We live in a pretend economy. It is important to recognize this condition, especially if you are an investor. Current market behavior is concerning. Bonds and stocks remain volatile and near record levels. Markets ignore the continuing stagnation in the pretend economy, buoyed apparently by government liquidity injections. To justify investing today in these markets, one must anticipate one or both of the following: economic growth is about to surge; and/or market values can continue to rise from here, potentially further widening the already large gap between valuations and fundamental economics. No reading of the economic tea leaves suggests a surge in economic growth is coming. Indeed, a critical analysis of the data makes one question whether there has been a recovery at all. Certainly any recovery has to be labeled as abnormal. Playing these markets in any conventional manner is akin to writing insurance policies for suicide bombers.
Update: as expected the denial of the propaganda didn't take long: PROTESTERS IN LUHANSK, UKRAINE, DENY HAVING EXPLOSIVES AND HOLDING HOSTAGES IN STATE SECURITY BUILDING
While the source of the most recent developments in the Ukraine is the country's state security services and should thus be taken with the usual mine of salt, Reuters is reporting that pro-Russian separatists have placed explosives in a building they seized in the eastern city of Luhansk and are using weapons to hold around 60 people against their will.
While we are sure the men of the world are applauding quietly from the background, President Obama's plan for equal pay is likely to appeal to the females in his audience - especially those who might vote... it is perhaps ironic that the President brings this up once again - and for good reason is the gender pay inequality gap is indeed worsening - when it is the women of America that have regained all their jobs (and then some) since the recession while men have not...
How HFT Quote Stuffing Caused The Market Crash Of May 6, And Threatens To Destroy The Entire Market At Any MomentSubmitted by Tyler Durden on 06/23/2010 17:16 -0400
Even as the idiots at the SEC mope about cluelessly, confirming they deserve not one cent of taxpayer money to fund their massively overbloated budget, and should all be summarily fired to collect tarballs in the Gulf of Mexico (and soon Maine), our friends at Nanex have conducted an exhaustive analysis (must read for everybody concerned about market structure), in which they identify the various parties responsible for the market crash, and, drumroll please, High Frequency Trading stands at the pinnacle of culprits for the 1,000 point Dow drop. From their findings: "While analyzing HFT (High Frequency Trading) quote counts, we were shocked to find cases where one exchange was sending an extremely high number of quotes for one stock in a single second: as high as 5,000 quotes in 1 second! During May 6, there were hundreds of times that a single stock had over 1,000 quotes from one exchange in a single second. Even more disturbing, there doesn't seem to be any economic justification for this. In many of the cases, the bid/offer is well outside the National Best Bid/Offer (NBBO). We decided to analyze a handful of these cases in detail and graphed the sequential bid/offers to better understand them. What we discovered was a manipulative device with destabilizing effect." In other words: enough with all the bullshit about HFT as a liquidity provider mechanism: in reality this is just a facade for the most insidious, computerized market manipulative device ever created. Nanex' conclusion: "What benefit could there be to whomever is generating these extremely high quote rates? After thoughtful analysis, we can only think of one. Competition between HFT systems today has reached the point where microseconds matter. Any edge one has to process information faster than a competitor makes all the difference in this game. If you could generate a large number of quotes that your competitors have to process, but you can ignore since you generated them, you gain valuable processing time. This is an extremely disturbing development, because as more HFT systems start doing this, it is only a matter of time before quote-stuffing shuts down the entire market from congestion. We think it played an active role in the final drop on 5/6/2010, and urge everyone involved to take a look at what is going on. Our recommendation for a simple 50ms quote expiration rule would eliminate quote-stuffing and level the playing field without impacting legitimate trading."
Presented with no comment...
As we noted previously, the US remains convinced that "there is strong evidence suggesting some of [the pro-Russian] demonstrators were paid," and Russia, in the same vein, responded that they "are particularly concerned that the operation involves some 150 American mercenaries from a private company Greystone Ltd., dressed in the uniform of the [Ukrainian] special task police unit Sokol." So, this morning's 'claims', substantiated, we presume, by YouTube clips and CIA promises, that John Kerry blasted to his Twitter followers is remarkable: "it is clear that Russia special forces and agents have been the catalysts behind the chaos of the last 24 hours in Ukraine." Clear... proof?
Despite Russia's veiled threat that any ongoing action against pro-Russian demonstrators had the potential to instigate civil war and bring action by the Russian forces, Ukraine's interior minister Arsen Avakov has announced, Reuters reports, that Ukraine has launched an "anti-terrorist" operation in the eastern city of Kharkiv and about 70 "separatists" have been arrested for seizing the regional administration building. Is this the red-line that Putin laid down last night?
Presented with little comment aside to ask if 4th time is the charm for the 'hoped for' earnings recovery in Europe...
Overnight weakness on the back of disappointment in the BoJ and PBOC was ignored entirely in the few minutes into and past the US open this morning. Perhaps it was the IMF's outlook? Perhaps it was just algos desperate to get back to VWAP to enable institutional sellers out? Whatever it was, the insta-vert-ramp in stocks at the open - entirely disconnecting from bonds, FX carry, and credit - has now reversed. Biotech's early 0.6% gain, gone. S&P's early 5 point rally, gone... and JPY crosses are no help at all as USDJPY tests 102 lows...
Another quarter, and another attempt at predicting the future by the people whose predictions have become the biggest butt of all economics jokes, even more so than Paul Krugman columns. We are talking, of course, about the IMF's World Economic Outlook update.
If the Fed is so powerful, why is it so cowardly and fearful that it has to cloak its theft of our money and its transfer of the wealth to the banks? What's it so afraid of? That we might wake up to the fact that we're being Fed to the sharks, every day, one morsel at a time?
Having hit their most hopeful levels in seven years in January, small business hiring plans have collapsed at the fastest rate since Lehman in the ensuring 2 months. Despite the headlines proclaiming the modest rise and beat in the headline NFIB data, capex spending plans dropped and hiring expectations dropped to lows seen 11 months ago. We can only assume the small businesses are expecting more winter storms through the spring...
Update: As CNBC just reported moments ago, tech fund Coatue is returning $2 billion of $7 billion to investors, citing "difficult market conditions." Just wait until the "difficult market" drops more than just 3% from all time highs...
As a reminder, for those with Bloomberg (and the proper permissions) the easiest way to track the performance of the most popular hedge fund names is using the BBG ticker GSTHHVIP, and especially its performance against the S&P. But for those who don't have access, or are too lazy or depressed to type anything into their terminal today, here it is, straight from Goldman's sales and trading mouth, summarizing yesterday's market poundage:
Our HF VIP basket underperforms the SPX by over 100bps, 3 standard dev move and the worst since June 2012.
Are you saying it took the highbrow economist cadre five years to figure out and agree with what we first said in 2009, and for which we received endless ridicule, abuse and accusations of fringe insanity? Yes. We are saying that.
- Russia's Gazprom says Ukraine did not pay for gas on time (Reuters)
- Ukraine Moves to Keep Control in East (BBG)
- Banks Set to Report Lower Earnings as Debt Trading Slumps (BBG)
- More DeGeners and Obama selfies needed: Samsung's lower first-quarter estimate highlights smartphone challenges (Reuters)
- Citi Is Bracing to Miss a Profit Target (WSJ)
- Another slam from GM? Safety group calls for U.S. probe of Chevy Impala air bags (Reuters)
- Japan drugmaker Takeda to fight $6 billion damages imposed by U.S. jury (Reuters)
- EU court rules against requirement to keep data of telecom users (Reuters)
- White House may ban selfies with president after Ortiz-Obama photo promotes Samsung (Syracuse)