The Herbalife drama - perhaps the biggest billionaire pissing contest of 2013 - just got excting again, following FT news that a criminal probe has been launched into Herbalife. "The US Department of Justice and the Federal Bureau of Investigation are investigating Herbalife, the multi-level marketing company that hedge fund manager Bill Ackman has alleged is a pyramid scheme, according to people familiar with the matter. The criminal investigation by the FBI and US attorney’s office in Manhattan raises the stakes for Herbalife, which is already facing civil inquiries from multiple government agencies that are looking into the Los Angeles-based company and its associated network of independent distributors."
The "common knowledge" meme among the uber-paid economists and talking-heads os Wall Street remains that if data is bad, it's the weather's fault; but if data is good, that's the recovery. However, as Lance Roberts explains in this brief clip, the deterioration in US fundamental macro data is not a one-month blip and in fact "the trend of economic growth has clearly been on the decline rather than gaining strength as has been hoped by the majority of economists". Furthermore, he notes (and shows in simple chart form) that the trend of consumer weakness, which makes up 70% of economic growth, has declined to levels that are more normally associated with very slow growth economies. Simply put, it's not the weather stupid, it's the economy.
Throughout 2013, the distortions created by intervention in once-free markets have left many scratching their heads. The interventions have worked - almost faultlessly - but for them to do so has required the suspension of one belief system (economic reality) and the adoption of another - namely, that everything will be OK because ... well, just because. Can the fantasy persist into 2014? Sadly, Grant Williams states "Yes. It most certainly can." Will it continue into 2014? Most likely. Will this new belief system become the new economic reality? Not a chance.
While shortened Christmas Eve trading is traditionally the lowest volume day of the year, based on recent trends it may be difficult for today's action to stand out from the landscape thanks to an ongoing volume collapse, which however should make the even more traditional low-volume melt up that much easier. Sure enough, futures are modestly higher driven by their favorite signal, the EURJPY. Not surprisingly there has been particularly light newsflow with market closures in Germany, Italy and Switzerland in addition to early market closures for UK, France, Netherlands and Spain. Those markets that are open are trading in positive territory with the FTSE 100 being supported by BSkyB following an upbeat pre-market report for the company and their customer base, whilst the IBEX 35 is being supported by the financial sector. Overnight in China there was news of an injection of CNY 29bln via a 7-day reverse repo, although market commentators have said that this is more of a gesture than any meaningful intervention given the size of the country's banking market. Fixed income markets are particularly light with there being no trade in the bund future given the Eurex closure, with other trading products relatively flat given the lack of newsflow. However, the short-sterling curve has bear-steepened and thus continuing the trend seen since the end of last week as a result of both UK unemployment and UK GDP coming in better than expected.
When former Tyco International CEO Dennis Kozlowski was convicted for stealing $150 million in company money in 2005 on 22 criminal counts including grand larceny, conspiracy, securities fraud/sales and falsifying business records to a prison term of 8.33 to 25 years, he became the poster child for corporate greed. Shortly thereafter the entire financial system nearly collapse when everyone on Wall Street became a poster child for corporate greed and nobody went to jail. As such it became a moot point to make anyone a symbol for "corporate greed" since the Department of Justice itself admitted there is a brand new category reserved for the uber-greedy ones, also known as Too Big To Prosecute. Which is why moments ago, news broke that Kozlowski was granted parole after serving 100 months in jail, exactly nobody was surprised.
- J.P. Morgan, U.S. Reach Historic Settlement (WSJ)
- OECD cuts global growth forecast (AP)
- Guess the profit margin: Wal-Mart Touts $98 TV as Holiday Seen Weakest Since 2009 (BBG)
- Republicans defy threat, block another Obama judicial pick (Reuters)
- Fed Ponders How to Temper Tapering Without Rate Increase (BBG)
- Wall Street uses 'merchant' workaround to cling to commodity assets (Reuters)
- PBOC to ‘Basically’ End Normal Yuan Intervention, Zhou Says (BBG)
- Italy’s leader warns Germany of rise of anti-European sentiment (FT)
- Yellen Nomination for Fed Chairman to Get Vote This Week (BBG)
- As U.S. default threatened, banks took extraordinary steps (Reuters)
- NSA vowed repeatedly to fix its collection errors (AP)
Farewell Mareeaah. The Money Honey who epitomized CNBC in its high flying (pardon the pun) years when it was actually a source of useful information, has just marked the nadir of the TV station which in the past five years rebranded itself stock market propaganda central, and whose viewership plunged appropriately to a 20 year low as we recently reported. As Drudge reports, Bartiromo whose contact is up, is moving to Fox Business. From Drudge: "DRUDGE has learned that Maria Bartiromo is jumping to FOX BUSINESS NETWORK with an announcement expected sometime soon. Sources close to the situation say there have been ongoing conversations throughout the Fall. The new deal calls for Bartiromo to anchor a daily market hours program on FOX BUSINESS. Insiders say there will be a role on FOXNEWS as well."
David Stockman has never been shy of expressing his true feelings (about Bernanke's "Born Again Jobs Scam", Calamity Janet Yellen, Obamacare's resentment-encouraging rollout, and the entire Keynesian state wreck ahead). But this time, he aims his acerbic ire at the "markets." During a brief interview on FOX Business, the author of The Age of Deformation exclaimed "There’s no one in the stock market today except drugged-up day-traders and robots... This is utterly irrational." The blame (and benefactors) are clear, he blasts, "how could someone in their right mind believe that you can have interest rates... at zero for nine years?... That is the greatest gift to the speculators, to the 1%, to the leveraged traders, to the carry trade ever imagined!" He concludes, "we're almost on the edge of another explosion at the present time."
David Asman: What happens now? If it’s Yellin she'll be like Bernanke on steroids. What does that mean for our economy?
Dr Paul: Prepare for the destruction of the dollar and the crash of the bond market one day. The bond bubble is weakening although the interest rates have doubled in the last year.
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The name Robert Khuzami is well-known to Zero Hedge readers: the former top SEC enforcer is perhaps best known not for what he did (judging by how many Wall Street bank executives ended up in jail following the Great Financial Crisis, very little), but for what he didn't - namely pursue any action against his former employer, Deutsche Bank, where he was a general counsel and where under his watch Greg Lippmann was "shorting your house." The reason, among others, extensive deferred comp linked to DB stock as we reported all the way back in May 2010. But Bob didn't care about what he did, or didn't do at the SEC - he was much more interested in what he would do after he left the regulator, which he did in January of this year. Because Bob, courtesy of his DB days, realized the massive paycheck potential of a revolving door job at the head of the government's enforcement unit. Sure enough, as the NYT reports, he has capitalized on just that following a $5 million a year contract (with a 2 year guarantee) with legal behemoth Kirkland & Ellis where he will be a partner and "will represent some of the same corporations that the S.E.C. oversees."
Call it what you will, a handshake or a parachute; the result is all the same. The rest of us just get elbow out of the way as we get pushed through the back door. The top executives leave by the front door and to boot they hop into a chauffeur-driven car (paid by the company, of course) as they drive off into the sunset. To parachute someone: send them elsewhere, relocate them, bundle them off, pack them off or dispatch.
Until now, we have refrained from trying to explain Fedspeak to the masses. The truth is it's not opaque. It's not indecipherable. It's simple. Or at least you can choose to believe it is, as we have. At last week’s press conference, Federal Reserve Chairman Ben Bernanke fielded questions from reporters employed by some of the world's most esteemed news organizations. Here is a summary, translated from Fedspeak into ordinary American English and heavily condensed for easy tweeting.
The state of Arizona may become the second state to use gold and silver coins as legal tender. Last week, Arizona lawmakers passed a bill that makes precious metals legal tender. Arizona is the second state after Utah to allow gold coins created by the U.S. Mint and private mints to be used as currency. Utah has had the law on the books for the past 2 years and is working on a system for using the precious metals as currency. The Arizona Senate Bill 1439 would allow the holder of gold or silver coins or bullion to pay a debt. However, the coins must be issued by the U.S. government or approved by a court, like an American Eagle Coin. Oddly the government does not require that persons or business must use or accept gold or silver as legal tender in contravention of the U.S. Constitution. The sponsor of the bill, Republican Sen. Chester Crandell, would need a final state Senate vote after approval by the House, and if passed the law would not take effect until 2014. Crandell said, "The whole thing came from constituents".
So far, Cyprus has not been able to pass a direct tax against depositors and has gone to Russia for a helping hand (and failed). However, the question of whether such an event could happen in the U.S. is a much more interesting point of discussion. While to most onlookers the idea of a direct deposit tax instituted by domestic US banks remains far off - the issue of the Fed's monetary policies, particularly since the last recession, has had a significant impact on "savers." While the individuals in Cyprus have been faced with an outright extraction of capital from their accounts - U.S. savers have had their savings negatively impacted much more surreptitiously. The continued drive by the Fed's monetary policies to artificially suppress interest rates to create a negative interest rate environment for savers is a defacto "tax" on savings. The destruction of principal since the turn of the century, which is far more disastrous than it appears when adjusted for inflation, has ended the dream of retirement for many individuals. So, can the U.S. potentially have a direct tax on savings? It's already happened.