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Equity Mutual Funds See Biggest Outflow Since August Despite Market Ramp

While once upon a time, retail equity capital flows would be a perfect coincident indicator to the overall market, with any notable spike in the S&P promptly matched by inflows into domestic equity mutual funds, this is no longer the case. As ICI reports, in the week ended July 12, equity mutual funds saw their 8th consecutive outflow, amounting to $5.9 billion, the largest outflow since the debt ceiling and US downgrade fiasco in August, and a number which brings the total year to date outflow to ($99) billion. True to form, the capital rotated once again out of stock and into bonds with $4 billion in inflows for the week. More than anything this confirms that retail no longer chases day to day market performance out of a profound skepticism for market structure, and the record volatility and well-documented near 100% correlation across all asset classes has driven out all but the bravest. Unfortunately, news like this just released report by Reuters that the Nasdaq hackers from February, also "installed malicious software on the exchange's computers that allowed them to spy on scores of directors of publicly held companies, according to two people familiar with an investigation into the matter." Hardly the stuff that build up confidence in fair and efficient markets.



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Fed Dollar Swap Lines With Europe Soar To $1.9 Billion, Most Since June 2010

For a week in which Europe was supposed to be healing, and certainly not provoking the curiosity of forensic capital chasers, it sure did a bad job. In the week ended October 19, the Fed disclosed that not only did it roll its $500 million 7 Day facility (at 1.08%) with the ECB, but it also entered into a new 84-Day 1.09% facility (this is about 60 bps more than 3M USD Libor, confirming just how ridiculous and meaningless the 3 month USD Libor market is). It is of course unclear which bank ends up being on the ECB's receiving end, but one thing is certain: the dollar shortage in Europe is now as bad as it was just after the first Greece insolvency, when nobody was prepared for the bank lockup that followed. Additionally, with deposit loans at the ECB soaring to €182 billion, a runrate which will promptly surpass last month's high, it is once again all too clear that there is no free liquidity in Europe, and that the thesis presented by Zero Hedge over the weekend, that the only reason for the persistent high level of the EUR is due to the sale of USD assets by French banks and subsequent FX repatriation, is what explains the ongoing schism between the European market, which is driven by wholesale asset sell offs by French banks, and the American one, which is electronically trading with 100% correlation to the EURUSD which is sending a completly false "all clear" signal to the market.



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Rogue Government Traders

The reason the liberal mainstream corporate media demonized the Tea Party is because it threatens the status quo.  The reason the conservative corporate mainstream media demonizes Occupy Wall Street is because it threatens the status quo.  These are textbook divide and conquer strategies being used on the American people.  Do not fall for it.  Yesterday I read a really interesting gallup poll that stated: “Not surprisingly, Americans who consider themselves supporters of the Occupy Wall Street movement (26% of all Americans) are more likely to blame Wall Street than the federal government for the nation's economic problems. Supporters of the Tea Party movement (22% of Americans) are overwhelmingly likely to blame the government.”  What is most compelling to me is that 26%+22% = 48% so basically almost a majority.  All we need to do is teach people that Washington D.C. and Wall Street are now the same corrupt entity.  They are one gigantic rogue trader sucking the lifeblood out of America.  If we can unite these forces, which I can say with certainty agree on the important issues, we can put an end to the status quo and free ourselves of this bondage. 



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It's A Boat, It's A Plane, It's The Great Wall Of China: Part Of Symbolic Chinese Landmark Collapses

It's one thing for China to have a rather embarrassing episode during a boat launch, or even when demonstrating the pride of its airforce. But when a part of the Great Wall Of China itself collapses, literally, you know the proponents of the Chinese Soft-Landing scenario (leaving aside that copper is now down 10% for the week) may want to reassess their thesis. From China Daily, "The damaged portion of the Great Wall is located in a remote area near the county of Laiyuan in Hebei Province, about 200 kilometers southwest of Beijing. The area is home to a dozen small mines, with some operating as close as 100 meters to the centuries-old wall. Villagers and local cultural heritage protection officials told Xinhua that about 700 meters of the wall, which was built during the reign of Emperor Wanli during the Ming Dynasty (1573-1620), had already collapsed, and more walls and even towers are likely to collapse if the mining continues unchecked." And while this is admittedly a symbolic development, we follow up this news with a piece from SocGen's Albert Edwards who has some quite factual observations on why China is now in stall speed and has little hope of a Hollywood ending.



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Watch Nobel Peace Prize Winner Make Statement On Gaddafi Lynching Live

Because nothing says "Nobel Peace Prize" better than discussing the "deposition" of a dictator you shook hands with two short years ago, by a bloodthirsty lynch mob.



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German Government Speaker Speaks

Siebert on the tape:

  • GERMANY'S SEIBERT SAYS MORE WORK IS REQUIRED ON EURO PACKAGE
  • GERMANY'S SEIBERT SAYS EU AIMS TO REACH ACCORD IN TWO STAGES
  • GERMANY'S SEIBERT SAYS EU AIMS FOR EURO AGREEMENT `NEXT WEEK'
  • SEIBERT SAYS `APPROPRIATE' GERMAN LAWMAKER PARTICIPATION NEEDED

And this, because the German parliament is not worthy:

  • SEIBERT SAYS MERKEL TO INFORM PARLIAMENT AT `APPROPRIATE TIME'

More promises; more future tense, more uncertainty and more complete chaos.  Should be good for 50 EURUSD pips higher.

 



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Greek Parliamentary Garage On Fire And Other Dramatic Footage From Today's Athens Riots

Today's deadly protests in Athens, in which one Greek has died, have been the most violent of the year so far. For footage of the Parliament's garage building as well as numerous dramatic photos of the violents riot, which is continuing over night, see attached.



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Fed Sells $8.9 Billion in Bills At 23 Bid To Cover

This is a topic we have touched upon in the past so we won't dwell much on it: last Primary Dealer Bid to Cover in Tuesday's 52-Week Bill  Treasury auction: 6.0x ($15.6 billion allocated to $94.7 billion in tendered bids); Bid to Cover in the just completed reverse POMO in which the Fed sold $8.870 in Bills maturing between August 2012 and March 2013 to $204 billion worth of interest? 23x. The Fed is once again four times more efficient than the Treasury at peddling US paper. Surely that is only to appease Brian Sack and not because there is million in free money to be made on the flip.



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Set Your Alarm: Germany's Government Spokesman To Make Statement At 7:30 pm Berlin Time, 1:30 pm Eastern

Ok, everyone can go on that Starbucks run: the market will be dead for the next hour when German government spokesman Siebert will make an announcement at 7:30 pm. No need for any UK tabloids to even frontrun the lies this time around. That said, we are concerned that the news won't be spinnable in a favorable fashion.



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Euro Summit Imploding: Merkel Cancels Friday Government Statement On EFSF

Luckily, we never promised readers to have a quota of only one stupid European story per hour or else we would be worse liars than the European bureaucrats who finally discovered the abacus and punch cards, and have realized that, as we noted, the EFSF is DOA. The WSJ reports that Angela Merkel has cancelled a government statement on the European Union summit this weekend, due Friday, at short-notice, a spokesman for her CDU party said Thursday. The reason for the cancellation was probably a lack of agreement on new guidelines for the euro zone's rescue fund, the European Financial Stability Facility, the spokesman said. But no reason has officially been given for the cancellation, he added. The EU confirmed earlier Thursday that it plans to hold the summit this weekend as planned. Earlier Thursday, reports had suggested the summit might be delayed over disagreement between Germany and France on how to leverage the EFSF. One wonders at this point just why the "make or break" summit is even happening? Is the catering bill so high that nobody thought of enacting a shorter than 48 hour cancellation policy? Then again this is Europe, where as Bob Pisani said, "we see thoughts as they happen in real time." Explains why the EURUSD is where it is right about now.



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The EFSF As A Hedge Fund

There are still so many alternatives on the table and each is so confusing it is hard to come up with a decent analysis. In the meantime, here is something to think about. EFSF walks into a meeting with a potential investor. EFSF is looking to raise some additional capacity so needs to borrow some money.The meeting starts off great. The investor is told that EFSF has 780 billion of capital. That is amazing, says the investor, not many people walk through the door with that much capital at launch. The investor is curious as to when the fund will get the funding. For the first time, EFSF looks a bit uncomfortable and has to explain it doesn't really have funding, it just has some guarantees. The investor is a bit confused about this since they would rather have money than guarantees, but decides that if the guarantors are good enough, maybe it's okay. The EFSF instantly replies that the guarantors are great, they are all highly rated. Well, some of them are at least. Well, actually a few are so weak that they won't actually ever provide the guarantees, they just let us include them in the pitchbook so we could have a bigger number. The Investor is getting a little nervous at this time, but still intrigued, so wants to know how much from the good guarantors? They are reasonably happy that the answer is 726 billion. Still very impressive, but at least a little confused why they bother with the 780 billion. Their experience as investors tells them that when someone lies a little, they tend to lie a lot.



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Summary Of Ira Sohn's San Francisco Conference Top Stock Picks By Portfolio Manager

For anyone deluding themselves that alpha still exists apart from beta, and can be generated sans "expert networks", we bring you the top stock picks from the Ira Sohn's San Francisco conference hosted last night. We will bring more detail shortly.



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Northern Ireland Man Thrown In Prison After Attempting To Turn Crap Into Gold

We take advantage of this brief lull in the European panic headline blasting for a comic interlude, presented without comment.



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