Wall Streeter's Lament Volcker Rule: "Liquidity Is About To Be Sacrificed At The Altar Of Ignorance & Fear"Submitted by Tyler Durden on 12/10/2013 16:55 -0500
"... The entire socio-economic model is now built on this and, whether right or wrong, it demands a very different sort of banking that the "pay 3% on deposits and lend them at 5%" kind of industry of the 70s and 80s. Volcker risks over-egging the pudding and, to mix my metaphors, killing the goose that lays the golden "growth" egg. Liquidity, the holy grail of markets, is possibly about to be sacrificed on the altar of ignorance and fear."
Volcker Rule - Who cares? I know we are supposed to care more about this convoluted rule, but we just can’t. The concept that somehow “prop” trading brought down the banks seems silly. The idea that market making desks were a dangerous part of the equation is ludicrous. They could have fixed this with a few simple changes, but that would have meant some blame would have had to be shifted onto the regulators...
The Obamacare enrollment portal is the gift that keeps on giving endless examples of government incompetence. The latest comes from Bloomberg which informs us that "there’s no way to tell how many people who think they’ve signed up for health insurance through the U.S. exchange actually have, after about 1 in 4 enrollments sent to insurers from the federal website had garbled included incomplete information." Still that particular glitch was not enough to prevent Obama from taking full credit for a "fixed" website after somehow the White House managed to calculate that sign ups soared to 100,000 people, and have taken off since the "fix."
The US data flow is relatively light which is typical of a post-payrolls week but it’s worth noting wholesale inventories on Tuesday and retail sales on Thursday. Importantly US House and senate negotiators are supposed to come to an agreement on a budget before the December 13th deadline. A lot of optimism has been expressed thus far from members of congress, and there are reports that a budget deal will be unveiled this week.
Following China's unveiling of its air defense identification zone (ADIZ) in the East China Sea, overlapping a large expanse of territory also claimed by Japan, the Japanese media has, as The Japan Times reports, had a dramatically visceral reaction on the various scenarios of a shooting war. From Sunday Mainichi's "Sino-Japanese war to break out in January," to Flash's "Simulated breakout of war over the Senkakus," the nationalism (that Kyle Bass so notably commented on) is rising. Which side, wonders Shukan Gendai ominously, will respond to a provocation by pulling the trigger? The game of chicken between two great superpowers is about to begin has begun.
Having discussed the advantages and disadvantages of the crypto-currency and noted the extreme volatility of the last few weeks, it seemed only a matter of time before some ambitious entrepreneur tried to monetize the volatility. What better way to "manage the risk" of your virtual currency horde than buying (or selling) options (in a more levered way). Predictious, the Dublin-based prediction market, this week unveiled Bitcoin Option Spreads enabling both long- and short-positions to be constructed on the already extremely volatile 'asset'. Regulatory clamp-down in 3..2..1...
Thinking like the Fed
To know your enemy, you must become your enemy -Sun Tzu
In war, poker, chess and many other endeavors, wise old hands will advise you to think like your opponent. We’ll try a related idea here by seeing if we can think like the members of the Federal Open Market Committee (FOMC). Specifically, we’ll pretend to write part of the statement for the FOMC’s December 17/18 meeting.
"Just be long. Pretty much anything. So here’s how I understand things now that I am no longer the last bear standing. You should buy equities if you believe many European banks and their sovereign paymasters are insolvent. You should buy shares if you put a higher probability than your peers on the odds of a European democracy rejecting the euro over the course of the next few years. You should be long risk assets if you believe China will have lowered its growth rate from 7% to nearer 5% over the course of the next two years. You should be long US equities if you are worried about the failure of Washington to address its fiscal deficits. And you should buy Japanese assets if you fear that Abenomics will fail to restore the fortunes of Japan (which it probably won’t). Hey this is easy… And then it crashed"
- Hugh Hendry
Obamacare is a catastrophe that cannot be fixed, because it doesn't fix what's broken in American healthcare. It is a phony reform that extends everything that makes the U.S. healthcare unsustainable sickcare.
End America’s central bank because it caused the crashes of 2008, 1987, and 1929 and will blunder again. That’s what many critics are saying about the Federal Reserve System (the Fed), which turns 100 on December 23. They note that on the Fed’s watch America has endured numerous bubbles, crashes, and inflationary cycles that have greatly devalued the dollar. The Fed, they say, has caused or aggravated several crashes. “If you say the goal of the Fed was to prevent calamities, then you have to say that it has been a failure,” says William A. Fleckenstein. “History and current experience,” Joe Salerno adds, “reveal to us that groups endowed with a legal monopoly over any area of the economy are prone to use it to the hilt to enrich themselves, their friends and allies.”
Just when you thought it was safe to step back into the water of the "fixed" Obamacare website, another glitch, this time in sending data on Medicaid, has The Center for Medicare and Medicaid Services writing a memo to the 36 states using the federal website last week acknowledging the information wasn't being transferred automatically and saying another system was being developed to send it. Potentially affecting tens of thousands of Medicaid recipients, ABC reports, "Essentially, if you're a consumer on healthcare.gov, it will tell you you're eligible for Medicaid and the state agency will take care of it, but there's no real way for the state Medicaid agency to know anything about it." The information, according to AP, is incomplete with regard to verifying eligibility and as South Carolina's HHS Director notes, "it's going to be a gigantic logistical mess."
Futures Pushed Higher On Weaker Yen, But All Could Change With Today's "Most Important Ever" Jobs NumberSubmitted by Tyler Durden on 12/06/2013 06:58 -0500
The latest "most important payrolls day of all time" day is finally upon us. Of course, this is a ridiculous statement: considering that the average December seasonal adjustment to the actual, unadjusted number is 824K jobs, it will once again be up to the BLS' Arima X 13 goal-seeking, seasonal adjusting software to determine whether the momentum ignition algos send stocks soaring or plunging, especially since the difference between up and down could be as small as 30K jobs. As Deutsche Bank explains: " today's number is probably one where anything above +200k (net of revisions) will lead to a further dip in risk as taper fears intensify and anything less than say +170k will probably see a decent relief rally after a tricky week for markets. Indeed yesterday saw the S&P500 (-0.43%) down for a fifth day - extending a sequence last seen in September." And then consider that nearly 30 times that difference comes from seasonal adjustments and it becomes clear why "farcial" is a far better definition of labor Friday.
Bitcoin could become a major means of payment for e-commerce and may emerge as a serious competitor to traditional money-transfer providers, BofAML notes in a report today, adding that as a medium of exchange, Bitcoin has clear potential for growth, in our view. Despite Greenspan's inability to find "value", BofAML prefers not to call the crypto currency a bubble, and assigns a maximum fair-value of $1,300, but does warn that the 100 fold increase in Bitcoin prices this year is at risk of running ahead of its fundamentals.
Having "fixed" Obamacare, the President is ready to re-pitch American 'excellence' today as he addresses the state of the economy. Remember, good is bad and bad is good - do don't over-sell it... oh, and all the bad stuff - that's the Tea-Party's fault... Just don't show him (or anyone) this chart...
While there was a plethora of macro data (starting with some ugly numbers out of Australia which clobbered AUD pairs overnight), China HSBC Services PMI dipping slighlty from 52.6 to 52.5, Final Eurozone PMI Services (printing at 51.2 up from 50.9 and beating expectations of the same on an increase in German PMI numbers from 54.5 to 55.7 and a decline in French PMI from 48.8 to 48.0), Eurozone retail sales declining by 0.2%, on expectations of an unchanged print, and much more (see below), perhaps the most important news of the day came from Japan which many expect will be the source of much more easing in the coming months and thus serve as marginal lever to push global fungible markets higher. However, not only did various BOJ officials for the first time in a while talk down expectations of a QE boost, but the head of the Japan GPIF said that it doesn't need to sell JGBs right now as it would "rock markets" and that instead can achieve its targeted 52% weighing as bonds mature, that it may buy foreign bonds instead to raise weighting to core target (as the Fed buys Japan bonds?), and that it will be very difficult for Japan to hit the BOJ's inflation target in 2 years. Is Japan already getting cold feet on rumors of more QE and did it realize there are only so many assets it can monetize. If so, watch out below on the EURJPY which has now priced in about 700 pips of expected BOJ QE boosting in early 2014.