Archive - Sep 2015 - Story

The Fed’s policy of forward guidance and radical transparency is not working. It turns out that letting the market peer over its shoulder as it makes monetary policy sausage is, in some ways, worse than the opaque process that existed prior to the arrival of Bernanke and Yellen. It pulls back the curtain and shows the human, error prone side of the Fed. Every time the Fed’s dots move, it is an admission of failure and undermines the very confidence it was trying to inspire.

Stocks are down hard, JPY momo is not working, nor is VIX... time to break something...

• *NYSE ARCA SUSPENDS ROUTING TO CHICAGO STOCK EXCHANGE
• *NYSE ARCA HAS DECLARED SELF-HELP AGAINST CHICAGO STOCK EXCHANGE

We have had "bad cop" Dudley and so now "good cop" Evans unleashes more uncertainty, confusion, and farce:

*EVANS: BEST APPROACH IS FOR LATER LIFTOFF, GRADUAL TIGHTENING
*EVANS SAYS `EXTRA-PATIENT APPROACH' TO TIGHTENING IS WARRANTED

The reaction was very clear, Fed Funds Futures dipped to record lows for October (16%) and December (41%). And worse still, "dovishness" did nothing for stocks at all...

The social media space is beginning to make one wonder if they’re looking at an iron ore chart, or bulk shipper, rather than “the hottest space it all tech.” i.e., everything social. And it’s just the beginning in my opinion. Sooner or later Wall Street is going to come knocking for either its promise of profits. Or, its money back. And when that starts (which I believe has already begun) the mad-rush to cash-in what ever value a share might have that day will be assailed with stunning speed... much like the commodity space where stalwarts of an entire sector can find themselves struggling for solvency in mere months.

Yet another nail in the Biotech Bubble's coffin as Bloomberg reports House Democrats demand a subpoena for Valeant over "massive price increases." The stock is down 12 % on the news extending the collapse of the last few days and weighing very heavily on the broad Biotech index. Very bad news for Bill Ackman and his 20 million shares...

The Federal Reserve-induced Echo Housing Bubble is finally starting to roll over, and the bubble's pop won't be pretty. Why is the bubble finally popping now? All the factors that inflated the Echo Housing bubble are running dry.

We are sure it's just a coincidence but seconds after Vladimir Putin concluded his speech at The UN calling for a broad anti-terrorist coalition, the Russian Ruble was sold aggressively (after a relatively news-less and quiet day in the currency)...

President Obama had his opportunity, started off well then dwindled into a renewed "it's all Russia's fault" blame game. Now it's Russian President Vladimir Putin's turn to explain how the world's decline into chaos is not his fault either... Should make the Putin-Obama 'conversation' later very interesting...

Who could have seen that coming?

Glencore is in total free-fall across all markets today. Most worrying for systemic risk concerns is the rush into credit protection that has occurred, as counterparties attempt to hedge their exposures. Forthe first time since 2009, Glencore CDS are being quoted with upfront pricing (something that happens as firms become seriously distressed). Based on the latest data, it costs 875bps per year (or 14% upfront) to buy protection against a Glencore default (which implies - given standard recoveries - a 54% chance of default).

As part of his UN speech seeking to restore a crumbling Pax Americana, president Obama, eager to cover up US involvement in the Ukraine presidential coup of early 2014 (who can forget Victoria Nuland "strategy" interception in which she laid out the post-coup lay of the land, while saying to "fuck the EU"), just said that "America has few economic interest in Ukraine." Few, perhaps, but quite substantial.

Republican presidential nominee front-runner Donald Trump, amid massively variant poll numbers (Fox >40%, WSJ ~21%?), plans to unveil his tax plan today, that, as WSJ reports, would eliminate income taxes for millions of households, lower the tax rate on all businesses to 15% and change tax treatment of companies’ overseas earnings. Trumps's plan claims to bring "sanity, common sense and simplification to the nation's catastrophic tax code," and, despite plans to end "carried interest" tax breaks - most loved by hedge fund managers - Carl Icahn has come out and endorsed Trump as "the only candidate that speaks about the country's problems."

Not since October 2008 (cough post-Lehman cough), has The Nasdaq Biotech index dropped for 7 straight days. The 18% close-to-close drop in the last 7 days is the largest since Lehman.

August's regional Fed survey collapse was unanimous... Dallas, Richmond, New York, Philly, Chicago, and even Kansas City all flashing recessionary warnings. And so now we begin to see September's data and Dallas Fed prints -9.5 - the 9th negative (contractionary) print in a row. While a small beat (against -10 exp.) and rise from August's -15.8, under the surfacxe the data is a disaster with wages lower, employees contracting drastically, and average workweek collapsing. Having noted that "the quantitative easing hangover is starting" in August, it appears - judging by the biggest plunge in Capex in 5 years.