Yesterday's "better than expected" New Home sales served as the "good news" pre-market boost to send futures ramping higher once again, if not enough to cause a fresh all time high. Here is what really happened when one spreads the numbers, courtesy of Mark Hanson's housing blog. "If all of the 4 regions were in this morning's New Home Sales print were rounded down to the nearest thousand by the Census Bureau vs up, it would subtract 4k sales, or about 12%. Even with the massive January seasonal adjustments, this would result in a SAAR headline print of 428k, or flat YoY vs the up 10% reported. If only the South was flat YoY like the other regions, the same thing would occur. "
When civilians launched a suicidal attack on an armed force in Kyiv on February 20, their sense of representing “the nation” far outweighed their concern with their individual mortality. The result was to swing a deeply divided society from the verge of civil war to an unprecedented sense of unity. Whether that unity endures will depend on how Europe responds. We hope and trust that Europe under German leadership will rise to the occasion. We must, however, end with a word of caution. A replay of the Cold War would cause immense damage to both Russia and Europe, and most of all to Ukraine, which is situated between them.
How the volatility of the market can be seen every day! Yesterday, the London financiers were out there celebrating on their 14-year high and backing that the ‘only way was up’. Then today they woke up too late after hitting the bottle too much and now that high has dropped as China’s economy is causing greater concerns for the rest of the financial world.
When a hypertotalitarian banana republic takes another turn for the gigasurreal, even Elon Musk is speechless.
Shorts were well-and-truly squeezed this morning providing (yet again) just enough ammo to push the S&P back into the green for 2014 and the Russell to new record highs as the pump-and-dump we noted earlier continued for the 3rd day. However, soon after Europe closed, the fabulous five (TSLA, AMZN, FB, AMZN, and TWTR) all stopped levitating and stocks began to drop back to JPY's reality once again. Treasuries continue to rally (-6bps on the week) to 2-week low yields (leaving stocks disconnected) and while early (and considerable) USD strength faded in the afternoon, the USD index ends up 0.2% on the week (with EUR weakness leading). Gold and Silver were monkey-hammered early on but the former recovered some of its losses to end +0.35% for the week so far. While stocks ended unchanged-ish, VIX (following last night's epiuc WTF moment) rose to 14.4% and credit spreads closed wider on the day.
Pop quiz: When really nasty criminals and dictators want to hide their illicit gains, which country do they go to? We’ll make this easy for you - multiple choice:
b) British Virgin Islands
c) Hong Kong
For the 3rd day in a row, the opening of the US day-session sparked some inexorable desire to buy stocks up to record highs - ignoring the realities of other assets like bonds (lower and lower yields), USD (soaring), VIX (rising), credit spreads (flat) and even JPY carry traders. And for the 3rd day in a row, the initial "pump" has failed and "dumped" back to AUDJPY reality. It seems the all-important green close for 2014 just won't hold (for now).
Fundamentally oriented investors tend to think that quants, like blondes, have all the fun. As ConvergEx's Nick Colas notes - it all looks like easy money - scalping trades with lightning fast computers, front running news with preferential access to press releases, or managing leveraged portfolios with thousands of small but profitable positions – but quants face their own significant challenges. Finding common rule sets that work in a wide array of stocks is not easy, and markets adapt quickly to close opportunities that seem historically profitable - the number of potential signals is seemingly endless; and regulators are now aware of quantitative investing and, in some cases, don't like what they see. Here are 10 reasons why why "it's not easy being a quant."
Economics is not a difficult subject, unless you try to learn it from an economist. Common sense is all that is required to be a good economist. Unfortunately, in order to get your union card, you must pretend to have none. Belief in fairy tales like more spending and “free lunches” is also necessary. But that is of little import in regard to the title – How to identify economic zombies... The test to determine whether you or your friends are zombies is simple. Answer the following question: How would you live if debt/credit were outlawed?
JPMorgan may have had zero trading loss days in 2013 but 2014 is not shaping up well for Jamie Dimon's firm. Just out from Reuters and BBG, which is reporting what the firm just announced at its investor day:
- JPMORGAN CHASE & CO EXECUTIVE: MARKET REVENUE YEAR-TO-DATE DOWN ABOUT 15 PCT VS YEAR AGO
- JPMORGAN CHASE & CO EXECUTIVE: MARKET REVENUE DOWN BROADLY YEAR-TO-DATE, BUT WORSE IN FIXED INCOME
- JPMORGAN SAYS HAS SEEN LOWER CLIENT ACTIVITY, ESP FIXED INCOME
And if the company feels compelled to report this now, one can only imagine what ridiculous addbacks JPM will have to do on earnings day: we can certainly expect at least $2 billion in loan loss reserves releases to make up for a reality that firmtly refuses to comply with Ph.D. economist models. And what is really funny, is that judging by the stock reaction, it is almost as if the algos don't know that nobody trades bonds when it snows outside. Duh.
US equities tagged new highs early in the day-session sparked by USDJPY ignition and rotating to support from AUDJPY as stops were run and exuberance over shitty data reigned. "Most shorted" stocks dramatically outperformed early on providing the sacrifice required but while bond yields rose from their open last night, they end the day practically unchanged (10Y +1bps); The USD rallied into the open but EUR and AUD strength cracked it back to practically unchanged by the close. Copper flailed (on slowing China construction fears) but oil, silver, and gold all rallied around 1% on the day (though rolled over in the afternoon). VIX dropped but held 14% and remains notably divergent. Credit rallied but remains a laggard compared to equity exuberance. Stocks tanked into the close; catching down to VIX, credit, and USDJPY - what a "market" with the S&P losing its highs and closing red for 2014 once again.
It would indeed be supremely ironic if the "strong" foreign law bond indenture would be tested, and breached, not by Greek bonds, as so many expected in late 2011 and early 2012, but by one of the last contries in Europe which is still AAA-rated. We would find it less ironic if the next leg of the global financial crisis was once again unleashed by an Austrian bank: after all history does rhyme...
Debt is the great palliative that has enabled the US and other major economies to escape reality, at least for a time. Ayn Rand described such behavior:
You can avoid reality, but you cannot avoid the consequences of avoiding reality.
It is possible to steal from tomorrow to improve today but only at the cost of having less of a future. That is what both nations and citizens have been doing. The ability to continue doing so has about run its course.
- Ukraine Seeks $35 Billion as Yanukovych Warrant Is Issued (BBG)
- Ukraine's fugitive president wanted for mass murder (Reuters)
- Polar Vortex to Bring More Snow on Return to U.S. This Week (BBG)
- China property prices continue to rise (FT)
- Microsoft Said to Cut Windows Price 70% to Counter Rivals (BBG)
- Pentagon to propose shrinking Army, scrapping some jets (Reuters)
- Hedge Funds Turn Bearish on S&P 500 as VIX Advances (BBG)
- Draghi’s Data Jigsaw Takes Shape as ECB Readies Showdown (BBG)
- China, eyeing Japan, seeks WW2 focus for Xi during Germany visit (Reuters)
The last 3 weeks have seen the macro fundamentals of the G-10 major economies collapse at the fastest pace in almost 4 years and almost the biggest slump since Lehman. Despite a plethora of data showing that 'weather' is not to blame, US strategists, 'economists', and asset-gatherers are sticking to the meme that this is all because of the cold on the east coast of the US (and that means wondrous pent-up demand to come). However, as the New York Times reports, for the earth, it was the 4th warmest January on record.