Volatility

It was a tale of two markets overnight: Asia first - where all commodity hell broke loose - and then Europe (and the US), where central banks did everything they could to stabilize the already terrible sentiment.

What has always separated successful professional gamblers from the "weekend sucker" is knowing when to step away from the table.

Today's most popular hedge fund strategy among institutional investors globally is "Alternative Global Macro Funds". Also known as a “go anywhere” investment style, active managers employ opportunistic trading tactics across asset classes, financial instruments, and geographic regions. Like many liquid alts, global macro funds grew rapidly following the financial crisis as investors looked for strategies that could diversify their portfolios in the midst of volatility in the global marketplace and historically high sector correlations against the S&P 500, thereby improving their risk-return profiles. Ultimately, success in this classification resides in selecting the right active manager given the strategy’s wide dispersion of returns.

VIX is "searching for a new home" according to Goldman Sachs as the current elevated level of implied risk lies at the high side (around 24) of the current business cycle (~18) and recession-esque volatility (~26) range. Current options prices imply a 7% chance of a 10% crash in the next month and uncertainty is running twice as high ahead of this week's jobs data than on a normal payrolls week...

It was all about China once again, where following a report of a historic layoff in which China's second biggest coal producer Longmay Group fired an unprecedented 100,000 or 40% of its workforce, overnight we got the latest industrial profits figure which plunging -8.8% Y/Y was the biggest drop since at least 2011, and which the National Bureau of Statistics attributed to "exchange rate losses, weak stock markets, falling industrial goods prices as well as a bigger rise in costs than increases in revenue." In not so many words: a "hard-landing."

Despite the Fed continuing to kick this down the road, they continue to claim that we are in the middle of an ongoing recovery. There’s just one problem with that: things are getting worse than pre-crisis levels for millions of the poorest Americans. Possibly even more concerning is the fact that the amount of Americans living below the poverty line has soared since 2007.

CATALAN SEPARATISTS CLOSE TO 50% OF VOTES: EXIT POLL

As documented here and elsewhere, in addition to the Pope and Putin, the third world leader US president Obama is "historically" meeting this week is China's President, and General Secretary of the Chinese Communist party, Xi Jinping. But just like everywhere else, the president is mostly a figurehead for far greater political and primarily financial interests backing him. So who calls the shots in China? The following infographc lays out the key power divisions of political, economic and financial power in China at this moment.

1. Peak in liquidity
2. Deflationary recovery
3. Manufacturing recession
4. Capitulation of the "strong $" & "TINA" trades

For those unaware, a fifth of Spain's GDP is voting on whether to secede from the country on Sunday. Here is everything you need to know about the Catalan black swan.

Yellen just reset the market's expectations, and in fact set the bar for disappointment even higher. As FTN rates strategist Jim Vogel very correctly notes, "financial market risk is calmer this morning, but Yellen actually elevated the stakes with her detailed speech yesterday afternoon."  What does that mean? He explains: "Yellen could be spot on this year but until the hike actually occurs, risk asset volatility veers once again to the upside with respect to US monetary policy."

“There’s a saying that helps explain our mood around here. When the sea is this turbulent, the only thing you can do is sit on the sand and watch. It’s not time to get in a boat."

Did Goldman just hand out the blueprint to crush the next "Lehman" and unleash the next global bailout? Read on to find out.

When risk sold off last week in the wake of the Fed’s so-called “clean relent,” it signalled at best a policy mistake and at worst the loss of any and all credibility. Tonight, Yellen gets a do-over.

Contrary to popular opinion, there are problems that are too big for the Central Banks to control.