The Zero Hedge audience have always been tough task masters and will hold people's feet to the fire. While markets have been a little tempestuous to say the least recently, TrimTabs' Charles Biderman comes out swinging with a spirited and honest defense of his calls - and quite frankly we still tend to agree with his bigger picture view of where this ends. From his Facebook miss to short-term fluctuations in the equity market (that now seem precipitously away from credit market reality), Biderman responds to comments here and elsewhere on both position sizing and perhaps most importantly risk management - adding (and this is where we believe he is dead right though timing the call is practically impossible) that "when the collapse happens it will happen overnight - that is why [he wants] to be short but safe at the same time."
Update: USPS STILL EXPECTS TO RUN OUT OF CASH IN OCTOBER - well, this is the bailout request that Draghi was waiting for. All your ECB - get involved.
The epic collapse of one of the most bloated government institutions continues at a ridiculous pace. From Bloomberg:
- U.S. POSTAL SERVICE LOST $5.2 BILLION IN THIRD QUARTER
- POSTAL SERVICE LOSS Q3 COMPARES WITH $3.1 BILLION LOSS YEAR AGO
- POSTAL SERVICE 3Q REVENUE FALLS TO $15.6 BILLION FROM $15.8B
- POSTAL SERVICE `LIQUIDITY CHALLENGES' REMAIN IN 2013
- POSTAL SERVICE MAIL VOLUME FALLS 3.5 PERCENT IN THIRD QUARTER
- POSTAL SERVICE WILL CONTINUE TO PAY EMPLPOYEES, SUPPLIERS
And it gets better:
- POSTAL SERVICE LOSS INCLUDES SKIPPED PAYMENT TO TREASURY - in other words the taxpayer bailouts of the USPS have begun... and the loss would have been even bigger.
- POSTAL SERVICE WILL `NEVER' CEASE DELIVERING MAIL: MARSHALL
There are no hyperbole in this headline. Nepotism is not just alive but it is blatant and thriving in Greek politics. As Athens News reports revelations that Vyron Polydoras, who held the position of speaker for just a single-day during the hung parliament of May 2012, rushed to hire his daughter - Margarita - as an employee of his office. Not only did he hire her on his one and only day in office, despite defending himself by stating he was entitled to hire up to six staff, but he also managed (all in this one day remember) to approve a two million euro 'election bonus' for his staff and police. We suspect the TROIKA will be permanently boots-on-the-ground here for a lot longer than anyone believes - and if we hear the word 'committed' or the phrase 'trust us', we know its all over.
The surprising economic beats, even as Europe and now China slide, continues, following better than expected initial claims, which were released early as someone broke the news embargo, and trade deficit data. In the week ended August 4, 361K people filed initial jobless claims, lower than the upward revised 367K, and below expectations of 370K. This is the 5th week out of 6 in which claims have beat expectations, and heading into the September FOMC meeting, especially in the aftermath of the "blistering" August NFP report, any hope that the Fed will do anything forceful can now be taken off the table. Continuing claims rose by 53K from 3,279K to 3,332K. Adding to the economic tailwind was the June trade deficit, which narrowed by 11% in June, down to $42.9 billion from $48.7 billion, and well below the expected print of $47.5 billion, down on sliding energy prices (back in June - as a reminder crude has soared 20% since then). The reason was a 0.9% rise in exports and 1.5% drop in imports. As Bloomberg observes, "this is likely the last report that shows the narrowing of the deficit this quarter." Finally, perhaps the most notable move that will pass largely unobserved is that in the week ended July 21, a whopping 127K dropped off extended claims, which means no more free $400 weekly checks, and a corresponding hit to iGadget purchases and retail sales.
The initial boost given to European equities following weaker than expected overnight data from China, which renewed speculation of more stimulus measures, has faded throughout the morning. The major European bourses are now trading in negative territory at the North American crossover. The DAX is underperforming, weighed down by the likes of Commerzbank and Deutsche Telekom who both failed to impress markets with their earnings reports pre-market. However, thin summer volumes and another light economic calendar have once again been the theme for the morning, with only the UK Trade Balance for June gaining some market attention. Despite the larger than expected deficit, the ONS said that the figure is likely distorted by the extra public holidays.
This Monday, a few shorts days after the Knight algorithm decided to do what it and the Fed does best, and go on a shopping spree, gobbling up $7 billion in stocks in 45 minutes and in the process almost destroying its host like any self-respecting virus, something weird happened with the 1.20-pegged EURCHF in the minutes after the marked closed: it shot up for no reason, only to slam right back down. Some speculated it was a fat finger. Turns out they were right. Only with a twist, as first it appears it was purely human error, which in turn set of an avalanche of algo trades which had no idea why they were buying, except that someone else was buying, so they had to be buying: the purest definition of momentum trading insanity, where one buys or sells with no rhyme or reason, but simple because someone else, marginal enough, is moving the market. And that is why every single capital market: stocks, bonds, commodities and FX, is always one trade away from total collapse.
- Gu Kailai Trial Has Ended, verdict imminent (WSJ)
- Greek unemployment rises to 23.1 pct in May, new record (Reuters)
- Greece’s Power Generator Tests Euro Fitness Amid Blackout Threat (Bloomberg)
- Fannie Mae, Freddie Mac Results May Ease Wind-Down Push (Bloomberg)
- Monti takes off gloves in euro zone fight (Reuters)
- U.S. Fed extends comment period for Basel III (Reuters)
- HP in $8bn writedown on services arm (FT) - must be good for +10% in the stock
- News Corp in $2.8bn writedown (FT) - must be good for +10% in the stock
- Japan to Pass Sales Tax Bill After Noda Avoids Election Push (Bloomberg)
- China May Set New Property Controls This Month, Securities Says (Bloomberg)
ECB Re-Regurgitates Draghi As Greek Unemployment Rises To New Record, China Deteriorates With No Easing In SightSubmitted by Tyler Durden on 08/09/2012 07:06 -0400
It has been a quiet session overnight (and that will continue until the Germans come back from vacation) punctuated by Mario Draghi's attempt to jawbone the market into submission again, this time following the release of the ECB monthly report in which it basically regurgitated Draghi's still misunderstood speech in it said it may buy bonds if strict conditionality is ensured, the same conditionality that Spain said it would not comply with, yet which European bond traders continue to misunderstand, because Spain will not request a bailout as long as its 10 Years are trading below 8% yield. Of course, nobody wants to sell first, until the selling actually begins. Then it will be waterfall. In other news Greek industrial production rose by a tiny amount from below sea level, rising by 0.3% in June following a 2.9% decline previously. This however must be due to the Greek workers' enhanced efficiency - Greek unemployment just rose yet again to the mindblowing 23.1%, from 22.6% - a new all time high (with youth unemployment just 45% away from 100%). And so the race between Spain and Greece over who can hit 50% unemployment first continues. Another notable economic milestone was crossed after the IFO institute euro-area economic climate indicator declined for first time this year, pushing the EURUSD to just above 1.2300. There were also more bad news from the UK whose trade deficit widened more than expected hitting GBP10.1 billion vs GBP8.7 billion estimated, with a record GBP28.3 billion good deficit, led by oil, cars and chemicals. In other news the European collapse continues unabated, yet the market which has long been nothing but a central bank policy tool and no longer discounts anything is perfectly oblivious to what is happening. There was one notable final change: the Chinese economy accelerated its own deterioration, and this time, courtesy of the specter of soaring food prices and a CPI print above estimates, it is very much powerless to even threaten with more easing.
While we already presented, courtesy of Nanex, the modus operandi of the Knight berserker algo, there was one outstanding question. What was the bottom line. And no, not how much the loss on Knight's Income Statement would be as a result of this glimpse into what really happens in the market: we already knew that would be $440 million. The question is what is the notional amount of stock that this algo bought in the 45 minutes in which it was operational. We now know: $7 billion. Or $155 million per minute. Or $2.6 million per second. Or, assuming the algo impacted just 150 stocks as previously reported, it was buying on average $17,333 in each name every second. Or, assuming an average stock price of the universe of 150 stocks of $30/share, the Knight algo lifted the offer roughly 600 times each second. For 45 minutes straight! That's right - the market making algorithm of a designated market maker which is responsible for 10% of the order flow in the US stock market, entered a pre-programmed mode (because the computer was told to do whatever it did by someone, and not without reason) that saw it buy up $2.6 million worth of stock every second.
Imagine you are driving to work this morning in Las Vegas (yes, you are one of the select few locals who has a job that does not involve relying on the strip's ever declining gambling revenues or flipping a house to John Paulson in the second, and far shorter, coming of the regional housing bubble, with poppage imminent), and you observe what appears to be a man who hung himself below a billboard saying "Dying for Work." Confused, you continue, only to drive by another billboard with what seem to be a man hanging off, this one saying "Hope you're happy Wall St." Slowly it all clicks: the man is not real, and this is not a suicide done in protest by some depressed unemployed person, instead it is merely a mannequin all part of some attempt at a statement. Would this be considered shocking, and will the thousands of commuters who saw this feel any worse or better toward Wall Street and its employees - America's bankers - having seen this, or will they merely continue with their lives? What if the dummy was a real person? And is this merely a foreshadowing of things to come in a country in which class warfare has never been as violent, and in which the divide between the haves and the have nots has never been as wide? And what happens when the next such stunt is a real person? More importantly, what happens if a depressed jobless person takes their life but first takes out some of those he thinks are responsible for his plight - say Wall Streeters?
"At this juncture . . . the impact on the broader economy and financial markets of the problems in the subprime markets seems likely to be contained" - Ben Bernanke, March 28, 2007
"I don’t think student loans are a financial stability issue to the same extent that, say, mortgage debt was in the last crisis because most of it is held not by financial institutions but by the federal government" - Ben Bernanke, August 7, 2012
Please mark your calendars accordingly as yesterday the Chairman just guaranteed that student loans will be cause for the next "financial stability issue."
It's very simple really. Please point out where on the below list of Top 20 contributors to a randomly selected US politician, in this case New York's Chuck Schumer, can one find Standard Chartered, Barclays, or HSBC?