Archive - Sep 18, 2015 - Story

As NY Times reports, "though the administration has long said that President Bashar al-Assad must go for there to be a durable solution to the Syria crisis, Mr. Kerry seemed on Friday to allow for the possibility that Mr. Assad might remain in power in the short term. Mr. Assad has had Russia’s backing throughout the conflict."

"The refugee crisis is undermining the EU’s fundamental principle of free cross-border movement within the Union… This is effectively throwing the EU’s very future in question. This may signal the beginning of the end, the stakes are extremely high."

The illusion that the tide of "prosperity" is lifting all boats is dissipating into a mist that no longer offers cover to obscenely wealthy politicos disclaiming the ugly reality of rising wealth/income inequality. The question for the chattering classes is this: will the bread and circuses of sports, random shootings, Trump and the rest of the churn in the media arena be enough to distract those stuck in leaky rowboats from the political fund-raising parties on the grandiose yachts?

"Asia banks indicate in coming weeks markets at early stage of crisis; Q3 EPS shows recessionary global economy. Crowded Discretionary, Banks, Tech & Eurozone most at risk should peak liquidity coincide with EPS recession, SPX<1870, GT30<2.8%, DXY<93...at least until new extreme policies introduced (Fed QE4, China QE1 or a G7 shift toward fiscal policy stimulus)."

That escalated quickly...

Now that the Fed appears to have made a grave policy error judging by the market's initial reaction, it is up to the ECB and BOJ to step up (even if as we warned two weeks ago both are running out of monetizable material) and try to preserve some confidence, i.e., halt the selling. Sure enough, that is precisely what happened earlier today when infamous ECB board member and hedge fund leaker Benoit Coeure hinted that if only the market drives 5Y5Y's even lower, i.e., inflation expectations, the ECB will have no choice but to boost QE.

It appears a combination of "there's not enough growth" and "well maybe they'll ease" has driven growthy commodities down hard post-Yellen and sent investors reaching for the safety of bullion. Silver is up over 5% this week now and Gold back at 3 week highs...

It appears we are going to need more dovishness. Following The Fed's admission that all-is-not-well - despite every talking head proclaiming liftoff imminent - the implicit lower-for-longer dovishness of The Fed has not been embraced by the "market." It appears a tipping point in Fed credibility may have been reached... but then again it is a quad witching.

"We are, here at TGL in our retirement fund, long of Apple and long of a “tanker’s” shares, whilst we are “short” of derivatives in sufficient quantity to be modestly net long of equities ..."

Chatter of a fat-finger trade, then exaggerated by the algos, has smashed UK's FTSE 100 lower instantly this morning, dragging major firms with it...

*HSBC DROPS 4.8% IN UK TRADING, QUICKLY REBOUNDS TO 2.3% LOSS
*BP DROPS 4.7% IN UK TRADING, QUICKLY REBOUNDS TO 1.8% LOSS

As with all these plunges, the machines BTFD but the rebound is weak. LSE regulators are now investigating and no trades have been DK'd (yet).

Don't look now but Greece (remember them?) is headed back to the polls on Sunday in an election that pits a watered down version of Alex Tsipras and Syriza against the conservative New Democracy. With Syriza's original vision relegated to the realm of "wishful thinking", Greeks face a choice that really is no choice at all.

• The bearish dovish Fed: Shares Fall After Federal Reserve Keeps Rates on Hold (WSJ)
• Developed, emerging markets diverge as Fed keeps rates steady (Reuters)
• Yellen May Emulate Taper Template and Raise Rates in December (BBG)
• Russia Raises Prospect of Sending Troops Into Combat in Syria (BBG)
• Rigged markets 1: U.S. Said to Investigate Chicago Trader as Spoof Probes Broaden (BBG)
• Rigged markets 2: Primary Dealers Rigged Treasury Auctions, Investor Lawsuit Says (BBG)
• Rigged markets 3: The Man Who Took KKR’s Stock for a Ride (WSJ)

What was one "one and done", just became "none and done" as the Fed will no longer hike in 2015 and will certainly think twice before hiking ahead of the presidential election in 2016. By then the inventory liquidation-driven recession will be upon the US and the Fed will be looking at either NIRP or QE4. Worse, the Fed just admitted it is as, if not more concerned, with the market than with the economy. Worst, suddenly the market no longer wants a... dovish Fed?