China's Central Bank Chief Admits "The Bubble Has Burst"

In a stunningly honest admission from a member of the elite, Zhou Xiaochuan, governor of China’s central bank, exclaimed multiple times this week to his G-20 colleagues that a bubble in his country had "burst." While this will come as no surprise to any rational-minded onlooker, the fact that, as Bloomberg reports, Japanese officials also confirmed Zhou's admissions, noting that "many people [at the G-20] expressed concerns about the Chinese market," and added that "discussions [at the G-20 meeting] hadn't been constructive" suggests all is not well in the new normal uncooperative G-0 reality in which we live.

Anatomy Of A Market Top, Part 1: Internal Combustion

The first change often occurs below the surface. The deterioration of the market’s internals typically occurs in the lead-up and development of a cyclical market top, but this dynamic too can persist for an extended period. However, eventually these divergences reach a head, and the most egregious cases have historically occurred within close proximity to major, cyclical market tops. The deterioration of the broader market is so great that the resultant foundation of support below the surface of the popular market cap-weighted averages is nearly non-existent. Once the relatively few leaders propping up the market begin to collapse under the weight, the inevitable cyclical decline can commence.

This Has Never Happened To VIX Before

Amid the carnage and chaos of the last two weeks, one thing has become crystal clear - the effect of massive one-way bets on 'everything', predicated on the omnipotence of central bankers, has left a market (stocks, bonds, FX, commodities) bereft of fundamental linkages and instead driven entirely by technicals (flows, forced unwinds, systematic gamma). While many 'records' were broken in terms of velocity of moves, it is the VIX complex that seems to have suffered most, and as the following chart shows, positioning is now at an extreme in both stocks, vol, and bonds once again.

Exorbitant Privilege: "The Dollar Is Our Currency But Your Problem"

There is no better way to describe the international monetary system today than through the statement made in 1971 by U.S. Treasury Secretary, John Connally. He said to his counterparts during a Rome G-10 meeting in November 1971, shortly after the Nixon administration ended the dollar’s convertibility into gold and shifted the international monetary system into a global floating exchange rate regime that, "The dollar is our currency, but your problem.” This remains the U.S. policy towards the international community even today. On several occasions both the past and present chairpersons of the Fed, Ben Bernanke and Janet Yellen, have indicated it still is the U.S. policy as it concerns the dollar. Is China saying to the world, but more particularly to the U.S., “The yuan is our currency but your problem”?

How Much More Ridiculous Can It Get?

If one considers that the next major interest rate manipulation by the Fed appears to hinge on a notoriously unreliable report about a lagging economic indicator, it should immediately become clear on what a flimsy foundation modern central economic planning rests. How much more ridiculous can it possibly get? Incidentally, it also serves to demonstrate how far off the reservation economists have veered in their desperate and laughable attempts to transform economics into a discipline akin to the natural sciences.

The Failed Moral Argument For A "Living Wage"

With Labor Day upon us, newspapers across the US will be printing op-eds calling for a mandated “living wage” and higher wages in general. In many cases, advocates for a living wage argue for outright mandates on wages; that is, a minimum wage set as an arbitrary level determined by policymakers to be at a level that makes housing, food, and health care “affordable.” All in all, it’s quite a bizarre strategy the living-wage advocates have settled on. It consists of raising the prices of consumer goods via increasing labor costs. Real wages then go down, and, at the same time, many workers lose their jobs to automation as capital is made relatively less expensive by a rising cost of labor. While the goal of raising the standard of living for workers and their families is laudable, it’s apparent that living wage advocates haven’t exactly thought things through.

Common Core Or "Communist Core"

You know things have become bad when... Common core is so wonderful that Lily Tang Williams, a Chinese-American mother of three who grew up in Communist China, says it reminds her of her oppressive, statist nature of her childhood education.

Peter Schiff Warns: Meet QT - QE's Evil Twin

The arrival of Quantitative Tightening will provide years' worth of monetary headwinds. Of course the only tool that the Fed will be able to use to combat international QT will be a fresh dose of domestic QE. That means the Fed will not only have to shelve its plan to allow its balance sheet to run down (a plan I never thought remotely feasible from the moment it was announced), but to launch QE4, and watch its balance sheet swell towards $10 trillion. Of course, these monetary crosscurrents should finally be enough to capsize the U.S. dollar.

For "Fearful, Erratic Markets", China's Reserves Are The New Risk-On/Off Trigger: Goldman

"Following the RMB devaluation some weeks ago, markets have been erratic, fearful that the initial move was the beginning of a larger devaluation cycle that could disrupt global markets. Given how worried markets have been about China, a better-than-expected reserves number holds the potential for risk assets to rally as devaluation fears abate."

Bread & Circuses: The Shady, Slimy & Corrupt World Of Taxpayer Funded Sports Stadiums

Like pretty much everything in the modern U.S. economy, wealthy and connected people fleecing taxpayers in order to earn even greater piles of money is also the business model when it comes to sports stadiums. Many cities have tried to make voter approval mandatory before these building boondoggles get started, but in almost all cases these efforts are thwarted by a powerful coalition of businessmen and corrupt politicians. Sound familiar? Yep, it a microcosm for pretty much everything else in America these days.

What Happens Next?

Just like in 1929, The Dow just dropped 13%, bounced, and is retesting the all the 'experts' comfort a restless investor crowd. So what happens next?

The Season Of The Glitch (Or "Why Retail Investors Have No Chance")

Thousands of investors with stop-loss orders on their ETFs saw those positions crushed in the first 30 minutes of trading last Monday, August 24th. Seeing a price blow right through your stop is perhaps the worst experience in all of investing because it seems like such a betrayal. “Hey, isn’t this what a smart investor is supposed to do? What do you mean there was no liquidity at my stop? What do you mean I got filled $5 below my stop? Wait… now the price is back above my stop! Is this for real?” Welcome to the Big Leagues of Investing Pain.

Here Are The "Unlikely" Cities Bloomberg Says Will Drive The US Economy

Back in May we highlighted a study from Georgetown that endeavored to show which college majors were most likely to help students land high-paying jobs upon graduation. The report was unequivocal. To wit: "STEM (science, technology, engineering, and mathematics), health, and business majors are the highest paying." Here's where to look for lucrative STEM employment.

"This Time May Be Different": Desperate Central Banks Set To Dust Off Asia Crisis Playbook, Goldman Warns

"The room to ease policy further, i.e., to adopt counter-cyclical policies, is now much more limited than in the past. To the contrary, in some cases monetary tightening may be needed (despite weaker real business cycles) in order to continue to attract foreign capital, anchor domestic currencies and preserve the integrity of the respective inflation targeting frameworks. Hence, we may soon enter a period of weaker FX and higher policy and market rates: i.e., market dynamics that would resemble more the 1997 Asian Financial Crisis."