November 19th, 2013
Bitcoin has increased more than tenfold since the beginning of 2013. One of the reasons for the incredible surge is that bitcoin is a freely traded market and not subject to rigging or price manipulation by banks or government. Physical Gold, either in your possession or in allocated accounts, remains a far safer alternative both to bitcoin, to digital gold platforms and to paper and electronic currencies in what is still a vulnerable banking system.
Tonight at 7 pm Ben Bernanke will be speaking at the National Economists Club Annual Members Dinner. As Credit Suisse's Carl Lantz notes, nobody knows the topic or the title of the speech: we can only assume it is some variation of the now trite and generic "BTFATH" coming from the Fed endlessly for the past 5 years. However, we do know one thing: the menu of the dinner that will accompany Bernanke's remarks. We are certain that in a world in which a tweet by a 70 year old billionaire moves markets as much as a statement by a current or future uber CTRL-Peers, it is the details of what the glorious chairman eats that is the most marking-moving event du jour, and as such the menu will be today's most important "fundamental" news. Jon Hilsenrath will follow up with his detailed analysis shortly.
- J.P. Morgan, U.S. Reach Historic Settlement (WSJ)
- OECD cuts global growth forecast (AP)
- Guess the profit margin: Wal-Mart Touts $98 TV as Holiday Seen Weakest Since 2009 (BBG)
- Republicans defy threat, block another Obama judicial pick (Reuters)
- Fed Ponders How to Temper Tapering Without Rate Increase (BBG)
- Wall Street uses 'merchant' workaround to cling to commodity assets (Reuters)
- PBOC to ‘Basically’ End Normal Yuan Intervention, Zhou Says (BBG)
- Italy’s leader warns Germany of rise of anti-European sentiment (FT)
- Yellen Nomination for Fed Chairman to Get Vote This Week (BBG)
- As U.S. default threatened, banks took extraordinary steps (Reuters)
- NSA vowed repeatedly to fix its collection errors (AP)
When all else fails, and/or when the president is caught in yet another major scandal, there is only one way out: war. As many expected, but as nobody knew what shape the latest provocation would take, overnight at least 23 were killed and dozens hurt after a twin bomb attack shook the Iranian embassy in Beirut. As NBC reports, a local al Qaeda affiliate, the Abdullah Azzam brigades, claimed responsibility for the explosions – the latest sign that Syria’s civil war is spilling over the border into Lebanon. Burning cars, bodies and pools of blood littered the front of the embassy building, in the Hezbollah-dominated south of the city. The Zahraa hospital nearby told AFP that it had received the bodies of five people and was treating at least 35 others for wounds. Lebanese media broadcast harrowing images from the scene of the blast, with charred bodies on a street lined by blazing cars and strewn with the rubble.
It is time for the centrally-planned markets to "try" for the round number trifecta of 16000, 1800 and 4000 again, although it may be a tad more difficult on a day in which there is no double POMO and just $2.75-$3.50 billion will be injected by the NY Fed into the S&P - perhaps it is Bitcoin that will hit the nice round number of $1000 first? Overnight, the Chinese Plenum news rerun finally was priced in and the SHComp closed red, as did the Nikkei 225 as the Asian euphoria based on communist promises about what may happen by 2020 fades. What's worse, the Chinese 7-day repo rate is up 140bp this morning to 6.63% amid talk of tightening domestic liquidity conditions, and back to levels seen during the June liquidity squeeze. All this is happening as China continues leaking more details and hope of what reform the mercantilist country can achieve, and how much internal consumption the export-driven country can attain: overnight there were also additional reports of interest rate liberalization and that the PBOC are to set up a floating CNY rate. Good luck with that.
Money means power. Money only deprives people on the losing team of their fundamental rights in society and it’s money that makes the world go round.
In 1997, the SE Asian Tigers all faced severe economic stresses, partially triggered by a primarily foreign capital-funded massive real estate bubble in Thailand. Today the EXACT same thing is happening as untempered foreign investment into Thailand’s real estate market has created not a “soaring” real estate market as economists always incorrectly explain them, but massive real estate market distortions better known as a bubble.
On Friday October 5, 2012, the BLS released what was arguably the most important report of Obama's first term: the final jobs number, and unemployment rate before the November 2012 presidential election. As so many predicted, it "plunged" from 8.1% to 7.8% allowing the president to conduct countless teleprompted speeches praising the success of his economic recovery. It also served as the basis for the infamous Jack Welch tweet: "Unbelievable jobs numbers..these Chicago guys will do anything..can't debate so change numbers" and prompted the pro-Obama media to quickly brand all those who questioned it as conspiracy theorists... Well, as it turns out over a year later, the conspiracy theorists were once again, spot on: the Bureau Of Lies And Subterfuge manipulated the most important jobs report in Obama's career.
"Reuters was completely accurate that I am concerned about the level of the market. But I also made it clear on the conference call (and I believe as Reuters reported it), that it is almost impossible to predict what a market will do in the short term. There are too many variables." - Carl Icahn
If there were any shreds of hope left that the stunning decline of the middle class could be turned around, Obamacare has absolutely destroyed them. Over the past decade or so, the middle class in the United States has been absolutely eviscerated. The number of working age Americans without a job has increased by 27 million since the year 2000, median household income in the U.S. has fallen for five years in a row, and the poverty numbers in this country are spiraling out of control. And now here comes Obamacare. As you will see below, Obamacare is causing millions of Americans to lose their current health insurance policies, it is causing health insurance premiums to explode to absolutely ridiculous levels, and it is systematically killing jobs even though the employer mandate has been delayed for a while.
Putting to rest fears that today's Senatorial hearing on digital currencies would crater Bitcoin (if in the immediate term), moments ago the digital currency priced in USD on the Mt Gox exchange, rose to yet another unpredecented price, hitting $850 moments ago, or about 50% higher than where it was this morning. But you ain't seen nothing yet. Because at the same time, the Renminbi-denominated price of Bitcoin on BTC China, has the digital currency at 6780CNY. At a USDCNY exchange rate of 6.09, this means a price over $1100 per Bitcoin. Naturally, at this point we would suggest picking up the 20%+ free arb, however it is unclear how one can short the CNY priced leg of the transaction, or if for that matter, there is even an actual, liquid market in the currency. Because as the final chart shows, taken literally moments before we were going to post this article, BitCoin touched $900 on Mt Gox... and promptly tanked to just under $700, entering a bear market in the span of seconds on what appears to be about 10,000 trades.
Two-and-a-half years ago, none other than the Fed's Bill Dudley explained why the inflating price of food was nothing to worry about because iPads were dropping in price (to which an audience member, rightly, exclaimed - "I can't eat an iPad"). Fast forward to today, and it seems, based on the highly scientific chart below, that the growth of food stamps (the benefit provided to members of our society that need caramel macchiatos or liquor - oh and food) correlates uncomfortably closely with the demand for iPads. Perhaps, Bill Dudley was right after all - we can eat our iPads...
As we warned two months ago, the bubble in credit markets (which if you ask anyone at the Fed, except Jeremy Stein, does not exist) is nowhere more evident than in the explosive growth of so-called cov-lite loans. While total volumes of cov-lite loans are already at record, as the FT reports, we now have 55% of new leveraged loans come in “cov-lite” form, far eclipsing the 29% reached at the height of the leveraged buyout boom just before the financial crisis. LBO multiples have reached record highs and demand for secutizations of these levered loans (CLOs) has surged on the back of the Fed's repressive push of investors into more-levered firms and more-levered instruments.
It has been a while since we heard from the rational folks over at GMO. Which is why we are happy that as every possible form of bubble in the capital markets rages, Jeremy Grantham lieutenant Ben Inkster was kind enough to put the raging Fed-induced euphoria in its proper context. To wit "the U.S. stock market is trading at levels that do not seem capable of supporting the type of returns that investors have gotten used to receiving from equities. Our additional work does nothing but confi rm our prior beliefs about the current attractiveness – or rather lack of attractiveness – of the U.S. stock market.... On the old model, fair value for the S&P 500 was about 1020 and the expected return for the next seven years was -2.0% after inflation. On the new model, fair value for the S&P 500 is about 1100 and the expected return is -1.3% per year for the next seven years after inflation. Combining the current P/E of over 19 for the S&P 500 and a return on sales about 42% over the historical average, we would get an estimate that the S&P 500 is approximately 75% overvalued."
Courtesy of the revelations over the past year, one thing has been settled: the statement "Wall Street Manipulated Everything" is no longer in the conspiracy theorist's arsenal: it is now part of the factually accepted vernacular. And to summarize just how, who and where this manipulation takes places is the following series of charts from Bloomberg demonstrating Wall Street at its best - breaking the rules and making a killing.