SPY

Something snapped overnight, moments after the EURJPY breached 140.00 for the first time since October 2008 - starting then, the dramatic weakening that the JPY had been undergoing for days ended as if by magic, and the so critical for the E-Mini EURJPY tumbled nearly 100 pips and was trading just over 139.2 at last check, in turn dragging futures materially lower with it. Considering various TV commentators described yesterday's 0.27% decline as a "sharp selloff" we can only imagine the sirens that must be going off across the land as the now generic and unsurprising overnight carry currency meltup is missing. Still, while it is easy to proclaim that today will follow yesterday's trend, and stocks will "selloff sharply", we remind readers that today is yet another infamous double POMO today when the NY Fed will monetize up to a total of $5 billion once at 11am and once at 2 pm.

Think of it this way: You’re a baseball player trying to break into the majors despite mediocre fielding skills, no foot speed, and a batting average that hovers around 250. Egged on by your friend, A-Rod, you think you can make it by using steroids and turning yourself into a power hitter. But it doesn’t work out as planned. After a year, you’re losing hair, your skull’s gotten bigger, there’s fatty tissue on your chest that wasn’t there before, and you’ve still only managed 18 home runs in a season. You finally accept that it’s not going to happen for you. In the baseball scenario, steroids didn’t show enough payoff before the side effects told you enough was enough. And you can say pretty much the same thing about our economic scenario and monetary steroids.  We’re seeing dubious benefits and fast developing side effects from the Fed’s actions, causing many observers to recommend a rethink of the Big Experiment. Yet, the experiment continues...

Predictions for 2014 from a cold war spy

• M&A Mystery: Why Are Takeover Prices Plummeting? (WSJ)
• Hedge-Fund Fight Club Traded Illegal Tips Not Punches (BBG)
• Speed Traders Meet Nightmare on Elm Street With Nanex (BBG)
• A new wave of U.S. mortgage trouble threatens (Reuters)
• Penny Lane: Gitmo's other secret CIA facility (AP)
• US hardens threat to leave Afghanistan with no troops (WSJ)
• Russian Prison Stuns Captain of Greenpeace’s Bombed Ship (BBG)
• ECB's Weidmann Warns Central Banks Might Be Too Dominated by Fiscal Concerns (WSJ)
• China Air Move Splits Japan as Carriers Obey New Rules (BBG)
• Inside the Breakup of the Pritzker Empire (WSJ)

• Washington turns bond market upside (FT)
• China Air-Zone Move Expands Field of Islands Spat With Japan (BBG); Japan rejects China claim on airspace over disputed islands (FT)
• 'Great Satan' meets 'Axis of Evil' and strikes a deal (Reuters)
• Iran Pact Faces Stiff Opposition (WSJ)
• Allies Fear a US Pullback in Mideast (WSJ)
• India to resume paying Iran in Euros (Economic Times)
• At 'Business Insider,' it's time to sell (USA Today)
• More ECB currency war jawboning: ECB’s Hansson Says Rate Cut Options Not Fully Exhausted (BBG)
• Spy World Links Plus Obama Ties Stoke Concern About NSA Review (BBG)
• A disunited Europe will struggle even to disintegrate (FT)

• Wonder why: JPMorgan plans to keep pay roughly flat from last year (Reuters) - maybe this: Charles Schwab Warns "We Are In A Manipulated Market"
• Democrats overturn filibuster rule, increasing Obama’s power (FT)
• Day JFK Died We Traded Through Tears as NYSE Shut (BBG)
• When even dictators snub Obama - Afghanistan rejects U.S. call for quick security deal (Reuters)
• Obama Plunges in Investor Poll as Stocks Make New Highs (BBG)
• Iran, six powers struggle to overcome snags in nuclear talks (Reuters)
• Derision for China’s ‘rejuvenation index’ (FT)
• Bottom is in: Paulson Said to Inform Clients He Won’t Add More to Gold (BBG)
• German business sentiment rebounds strongly (WSJ)
• WTO on verge of global trade pact (FT)

While hardly as dramatic as ongoing revelations of Big NSA Brother probing every aspect of Americans' lives, overnight the WSJ reported that in addition to the complete loss of privacy - which should now be taken for granted - the CIA has been added to the list of entities that scrutinize every online interaction, and is "building a vast database of international money transfers, including Western Union, that includes millions of Americans' financial and personal data, officials familiar with the program say." The program will be (and is) carried out under the same provision of the Patriot Act that enables the National Security Agency to collect nearly all American phone records. In other words, instead of being upfront that all the CIA, and administration, care about is tracking large flows of money that may have "evaded" taxation, and is traditionally used by expats to send modest amounts of money back to their host countries, what the CIA is instead focusing on is whether mom and pop are using Western Union to deposit $500 in Al-Qaeda's account in Afghanistan.

Here is a summary of the key stock additions, sales, initiations and liquidations conducted by the most prominent US hedge funds in the third quarter.

On October 15, two weeks after the end of the third quarter, David Tepper appeared on CNBC for his semi-annual stock pumpfest, most memorable for his suggestion that a 20x P/E multiple on the S&P was perfectly acceptable. Which would suggest Tepper was very bullish on risk. Which would suggest buying more stocks, not selling. Yet selling is precisely what he did between June 30 and September 30 according to his just released 13F. Specifically, after having a total long equity AUM of $6.9 billion at the end of the second quarter, the Appaloosian lowered the dollar value of his AUM by nearly 10%, to $6.3 billion as of September 30. So what did he liqudate? Here are his biggest liquidations and notable sales.

A central tenet of propaganda is that the Big Lie repeated often enough is accepted with greater ease than small lies. Thus it is no surprise that the leadership and propaganda organs of the Fed, Federal government and the Keynesian cargo Cult of fellow travelers all repeat our era's Big Lie: There is a free lunch after all. There are two free lunches, according to our financial and political leaders: free money, in the form of money created out of thin air by the Fed, and almost-free money borrowed into existence by the Federal government. The problem with Big Lies is reality has not been disappeared; it still exists. Actions create consequences, and not necessarily the consequences that were planned or expected.

It’s Only Tyrannical When OTHERS Do It

Having done a bang up job in Syria, where Obama nearly started world war III so Qatar could send its natgas to Europe at a lower price than  Gazprom's, while alienating America's legacy allies in the region, Saudi Arabia and Israel, and ensuring its enemies see it even weaker in the international arena following Obama's schooling by Putin, the US president continues to win friends abroad (while spying there, here and everywhere, namely the Pope) with the latest snafu coming from Pakistan, another former ally, where America just droned the leader of the Taliban fighters on Saturday, leaving his body "damaged but recognizable". 

Al Jazeera America has done some great work in obtaining the official NSA talking points via a Freedom of Information Act request. As might be expected, the agency tells its people to use the attacks on September 11, 2001 to manipulate public opinion into accepting unacceptable levels of surveillance.  One of the highlights, actually lowlights, of the document is what the NSA refers to as a “soundbite that resonates.” Here it is: "I much prefer to be here today explaining these programs, than explaining another 9/11 event that we were not able to prevent."

Argues Spying Okay As Long As Government Doesn’t Get CAUGHT

In the latest blow, and a new low, for the US spying agency, earlier today Italian magazine Panorama blasted a preview of an article due for publication tomorrow, with the simple premise: "NSA had tapped the pope." According to a Reuters report, the "spy agency had eavesdropped on Vatican phone calls, possibly including when former Pope Benedict's successor was under discussion, but the Holy See said it had no knowledge of any such activity. Panorama magazine said that among 46 million phone calls followed by the U.S. National Security Agency (NSA) in Italy from December 10, 2012, to January 8, 2013, were conversations in and out of the Vatican." But while it is unclear just what divine information the NSA had hoped to uncover by spying on the Vatican, what is an absolute headbanger, is that according to Panorama one of the reasons for the illegal wiretaps was to be abreast of "threats to the financial system." We can only assume this means keeping on top of Goldman's activities around the globe: after all, when one intercepts god's phone calls, one is mostly interested what the bank that does god's will is doing.