Archive - Sep 2015 - Story

Over the past few years three things have 'worked' - Buybacks, Biotechs, and Buying IPOs. Those days are now over...

Yet another auto-maker has lied. Fiat Chrysler Automobiles US says in a statement that it has identified deficiencies in its TREAD reporting and has promptly notified NHTSA. One cannot help but wonder what came first, a leak or some conscience, but as NHTSA notes this means FCA under-reported the number of deaths and injuries that the automaker may be responsible for.

For investors, the markets have been sending a fairly clear warning signal. Market topping processes take time to develop fully and, unfortunately, are only fully recognized in hindsight. The problem in waiting for "recognition" is that the destruction of capital is already far larger than previously expected. This leads to a series of "psychological" responses that exacerbate the problem such as "hoping to get back to even." The last point is critically important. In the world of investing, "hope" has never been an investment strategy that one could profit by. It likely won't be successful this time either.

"The people that want to come in and replace Assad, nobody knows who they are and they could end up being worse. We're constantly going out and siding with people and they turn out to be worse than the people who were there before."

The United States government deliberately hid “the worst nuclear disaster in U.S. history,” according to experts and an in-depth investigation by NBC4 Southern California. Whistleblowers have also come forward to expose the little-known catastrophe, which occurred north of Los Angeles in 1959 and leaked over 300 times the allowable amount of radiation into surrounding neighborhoods. That contamination is now linked to up to a 60% increase in cancer in the area, but the government still refuses to acknowledge its colossal mistake.

In yet another indication that manipulation may well be unspoken (or perhaps even spoken) policy at the BOE, new details regarding the UK Serious Fraud Office's investigation into emergency liquidity auctions conducted during the crisis suggest the central bank may have played a direct role in rigging the bids.

Can you hear me now?

— Edward Snowden (@Snowden) September 29, 2015

When you tell people in self denial the market could drop 40% in a few months, they think you are crazy. They declare this could never happen. They would get out of the market before it would fall vertically. Their memories are conveniently short as their normalcy bias and cognitive dissonance blind them to what happened over three months in 2008/2009. We wonder how many willfully ignorant investors can handle a 50% to 70% haircut in their 401k, especially if they are over 50 years old. We wonder how much angrier the populace will become when the current recession results in more job losses, bankruptcies and revelations of Wall Street malfeasance. Beware of the bear.

As WSJ reports, "Bank of America Corp. is expected to announce layoffs in its global banking and global markets unit as early as Tuesday, according to people familiar with the matter."

If Congress understood the Austrian theory of the business cycle, it would have allowed the recession that followed the housing bubble’s inevitable collapse to run its course. Recessions are the economy’s way of eliminating the distortions caused by the Federal Reserve. Attempts by Congress and the Fed to end a recession via inflation and government spending will only lead to future, and more severe, economic downturns.

China's massive interventions in the offshore yuan spot look to have begun affecting liquidity in Hong Kong as heavy CNH buying by Chinese banks coincides with a spike in O/N HIBOR. The question now would appear to be this: how long before something snaps in mainland money markets?

Nothing screams out human rights like bombing women and children at a wedding party.

For the second month in a row, US Consumer Confidence (according to The Conference Board) soared in September. Printing 103.00 (smashing expectations of 96.8) in September, this is just shy of January's high going back to August 2007. The biggest driver of this seemingly odd exuberance (amid global escalation in financial and physical wars) is the Present Situation (up from 115.8 to 121.1) while "hope" dropped from 91.6 to 91.0. As The Conference Board concludes, "while consumers view current economic conditions more favorably, they do not foresee growth accelerating in the months ahead.”

Superficially one gets the impression that they aren’t really trying to “explain” anything to the hoi-polloi, since it all sounds remarkably uncoordinated. To the extent that the messages are contradictory, they merely reveal the literal impossibility of central planning – neither Dudley nor Evans can possibly know at what level short term interest rates should be set.

Forget China, Volkswagen, Glencore, Noble, and pretty much everything else. The only catalyst that matters for today's price action has just been revealed. Earlier today, Dennis Gartman, whose flop-flip-flop-flipping calls on stocks, commodities and everything else have become a blur, just went mega bearish, and is predicting that the S&P has some 400 points of imminent downside.