New Normal

Bill Gross' Latest: "Mainstream America Is Being Slowly Cooked Alive"

"Mainstream America with their 401Ks are in a similar pickle. Expecting 8-10% to pay for education, healthcare, retirement or simply taking an accustomed vacation, they won’t be doing much of it as long as short term yields are at zero. They are not so much in a pickle barrel as they are on a revolving spit, being slowly cooked alive while central bankers focus on their Taylor models and fight non-existent inflation."

Top UK Hedge Fund Manager Admits: "Central Banks Made The Rich Richer"

Quantitative easing, as this policy is known, has bailed out bonus-happy banks and made the rich richer.  Banks have been the biggest beneficiaries, with their 20- or 30-times leveraged balance sheets. Asset managers and hedge funds have benefited, too. Owners of property have made out like bandits. In fact, anyone with assets has grown much richer. All of us who work in financial markets owe a debt to QE.

Conspiracy "Fact" - VIX Manipulation Runs The Entire Market

Ever since Simon Potter's 2012 arrival as head of The NYFed's trading desk, the manipulation of VIX (and thus its reflexive levered tail wagging the algo-driven dog of the indices) has been front-and-center day-after-day in the so-called US equity 'market'. While only fringe-blogs have noticed this in the past, now The FT admits that not only was recent volatility in markets exacerbated by VIX ETFs (thus confirming the tail-wagging-dog analogy), and further, the nature of the link between VIX ETFs and VIX Futures (rebalancing) enables frontrunning which serves to reinforce any trend into the close and thus manipulate the markets.

In Thrall To The Federal Reserve

After so many years of the “new normal,” we have to be reminded just how extraordinary — and unprecedented — the Fed’s actions since 2008 have been. But does it not occur to bankers, much less the media breathlessly covering stock and bond markets, that these actions have set America on a hopelessly dangerous and unsustainable path? Or that placing so much economic power in the hands of a select few might not end well?

Global Stocks Slide, Futures Tumble On Confusion Unleashed By "Uber-Dovish" Fed

What was one "one and done", just became "none and done" as the Fed will no longer hike in 2015 and will certainly think twice before hiking ahead of the presidential election in 2016. By then the inventory liquidation-driven recession will be upon the US and the Fed will be looking at either NIRP or QE4. Worse, the Fed just admitted it is as, if not more concerned, with the market than with the economy. Worst, suddenly the market no longer wants a... dovish Fed?

The Real Reasons Why The Fed Will Hike Interest Rates

With a complex and disaster-prone system of interdependence causing social strife and chaos, why not just simplify everything with a global currency and perhaps even global governance? The elites will squeeze the collapse for all it’s worth if they can, and a Fed rate hike may be exactly what they need to begin the final descent.

Traders Fear Second China State Entity Default As Aussie Leading Index Plunges, PBOC Devalues Yuan

Chinese equity markets are holding modest 'bounce' gains after two days of carnage. After 3 days of stronger fixes PBOC devalued the Yuan but the Ministry of Finance made it clear that "devaluation is not aimed at boosting exports," which makes us wonder, is it aimed at selling Treasuries? No additional direct liquidity injections but anxiety grows as China National Erzhong Group Co. may miss an interest payment later this month after one of its creditors filed a restructuring request, putting it at risk of becoming the second state-owned company to default in the nation’s onshore bond market.

USDJPY, Nikkei 225 Tumbles After Disappointing "No Change" From Bank Of Japan

We noted earlier the premature exuberation in USDJPY and Nikkei 225 - despite most of the sell-side not expecting anything from The BoJ - and it appears the banks were right and the FOMO traders wrong. The Bank of Japan made no change to its monetary policy (no increased buying, no shift in ETF allocations, and no NIRP for now). BoJ members spewed forth their usual mix of "everything is awesome" and "any quarter now" for the recovery but the market wasn't buying it. That leaves only one thing left to cling to for a "we must buy" crowd - no change today 'guarantees' moar QQE in October.

Goldman Warns: VIX Is Not Going Back To Low-Teens, No Matter What Fed Does

While equities do tend to be lower one-, two-, and three-months after a Fed rate hike, S&P 500 realized volatility and VIX levels have been fairly well contained. However, Goldman Sachs warns not to expect VIX to calm down and settle back into the low teens like it was from 2013 to mid-August 2015. New normal trend VIX levels should now be 4-5 points higher than the average level of 14 experienced in 2013-2014 given the current state of the economy.

EM FX Bloodbath Continues As Lira Slides To New Low, Tenge Plunges

The EM FX carnage continues unabated heading into the FOMC as the Kazakh tenge plunges for a seventh consecutive day and the beleaguered Turkish lira slides to a new low as an obstinate central bank and an extraordinarily unstable political situation conspire to undermine confidence ahead of elections scheduled for November 1.

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