Gambling

Two weeks after FXCM was on death's door, and only a last minute vulture investment by Jefferies prevented the company from filing, FXCM has decided that it can't afford to blow up the bulk of its clients who traded the EURCHF on the wrong side, and as the company reported moments ago, will forgive their negative balances. In other words, another bailout for HFTs, and the rich and those habitually addicted to gambling in rigged markets, who just happen to be the lifeblood of companies like FXCM.

Shortly after yesterday’s open, the S&P 500 was down nearly 2% and off its recent all-time high by 3.5%. But soon the robo-machines and day traders were buying the “dip” having apparently once again gotten the “all-clear” signal. Don’t believe it for a second! The global financial system is literally booby-trapped with accidents waiting to happen owing to six consecutive years of massive money printing by nearly every central bank in the world.

In what has been the most anticipated bankruptcy case in the past several years, hours ago Caesars Entertainment put its main operating unit under Chapter 11 bankruptcy protection in Northern Illinois bankruptcy court (case 15-01153) even as a splinter group of dissident creditors including Appaloosa and Oaktree, holders of about $41 million of Caesars debt and which allege the company has siphoned off billions in value from creditors, put the company into involuntary bankruptcy in Delaware bankruptcy court on January 12. As a reminder, Caesars was one of the sterling LBOs of the last credit bubble, when in 2008 Apollo and TPG decided to take the company private. The problem, as is always the case: too much debt, especially when combined with a broken business model, as Caesars has lost money every year since 2009.

The person who risks nothing, does nothing, has nothing, is nothing, and becomes nothing.

In the first half of this piece, readers were subjected to an exposition on the status quo. We revisited the preposterous paradigm of “too big to fail”, where a Crime Syndicate of private sector mega-banks pronounced themselves so “systemically important” that (supposedly) we could not live without them.

The Long/Short Strategy for the New Reality
1. Go long companies that cater to the 1%.
2. Short companies that cater to the middle class.
3. Go long companies that cater to the poor.

"By adopting these resolutions, Congress can make 2015 the year America begins reversing the long, slow slide toward authoritarianism, empire, national bankruptcy, and economic decline..."

In our Wonderland Matrix; we are frequently sold perversion by our corrupt governments, criminal banks, and (of course) the parrots of the Corporate media. Black is white. Down is up. Bad is good.

With respect to the latter perversion; while we have many examples to choose from, there could be no better selection than the obscenity dubbed by the Big Banks themselves as “too big to fail”. Regular readers are already familiar with my condemnation of this fraud, as too-big-to-fail is literally nothing but (very) thinly-veiled blackmail.

"Customers who used to wager on casino tables are probably now sitting at home betting on stocks,” said Tai Hui, Hong Kong-based chief Asia market strategist at JPMorgan Asset Management. “Investors are levering up on margin trading, or ‘using a small knife to cut a large tree.’"

Meet Emerge Energy Services: the poster boy for the “irrational exuberance” that has become institutionalized throughout the length and breadth of the Wall Street casino. Today’s Wall Street Journal story coming just five months after last summers potboiler is therefore not simply an update on a speculation gone horribly wrong. It’s actually a template for the deluge to come.

"Don't fall for the trap of myopically following yesterday's winners. Protect yourself, keep your powder dry, and wait for a better day. Think more about getting rich in 2020 or beyond... The Fed has turned the entire investing population into zombies (with a gambling addiction, I might add) wandering aimlessly in search of any tiny extra return to ravenously consume... This has left stock markets as elevated and overvalued as they’ve been since the dot-com mania (and more than they were in 1929 and 2007), which history has shown will likely lead to significant declines ahead."

• The year of dollar danger for the world (Ambrose Evans-Pritchard)
• Draghi Says ECB Prepares Action as Deflation Risk Non-Negligible (BBG)
• Obama Pivots to Lawmakers: New Plan to Advance Policy Goals by Working With Congress Draws Skeptics (WSJ)
• Affordable Care Act Creates a Trickier Tax Season (WSJ)
• Oil pares early gains, trades near $57 as supply glut prevails (Reuters)
• Iran says Saudi Arabia should move to curb oil price fall (Reuters)
• Pimco Fund Trails Peers in 2014 After Missing Rally (BBG)
• Piketty rejects Légion d’Honneur award (FT)
• UK manufacturing activity hits three-month low (BBC)

Goldman head Lloyd Blankfein was completely wrong when he declared his firm was doing “god’s work”. That couldn’t be. In fact, Goldman and its principal competitors have become nothing less than the devils workshop during the modern era of Keynesian central banking instigated by Alan Greenspan. Greenspan’s “committee to save the world” did no such thing. What it did was bury the American middle class in debt, while massively outsourcing US goods production capacity to China and elsewhere in the EM.

The speculative fever in Chinese stocks has reached 11 on the Spinal Tap amplifier of euphoria. Last week saw a stunning 900,000 new stock trading accounts opened - the most since October 2007 (right before the Shanghai Composite collapsed 70% in the following 9 months). With real estate prices floundering, everyone and their pet rabbit is piling into Chinese stocks, as one 'investor' explained to The NY Times, "almost everyone I know is investing, so I think I should be investing, too."

If the BOJ’s mad money printers were treated as monetary pariahs by the rest of the world, it would at least imply that a modicum of sanity remains on the planet. But just the opposite is the case. Establishment institutions like the IMF, the US treasury and the other major central banks urge them on, while the Keynesian arson squad led by Professor Krugman actually faults Japan for being too tepid with its “stimulus”. Now comes several new data points that absolutely confirm Japan is a financial mad house...