The high-beta honeys were not amused (despite another melt-up in NFLX into earnings) as the Russell 2000 underperformed (-0.25% on the day). The Dow and S&P ended practically unch, Nasdaq bid (helped by AAPL ahead of the product news tomorrow) and Trannies closed their highs of the day exuberating all the way... Treasury yields rose 2-3bps (steepening). FX was quiet with the USD very slightly higher (helped by JPY weakness) but AUDJPY was in charge of S&P 500 trading today. Oil dropped 1.6% closing back under $100 (first time in over 3 months) and Silver rallied 1.3%. Hedgers were active (6though clearly the selling was limited) as credit spreads and volatility markets saw protection buyers active.
- FHFA Is Said to Seek at Least $6 Billion From BofA for MBS Sales (BBG)
- Record Pact Is on the Table, But J.P. Morgan Faces Fight (WSJ)
- Magnetar Goes Long Ohio Town While Shorting Its Tax Base (BBG)
- Mini-Wall Street' Rises in Hamptons (WSJ)
- Obama to call healthcare website glitches 'unacceptable' as fix sought (Reuters)
- Starbucks Charges Higher Prices in China, State Media Says (WSJ)
- Cruz Is Unapologetic as Republicans Criticize Shutdown (BBG)
- Berlusconi struggles to keep party united after revolt (Reuters)
- SAC Defections Accelerate as Cohen Approaches Settlement (BBG)
While some have proclaimed the 36,000 enrollment in The Affordable Care Act "a good start," the online marketplaces that Obamacare has become more infamous for have been plagued with problems in the brief two weeks since launch. Politico provides 25 of the most telling and colorful comments made about the "glitches" the online exchanges have faced...
Reflecting on the collapse of the USD, the surge in gold, the Chinese ratings agency downgrade, and the groundhog-day-like world in which the US government (and markets) live, DoubleLine's Jeff Gundlach warns that "America's credibility is slowly eroding." In his typical manner, Gundlach rapidly and efficiently covers a lot of ground in these brief clips; from the growing skepticism of the rest of the world towards the US' full faith and credit, to no end in sight for QE and reignition of bond inflows under an even more interventionist Yellen, to his views on Tesla, Google, and Apple.
- Congress Vote Ends Impasse to Be Revisited in January (BBG); Congress Passes Debt, Budget Deal (WSJ)
- House GOP extracts no concessions (Politico)
- Washington becomes the biggest risk to the U.S. economy (Reuters)
- Debt Deal Seen Boosting U.S. Consumers as Holidays Approach (BBG) - only thing missing: disposable income
- Federal Employees Head Back to Work (WSJ)
- Regulator Suggested Shift for Dimon at J.P. Morgan Unit (WSJ)
- Twitter hires Google ad exec ahead of IPO (CNET)
- Teens can now post publicly, but posts are friends-only by default (WaPo)
- Germany Moves to Finalize Coalition Deal (WSJ)
- Draghi Turns Judge on EU Banks as ECB Studies Accounts (BBG)
- UK nuclear deal with China a ‘new dawn’ (FT)
It's gotten beyond silly: with less than a day to go until the first X-Date, beyond which if Jack Lew is correct (he isn't) all hell will break loose if the US doesn't have a debt deal in place, stocks couldn't care less, Bills continue to sell off, carry traders only care how big the central banks' balance sheets are, all news are generally shunned and yet stocks have soared 600 DJIA points on Harry Reid's relentless optimism a deal will get done, even though so far none has. Today, as we observed on Monday, we expect more of the same: stocks and futures will ignore the reality that the midnight hour will come and go with no deal in place, but will continue to explode higher as Harry Reid's latest set of "optimism" headlines hits the tape in low volume trading. We expect the first big hope rally around POMO time, then shortly after Senate comes back in Session, around noon. Then for good measure, another one just before market close. Why not: it's not like the "market" even pretend to be one anymore. Keep an eye on today's 4-Week bill auction before noon. It should be a far bigger doozy than yesterday's longer-dated bills.
- Spot the pattern: Senate Leaders Nearing a Deal (Politico), Senators say debt, shutdown deal is near (USA Today), Senate Leaders in Striking Distance of a Deal (WSJ), U.S. senators hint at possible fiscal deal on Tuesday (Reuters), Senate Debt-Limit Deal Emerging (BBG)
- U.S. debt ceiling crisis would start quiet, go downhill fast (Reuters)
- Uneasy Investors Sell Billions in Treasurys (WSJ)
- BOE’s Cunliffe Says U.K. Is Not in Grip of Housing-Market Bubble (BBG)
- Letta Mixes Tax Cut With Rigor in Post-Berlusconi Italian Budget (BBG)
- Japan Seeks to Export More High-End Food (WSJ)
- Burberry names Bailey CEO as Ahrendts quits for Apple (Reuters)
- China’s Biggest Reserves Jump Since 2011 Shows Inflow (BBG)
If mere hope of an "imminent" deal starting on Thursday and continuing through Monday, with no actual deal but who cares about details, was enough to push the DJIA up by 600 points, then all it would take to set a new record market high today, is for another day to pass - one day before the October 17 X-Date when one Senator can filibuster the US through the deadline on their own, and when the House still has to have a voice on what the Senate has been doing - without an actual debt deal. After all, the market is so "centrally-planned" all that is needed is knowledge that Bernanke will get to work, and is getting to work to the tune of $85 billion a month, mixed in with some hope. And with today's "market for idiots" facilitating POMO of over $5 billion which guarantees a green close, all that is needed is a complete failure in talks for the SPX to go limit up on even more hopes things will be fine any second now... if not right now.
What politicians want from their regulatory efforts is a world of pure beta and zero alpha. This is the ultimate “level playing field”, where no one knows anything that everyone else doesn’t also know. The presumption within regulatory bodies today is that you must be cheating if you are generating alpha. How’s that? Alpha generation requires private information. Private information, however acquired, is defined as insider information. Insider information is cheating. Thus, alpha generation is cheating. QED. Why would politicians want an alpha-free market? Because a “fair” market with a “level playing field” is an enormously popular Narrative for every US Attorney who wants to be Attorney General, every Attorney General who wants to be Governor, and every Governor who wants to be President … which is to say all US Attorneys and all Attorneys General and all Governors. Because criminalizing private information in public markets ensures a steady stream of rich criminals for show trials in the future. Because the political stability of the American regime depends on a widely dispersed, non-zero-sum price appreciation of all financial assets – beta – not the concentrated, zero-sum price appreciation of idiosyncratic securities. Because public confidence in the government’s control of public institutions like the market must be restored at all costs, even if that confidence is misplaced and even if the side-effects of that restoration are immense.
Presented with no comment...
Even as Washington stares into a fiscal abyss of its own construction, there is one bright spot: the ongoing global popularity of the $100 bill. The U.S. Treasury/Federal Reserve launched their latest version of the venerable C-Note just this week, printing $350 billion worth over the last 12 months to meet anticipated robust worldwide demand. Given that $100 bills last about 15 years in circulation, ConvergEx's Nick Colas notes that these record amounts seem to indicate very strong worldwide demand for hard currency rather just replacing old stock. In the US, by contrast, the ‘Cashless economy’ is coming hard and fast.
- Janet Yellen, a Backer of Pushing the Fed's Policy Boundaries (WSJ)
- Jos. A. Bank proposes to buy Men's Wearhouse for $2.3 billion (Reuters)
- J.P. Morgan to Cull Business Clients (WSJ)
- RBS Said to Pass Currency Trader Chats to FCA Amid Probe (BBG)
- Prosecutors give SAC settlement ultimatum (FT)
- U.S. builders hoard mineral rights under new homes (Reuters)
- Bill Comes Due for Brazil's Middle Class (WSJ)
- US expected to slash aid to Egyptian government (AP)
- Samsung launches world's first smartphone with curved screen (Reuters)
- Microsoft’s $7.2 Billion Nokia Bet Not Luring Apps (BBG)
- China raises hurdles for foreign banks (FT)
"Steve Jobs was really a pretty terrible man... and I just don't believe bad guys do well in the long run," is the subtle way the billionaire fund managed describes the ex Apple CEO before shifting his view to the broader market. A spell-bound Maria Bartiromo was looking for any silver lining when Julian Robertson responded ominously, "we're in the middle of a kind of bubble market," and when they "prick the bubble, there will probably be a pretty bad reaction." With views on The Fed's easy-money, Twitter, and market frothiness, Robertson is a breath of truthy fresh air that we suspect will not be back on the money-honey's show anytime soon...
- A U.S. Default Seen as Catastrophe Dwarfing Lehman’s Fall (BBG)
- Software, Design Defects Cripple Health-Care Website (WSJ)
- Gunmen kill 5 Egyptian soldiers near Suez Canal, 2 people die in blast (Reuters); Egypt death toll rises to 53, streets now calm (Reuters)
- Three retailers sell Apple iPhone 5C for $50 or less (Sun Sentinel)
- New American Economy Leaves Behind World Consumer (BBG)
- Dow's Exiles Often Have Last Laugh (WSJ)
- Macy's Puts China Online-Expansion Effort on Hold Amid Economic Slowdown (WSJ)
- Gold Befuddles Bernanke as Central Banks’ Losses at $545 Billion (BBG) - just ask the BIS gold selling team: they are unbefuffdled
- Markit Group Said to Avoid U.S. Antitrust Claims as EU Proceeds (BBG) - being owned by the banks has benefits
- Paulson leads charge into Greek banks (FT) - and scene for the Greek banking sector
"MasterCard will be the first major payment network to join FIDO. The Alliance is developing an open industry standard for biometric data such as fingerprints to be used for identification online. The goal is to replace clunky passwords and take friction out of logging on and purchasing using mobile devices."
It’s for your own good, and it’ll probably fight terrorism too!