- No Happy Ending for Investors in Central Bank Fairy Tale (BBG)
- Ebola Response Strains Hospitals (WSJ)
- Obama, foreign military chiefs, to thrash out Islamic State plans (Reuters)
- Draghi’s ‘Whatever It Takes’ Plan on Trial at EU Court (BBG)
- Too-Big-to-Fail Banks Face Up to $870 Billion Capital Gap (BBG)
- Iran’s Message to World: You Need Us to Fight Islamists (BBG)
- Facing new oil glut, Saudis avoid 1980s mistakes to halt price slide (Reuters)
- Ukraine Grannies Outprice Banks on Hryvnia Black Market (BBG)
- HK police use sledgehammers, chainsaws to clear protest barriers, open road (Reuters)
- Gazprom Quarterly Net Rises 13%, Misses Estimate on Ukraine Debt (BBG)
At 1532ET today (Columbus Day - with half the market absent), someone - apparently having waited to see if the almost 'ubiquitous' 330pm Ramp would occur - decided it was time to dump three-quarters of a billion dollars notional of US equity market exposure in 1 second. The results of this forced liquidation (or utter disregard for fiduciary duty) were as follows...
We believe there is scientific and epidemiologic evidence that Ebola virus has the potential to be transmitted via infectious aerosol particles both near and at a distance from infected patients, which means that healthcare workers should be wearing respirators, not facemasks... To summarize, for the following reasons we believe that Ebola could be an opportunistic aerosol-transmissible disease requiring adequate respiratory protection: i) Patients and procedures generate aerosols, and Ebola virus remains viable in aerosols for up to 90 minutes; ii) All sizes of aerosol particles are easily inhaled both near to and far from the patient; iii) Crowding, limited air exchange, and close interactions with patients all contribute to the probability that healthcare workers will be exposed to high concentrations of very toxic infectious aerosols; iv) Ebola targets immune response cells found in all epithelial tissues, including in the respiratory and gastrointestinal system; v) Experimental data support aerosols as a mode of disease transmission in non-human primates.
Welcome to the diminishing returns of the global economy. How long do we pretend that all the refugees are welcome to come here, bleeding from their eyes and noses, as their dreams of laying sod for $6-an-hour or slaughtering chickens for the greater glory of Colonel Sanders collide with the diminishing returns of yet another Elon Musk sales pitch for the blessed denizens of Palo Alto aspiring to Godhood.
Most planned cities probably aren't designed with the view from space in mind, but, as Wired.com's Betsy Mason notes, some of them create incredible patterns on the landscape that can only be truly appreciated from above.
Just as we warned, liquidity was incomprehensibly low today (below normal pre-market levels during the peak of the trading day) and the intraday whipsaws were meteoric as a closed cash bond market enabled the slightest twitch in USDJPY to send S&P algos into conniptions. Biotech crashed. Trannies were ripped ridiculously higher at the open - then collapsed into correction (-11% from highs); US Airlines have fallen for 6 straight days, crashing 17% (with today's 7% plunge - driven by chatter over airborne Ebola - its biggest in over years). Tresury futures implied a notable drop in yields across the curve (10Y -7bps at 2.21%, 30Y 2.97%, and 5Y 1.45%). The USdollar closed -0.33% led by EUR and JPY strength (but AUD surged 1% extending gains after China data). Gold ($1234), Silver, and copper all gained on the day as WTI fell once again (despite some intraday strength in the middle of the day). Stocks "flash-crashed" on very heavy volume in the last 30 mins with VIX breaking above 24 (highest in 16 months). All major equity indices are now below their 200DMA with the worst 3-day loss since late 2011.
Marc Faber warned last week that central-bank-funded deficits were creating bigger and bigger governments which implicitly reduce the dynamism of the economy and slow growth. Today, it was billionaire venture capitalist Peter Thiel's turn to make the anchors on business media squirm a little in his unleashed truthiness. Having predicted the current surge in volatility just weeks ago (due to the end of QE), Thiel believes "the thing that is most distorted is the bond market and fixed income, and perhaps less on the equity side," but, he warned, "we certainly are back on a government bubble of massive size," and as Faber notes, that means slower growth as Thiel notes, with regard Tech investing "investors always overrate growth."
We’ve landed in the next phase of what arguably started in 2007, but what you could place back many years before that, an economic system based on the fantasy that is debt driven growth, inflated by a factor of a trillion, give or take a few zeros. That system is in the process of dying. And the people who have tried to make you believe, and succeeded, that it would all be fine in the end, are now jockeying for position in the aftermath of the demise of a world built on debt. And they are the same people who built that world, profited from it to an insane degree, and want to use those profits to hang on to power in a world that will be dramatically different from the one they called the shots in. And that doesn’t bode well; it tells us violent clashes will be on the horizon.
Having previously mapped the world's Muslims, we thought it only politically-correct (and fair-and-balanced) to highlight where the world's Christians make their home...
“Hyperinflation and hyper-deflation are just two different forms of the same phenomenon: credit collapse. Arguing which of the two forms will dominate is futile: it blurs the focus of inquiry and frustrates efforts to avoid disaster.”
While today's market dump was certainly dramatic, it was a function of the scant liquidity in the market (as we warned would be the case first thing) and outsized moves following last week's mauling, not the result of any fundamental (or not so fundamental) news. That could change tomorrow, and change for the worse, because as Barclays reminds us, tomorrow is when the European Court of Justice (ECJ) is scheduled to hear testimony on the ECB’s non-existent Outright Monetary Transactions program (OMT). Recall that the OMT is the imaginary (again: non-existent) byproduct of Draghi's "whatever it takes" speech: a byproduct that was supposed to exist purely in the imaginary realm (as it was merely a verbal bluff, one which was never meant to be actually activated), and never actually take practical shape (hence, why the OMT's legal term sheet still does not exist, over two years later). Sadly for Draghi, and the entire Deus Ex theater that managed to send European peripheral bonds from record wides yields to record low, tomorrow it will attain some much dreaded shape.
'Everyone' knows that the Japanese economy is weakening (apart from Abe and Kuroda obviously), 'everyone' knows that the European economy is tumbling towards another recession, 'most' know that China is really slowing (no matter what the magic of excel enables GDP to be)... and 'everyone' knows that the US economy is the cleanest dirty shirt, will decouple from the rest of the world, and thanks to endless extrapolated dreams, will lead the world to escape velocity. Except... recent macro data suggests otherwise...
The old adage that if something is repeated often enough it is soon assumed to be true couldn’t be more apt with respect to the Fed’s 2% inflation target. That Keynesian central bankers peddle this nostrum with a straight face is amazing in itself, but it is at least understandable because it gives them a reason to keep the printing presses humming. That journalists repeat it with no questions asked is even more remarkable. It proves that the impending replacement of financial journalists with robo-writers may not be so bad after all. It won’t make any real difference.