• Bruce Krasting
    12/18/2014 - 21:42
      The one thing that Jordan can't do in this war is appear to be weak.
  • Marc To Market
    12/20/2014 - 12:21
    When the dollar falls, we are told it is logical.  The empire is crashing and burning.  When the dollar rises, the markets, we are told are manipulated.    Well, the dollar is...

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The Housing Bubble Explained in One Little Gem of an Excerpt...

It feels like a good time to review what we can expect when our government and its agencies attempt to create wealth out of thin air.  We can see the absurdity and hubris of our policymakers who believe they can circumvent economic laws in the following excerpt from the “The National Homeownership Strategy: Partners in the American Dream”. This little gem which we are suggesting is the document that led us to the economic devastation from which we are yet to crawl out. "For many potential homebuyers, the lack of cash available to accumulate the required downpayment and closing costs is the major impediment to purchasing a home. Other households do not have sufficient available income to to make the monthly payments on mortgages financed at market interest rates for standard loan terms. Financing strategies, fueled by the creativity and resources of the private and public sectors, should address both of these financial barriers to homeownership." So what lesson did we learn the hard way?  Looking around today, absolutely nothing.



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When Shale Hedges Fail: The Downside Of Three-Ways

"[Shale Oil]Producers are inherently bullish," warns one energy-hedging firm, and that truth belies the weakness in the apparent hedging programs many over-optimistic energy firms are facing now. We hear day after day that, in the short-term, low prices can be handled "because they're hedged," but producers were so exuberant about the direction of oil prices they didn't do simple linear hedges (swaps or futures) to manage price movements, but instead, as Bloomberg reports, used the so-called "three-way collar." Simply put instead of a floor and a ceiling for prices, there is a 3rd (bullish) leg of low-strike sold puts that subsidized the cost of the hedge... unless the price of oil goes below that strike, in which case the hedge fails and, as a lot of producers are finding, they are now losing money.



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Former BIS Chief Economist: "The System Is Dangerously Unanchored; It Is Every Man For Himself"

"There is no automatic adjustment of current account deficits and surpluses, they can get totally out of hand. There are effects from big countries to little ones, like Switzerland. The system is dangerously unanchored. It is every man for himself. And we do not know what the long-term consequences of this will be. And if countries get in serious trouble, think of the Russians at the moment, there is nobody at the center of the system who has the responsibility of providing liquidity to people who desperately need it. If we have a number of small countries or one big country which run into trouble, the resources of the International Monetary Fund to deal with this are very limited. The idea that all countries act in their own individual interest, that you just let the exchange rate float and the whole system will be fine: This all is a dangerous illusion."



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"Something Changed" - Comparing E-Mini Liquidity In 2009, 2012 And Today

As Eric Hunsader rhetorically notes, "eMini Liquidity was cut in half starting Dec 12. Unknown why." Actually "known" as we explained in "How The Market Is Like CYNK."



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5 Things To Ponder: Variegated Contemplations

Yes, it is that magical week leading up to Christmas and the subsequent low volume push into the new year. It is "magic time" as hopes are high that "Santa Claus" will come to WallStreet. "Ignoring valuation – ignoring risk – is a recipe for disappointment and is the thing that is most likely to lead investors to ruin"



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Why The US Is About To Be Flooded With Record Oil Production Due To Plunging Oil Prices

One would think that plunging oil prices and the resulting mothballing (or bankruptcy) of the highest-cost domestic producers would lead to a collapse in US oil production. And sure enough, if looking simply at headline data like the Baker Hughes count of active rigs in the US, then US oil production grinding to a halt would be all but assured. However, what will actually happen, even as the highest-cost producers and those with the weakest balance sheets are taken to their local bankruptcy court, is that as Bloomberg reports, the US is - paradoxically - set to pump a 42-year high amount of oil in 2015 "as drillers ignore the recent decline in price, pointing them in the opposite direction."



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Central Banks Are Now Uncorking The Delirium Phase

Virtually every day there is an eruption of lunacy from one central bank or another somewhere in the world. In short, the central banks of the world are embroiled in a group-think mania so extreme and irrational that it puts one in mind of the spasm of witchcraft trials that erupted in the Massachusetts Bay Colony nearly four centuries ago.  As a practical matter, this mania amounts to a race to the currency bottom and the final extinguishment of the price discovery mechanism in every financial market on the planet. Flying blind, the financial markets are thus bubbling - in the delirium phase - like never before. That is, until they don’t.



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S&P 500 Melts Up Over 100 Points In 3 Days, Nears All-Time High

Well that escalated quickly... The S&P 500 cash index has ripped from 1972.50 to over 2076 in 3 days... And US Treasuries are rallying hard too.



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The Fed Is "Confused & Confusing"

"At the end of the day, the Fed is confused and confusing, so if you spend too much time addressing their comments you end up confusing as well." The FOMC meeting was, simply put, slightly hawkish. Unfortunately, the markets’ outsized and illogical reactions are signs and symptoms that financial markets are broken. The FOMC’s meddling in financial market behavior could easily catch up to them in an ugly fashion.



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Guest Post: Calculating The Breakeven Price For The Median Bakken Shale Well

A lot of data has been thrown around recently concerning the Bakken shale wells of North Dakota in an attempt to figure out the necessary oil price required to break even on the investment.  In order to get a clearer picture of the financial situation in Bakken, it is necessary to develop a financial model of the median Bakken well... If the current oil price of $55 per barrel is used, the initial production rate has to be increased to 800 BPD in order to break even; and the number of wells drilled will be about a quarter of the present number.



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The "North Korea Hacking" Scandal As Explained By The Taiwanese Animators

Nothing more to add to this: "Wouldn't it be funny if it was all just a set up?"



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"Some North Korean Folks Are Hacking..." President Obama Explains "Costs" - Live Feed

Having become convinced that the North Koreans are responsible for hacking the Japanese company Sony (with the apparent help of China or some Chinese folks... though not Russia or ISIS yet), President Obama will hold a press conference to - we are sure - show us the proof, explain how bad the movie was anyway, discuss the "costs" to be imposed, and point out that the terrorists did not win...



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US Oil Rig Count Tumbles Most In Over 5 Years,"Demand From Oilfield Customers Dropping Rapidly"

"Unequivocally" not good. Following last week's surge in initial jobless claims for 'Shale' states, Baker Hughes confirms rig counts continue to tumble.  The last two weeks have seen the total US rig count fall the most since 2009 (and Canada down 9.3% this week alone). Seemingly confirming this weakness, The Kansas City Fed notes respondents see non-durable (petroleum) demand "sluggish", and rather awkwardly against the "everything's great meme," one respondent exclaims, "demand from oilfield customers is dropping rapidly." The current US rig count is now the lowest in 5 months.



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Just One Question About Yesterday's Last Minute "Berserk ETF" Freak Out

With 4 seconds to the close of yesterday's epic trading session, someone executed over $200 million and 1,147 trades in SPY - the S&P 500 ETF - in one-second, lifting the price to a S&P level of 2,130. This massive-loss-making "fat-finger" - resulting in millions of losses - would normally be followed by "probes" from the exchange into "erroneous trades" and then rapidly accompanied by the exchanges busting all the losing trades. But not this time! In all other cases of fat-finger'd and busted trades, we have learned who the counterparty was - even Goldman Sachs was exposed after regulators DK'ed its busted trades several years ago. So, the question is - why hasn't the other side of yesterday's berserk "fat-finger" buying spree in SPY spoken out in anger that its massive money losing trade will not be DKed?



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