Between IB's margin hike yesterday (crushing MOMO leverage), a rising JPY squeezing carry trades, and high-beta to a plunging market, the momentum-mavens are hurting. Of course, as CNBC just said - now is the time to BTFD to make your year when they all bounce... with the Russell back to its 50DMA -with its biggest 2-day drop in almost 4 months.
Recent speeches from the SEC indicate they plan to use Midas to look at the details behind quote stuffing, excessive order cancellations, the cause of mini flash crashes, and other nefarious activities. While these are all good uses for a market analysis tool (Midas), they pale in comparison to a data-feed delay analysis, because the former are governed by blanket, hard-to-prove manipulation laws, while the latter can be tied directly to a core rule that lies at the heart of Regulation NMS. An improper data-feed delay was the reason for the $5 million fine against an exchange in September 2012. Furthermore, millions of people are directly affected and disadvantaged by illegal data-feed delays. Therefore, it would be a great waste of public resources to not immediately pursue a data-feed delay analysis, because there exists ample evidence that an illegal speed advantage exists in direct feeds over the public quote.
"Escalating..." Whocouldanode that exploding T-Bill yields (which have been doing so for a week) would suggest more anxiety? Tempest in a teacup...
Moments ago, the just concluded 4 week Bill, with a Cusip which appropriately enough was BK, priced at a stunning 0.35%, blowing through the 0.295% When Issued, the highest yield since October 2009, the lowest Bid to Cover since March 2009, and the largest tail since March 25, 2008. The bond market panic is palpable, and just as we predicted would happen in a market gripped by sheer "Bernanke will kiss and make it all better" complacency.
The chart below, showing the historical change in the IMF's periodic revisions of world growth and revised for today's just released latest World Economic Outlook, shows that much taxpayer money can be saved if the monetary fund's staff was replaced with dart-throwing chimps.
The BPC, whose initial analysis of the US default has become the staple "go-to" analysis for Treasury cash obligations and key events in the day surrounding and following the X-Date, has released a new update on when the US runs out of money. The latest: October 22 - November 1. Which means that if it so desires, the GOP can and probably will delay a debt ceiling bargain until the last possible moment which may well be, appropriately enough, Halloween. In the meantime, the US Treasury now has about $40 billion in total cash on hand and available extraordinary measures and declining fast.
Amid the bluster of yet another press conference, equity markets chopped around jerking up and down 5 points at a time for the S&P 500. But one market, the Treasury Market, went only one way. While it is all too easy to watch the tickers and listen to the glib bloviation of any and all talking head exclaiming that there is no-way, zero-chance, totally unlikely, impossible that the US government would technically default - the Treasury-Bill market is less confident (10/17s +8.5bps to 22.5bps, 10/31s +7.5bps to 23.5bps). In fact, the T-Bill yield has now spiked massively more than during the 2011 Debt-Ceiling debate (and stocks - for now - have not).
It doesn't sound like the politicians are getting any closer...
- BOEHNER SAYS IT'S TIME TO SIT DOWN, TALK, RESOLVE DIFFERENCES
- BOEHNER SAYS ALL HE'S ASKING FOR IS NEGOTIATIONS
- BOEHNER SAYS OBAMA, REID PUTTING U.S. ON `DANGEROUS PATH'
And the already proverbial Schrodinger table:
- BOEHNER SAYS NOTHING IS ON THE TABLE, NOTHING IS OFF THE TABLE
While until today the only way to save the greater idiots from themselves was to halt the trading of Twitter-lookalike stock ticker TWTRQ, the decision has been made by the exchange (we assume in coordination with the company itself) to change the ticker symbol to THEGQ. There is no statement from either the exchange or the company to clarify the reasoning (for now) but given the "investing" public's interest in the company, we can only imagine the demand when the stock re-opens.
Long before Edward Snowden's whistleblowing revelations hit the world and the Obama administration's approval ratings like a ton of bricks, we ran a story in March 2012 which exposed the NSA's unprecedented domestic espionage project, codenamed Stellar Wind, and specifically the $1.4+ billion data center spy facility located in Bluffdale, Utah, which spans more than one million square feet, uses 65 megawatts of energy (enough to power a city of more than 20,000), and can store exabytes or even zettabytes of data (a zettabyte is 100 million times larger than all the printed material in the Library of Congress), consisting of every single electronic communication in the world, whether captured with a warrant or not. Yet despite all signs to the contrary, Uber-general Keith Alexander and his spy army are only human, and as the WSJ reports, the NSA's Bluffdale data center - whose interior may not be modeled for the bridge of the Starship Enterprise - has been hobbled by chronic electrical surges as a result of at least 10 electrical meltdowns in the past 13 months.
During the European crisis, we saw sovereign debt yields rising way above their domestic banking sector's yields as investors feared systemic crisis and technical flows dominated the price action amid aggressive hedging. Now, with Washington looking increasingly likely to crash upon the shores of a US Treasury technical default, for the first time on record the yield on short-term Treasury-Bills is above the yield on US interbank loans. T-Bill yields (the US government's "risk") have surpassed short-term LIBOR (US Banks' "Risk")... must be a good reason to BTFATH...
Confused as to why US equity futures are levitating once again this morning (aside from a pre-open lift to restore retail's confidence to buy some more all-time highs)? Have no fear, the JPY is here. A sudden (and entirely un-news-driven) ramp in JPY crosses has lifted the S&P to overnight highs, dragged Treasury yields higher, and pushed gold and silver prices lower as the correlated cross-asset-class algos play free in the pre-open. Only problem with all this exuberance, the 10/24/13 T-Bill yiled has exploded 6bps higher to 22.5bps this morning as it is clear short-term risk of a missed payment is rising fast.
Goldman, which is the hedge fund best known for originating prop order flow in the opposite direction of what its sellside "research" team tells its clients to do (see Tom Stolper), has never been clearer on gold: "Gold is slam dunk sell for next year because the U.S. economy will extend its recovery after lawmakers resolve stalemates over the nation’s budget and debt ceiling, Goldman Sachs Group Inc.’s Jeffrey Currie said." How the economy will expand, especially with the Fed supposedly tapering (even though everyone saw what happened to markets and the economy at the mere mention of "tapering" the last time around) and eventually ending QE - the only driver of upside market momentum in the past 5 years - was not discussed. What was, however, clear is that Goldman will continue buying all the gold its clients have to sell until the bailed out hedge fund's price target of $1,050/ounce is hit.
- Hilsenrath: Tense Negotiations Inside the Fed Produced Muddled Signals to Markets (WSJ)
- Biggest US Foreign Creditors Show Concern on Default Risk (BBG)
- Shutdown Costs at $1.6 Billion With $160 Million Each Day (BBG)
- What default? Republicans downplay impact of U.S. debt limit (Reuters)
- Top Bankers Warn on U.S. Debt Proposal (WSJ)
- India to stick with austerity despite looming election (Reuters)
- Japan's Current-Account Surplus Plunges (WSJ)
- Amazon Wins Ruling for $600 Million CIA Cloud Contract (BBG)
- German Factory Orders Unexpectedly Fall on Weak Recovery (BBG)
- Britain's Higgs, Belgium's Englert win 2013 physics Nobel prize (Reuters)
- Supreme Owner Made a Billionaire Feeding U.S. War Machine (BBG)