• Tim Knight from...
    01/26/2015 - 21:16
    "Oh, he's there to make sure high school kids don't jump in front of a train to kill themselves", I would reply. And you, assuming you come from a place that isn't insane, would be puzzled and...

New Normal

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"Optimism Bias" & "Nervous Stasis"; The Sell-Side Fears "It Feels Like 2007 All Over Again"





As with any drug addiction, the first step is admitting you have a problem (or waking up naked in Glasgow train station). It seems HSBC - among a number of other sell-side strategists - are starting to wake up to their undying 'faith' and 'hope' that, based on the world's addiction to free money, there will be a return to the old normal status quo. As HSBC's Chief economist Steophen King notes, "there is an optimism bias, largely reflecting an attachment to pre-crisis growth trends which, post-crisis, have mostly remained out of reach," and they are finally facing up to the fact that "the world economy has succumbed to a lower structural rate of economic growth." But it is RBS that is waving the red flag as they warn of a "sense that this nervous stasis is dulling our perceptions about risk... it feels like 2007 all over again."

 
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The USD Is Tumbling; Near 2 Month Lows





Equities have flip-flopped this morning, giving up the new normal opening-squeeze higher gains as USDJPY fades. Bonds are rallying. But it is the USD Index that is the most notable this morning as it tumbles back towards 2-month lows in a hurry... This is the biggest 2-day plunge in 3 months.

 
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Laundering Illegal Money? There's Ultraluxury New York Real Estate For That





Today, we can finally end any debate on the topic of just where the world's illegal money comes to roost. The answer: ultra-luxury real estate, primarily in New York, courtesy of a report in New York magazine that catches up with what we first said in the summer of 2012, and which is titled, appropriately enough: "Stash Pad."

 
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Why "Margin Debt" Is Meaningless In The New Shadow Banking Normal





Pundits enjoy pointing to NYSE margin debt as an indication of overall system leverage, and how prone to margin calls and liquidations the investor class may be at any given moment. However, in the new normal, in which sophsiticated investors fund themselves via completely different mechanism - mostly involving repo and other shadow banking conduits - margin debt has become a very much irrelevant indicator of overall leverage.

 
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Algos Gone Wild? "Technical Glitch" Halts New Zealand Stock Market For 2nd Time This Month





While New Zealand's stock market is the 3rd smallest among AsiaPac exchanges, it is not immune from the "glitches" even the largest exchanges have become used to in the new normal era of 'liquidity providers'. For the 2nd time this month, equities trading in New Zealand (the entire market) is halted after a "technical fault" at the operator of the exchange. As one trader noted understatedly, "there seems to be a reasonably regular occurrence of issues, which is a bit of concern."

 
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The "Never Say No" Economy





"No" is not a word one hears very often in the new normal centrally-planned, no consequence world in which the world increasingly finds itself. As ConvergEx's Nick Colas notes, there is good reason not to scare people off as the power of the word “No” in human interaction shows its psychological heft is inversely proportional to its length. From early childhood, Colas points out, we learn that “No” signifies a negative outcome, and that wiring stays with us the rest of our lives. Studies using brain-imaging scans show this in detail. Subjects who hear the words “Yes” and “no” exhibit dramatically different brain activity. “No” gets processed slightly more slowly, but with powerful negative emotion. The result is less trust and cooperation from the person who hears “No”. If that is your desired result, “No” is your word of choice. But if it isn’t, try something else.

 
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These Fake Rallies Will End In Tears: "If People Stop Believing In Central Banks, All Hell Will Break Loose"





Investors and speculators face some profound challenges today: How to deal with politicized markets, continuously “guided” by central bankers and regulators? In this environment it may ultimately pay to be a speculator rather than an investor. Speculators wait for opportunities to make money on price moves. They do not look for “income” or “yield” but for changes in prices, and some of the more interesting price swings may soon potentially come on the downside. They should know that their capital cannot be employed profitably at all times. They are happy (or should be happy) to sit on cash for a long while, and maybe let even some of the suckers’ rally pass them by. As Sir Michael at CQS said: "Maybe they [the central bankers] can keep control, but if people stop believing in them, all hell will break loose." We couldn't agree more.

 
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Overnight Equity Futures Algos Jittery After Discovering Dubai On The Map





Judging by the surprising reversal in futures overnight, which certainly can not be attributed to the latest data miss out of Europe in the form of the June German IFO Business Climate report (print 109.7, Exp. 110.3, Last 110.4) as it would be naive to assume that centrally-planned markets have finally started to respond as they should to macro data, it appears that algos, with their usual 24 hour delay, have finally discovered Dubai on the map. The same Dubai, which as we showed yesterday had just entered a bear market in a few short weeks after going turbo parabolic in early 2014. It is this Dubai which crashed another 8% just today, as fears that leveraged traders are liquidating positions, have surfaced and are spreading, adversely (because in the new normal this needs to be clarified) to other risk assets, while at the same time pushing gold and silver to breakout highs. Recall that it was Dubai where the global sovereign crisis started in the fall of 2009 - will Dubai also be the place where the first domino of the global credit bubble topples and takes down the best laid plans of central-planners and men?

 
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Social Media Advertising A Dud: 62% Of Americans Say "Social" Ads Have No Impact On Purchasing Decisions





One of the great "paradigms" of the New Normal tech bubble that supposedly differentiated it from dot com bubble 1.0 was that this time it was different, at least when it came to advertising revenues. The mantra went that unlike traditional web-based banner advertising which has been in secular decline over the past decade, social media ad spending - which the bulk of new tech company stalwarts swear is the source of virtually unlimited upside growth - was far more engaging, and generated far greater returns and better results for those spending billions in ad bucks on the new "social-networked" generation. Sadly, this time was not different after all, and this "paradigm" has also turned out to be one big pipe dream. According to the WSJ, citing Gallup, "62% of the more than 18,000 U.S. consumers it polled said social media had no influence on their buying decisions.

 
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The Generational Short Part 2: Who Will Boomers Sell Their Stocks To?





With Gen-X and Gen-Y out as buyers, who's left to scoop up the tens of trillions of dollars of Boomer assets at bubblicious prices? Given that other nations face the same demographic dilemma, the answer appears to be: no one.

 
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Bull vs Bear vs Right vs Wrong: And Does It Really Matter





Currently there is a great debate within the financial media on the who’s right – who’s wrong, as both sides stare at a financial market that seems to go ever higher with every morning bell. In actuality, it’s both, and neither. Currently the macro economy is being expressed via circumstances resulting from a myopic view of participation. i.e., The financial markets. All of those fundamental based principles have been annexed to what one solitary person will do – then say. That person was Ben Bernanke. Now it’s been codified via the markets recent reactions to Janet Yellen. All of those fundamental based principles have been annexed to what one solitary person will do – then say. That person was Ben Bernanke. Now it’s been codified via the markets recent reactions to Janet Yellen.

 
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Beware Friday's OPEX, JPMorgan Warns "Volatility Too Low, Disconnected From Fundamentals"





Many market participants are scratching their head as to whether the low VIX levels are an anomaly or some kind of utopian new normal. JPMorgan's Quant Derivatives shop warns the current environment is not similar to the great moderation of 2004-2007 as volatility appears to be disconnected from fundamentals and pressured by structural effects, including central bank intervention, low trading volumes, and pressure from option hedging. Crucially, based on an examination of 'gamma imbalances', the current (low) volatility regime may change significantly after the June expiry.

 
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FUBAR II: China Must Import More Water Than The US Imports Oil





We discussed earlier that China does not have the capacity to feed itself as it simply doesn’t have enough fertile land in production to support its population’s growing food demand. Theoretically this is fixable. With a bit of time, patience, and technology, barren soil can be rehabilitated In other words, China doesn’t have enough enough productive land capacity to support its population. But the far greater issue is China’s massive freshwater deficiency.

 
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US Patent Office Strips "Washington Redskins" Name For Being "Disparaging"





What Obama wants, he appears to get. As AP reports, the U.S. Patent Office has ruled the Washington Redskins nickname is "disparaging of Native Americans" and that the team's federal trademarks for the name must be canceled. We note that this decision is based on the fact that 30% of Native Americans believed the term 'Redskins' to be disparaging (not a majority). Which leaves us questioning when the Federal Government will see the New York Giants as disparaging of tall people and The Oakland Raiders as disaparaging of pirates... welcome to the new normal. We wonder (rhetorically of course) if this latest Redskins escalation is supposed to distract from Ukraine, Iraq, Bergdahl, IRS, Benghazi, or approval ratings?

 
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GDP Negative: 64-Year-Old Meth Cook Arrested In California Retirement Community





Fresno police have arrested a 64-year-old man suspected of cooking methamphetamine in his apartment at a retirement community. KFSN-TV reports Robert Short was pulled over as part of a routine traffic stop late Saturday and officers found meth in his car. Investigators then went to Short’s apartment in the California League-Fresno Village, where they found a half pound of meth, heroin and materials for a meth lab.

 

 
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