Archive - Sep 2015 - Story

Government poses a threat to liberty, that much is clear. But what may be surprising is that almost half of Americans clearly identified government as a clear and “immediate” threat, and are obviously outraged about what is going on. It is time that Americans embrace their anger at government, and focus their attention past the politicians to the real problem. Start with the bankers, follow the money, and see where it goes...

When you tie the reflexivity problem in with the fact that the excessive use of counter-cyclical policy is leading to the creation of ever larger asset bubbles by effectively short circuiting the market's natural ability to purge speculative excess and correct the misallocation of capital, what you get is a never-ending loop whereby the consequences of unconventional monetary policy serve as the excuse for doubling and tripling down on those same policies.

There is growing turmoil in buybacks that threatens the very fabric of the stock bubble. That was always the primary transmission of the foundation of its current manifestation, corporate debt, into asset prices; especially the huge run following QE3 and QE4. The problem once momentum fades is that investor attention turns toward valuations that were repeatedly ignored before. As long as everything is moving upward and any fundamental downside is completely contained (in perception) as “transitory” then valuations are easily set aside as one form of rationalization. The effect of reversing momentum is for a more honest measurement; particularly by force of change in economic sentiment which is almost always concurrent.

"...the federal funds rate and other nominal interest rates cannot go much below zero, since holding cash is always an alternative to investing in securities. ... the lowest the FOMC can feasibly push the real federal funds rate is essentially the negative value of the inflation rate. As a result, the Federal Reserve has less room to ease monetary policy when inflation is very low. This limitation is a potentially serious problem because severe downturns such as the Great Recession may require pushing real interest rates far below zero for an extended period to restore full employment at a satisfactory pace."

When risk sold off last week in the wake of the Fed’s so-called “clean relent,” it signalled at best a policy mistake and at worst the loss of any and all credibility. Tonight, Yellen gets a do-over.

The ongoing oligarch theft labeled an “economic recovery” by pundits, politicians and mainstream media alike, is one of the largest frauds we’ve witnessed in my life. The reality of the situation is finally starting to hit home, and the proof is now undeniable. So now we know what has kept meager spending afloat during this pitiful “recovery.” A combination of “alternative loans” and a bleeding of retirement accounts. The transformation of the public into a horde of broke debt serfs is almost complete.

"Good morning. Nothing extraordinary happened yesterday in the building of Banco de España in Barcelona"...

We have all watched the dramatic and disturbing scenes from Venezuela as 'average joes' fight over the last bar of soap or sheet of toilet paper as prices soar beyond anyone's control... and said "that could never happen here." Well with stealth-flation leaking into everyday prices wherever you look (as long as 'you' are not The Fed), we may have just witnessed the awakening. With prices for chicken having hit record highs, residents of America are brawling over the last winged feast...

The outlook for diesel looks grim after U.S. regulators found that the world’s second biggest car manufacturer cheated on its emission tests. Now that diesel is not as clean as it appeared (with stricter emissions tests and perhaps even stricter regulation to be expected), one has to ask; does this mean the end of diesel for light vehicles? This is not just alarming for the automotive industry, but could also lead to a structural demand shift in fuel products. That shift could not have come at a worse time for diesel.

The problem with rushing to combat any sign of economic or financial market turmoil by resorting immediately to counter-cyclical policies is that the creative destruction that would normally serve to purge speculative excess isn’t allowed to operate and so, misallocated capital is allowed to linger from crisis to crisis, making the next boom and subsequent bust even larger than the last.

"According to a senior officer in the Syrian Arab Army (SAA) that is stationed inside the Syrian coastal city of Latakia, Chinese military personnel and aerial assets are scheduled to arrive in the coming weeks (6 weeks) to the port-city of Tartous – he could not provide anymore detail."

After punishing the bulls like clockwork, many were wondering when will JPM head quant Kolanovic flip bullish and dole out some overdue pain for the bears. The answer: moments ago, when in a note providing an "Update on Technical Buying/Selling" he concludes that the technical selling is now officially over and the same technical sellers, among which the much maligned risk parity funds that pushed stocks in late August and early September, are now "expected to buy Equities."

With the market's perceived risk of default across the energy space at record highs, it should be no surprise that willingness to lend (even for the greater-fool reach-for-yielders) is collapsing. As Bloomberg reports, oil services companies are finding alternative ways to raise cash and repay debt after falling crude prices has made it difficult for them to get funding from traditional sources. As one restructuring firm warned, "bond markets are closed for these companies, especially small ones, and banks may not be lending to them at this stage," with another ominoulsy warning, "getting new liquidity in this market could be a painful exercise. For many companies, financial restructuring seems inevitable."