The Senate Banking Committee’s confirmation hearing for current Vice-Chair of the Federal Reserve began with Janet Yellen delivering prepared remarks. Most observers likely tuned out well before the completion of the 2 ½ hours meeting to decide whether Yellen was worthy to succeed outgoing Chair Ben Bernanke and ascend to the top spot at the Fed. With the ongoing debacle of the Affordable Health Care website handcuffing Democrats, tough questions about QE, ZIRP, the oft talked about Taper and the possibility of reducing the Fed’s gargantuan $4 trillion balance sheet were verboten. That left Republicans to address the elephant(s) in the room. Predictably, it took nearly the entire hearing until a Senator from Nebraska offered his views about the damage being done by the various fiscal and monetary machinations undertaken to combat the Great Recession. What happened, beginning just after the 2 hour point of the meeting, was both remarkable and revealing...
What Carl giveth, Carl can taketh away. We have warned for a month that credit markets have been decompressing (amid saturation) even as stocks went only one way. The S&P has hit almost its LABIA-based Fed fair-value and VIX/VXV hit extreme complacency levels so we were primed for a fall so it's ironic that Icahn pricked the bubble (at least for one day). More ironic still was CNBC's dismissal of his warning "as he is not a market timer" - when they wait with baited breath for his next 'buy AAPL' tweet. Bill Dudley's economic bullishness (and hawkish policy talk) also weighed on stocks. Credit was weak from the start - even as equities broke to new records; Treasury yields slid all day (with a small bounce higher after Europe closed). The USD's early weakness retraced to unch by teh close - rallying from the US open (but EURJPY was a big driver of weakness in stocks). Commodities did not bounce - all flushed lower around the European close and never recovered as stockd dumped.
Back in August, we joked that in the Tesla press-release the one most often used word was Non-GAAP (43 times). Conveniently, we provided a word cloud of the company's Q2 release for the visual learners to grasp just this. That TESLA's earnings were an epic non-GAAP adjustment joke was only further cemented by the fact that the company itself provided a bridge between its GAAP and Non-GAAP earnings. Now, the euphoria is over and the story is different, as not only has the company's self-reported and erroneous record of making the safest car in the world gone up in flames, but the momentum appears terminally broken and following today's most recent 11% drop, TSLA stock could soon be headed for double digit territory again. More importantly, however, the end of the momentum story means that those who care about such anachronisms as fundamentals can once again look beneath the hood of TSLA to get the true story of what is really going. There, with the help of Bloomberg's forensic accounting sleuth Jonathan Weil one uncovers nothing but cockroaches.
Carl Icahn, who is currently speaking at the Reuters Global Investment Outlook Summit, just poured cold water over the Fed's 16,000 DJIA EOD price target.
ICAHN: ‘VERY CAUTIOUS ON EQUITIES, MARKET COULD EASILY HAVE BIG DROP'
ICAHN SAYS MANY COS. EARNINGS ARE A ‘MIRAGE,’ REUTERS SAYS
ICAHN: DOESN’T WANT FIGHT WITH APPLE,NO PLANS TO WALK AWAY
But... but.. two POMOs... Still, not too late for K-Fed and his merry unlimited balance sheet trading men to pull a record third POMO today and keep the "wealth effect" illusion going. Was it just a month ago that we warned "Carl Icahn's nightmare" was about to occur? - as the credit market became saturated...
As H.L. Mencken opined, 'The most dangerous man to any government is the man who is able to think things out for himself, without regard to the prevailing superstitions and taboos. Almost inevitably he comes to the conclusion that the government he lives under is dishonest, insane, and intolerable.' It is no wonder that, according to a Gallup Poll conducted in early October, a record-low 14% of Americans thought that the country was headed in the right direction, down from 30% in September. That's the biggest single-month drop in the poll since the shutdown of 1990. Some 78% think the country is on the wrong track. Simply put, Faber explains, it is most unlikely that US economic growth will surprise on the upside in the next few years. It is more likely there will be negative surprises.
The Failure Of Abenomics In One Chart... When Even The Japanese Press Admits "Easing Is Not Working"Submitted by Tyler Durden on 11/18/2013 14:56 -0400
Today, with the traditional one year delay (we assume they had to give it the benefit of the doubt), the mainstream media once again catches up to what Zero Hedge readers knew over a year ago, and blasts the outright failure that is Abenomics, but not only in the US (with the domestic honor falling to the WSJ), but also domestically, in a truly damning op-ed in the Japan Times. We will let readers peruse the WSJ's "Japan's Banks Find It Hard to Lend Easy Money: Dearth of Borrowers Illustrates Difficulty in Japan's Program to Increase Money Supply" on their own. It summarizes one aspect of what we have been warning about - namely the blocked monetary pipeline, something the US has been fighting with for the past five years, and will continue fighting as long as QE continues simply because the "solution" to the problem, i.e., even more QE, just makes the problem worse. We will however, show the one chart summary which captures all the major failures of the BOJ quite succinctly.
As Silk Road emerged from the "dark-web", other sites have appeared offering services that are frowned upon by most. As Forbes reports, perhaps the most-disturbing is "The Assassination Market" run by a pseudnymous Kuwabatake Sanjuro. The site, remarkably, a crowdfunding service that lets anyone anonymously contribute bitcoins towards a bounty on the head of any government official–a kind of Kickstarter for political assassinations. As Forbes reports, NSA Director Alexander and President Obama have a BTC40 bounty (~$24,000) but the highest bounty - perhaps not entirely surprising - is BTC 124.14 (~$75,000) for none other than Ben Bernanke. Sanjuro's raison d'etre is chilling, "as a few politicians gets offed and they realize they’ve lost the war on privacy, the killings can stop and we can transition to a phase of peace, privacy and laissez-faire."
It may appear to be safe for everyone to be on the same side of the boat, but the gunwale is awfully close to the water.
Somehow, Fed head Bill Dudley has managed to encompass the entire "we must keep the foot to the floor" premise of the Fed in one mind-bending sentence:
- *DUDLEY SEES 'POSSIBILITY OF SOME UNFORESEEN SHOCK'
So - based on an "unforeseen" shock - which he "sees", and while there are "nascent signs the economy may be doing better", the Fed should remain as exceptionally easy just in case... (asteroid? alien invasion? West Coast quake?)
The CFTC has won a consent order against MF Global requiring it to pay $1.212 billion in restitution to customers and a further $100 million civil penalty:
- *MF GLOBAL TO PAY $1.2 BLN RESTITUTION, $100M PENALTY
- *CFTC:PENALTY TO BE PAID AFTER MF FULLY PAYS CUSTOMERS/CREDITORS
- *CFTC:LITIGATION CONTINUES VS CORZINE,O'BRIEN,MF GLOBAL HOLDINGS
- *CFTC: MF GLOBAL ADMITS TO ALLEGATIONS OF LIABILITY IN ORDER
The big question is - of course - where is the money coming from?
As reported earlier today, Paris was the latest city to succumb to a rogue shooter when a gunman shot a photographer at left-leaning French newspaper Liberation, following by a shooting near the headquarters of French bank SocGen. The lone gunman is shown on the picture below. How the Paris situation differs from numerous such incidents taking place recently in the US, however, is that so far the gunman has not been captured or otherwise "incapacitated." Furthermore, as was reported subsequently, the Paris prosecutors are now treating the shooting as a "terrorist" case. And now, as the WSJ reports, Paris in now gripped in a manhunt for the gunman who is currently on the loose.
China's GDP is about to undergo the same magic that US GDP received earlier in the year. The "Chinese system of National Accounts" will see five significant adjustments that are expected to (surprise) boost the size of the nation's estimate of its GDP. The National Bureau of Statistics is considering making the changes to reflect the latest economic and social developments and implement the reform guidelines unveiled at the 3rd Plenum recently. From the addition of research and development - intellectual properrty - (just as the US did) to including mark-to-market changes (read rises) in employee stock options and real estate in consumption data, the Chinese appear dead set on making a once-unbelievably goal-seeked number into an entirely fantastical representation of reality (which of course enables moar higher manipulation as to avoid any debt-to-gdp hurdles that the real world might see as a concern).
The stock below is up 1200% year-to-date. The company in question is insolvent by any and all measures and has a "parent" under great pressure to take whatever gains it can get (as opposed to leave anything for shareholders). The company is exposed to the worst of the worst in the housing market. The smart money (as they are called) is piling in. The company is, of course, Fannie Mae (or Freddie Mac - same discussion). This chart, like none other, reflects the "investment" thesis in America today, as Grenwood's Walter Todd notes, “Either you’re going to make a lot of money or you’re going to lose everything you put into it."
While the domestic euphoria in the stock market bubble has succeeded to sucker in everyone into the biggest multiple expansion rally in 15 years (as was noted earlier today, 75% of the S&P's YTD return has come from its trailing PE expanding to 16.5x now from 13.7x in 2012 - the largest increase since 1998), foreigners continue to vote with their feet. In fact, as today's August TIC data report showed, in August - perhaps due to Tapering fears - foreigners sold $16.9 billion in US equities. This was the fourth largest equity outflow in history. Transactions in other securities were mixed, with $10.8 billion in long-term Treasury sales offset by $16.8 billion in MBS/agency purchases, as well as $2.3 bilion in Corporate Bond buys.