...One reporter asked the President if perhaps the celebration was premature, since so much of the law has yet to go into effect, and nobody can say whether the new regime will in fact be better than the old one. Responding in that cute way that makes us forget so many of our other disappointments with him, Obama responded by saying “don’t be a party pooper.”
The outperformance "hope" of so-called 'growth' stocks over the past 5 months has been rapidly eviscerated as they catch down to 'value'... it seems the self-sustaining escape-velocity dream is postponed for now...
There is a gloriously simple solution to all the world's TBTF problems, one that could be enacted in a HFT millisecond by pulling the trigger, so to speak. The solution comes from none other than that historic US nemesis, Vietnam, where unscrupulous financiers don't just go to jail. Sometimes, they get death row.
The jobs number expectation had been falling for a few days into the print this morning and despite the desperate efforts of every status-quo-hugging TV talking-head's Goldilocks scenario, it was not a good report - it missed low expectations and it seems the market is realizing (having been told the bar is very high for an un-taper) that the Fed will not rescue it any time soon. GDP expectations are also tumbling and thus the hope-driven hyper-growth stocks have been monkey-hammered. This is the worst swing for the Nasdaq since Dec 2011 (with Russell, Dow, and Nasdaq -1% YTD). Momos and Biotechs were blamed but this was broad-based selling as JPY carry was unwound in a hurry. Gold rallied above $1300 (+8.1% YTD) as bond yield ripped lower for 5Y's biggest daily drop in 10 weeks (short-end -4bps on the week). VIX pushed back above 14 (but it was clear derisking exposure - as opposed to hedging positions - was the order of the day).
On Monday, in "High Frequency Trading: Why Now And What Happens Next" we predicted that "the high freaks are about to become the most convenient, and "misunderstood" scapegoat, for when the market finally does crash. Which means that those HFT-associated terms which very few recognize now, especially those on either side of the pro/anti-HFT debate who have very strong opinions but zero factual grasp of the matter, such as the following:
- Layering: multiple, large orders are placed passively with the goal of “pushing” the book away
Of course, another name for "layering" is "spoofing" which is precisely the term that the SEC used today when it announced that it charged the owner of a New Jersey-based trading firm and several other defendants "in a scheme to manipulate the market through an illegal practice known as "spoofing."
According to stunning new numbers just released by the federal government, that we detailed yesterday, nine of the top ten most commonly held jobs in the United States pay an average wage of less than $35,000 a year. When you break that down, that means that most of these workers are making less than $3,000 a month before taxes. And once you consider how we are being taxed into oblivion, things become even more frightening. Can you pay a mortgage and support a family on just a couple grand a month? Of course not. In the old days, a single income would enable a family to live a very comfortable middle class lifestyle in most cases. But now those days are long gone.
"Stock-Picker's Market" is the term we hear again and again, but, as Cliff Asness blasted "I think they mean, "We will have to pick stocks now because the market isn’t making us money the easy way." As the following chart shows, the picture for most people's portfolios is a very different one from the index all-time highs that are tritted out day after day as indicative of the wealth that the Fed has created. As Asness concluded, perhaps talking-heads should more honestly explain, “Our market-timing forecasts are mostly useless most of the time, but right now, they are completely useless,” as the average member of the S&P 500 is 6.5% off its highs (as the index pushes ahead).
While the West and Russia exchange sanctions in a tit-for-tat 'do no real damage' process, the rhetoric between Ukraine and Russia is escalating from words to deeds in some cases. As The FT reports, Russia detained 25 Ukrainian citizens on suspicion of plotting terror attacks (on Russian soil) and claimed to have information that the Ukrainian Right Sector movement was to “carry out subversive and terrorist acts” in seven Russian regions. Ukraine retaliated with claims it had evidence that implicated dozens of Russian Federal Security Bureau agents in a crackdown on anti-government protesters in February that left more than 100 demonstrators dead, many from police sniper fire, which Russia's FSB denied. NATO proclaimed it all "just propaganda and disinformation."
We get a modest sell-off... and the market breaks. As the popular saying goes: "the market may be rigged, but at least it's broken."
Earlier today, four "buzzing" US-based IPOs priced, raising hundreds of millions in cash, namely GrubHub ($193 million), OPower ($116 million), Five9 ($70 million), and Corium ($52 million), for a grand total of nearly half a billion in proceeds. So how much actual net income do these supposedly post-VC stage companies generate? Instead of boring readers with more numbers, here is a simple chart.
It is now quite clear why BATS CEO Bill O'Brien was so agitated during the Tuesday's screamfest on CNBC. As The Wall Street Journal's Scott Patterson reports, under pressure from the NYAG, BATS has hurriedly issued a statement correcting the CEO's false comments during the exchange with IEX's Brad Katsuyama. After Katsuyama said "you wanna do this, let's do this" clearly giving him an out, O'Brien stated that BATS priced its trades off 'high-speed' data feeds when in fact they price their trades off a much slower feed (and therefore 'enable' the exact HFT-front-running that is in question).
UPDATE: Nasdaq negative year-to-date; Biotechs 3-month lows. AMZN, FB, TWTR, NFLX, P all in Bear market territory
Shortly after 946amET, the stock of The Nasdaq OMX Group suddenly dropped in a mini-flash-crash from from 35.98 to 35.00 in just over 2 seconds on approximately 100,000 shares. As Nanex notes, this is what high-frequency-trading liquidity looks like. But now, an hour or so later, the Nasdaq index and most especialy its Biotech and high-growth names are being crushed. Biotechs are near 3-month lows, Momos are down 16 to 18% since FOMC, and Nasdaq is about to go negative for the year.