derailedcapitalism's blog

The internet is in a very sad state. Recent measures introduced by governments around the world, including C-51, TPP, and previous bills introduced such as the Stop Online Piracy Act (SOPA), threaten the rights to a free and open internet. However, much less talked about is the current state of online advertising and how it's slowly eroding our rights to browse online through disabling content for those using ad-blockers, paywalls and invasive tactics to market products based on our browsing history.

Stretched debt-to-income, increased contract work (to the detriment of full-time work), and record housing prices are forcing Canadians to monetizing assets through ride-sharing, AirBnB and through additional contract work.

In the big pharma M&A scramble, TEVA has been hosting potential suitors and may become the next acquisition target.

While not relevant to financial markets, our beloved friend and member of the financial community, Sachan Sapra, needs everyone's support. Sachan is taking part in a 160KM bike ride* for Oakville Hopsital's Palliative Care Unit. Palliative Care is a type of care that's given to patients when they are near the end to relieve and prevent suffering. It is the kind of healthcare that is overlooked and underfunded, but is very important as society ages. Sachan needs to raise a minimum of $1500 for this. But let's all unite and help him be the top fund-raiser.

http://www.thehealingcycle.ca/Rider/2049/

There is just under two hours left in today's trading session and the AUD.JPY to ES correlation has decoupled. Since we all know it is impossible to finish red on POMO days, it is time to put on the convergence arb and rake in the free money as the late afternoon parabolic ramp up is bound to happen.

Earlier in the week we posted that Market-Neutrals were deleveraging, we then further speculated that a market drop would soon follow as liquidity disappeared and small sell block trades would move the market. We received many emails from individuals asking for further explanation of this metric and why we feel it is a useful indicator to look at. While this is merely a theory with no empirical evidence, we would like to display the following chart 2-year with daily closes in which m/n's rapidly delevered days before a market drop. On all 5 occasions, the rapid decline in HSKAX was indicative of the S&P500 index experiencing further weakness.

The markets appear to be risk-off this evening as the JPY strengthened materially against the USD despite overall strength in the greenback. Within a few minutes the USD/JPY managed to fall 50 pips from 81.25 to 80.75, the Yen is now flirting with all time lows against the USD. This is extremely dangerous for the perfectly correlated markets, we are now waiting for Bernanke's Plunge Protection Team to step in to fight the fire. A collapse in the AUD/JPY translates into a drop in the ES sell-off. How will the Fed's turn the market to print green by end of day tomorrow?

Market-neutrals are deleveraging at a rapid pace breaching the 50-ma on Friday. Is this indicative of a market drop in the coming days as market liquidity is disappearing and no one is trading?

The late night (daily) decoupling is here.

FX Bottom-line: Heading into 2011, USD/CAD is facing a divergence in US-Canadian policy rates reminiscent of the 2002/03 period. Although USD/CAD declined by 15% during that period, we do not envision a similar demise in USD/CAD but diverging policy stances will keep USD/CAD under downward pressure throughout 2011. However, should the growth decoupling between the global and the US recoveries continue at the same pace as seen during the last 12 months, the 2002/03 scenario could well repeat itself in the currency market, leaving the trend in CAD against USD looking increasingly similar to the most recent rally in AUD/USD.

At 8PM EST tonight the EUR/USD cross sold off 80pips in seconds only to rebound 60pips. Is this another mini flash crash causing ripples through the fx markets with HFT's going haywire? DXY spiked to 77.30. At what point are market regulators going to realize this gambling house is broken and there is no longer any creditability in capital markets?

The Bank of Canada Governor Mark Carney has made it quite clear that the “persistent strength in the Canadian dollar has the potential to seriously influence Canadian economic growth.” Further tensions in the global currency markets through intervention are forcing the Bank of Canada to consider exercising policy to manage the exchange rate.

Australia’s CPI data was released this evening at 0.6% with expectations of 0.7% disappointing the computers which instantly sold off the AUD/USD 50pips. …expect ES to follow AUDJPY

With the Bank of Canada lowering their economic outlook for the third quarter, the BoC maybe accurate as many of the most recent data points have remained tepid. These data points indicate that the Bank of Canada will most likely sit tight on any further monetary tightening at the next policy meeting.

The Department of Finance released their latest economic and fiscal budget projections up until 2015, and to no one’s surprise, it is extremely optimistic. There are many positive data points in the report, highlighting the positive employment situation, the strong fiscal position ‘relative’ to other G-7 nations, and solid growth in GDP.