New Normal

Economists Stunned By "Irrational Consumers" Who Used Gas Savings To Buy More Expensive Gas

While we knew the quantitative answer to the biggest conundrum stumping economists, namely that Americans bought even more gas with their gas savings, we were missing the qualitative one. Courtesy of the NYT we now learn that not only did consumers not redirect their spending to other discretionary items, but engaged in an act that has stunned economists around the globe: they don’t just buy more gasoline; they bought more expensive gasoline!

The Calm Before The Storm?

The Fed has worked overtime since the 2008 crisis to produce a stability, a sense of normalcy in the economy and markets. It is a stable equilibrium now but almost any minor shock could change that dynamic for the worse and quickly. Widening credit spreads, Treasuries and gold outperforming stocks indicate that some parts of the market are already preparing for the storm. Stocks are about the only asset yet to batten down the hatches. If this is the calm before the storm, stock investors are about to get swept overboard.

Who Will Be Blamed?

"... you can bet that whenever an earthquake like this happens, especially when it’s triggered by two invisible tectonic plates like put gamma and call gamma and then cascades through arcane geologies like options expiration dates and ETF pricing software, both the media and self-interested parties will begin a mad rush to find someone or something a tad bit more obvious to blame. So you end up getting every investment process that uses a computer – from high frequency trading to risk parity allocations to derivative hedges – all lumped together in one big shotgun blast"

Coming Soon To A Checkout Lane Near You: Stock Giftcards

This. Will. Not. End. Well. As WSJ reports, "retailers such as Kmart and Office Depot this week are starting to roll out cards that give the recipients small amounts of stock in some of the country’s best-known companies." "I have always wanted to get into the stock market business, but I honestly don’t have the time to explore what’s going on in the market trends of the day"...

Spot The Difference

Welcome to your new normal - single-factor- 100% correlated "markets"...

Johnson & Johnson Announces $10 Billion Buyback Ahead Of Earnings To Stabilize Sliding Stock Price

With JNJ about to announce - what are almost certain to be very bad - earnings in just over an hour, the company decided it was prudent to set the mood by preannouncing, less than an hour before earnings, good days are back again and that the company will do all in its power to not only increase the buyback pardon equity-linked compensation of CEO Alex Gorsky, but to reward shareholders for sticking with a company that hasn't announced a major buyback plan in recent months.

Why Oil Is Tumbling: Oil Hedges Were Just Rolled Over

Wwith oil volatility surging in recent months, oil producers needed to take advantage of a rally, technical or otherwise, and an oil vol lull to reestablish hedges, even if it meant at far lower prices than recent benchmarks.  This is precisely what happened in the past week following one of the most torrid surges in the price of oil seen in recent years.

BlackRock, The Stock Market, & The Alleged Evils Of "Volatility"

We would argue the main reason for Blackrock’s attempt to persuade the exchanges to adopt its recommendations on trading halts is that Blackrock itself is inconvenienced by downside volatility. Presumably the company is no stranger to leverage (how else can it squeeze out large returns with a portfolio this large in a ZIRP world?) and is therefore forced to exercise stop loss orders itself when the market declines fast. Such attempts to “regulate” everything, even the price swings markets are allowed to make, are attempts to stem oneself against nature.

Bernanke: The Courage To Print - Reading Between The Lies

The Fed needs to extricate itself from manipulating the financial markets. It needs to end backstopping market liquidity. It must never again print Trillions of new “money” out of thin air. Because so long as the marketplace perceives that the markets are "too big to fail", there will be speculative excess, major securities markets mispricings and Bubble fragilities. No one – average investor or sophisticated financial operator – has a clue as to the degree Fed policies have distorted asset prices.

How Much Longer Can Our Unaffordable Housing Prices Last? (Spolier Alert: Not Much)

This globalization of regional housing markets is pricing the middle class out of housing in areas that also happen to be strong job markets. Many commentators are concerned that a nation of homeowners is being transformed into a nation of renters, as housing is snapped up by hedge funds and wealthy elites fleeing China and the emerging markets. But will current conditions continue unchanged going forward?

It's Time For Negative Rates, Fed's Kocherlakota Hints

If you’re a fan of dovish policymakers who are committed to Keynesian insanity, you can always count on Minneapolis Fed chief Narayana Kocherlakota who is out today with the latest hint that NIRP is coming to America.

China Opens Weaker Than Expected After Goldman Downgrade And "Mirage Of A New Dawn" Warnings

After a "no change" statement from The BoJ, today's dismal Japanese data was terrible enough to be great news in the new normal as August machine orders drop the most in at least a decade and stocks, USDJPY dipped and ripped. However, it was the China open that investors waited for (after China shares rising 10% in US trading, and CNH strengthening on lower than expected reported outflows) as Goldman slashed its 12m target for Chinese stocks, and Bocom's chief strategist (who called the boom and the bust) says "rally is mirage of new dawn, volume is dying, sell the rallies." PBOC fixed the Yuan at its strongest in 2 months and while Chinese stocks opened up notably it was less than US ADRs suggested (CSI +4% vs ASHR +9.5%).