New York Stock Exchange
One of the most published academics on gold in the world is Dr Brian Lucey of Trinity College Dublin (TCD) and he and another academic who has frequently covered the gold market, Dr Constantin Gurdgiev have just this week had an excellent research paper on gold published.
They have researched the gold market, along with Dr Cetin Ciner of the University of North Carolina and their paper, ‘Hedges and safe havens: An examination of stocks, bonds, gold, oil and exchange rates’ finds that gold is a hedge against US dollar and British pound risk due to “its monetary asset role.”
It was a quiet overnight session, in which the Nikkei was catching up to USDJPY weakness from the past two days, while China dipped once more despite the NDRC's chief economist stating China may cut RRR or conduct more reverse repos in H2 to maintain stable credit as loan growth slows down (or in other words things go back to normal). In Europe ECB's Nowotny decided to undo some of Draghi's recent work when he said that "good economic news" removes the need for a rate cut which in turn pushed the EURUSD higher (and European exports lower), even as former Cyprus central bank Orphanides said the Euro crisis may flare up after the German elections. In the UK Q2 GDP came in slightly stronger than expected at 0.7% vs 0.6% Exp. letting the GBP outperform since a need for the BOE to ease, at least in the short run, is becoming less pertinent. In amusing news, Moody’s late yesterday put six largest U.S. banks on review as it considers the effect of evolving bank resolution policies under Dodd-Frank and international regulations. As such GS, JPM, MS and WFC may be cut.
Just over three hours ago, when discussing the NASDARK 3 hour trading halt, we asked: "what was it about Apple's locked Bid and/or Ask that caused the NASDAQ freak out, and was all the Tape C trouble at the NASDAQ purely a function of a locked order originating at NYSE Arca?" Moments ago, we got one half of the answer courtesy of the WSJ, which reports that "Nasdaq OMX Group Inc. executives internally on Thursday pointed to a "connectivity" problem with competing electronic exchange NYSE Arca as the trigger to technical issues that led to a three-hour halt in trading of Nasdaq-listed stocks, according to people familiar with the matter." Of course, Zero Hedge readers already knew that.
As we pointed out first, the Nasdaq outage can be directly and indirectly traced to action in Apple stock from mere minutes (when it suddenly dropped to under $500) to just over an hour before the Tape C halt was announced. And while the plunge below $500 may have been the proximal cause for the lock up that crippled the Nasdaq in a historic three hour episode of unprecedented humiliation, Nanex, which also uncovered the real quote-stuffing reason behine the May 2010 flash crash (and which the SEC tried to pin squarely on Waddell and Reed) has just disclosed that Nasdaq was already demonstrating explicit "glitches" in the trading of Apple well ahead of the 12:21 pm trading halt.
Wondering why the ES is soaring? Because the NYSE just broke too.
- NASDAQ HAS DECLARED SELF HELP AGAINST NYSE ARCA (ARCA)
- NASDAQ DECLARES SELF HELP AGAINST NYSE ARCA AS/OF 15:26:42 E.T
- NYSE ARCA HAVING DIFFICULTY PROCESSING OUTBOUND TAPE C QUOTES
And BATS too:
- BATS HAS DECLARED SELF-HELP AGAINST ANOTHER MARKET CENTER
- BATS SAYS ROUTING TO NYSE ARCA HAS BEEN SUSPENDED AS OF 15:39
An absolute circus meant only to preserve confidence in a rigged, manipulated system based on incorrect electronic trades.
First it was BATS self-helping against NYSE Arca, now it's Nasdaq's turn to break. Joking aside, AAPL dipped below $500 literally minutes before the NASDAQ broke. We joked earlier when we said any selling is enough to break the market. Now, we are not so sure...
UPDATE: Looks like that Goldman loss may have been a bit bigger than expected. BATS just redeclared self-help against NYSE Arca. There was a time that a red DJIA was needed for the market to break. It has become any downtick.
It's happened again... Judging by the speed with which the latest NYSE Arca market failure was resolved, we can only assume the amount of Goldman Sachs losses that are about to be DK'ed is 'only' in the 10 million range at most...
- Obamacare, tepid U.S. growth fuel part-time hiring (Reuters)
- Cameron was behind UK attempt to halt Snowden reports (Reuters), Britain defends detention of journalist's partner (Reuters)
- Goldman Options Error Shows Peril Persists One Year After Knight (BBG)
- China expresses 'shock' as Japan's nuclear crisis deepens (Reuters)
- Inquiry into China insurance firm rattles industry (Caixin)
- Cheaper rivals eat into Apple’s China tablet share (FT)
- Exporting fast food: Subway Targets Europe With as Many as 1,000 New Outlets in 2014 (BBG)
- Reserve Bank of India boosts liquidity to ease pressure on banks (FT)
- Justice Department Plans New Crisis-Related Cases (WSJ) - Holder doing his cutest attempt to pretend the TBTProsecute aren't
- Syrian Opposition Alleges Gas Attack, Which Government Denies (WSJ)
This morning's debacle in the options pit appears - just as we noted - to be due to Goldman Sachs 'erroneous' trades:
- *GOLDMAN MAY LOSE AS MUCH AS $100M ON ERRONEOUS TRADES: FT
But, as we also noted earlier, unlike Knight (which was wiped out when its market-making algos went rogue), in Goldman's case:
- *GOLDMAN SAYS 'WORKING WITH EXCHANGES' TO RESOLVE OPTIONS ISSUE
They get everything DK'ed...
As the cash equity markets opened in the US this morning, it appears a slew of options-based bearish bets were placed across a variety of stocks (starting with letters H to L). This slammed the Dow down into the red and to the all-important 15,000 Maginot Line. All was 'normal' until that critical indicator of 'wealth' finally broke 15,000 and almost instantly the exchanges went into "catastrophic error" mode which has resulted in trades from 0930ET to 0947ET on the CBOE being "busted". The exact time when the selling was under-way (so we can't have those sells being counted?). However, there is a rumor that what really drove it was Goldman losing millions on options trades (including JPM), and instead of the NYSE forcing the firm to eat its losses as it did with Knight, it decided to unwind 17 minutes of trades. These are the 'markets' in which investors are supposed to trade?
A recent survey of asset managers globally, managing USD 27.4 trillion between them, found that 78% of defined-benefit plans would need annual returns of at least 5% per year to meet their commitments, while 19% required more than 8%, "a target of 5% per year can be reached but only by using leverage, shorting, and derivavtives." And sure enough, as Deutsche Bank (DB) reports, in short, investors have rarely been more levered than today! According to DB, a MoM change in NYSE margin debt >10% has to be taken as a critical warning signal as there are astonishing similarities in the sequence of events among all crises. As the S&P 500 just hit a new all-time high, investors might want to ask themselves when it is a good time to become more cautious – yesterday, in our view. Simply put, the higher margin debt levels rise, the more fragile the underlying basis on which prices trade; with even a less severe sell-off in equities capable of triggering a collapse.
It hasn’t been a great year for Chesapeake Energy, just coming down from a management meltdown and now giving up on its leases in New York over the state’s ban on high-volume fracking. It’s a battle that’s been on for two years over thousands of acres of natural gas leases in New York, where fracking has been banned for five years. The problem was that the landowners leased the acreage to Chesapeake before the advent of hydraulic fracturing, and now they don’t want these leases extended under the original terms, according to a report by Reuters. The report says that Chesapeake has now notified the landowners that it is giving up the fight, and that the decision should be finalized next week. But there’s more to this than a simple court case...
It is well-known that as part of the S&P500's ascent to new records, investor margin debt has also surged to all time highs, surpassing for the past three months previous records set during both prior, the dot com and the housing, stock market bubbles. And as more attention has shifted to the topic of speculator leverage once more, inquiries into the correlation between bets upon bets and stock performance are popping up once more, in this case in a study by Deutsche Bank titled "Red Flag! - The curious case of NYSE margin debt." Of particular note here is a historical comparison of margin-debt warnings that have recurred throughout history but especially just before major stock bubble crashes, such as in the period 1999/2000, 2007/2008 and of course today, which have time and again been ignored. Here is what was said then, what is being said now, and what is ignored always.
This insane world was created through decades of bad decisions, believing in false prophets, choosing current consumption over sustainable long-term savings based growth, electing corruptible men who promised voters entitlements that were mathematically impossible to deliver, the disintegration of a sense of civic and community obligation and a gradual degradation of the national intelligence and character. There is a common denominator in all the bubbles created over the last century – Wall Street bankers and their puppets at the Federal Reserve. Fractional reserve banking, control of a fiat currency by a privately owned central bank, and an economy dependent upon ever increasing levels of debt are nothing more than ingredients of a Ponzi scheme that will ultimately implode and destroy the worldwide financial system. Since 1913 we have been enduring the largest fraud and embezzlement scheme in world history, but the law of diminishing returns is revealing the plot and illuminating the culprits. Bernanke and his cronies have proven themselves to be highly educated one trick pony protectors of the status quo. Bernanke will eventually roll craps. When he does, the collapse will be epic and 2008 will seem like a walk in the park.
S&P futures volume was the lowest of 2013 for a non-holiday-related day (35% below last year's volume and 40% below recent average volume). NYSE volume the second lowest of the year. Tech and Staples managed small gains on the day but homebuilders and utilities underperformed as bond yields rose 3 to 5bps on the day. The 'anxiety' in stocks showed itself with another appearance of the Hindenburg Omen (which has signaled short-term weakness in the last six months). The Russell closed green and thanks to AAPL, the Nasdaq eked out a small gain. Trannies were down 0.8% in their now-ubiquitous schizophrenic manner as 'most-shorted' names outperformed significantly. The USD slid lower from the US open ending -0.1% (with JPY strength dominant) but commodities were worse down 0.5% (WTI) to 1% (silver and gold) on the day. VIX was clubbed lower (to 11.8% - its lowest close in 5 months) right at the close to ramp stocks into the cash close.