Stephen Roach, former Chief Economist at Morgan Stanley, has never been shy to share his opinions about the world and having left the Wall Street firm is even freer to speak uncomfortable truthiness. This brief clip, as Sovereign Man's Simon Black notes, says it all so succinctly... "The market has been distorted by far bigger forces than flash trading. To me, the force that has rigged the market... is the Federal Reserve, not the flash traders."
US Equity markets were on a mission today... all-time highs for the S&P and Dow were in sight, green for April for the S&P, and unchanged year-to-date for the Nasdaq and Russell was just over the horizon, but... a total divergence from JPY carry, bond yields, credit, and even VIX meant that a 'warning' from David Einhorn about Tech Bubble 2.0 was just enough to take the juice out of what was already a low volume levitation. It's a Tuesday so we closed green - the 6th up day in a row - longest run in 7 months. Biotechs ripped higher on M&A "get rich quick'"fever - biggest 2-day rise in 30 months. Treasuries were mixed with 30Y bond yields ripping lower and 5s30s dropping 4bps to 1.75% - new lows since 2007. Copper made modest gains on the day but gold, silver, and worst of all WTI crude all dropped on the day (WTI -2% to $102).
"We have repeatedly noted that it is dangerous to short stocks that have disconnected from traditional valuation methods. After all, twice a silly price is not twice as silly; it’s still just silly. This understanding limited our enthusiasm for shorting the handful of momentum stocks that dominated the headlines last year. Now there is a clear consensus that we are witnessing our second tech bubble in 15 years. What is uncertain is how much further the bubble can expand, and what might pop it. In our view the current bubble is an echo of the previous tech bubble, but with fewer large capitalization stocks and much less public enthusiasm."
- David Einhorn
"We were wearing life jackets. We had time... If people had jumped into the water... they could have been rescued. But we were told not to go out." An entire ship full of passengers dutifully followed the instructions set forth by the crew. The "experts" told them what to do...."We're putting on our life vests. They're telling us to wait and stay put, so we're waiting..." Yet as it turned out, the ferry quickly became submerged. And following orders cost many their lives. 302 are either dead or missing. Just like Sewol, many countries in the West are sinking, and it’s up to you whether you sink with them or jump ship while there’s still time.
When it comes to home purchases, there are the rich, with $1MM+ existing home transactions up a recoveryish 13% in the West, and then there are the poor, where in the cheapest bucket have crashed a depression-like -45%. Why is this an issue? Because homes priced $500K and lower represent 90% of all existing home sales. Homes priced $1 million and above are just 2.1%. Or, to summarize, Rich 1 - Poor 0... Just like the Fed wanted it.
The following is a new ad campaign in Britain. As we have warned numerous times - muddle-thruugh has failed; Martin Armstrong notes, the politicians have squandered everything and now they are hunting down capital everywhere and the view is people have to pay whatever they demand or you are just a criminal. Nobody even bothers to look at what they are doing to the world economy. These advertisements are appearing everywhere and they will only succeed in created the worst economic collapse since the Great Depression.
For seven years through 2012, the number of Californians aged 50 to 64 who live in their parents' homes swelled 67.6% to about 194,000, according to the UCLA Center for Health Policy Research and the Insight Center for Community Economic Development. Many more young adults live with their parents than those in their 50s and early 60s live with theirs. Among 18- to 29-year-olds, 1.6 million Californians have taken up residence in their childhood bedrooms, according to the data. Though that's a 33% jump from 2006, the pace is half that of the 50 to 64 age group.
While the auction overall was not fireworky just yet, a few more "dots" fiascoes and suddenly the short end of the curve is going to get a whole lot more interesting. And should European idiot asset managers, once they have taken the Spanish 10 Year to 0%, decide to bid up US paper, and inverted the 2s10s, well that is the time to quiet get out of dodge.
The proud recipient of today's $250,000 invoice for propaganda rendered by Ben Bernanke will be the Economic Club of Canada...
BERNANKE: FED ACTIONS DIDN'T FAVOR WALL STREET OVER MAIN STREET
Bernanke Says US Economy Is Heading Towards Complete Recovery
Just don't tell Obama (or the Democrats who have been told not to mention the 'recovery'), or the record number of middle-aged people living with their parents, or the almost imperceptible rise in the employed population since QE began...
It would seem a red-line or two have been crossed:
*UKRAINE MILITARY PLANE HIT BY GUNFIRE FROM REBEL TOWN: AFP
This comes on the heels of elevated tensions in the last few days since the "deal" and Biden's arrival in Kiev. Last week saw 'unidentified' fighter jets open fire on the Pro-Russian-held Kramatorsk airfield. The plane, a propellor-driven Antonov An-30, safely made an emergency landing
Ukraine's Acting President Turchynov appears to be calling for an official break in the "truce" deal...
- *UKRAINE'S TURCHYNOV URGES RESTART OF ANTI-TERRORIST OPERATION
- *TURCHYNOV SAYS 'TERRORISTS' HOLDING EAST UKRAINE REGION HOSTAGE
- *TURCHYNOV SAYS EAST UKRAINE SEPARATISTS SUPPORTED BY RUSSIA
So much for Joe Biden's peace-keeping salvation mission to Kiev...
Pre-crisis levels of confidence... never before seen bond yields... stocks surging back toward record highs... just don't tell the record number of unemployed Europeans...
How Bill Ackman Scrambled To Acquire Over $3 Billion In Allergan Calls Knowing Valeant Would Submit A BidSubmitted by Tyler Durden on 04/22/2014 09:29 -0400
Gold is down 6 days in a row and has broken back down to its lowest since mid-February (under its 200DMA once again). The reason... aside from growth stocks are rallying which must mean the economy is fixed and therefore no need for the world's central banks to print any more money (oh wait apart from the BoJ and ECB)... is unclear... though we suspect the driver is to do with the following crucial chart...
In February, we highlighted the fact that subprime loans were about to make a return: Subprime Mortgages are Back…This Time Marketed as “Second Chance Purchase Programs.” In that article, we posited that with the “all cash” private equity shops and hedge funds no longer able to make good returns through buying new homes to rent, these investors would need some sucker to sell to in order to realize a return (Blackstone’s purchases have plunged 70% recently). That sucker, as always, will be the retail muppets, and those muppets will be lured in through subprime. This is now starting to happen in earnest. "We're sorry, but on what sort of bizarro crackhead planet is putting 3% down toward an asset mean you are “buying it.” ... The Truman Show rolls on..."