"Frustrated" Liquidity Addicts Demand Moar From BOJ As Nikkei Rally Stalls, Abenomics Founders And "Hope Fades"Submitted by Tyler Durden on 11/13/2013 10:25 -0400
While the only topic of discussion for "sophisticated" investors everywhere is when (and if) the Fed will ever dare to reduce its monthly flow injection into US markets from $85 billion to a paltry $75 billion, everyone has forgotten that across the Pacific, for the past seven months the BOJ has been calmly injecting another $75 billion each and every month into the market, with no risk of this liquidity boost ever being tapered (since the broad 2% inflation target relies on ever broader wage increases that will never come). However, much to Japan's chagrin, in the current insta-globally fungible capital markets, over the past five months the bulk of this liquidity has found its way to the US stock bubble, leaving the Nikkei in the dust. As a result, the local Japanese liquidity junkies have started to loudly complain once again, and now the FT reports that "as excitement over the world’s second-biggest stock market has faded, some are now crying out for another jump-start." In other words: the BOJ must do "moar" to push the Nikkei bubble even higher following its rangebound trade since May which, worst of all, is now the primary reason why "hope is fading."
Blackberry Craters After Report Company Abandons Sale, To Replace CEO, To Issue 19.2% Dilutive Convert InsteadSubmitted by Tyler Durden on 11/04/2013 09:21 -0400
Just over a month ago, when we shared our cynical view on the "hopium" inspired LBO of Blackberry, we commented as follows: "In other words an LBO, one which however has not only one but many outs: "There can be no assurance that due diligence will be satisfactory, that financing will be obtained, that a definitive agreement will be entered into or that the transaction will be consummated." Which means that once the buyers figure out the potential disaster on the books, expect the final price (if any) to be revised lower as one after another MAC clause is triggered." Not even we were right: as it turns out moments ago, the Globe & Mail reported that having looked at the BBRY, not only will the price be revised lower, but the "purchase" price will be eliminated altogether as any deal is now dead, the company will do a convert offering instead and deadpan CEO Torsten Heins is history.
It is a common view that the shutdown, the debt-limit debacle and the repeated failure to enact entitlement and pro-growth tax reform reflect increased political polarization. John Taylor believes this gets the causality backward. Today's governance failures are closely connected to economic policy changes, particularly those growing out of the 2008 financial crisis. Despite a massive onslaught of legislation and regulation designed to foster prosperity, economic growth remains low and unemployment remains high. Claiming that one political party has been hijacked by extremists misses this key point, and prevents a serious discussion of the fundamental changes in economic policies in recent years, and their effects.
The recent strong rise in the so-called CBOE SKEW index is yet another among the various divergences that make the stock market's current advance suspect. Skew measures the perceived tail risk of the market via the pricing of out-of-the-money options. Generally, a rise in skew indicates that 'crash protection' is in demand among institutional investors. An unusual move in the skew index (which historically oscillates approximately between a value of 100 and 150) is especially interesting when it diverges strongly from the VIX, which measures at the money and close to the money front month SPX option premiums. Basically what a 'low VIX/high skew' combination is saying is: 'the market overall is complacent, but big investors perceive far more tail risk than usual' (it is exactly the other way around when the VIX is high and SKEW is low). In other words, a surprising increase in realized volatility may not be too far away.
Ordinary Americans Priced Out Of Housing: Institutional Purchases Hit Record, Half Of All Deals Are "All-Cash"Submitted by Tyler Durden on 10/24/2013 08:13 -0400
If there was any doubt that the US housing "recovery" is anything but the latest speculative play by deep-pocketed (namely those who already have access to cheap funding) investors, who are now engaged in rotating cash gains out of capital markets and into real estate, on their way hoping to flip newly-acquired properties to other wealthy investors, then the most recent, September, RealtyTrac report will put that to rest. To wit: Institutional investors (purchasing 10 or more properties in the last 12 months) accounted for 14 percent of all sales in September, up from 9 percent in August and also 9 percent in September 2012. September had the highest percentage of institutional investor purchases of any month since RealtyTrac began tracking in January 2011....All-cash purchases nationwide represented 49 percent of all residential sales in September, up from a revised 40 percent in August and up from 30 percent in September 2012. In other words, institutional purchases are now at all time highs, with all-cash accounting for half of all transactions!
- Top China Banks Triple Debt Write-Offs as Defaults Loom (BBG)
- PBOC suspends open market operations again (Global Times)
- Eurozone bank shares fall after ECB outlines health check plan (FT)
- O-Care falling behind (The Hill)
- Key House Republican presses tech companies on Obamacare glitches (Reuters)
- J.P. Morgan Faces Another Potential Huge Payouta (WSJ)
- Yankees Among 10 MLB Teams Valued at More Than $1 Billion (BBG)
- Free our reporter, begs newspaper as China cracks down on journalists (Reuters)
- Peugeot Reviews Cost-Saving Alliance With GM (WSJ)
- Congress Vote Ends Impasse to Be Revisited in January (BBG); Congress Passes Debt, Budget Deal (WSJ)
- House GOP extracts no concessions (Politico)
- Washington becomes the biggest risk to the U.S. economy (Reuters)
- Debt Deal Seen Boosting U.S. Consumers as Holidays Approach (BBG) - only thing missing: disposable income
- Federal Employees Head Back to Work (WSJ)
- Regulator Suggested Shift for Dimon at J.P. Morgan Unit (WSJ)
- Twitter hires Google ad exec ahead of IPO (CNET)
- Teens can now post publicly, but posts are friends-only by default (WaPo)
- Germany Moves to Finalize Coalition Deal (WSJ)
- Draghi Turns Judge on EU Banks as ECB Studies Accounts (BBG)
- UK nuclear deal with China a ‘new dawn’ (FT)
What politicians want from their regulatory efforts is a world of pure beta and zero alpha. This is the ultimate “level playing field”, where no one knows anything that everyone else doesn’t also know. The presumption within regulatory bodies today is that you must be cheating if you are generating alpha. How’s that? Alpha generation requires private information. Private information, however acquired, is defined as insider information. Insider information is cheating. Thus, alpha generation is cheating. QED. Why would politicians want an alpha-free market? Because a “fair” market with a “level playing field” is an enormously popular Narrative for every US Attorney who wants to be Attorney General, every Attorney General who wants to be Governor, and every Governor who wants to be President … which is to say all US Attorneys and all Attorneys General and all Governors. Because criminalizing private information in public markets ensures a steady stream of rich criminals for show trials in the future. Because the political stability of the American regime depends on a widely dispersed, non-zero-sum price appreciation of all financial assets – beta – not the concentrated, zero-sum price appreciation of idiosyncratic securities. Because public confidence in the government’s control of public institutions like the market must be restored at all costs, even if that confidence is misplaced and even if the side-effects of that restoration are immense.
Big picture and dispassionate discussion.
Hong Kong's richest are busy offloading local assets which institutions are happy to buy. It's exhibit A why institutional money often represents dumb money.
It may seem counter-intuitive but the US dollar appreciated last week, despite the partial closure of the Federal government, the heightened risk of default and the nomination of Yellen. The dollar can move higher next week too.
- A U.S. Default Seen as Catastrophe Dwarfing Lehman’s Fall (BBG)
- Software, Design Defects Cripple Health-Care Website (WSJ)
- Gunmen kill 5 Egyptian soldiers near Suez Canal, 2 people die in blast (Reuters); Egypt death toll rises to 53, streets now calm (Reuters)
- Three retailers sell Apple iPhone 5C for $50 or less (Sun Sentinel)
- New American Economy Leaves Behind World Consumer (BBG)
- Dow's Exiles Often Have Last Laugh (WSJ)
- Macy's Puts China Online-Expansion Effort on Hold Amid Economic Slowdown (WSJ)
- Gold Befuddles Bernanke as Central Banks’ Losses at $545 Billion (BBG) - just ask the BIS gold selling team: they are unbefuffdled
- Markit Group Said to Avoid U.S. Antitrust Claims as EU Proceeds (BBG) - being owned by the banks has benefits
- Paulson leads charge into Greek banks (FT) - and scene for the Greek banking sector
Dispassionate overview of the key factors shaping the investment climate in the week ahead.
Last Thursday when we reported the surreal sequence of investor disinformation events facilitated by both JCP's management team, CNBC and a conflicted "source", we said that "it was only a matter of time before lawyers started making phone calls, and before someone got implicated in what in retrospect can be construed as very serious, and costly, 10(b)-5 securities fraud." Sure enough, it took a little under 48 hours before the first (of many) lawyers smelled blood, and resulted in Shareholder Rights Law Firm Johnson & Weaver, LLP starting an investigation " if a securities violation was committed by J.C. Penney Company, Inc., when it made specific representations about the company's liquidity and the need to raise cash." The answer: yes. The only question is who is guilty, and how much the settlement will be for all those who lost cash on the second most active trading day of JCP stock in history (followed only by the next trading day in which the stock tumbled another 6% from the Goldman follow on offering price to a fresh 13 year low).
Thus, we see the “smart money” exiting the markets. We also see fewer and fewer companies participating in the market rally. Those who run these companies are more pessimistic than at any point in the last five years dating back to the nadir of the 2009 collapse. And finally we have investors as a whole displaying the most complacency about the market in history.