015

December 18th 2014 saw SPY - the S&P 500 ETF - suddenly spike to 212.97 (on no news whatsoever). We have now taken out that "fat finger" peak.