Apr 15

- The S&P 500 Enters “Vertical Straight Line Up” Formation (ZeroHedge, April 15, 2014):

The comedy from yesterday continues. Sure enough it is market open on a Tuesday (remember – the market never goes down on Tuesday) – the two most bullish catalyst to momentum ignition vacuum tubes. The rest is indescriminate panic buying history.

20140415_es1

- European Stocks Tumble As Investors Rush Into “Safe Haven” Italian Bonds!? (ZeroHedge, April 15, 2014):

Consumer confidence slumps in the core and Ukraine fears weighed heavily on European stocks despite getting a push from the insanity in US equity markets this morning. Europe closed at their lows of the day led by Italy and Portugal stocks fading fast. It would appear that these worried investors greatly rotated into safe-havens such as Italian government bonds – which broke to their lowest yield on record today… makes sense right?

- Russell 2000 Breaks Below Key Technical Level (ZeroHedge, April 15, 2014):

For the first time since Novemeber 2012 (when QE4EVA was kicked off in style), the Russell 2000that long-heralded indication that everything is great in the US economy and the indicator that stocks are great at discounting the future that is undoubtedly rosyhas broken back below its 200-day moving-average. In the meantime, an oddly dominant algorithm is swamping options markets with millions of fake orders…”rigged?”

- “Growth” Stocks Tumble To 7-Month Lows To “Value” As Bond Yields Collapse (ZeroHedge, April 15, 2014):

It is perhaps worth reflecting on the smorgasbord of free advice given out by the talking-heads after last night’s closing ramp proclaiming the dip to be bought and that everything was fixed once again. It was not. Stocks are making fresh cycle lows and the Nasdaq and Russell 2000 are both now below the 200-day moving-average and appraoching the 10% (correction) from their highs. 10Y is back under 2.6% and the 30Y yield is back at 10-month lows… which perhaps explains why “growth” stocks are back at 7-month lows versus “value” stocks

- Gold Tumbles Most In 4 Months On China Demand Slowdown Fears (ZeroHedge, April 15, 2014):

Gold prices are down almost 2% this morning (over $25) as last night’s slowdown in Chinese money-supply growth and fears that China’s insatiable gold demand has become less insatiable send the barbarous relic back towards $1300. Slowing GDP expectations, increasing restrictions on shadow-banking commodity-backed financing, and a need for liquidity are all factors weighing on the precious metal this morning.

- Copper Joins Precious Metals Rout, Tumbles Below $3.00 (ZeroHedge, April 15, 2014):

The fears over ongoing commodity-financing restrictions and slowing money supply growth are contagiously spilling over into other collateral. Copper prices are in free fall this morning, crashing through critical levels (especially Dennis Gartman’s “long punt”) and back below the Maginot Line of $3.00. These are near 3-week low levels and the biggest drop since the cash-for-commodity financing deals came under real pressure.

- Stocks moderate slide after Nasdaq nears correction territory (CNBC, April 15, 2014)

H/t reader M.G.:

“Yesterday, these stocks were darlings. They are so desperate, they are telling lies to steal pennies……”

- U.S. Stocks Decline as Tech Selloff Resumes Amid Earnings (Bloomberg, April 15, 2014)

And the ECBs buying spree continous…..

- The “Shocking” Buying Spree Of America’s Mysterious Third Largest Treasury Holder Ramps Higher (ZeroHedge, April 15, 2014):

In summary: someone, unclear who, operating through Belgium and most likely the Euroclear service (possible but unconfirmed), has added a record $141 billion in Treasurys since December, or the month in which Bernanke announced the start of the Taper, bringing the host’s total to an unprecedented $341 billion!

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Apr 14

From the article:

“Because one can just as easily make the case that as the global financial house of cards, teetering since the great financial crisis of 2008, and upright only thanks to the explicit “wealth effect” support of the final backstop – the world’s money printers – any protracted downward move which implicitly crushes the faith in the monetary religion, and crushes the uber-leveraged smart money community, will make the “drawdown” in both momo and S&P500 stocks in March 2000 seem like a pleasant walk in the part compared to what may be coming.”


- “Shadows Of March 2000″ – Goldman On The Great Momo Crash Of 2014 (Zerohedge, April 14, 2014):

Behold the great momo basket which after being the source of so much joy for momentum chasers over the past year, has mutated into the source of so much sorrow over the past two weeks.

Momo basket

We have bad news for hedge funds who, like Hugh Hendry in December of last year, threw fundamentals and caution to the wind and, with great reservations, jumped into this momo bandwagon in which mere buying beget more buying until nobody knew why anyone bought in the first place… and then everything crashed, leading to the worst day for hedge funds in a decade: according to Goldman’s David Kostin, whose job is to be a cheerleader for the intangible “wealth effect” leading to all too tangible Goldman bonuses: “The stock market will likely recover during the next few months… but not momentum stocks.”

Behold the (not so) great Momo crash of 2014:

SPX momo GS

First the bad news: according to Goldman not only will the momo stocks not rebound to previous highs and resume their leadership role, but clients increasingly are wondering if this is the second coming of the dot com bubble burst.

Conversations we are having with clients: Momentum reversal and the shadow of 2000

Our client discussions this week focused on two topics: Momentum reversal and comparisons between today and March 2000. Two questions dominated: “When will the reversal end?” and “Will the sell-off in momentum stocks drive a market-wide price decline as occurred in 2000?”

During the past month, momentum has plunged by 7%, a 10th percentile ranking of all monthly momentum returns since 1980. We define “momentum” as the relative performance of the best vs. worst performing S&P 500 stocks during the prior 12 months. We identified 46 similar distinct 10th percentile “drawdowns” with an average one-month return of -8% and a cumulative -10% return during six months.

Historical experience suggests the S&P 500, but not momentum, will likely recover during the next few months. Following the drawdowns, S&P 500 posted a 6-month return averaging +5% and delivered a positive return 70% of the time. Momentum declined by a further 4% on average, and 60% of the time the stocks posted a negative return.

Analysis of historical trading patterns around momentum drawdowns shows: (a) roughly 70% of the reversal is behind us following a 7% unwind during the last month; (b) an additional 3% downside exists to the momentum reversal during the next three months if the current episode follows the average historical experience; (c) if the pattern followed the path of a 25th percentile event a further 7% momentum downside would occur, or about double the reversal that has taken place so far; and (d) whenever the drawdown ends, momentum typically does NOT resume leadership. The best performing stocks during the 12 months leading up to the start of the drawdown do not subsequently outperform (see Exhibit 2).

MOMO performance after momo crash_0

So what are the good news? Well, Goldman is bullish on the non-MOMO stocks, which it sees as rising during the next 6 months by, if history is any precedent, 5%. Of course, the market merely regaining its all time highs by October will hardly please the investor community which is used to 20%+ return year after year. After all someone must benefit from the Fed’s ludicrous actions.

S&P 500 Index performance during 46 momentum reversals since 1980 suggests the broad market will likely rise steadily during the next six months by an average of 5%. Based on a current S&P 500 index level of 1815, a 5% rise would lift the index to just above 1900 which is our year-end 2014 forecast. A 25th percentile trajectory implies a flat equity market during the next six months while tracking at the 75th percentile would see S&P 500 climb by 15% to 2090 by the end of 3Q (see Exhibit 3).

S&P performance after momo crash

But most interesting is Goldman’s attempt to deny that this is the second coming of March 2000:

One historical momentum drawdown has come up repeatedly in recent conversations with clients: March 2000. The current sell-off in high growth and high valuation stocks, with a concentration in technology subsectors, has some similarities to the popping of the tech bubble in 2000.

Veteran investors will recall S&P 500 and tech-heavy Nasdaq peaked in March 2000. The indices eventually fell by 50% and 75%, respectively. It took the S&P 500 seven years to recover and establish a new high but Nasdaq still remains 25% below its all-time peak reached 14 years ago.

We believe the differences between 2000 and today are more important than the similarities and the recent momentum drawdown is unlikely to
precipitate a more extensive fall in share prices:

  • Recent returns are less dramatic. Although the trailing 12-month returns are similar (22% today versus 18% in 2000), the trailing 3-year and 5-year returns are much lower (51% vs. 107% and 161% vs. 227%, respectively).
  • Valuation is not nearly as stretched. S&P 500 currently trades at a forward P/E of 16x compared with 25x at the peak in 2000. The price/book ratio is 2.7x versus 6.Xx. The EV/sales is currently 1.8x compared with 2.7x in 2000.
  • More balanced market. The reason it is called the “Tech Bubble” is that 14% of the earnings of the S&P 500 came from Tech in 2000 but it accounted for 33% of the equity cap of the index. Today Tech contributes 19% of both earnings and market cap. Top five stocks in 2000 were 18% vs. 11% today.
  • Earnings growth expectations are far less aggressive. Bottom-up 2014 consensus EPS growth currently equals 9%, close to our top-down forecast of 8%. In 2000, consensus expected EPS growth equaled 17%.
  • Interest rates are dramatically lower. 3-month Treasury yields were 5.9% in 2000 vs. 0.05% today while ten-year yields were 6.0% vs. 2.7% today. The yield curve was inverted by 47 bp. Today the slope equals +229 bp.
  • Less new issuance. During 1Q 2000, 115 IPOs were completed for proceeds of $18 billion. In 1Q 2014, 63 completed deals raised $11 billion.

All great points, yet one thing is conspicuously missing and perhaps Goldman can clarify:

  • how much debt as a percentage of global GDP was held by the world’s major central banks then and now, and
  • how much consolidated global leverage, including shadow banking in both the US and China, as well as how many hundreds of trillions of derivatives notional outstanding existed then… and now

Because one can just as easily make the case that as the global financial house of cards, teetering since the great financial crisis of 2008, and upright only thanks to the explicit “wealth effect” support of the final backstop – the world’s money printers – any protracted downward move which implicitly crushes the faith in the monetary religion, and crushes the uber-leveraged smart money community, will make the “drawdown” in both momo and S&P500 stocks in March 2000 seem like a pleasant walk in the part compared to what may be coming.

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Apr 13

- HFT Purge Begins: SEC Prepares To “Remove” Some High Frequency Trading Firms (ZeroHedge, April 13, 2014):

Ever since Goldman’s anti-HFT Op-Ed less than a month ago, and since the even more recent full-hearted support by Goldman of Michael Lewis’ most recent entry into the anti-HFT crusade (one promoting the Goldman-supported IEX exchange), one thing has been clear: the days of market structure in its current format are numbered. This was further confirmed after Goldman exited both its legacy Spear Leeds & Kellogg designated market making post at the NYSE, and is said to be winding down its market-dominating dark pool, Sigma X.

It also means that our 5 year crusade against HFT – not because we want it replaced with a different, Goldman-backed exchange but because HFTs inherently destabilize the market (see May 2010 and the now daily flash crash in individual stocks and/or exchanges) – and specifically those most profitable but also most parasitic and predatory HFT strategiesContinue reading »

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Apr 11

- Herbalife Tumbles 14% On News Criminal Probe Has Been Launched Into Company (Zerohedge, April 11, 2014):

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.”

One can’t help but wonder if those “people familiar” have a material stake in Pershing Square, which as is widely known has an extensive short and put position in HLF shares, which as expected tumbled by 14% on the news. Continue reading »

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Apr 11

Flashback:

- At $72.8 TRILLION Presenting The Bank With The Biggest Derivative Exposure In The World (Hint: Not JPMorgan)


- Deutsche Bank: “The Oxygen That Has Fuelled The 5 Year Bull Market Is Slowly Draining Out” (ZeroHedge, April 11, 2014):

From Deutsche Bank’s Jim Reid:

We can’t help thinking that as it becomes ever clearer that the Fed is pretty much fixed in its determination to stop QE late this year, the oxygen that has fuelled the 5 year bull market is slowly draining out of the market. Clearly the Fed is still buying a significant amount of bonds and thus providing a lot of liquidity but clearly only for a few more months. We think this is creating a lot more two-way tension in equity markets. Supporting this argument is the fact that those sectors that have done best since the bull market/high liquidity period started are suffering in the recent correction. If we define the beginning of the bull market as having started on the 9th of March 2009 when stocks hit their financial crisis-lows, the NASDAQ Technology and Biotech indices have gained 254% and 281% respectively. The S&P 500 homebuilders index has gained 256% over the same period. For comparison, the S&P 500 has gained “only” 177%. Tech, biotech and homebuilders are now down 5%, 19% and 12% from their YTD peaks. This compares with 3.1% retracement in the S&P 500 from the record highs posted in early April this year. So it does seems that sectors that have benefited the most from easy policy are those that are selling off the most right now.

But… what about the fun-der-mentals?

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Apr 11

From the article:

Perhaps, like Goldman, Fidelity knows that “unless things change, there’s going to be a massive crash – a flash crash times ten…”


- The HFT Blowback Continues: Fidelity Creates New Trading Venue (ZeroHedge, April 10, 2014):

In what the firm believes will be an improvement over other so-called dark pools because it will be a collaboration among big mutual-fund firms, WSJ reports that the giant fund manager is quietly building a new trading venue designed to let big money managers sidestep many of the problems that they argue lead to unfair or costly trading – i.e. avoid the HFT predation. Fidelity, with $1.95 trillion of assets under management, is in the initial stages of planning the trading venue and has just begun to pitch the idea to other large asset managers. It seems 5 years of vociferous exposure and a Michael Lewis book may be beginning to starve the HFTs of their prey.

As WSJ reports,

Continue reading »

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Apr 11

- The Deer Is Back – Nasdaq Suffers Biggest Loss Since Nov 2011 (Zerohedge, April 10, 2014):

But the pretty people on TV said the Fed Minutes proved they were the most dovish ever and initial claims hit recovery lows… What a total disaster – Equity markets peaked within a few minutes of the open and never looked back – yesterday’s “Fed Cat Bounce” gave way to Really Red Thursday

  • Biotechs -6% worst day since Aug 11
  • Nasdaq -3.2% worst day since Nov 11
  • Russell 2000 -3.1% worst day in 12 months
  • S&P “Growth” -2.5% worst day in 10 months
  • Financials -2.2% worst day in 10 weeks
  • Social Media ETF -4% worst day in 11 months
  • VIX +17% biggest rise in 3 months
  • Nikkei knackered… Hits 14,000 – down 14.25% from highs to six month lows

Nasdaq and Russell are -6.5% from recent highs and the S&P is -3.5% from its highs…

deer headlights

deer headlights

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Apr 11

- Japan Freefall Continues – Bank Stocks Hit Bear Market (ZeroHedge, April 10, 2014):

The Nikkei 225 is down over 700 points from the post-FOMC minutes exuberance with major volume hitting the open in Japan.

Japanese stocks are now down 15% from their high and trading at six-month lows (and the cheapest to the Dow in 15 months). USDJPY is tumbling further (though the standard opening knee-jerk stop-run is being attempted).

Within the broader Topix index, Japanese bank stocks have just hit a bear market (down over 20% from their highs) at 10-months.

When asked how he felt about this, we suspect Abe said “depends.”

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Apr 09

Bill-Gates-Monsanto

More info on Monsanto HERE.


Added: Apr 8, 2014

Organic Spies

Description:

Continue reading »

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Apr 09

- What In The World Is Happening To The Nasdaq? (Economic Collapse, April 7, 2014):

All of a sudden, the Nasdaq is absolutely tanking.  On Monday, it fell more than 1 percent after dropping 3.6 percent on Thursday and Friday combined.  At this point, the Nasdaq is off to the worst start to a year that we have seen since 2008, and we all remember what happened back then.  So why is this happening?  In recent years, the Nasdaq has been ground zero for “dotcom bubble 2.0″.  The hottest stocks in the entire world are on the Nasdaq – we are talking about stocks like Yahoo, Netflix, Apple, Tesla, Google and Facebook.  Those stocks have gone to absolutely incredible heights, but now they are starting to fall.  Some are blaming insider selling, and without a doubt the “smart money” is starting to flee the stock market.  Just check out this chart.  Others are blaming low expectations for first-quarter earnings or the tapering of quantitative easing by the Federal Reserve.  But whatever is causing this decline, it is starting to get alarming.  The Nasdaq just experienced its largest three day fall since November 2011.

No stock can resist gravity forever.  What goes up must eventually come down.  This is especially true for stock prices that become grotesquely distorted.

Continue reading »

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Apr 08

- This Time Better Be Different (ZeroHedge, April 7, 2014):

Today’s screengrab du jour comes by way of Bloomberg TV, reminding us that this time better be different, or else (even though as we pointed out the market’s forward PE multiple is now identical to where it was at the last bubble peak). And keep in mind, this is after the not so great momo crash of 2014.

PE irrationality

And now, cue the hypno-toad: “healthy correction… healthy correction… healthy correction”

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Apr 07

- The Day That BTFD Failed (Zerohedge, April 6, 2014):

We noted on Friday that something happened in the US stock market that day that has not been seen since the Fed unveiled QE4EVA. It went quietly under the radar of the mainstream media; talking-heads did not mention it; and strategists shrugged it off. What happened? BTFD Failed… and, as BofAML’s Macneil Curry warns, popular trades are in trouble (bad news for equity bulls and treasury bears).

As a gentle reminder, the main investing thesis of the last few years has been BTFD (because buying the fucking dip has worked every time in the past, it will continue to work – therefore BFTD, BTFATH, and BTFWWIII)…

But – for the first time in 18 months… BTFD failed on Friday… (each dip was met with higher highs)…

20140404_EOD8

Until Friday.. when the Nasdaq, having “dipped” to the 100DMA was “bought” back above the 50DMA but failed to make new highs and in fact made new lows… Continue reading »

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Apr 04

- Momos Mauled: Nasdaq Crashes Most Since 2011, Stocks Tumble From Record High (Zerohedge, April 4, 2014):

The jobs number expectation had been falling for a few days into the print this morning and despite the desperate efforts of every status-quo-hugging TV talking-head’s Goldilocks scenario, it was not a good report – it missed low expectations and it seems the market is realizing (having been told the bar is very high for an un-taper) that the Fed will not rescue it any time soon. GDP expectations are also tumbling and thus the hope-driven hyper-growth stocks have been monkey-hammered. This is the worst swing for the Nasdaq since Dec 2011 (with Russell, Dow, and Nasdaq -1% YTD). Momos and Biotechs were blamed but this was broad-based selling as JPY carry was unwound in a hurry. Gold rallied above $1300 (+8.1% YTD) as bond yield ripped lower for 5Y’s biggest daily drop in 10 weeks (short-end -4bps on the week). VIX pushed back above 14 (but it was clear derisking exposure – as opposed to hedging positions – was the order of the day).

“Not” Off The Lows…

Lead-ilocks!

But gold winning Year-to-Date…

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Apr 04

- Peak Bubble 2.0: The Market Is Now Exactly As Overvalued As It Was At The Last Bubble Peak (Zerohedge, April 4, 2014):

According to this chart from JPM the market’s forward P/E ratio now is precisely 15.2x. What was it at precisely the last bubble peak on October 9, 2007? 15.2x.

Everyone knows what happened next.

JPM SPX

Source: JPM

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Apr 04

- First Nasdaq Stock Flash-Crashes, Now The Nasdaq Index Is Crashing (Zerohedge, April 4, 2014):

UPDATE: Nasdaq negative year-to-date; Biotechs 3-month lows. AMZN, FB, TWTR, NFLX, P all in Bear market territory

Shortly after 946amET, the stock of The Nasdaq OMX Group suddenly dropped in a mini-flash-crash from from 35.98 to 35.00 in just over 2 seconds on approximately 100,000 shares. As Nanex notes, this is what high-frequency-trading liquidity looks like. But now, an hour or so later, the Nasdaq index and most especialy its Biotech and high-growth names are being crushed. Biotechs are near 3-month lows, Momos are down 16 to 18% since FOMC, and Nasdaq is about to go negative for the year.

Continue reading »

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Apr 02

FYI.


- Jon Stewart On HFT: “It’s Not American; It’s Not Even Capitalism. It’s Cheating” (ZeroHedge, April 2, 2014):

Jon Stewart is stunned by the world of HFT (where “stock exchanges sell the right to advance information to high frequency traders [by locating their computers closest to the exchange]“) and the mainstream media’s immediate jump to defend it “as good for us”, but as Michael Lewis explains “anyone whose livelihood is dependent on Wall Street [from CNBC, FOX and even the SEC] is invested in this… it sounds like a conspiracy.”

In this excellent interview, The Daily Show doubter asks “we have set a standard for share buying (you can’t but 1/100th of a share) so why not set a standard for frequency of trading?” Lewis stoic response sums up our world perfectly, “in a sane world, we would… but the money is too big,” and adds that indeed that is what IEX is doing. The HFTs “function on volume and volatility” alone and “they know the prices before you do… which is illegal if it’s a person, but as a computer, meh?” Continue reading »

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Apr 01

Flash Boys - A Wall Street Revolt
@Amazon.com: Flash Boys: A Wall Street Revolt Price: $17.46

From the article:

The stock market really was rigged… “It’s 2009,” Katsuyama says. “This had been happening to me for almost two years. There’s no way I’m the first guy to have figured this out. So what happened to everyone else?” The question seemed to answer itself: Anyone who understood the problem was making money off it…

- Read Michael Lewis’ Flash Boys: A Wall Street Revolt: An Adaptation (ZeroHedge, March 31, 2014):

This article is adapted from the book “Flash Boys: A Wall Street Revolt,” by Michael Lewis, published by W. W. Norton & Company. Courtesy of The New York Times Magazine. The full Michael Lewis book can be purchased on Amazon.

The Wolf Hunters of Wall Street

Before the collapse of the U.S. financial system in 2008, Brad Katsuyama could tell himself that he bore no responsibility for that system. He worked for the Royal Bank of Canada, for a start. RBC might have been the fifth-biggest bank in North America, by some measures, but it was on nobody’s mental map of Wall Street. It was stable and relatively virtuous and soon to be known for having resisted the temptation to make bad subprime loans to Americans or peddle them to ignorant investors. But its management didn’t understand just what an afterthought the bank was — on the rare occasions American financiers thought about it at all. Katsuyama’s bosses sent him to New York from Toronto in 2002, when he was 23, as part of a “big push” for the bank to become a player on Wall Street. The sad truth was that hardly anyone noticed it. “The people in Canada are always saying, ‘We’re paying too much for people in the United States,’ ” Katsuyama says. “What they don’t realize is that the reason you have to pay them too much is that no one wants to work for RBC. RBC is a nobody.”

Continue reading »

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Mar 31

- Check out these 8 new ‘record highs’. #6 is a real shocker. (Sovereign Man, March 31, 2014):

There’s nothing like a nice cup of reality first thing on Monday morning.

If you’ve been a reader for any length of time, you know one of the things I periodically do is scan headlines for phrases like “record high” or “all time high”.

The results can often given an interesting big picture perspective of what’s happening in the world. Continue reading »

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Mar 31

H/t reader M.G.:

“The Stock Market is Rigged in favor of High Frequency trades” says an article on Reuters. No kidding.
The article says better than half of all transactions are now HFT…..actually, it is 85%. I call it skim and sell.


- U.S. stock markets are rigged, says author Michael Lewis (Reuters, March 31, 2014)

- “The Market Is Rigged” – Michael Lewis Explains How HFTs “Screw” Investors Every Day (ZeroHedge, March 31, 2014):

It was almost excatly five years ago to the day, on April 10, 2009, that Zero Hedge – widely mocked at the time by “experts” – began its crusade against HFT and the perils of algorithmic trading (which of course were validated a year later with the Flash Crash). In the interim period we wrote hundreds if not thousands of articles discussing and explaining the pernicious, parasitic and destabilizing role HFT plays in modern market topology, and how with every passing day, markets are becoming increasingly more brittle, illiquid and, in one word, broken. Or, as Michael Lewis put it most succinctly, “rigged.” With Lewis’ appearance last night on 60 Minutes to promote his book Flash Boys, and to finally expose the HFT scourge for all to see, we consider our crusade against HFT finished. At this point it is up to the general population to decide if this season’s participants on Dancing with the Stars or the fate of Honet Boo Boo is more important than having fair and unrigged markets (obviously, we know the answer).

For those who missed it, here is the full video again.

And broken down by segment: in the clip below, Lewis explains how an extra millisecond allows high-frequency traders to exploit computerized trading in the U.S. stock market. By “beating” investors to exchanges, Lewis argues that high-frequency traders can buy stocks and quickly sell them back at higher prices. Continue reading »

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Mar 24

- This Chart Is A True Picture Of the Unemployment Crisis In America (Testosterone Pit, March 22, 2014):

The unemployment rate is a complex measure based on surveys and some grotesque definitions, including who gets counted as “unemployed.” These definitions eliminate millions of jobless people from the list of the officially “unemployed.” The resulting grotesque data – grotesque in, grotesque out – is then adjusted to paper over nagging real-world issues, such as seasonality. The result is a number that is easy to toss around during speeches but hard to use for gauging what’s really going on in the labor market.

The unemployment rate’s inability to accurately portray the labor market has caught so much flak that even the Fed abandoned it as a trigger for unwinding its zero-interest-rate policy. Instead, it will “take into account a wide range of information….”

Continue reading »

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Mar 21

- James Montier: “The Market Is Overvalued By 50%-70%” And “Nothing At All” Is Attractively Valued (ZeroHedge, March 21, 2014):

A month ago we presented a must read interview by Swiss Finanz und Wirtschaft with respected value investor Howard Marks, in which, when explaining the motives driving rational investing he summarized simply, “in the end, the devil always wins.” Today, we are happy to bring our readers the following interview with one of our favorite strategists, GMO’s James Montier, in which true to form, Montier packs no punches, and says that the market is now overvalued by 50% to 70%, adding that there is “nothing at all” that has an attractive valuation, and that he sees a “hideous opportunity set.”

Still, despite the clear bubble in stocks, he is unsure what to do since financial repression could last very long with “the average length of periods of financial repression in history is 22 years. We’ve only had five years so far.” Finally on the topic of Japan and Abenomics, “for me, there is too much hope and expectation embedded in Abe, not unlike Obama in 2009: There was so much hope projected into Obama that he could only disappoint.” He did, well… everyone but the 0.001% billionaires. Then again in a world in which there is only hope left, what happens when that too is removed?

james montier

From Finanz und Wirtschaft

James Montier is a full-blooded value investor. Pickings are slim these days, though, says the member of the asset allocation team at the Boston-based asset manager GMO. He sees a «hideous opportunity set» for investors, with the S&P-500 being overvalued by 50 to 70 percent.

James, are you able to find anything in today’s financial markets that still has an attractive valuation?

Continue reading »

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Mar 20

- Chinese Stocks Enter Bear Market Following 2 More Defaults Overnight (ZeroHedge, March 20, 2014):

Following the default of 2 more corporations last night, Hang Seng’s index of China Enterprises plunged to 8-month lows and officially entered bear market territory. Overnight angst in the Chinese currency markets (which saw the Yuan trade back to 1-year lows) has sparked broad commodity weakness (as CCFD unwinds en masse) with copper giving back most of yesterday’s major short squeeze gains back. Chinese corporate bond prices also tumbled to one-month lows.

Hang Seng’s China Enterprise Index (the most liquid vehicle for trading Chinese stocks for foreigners) has entered a bear market

20140320_china1

as cash-for-commodity financing deals continue the unwind, Continue reading »

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Mar 20

- New doomsday poll: 99.9% risk of 2014 crash (MarketWatch, March 17, 2014):

Commentary: Black-swan crisis warning for now through mid-April

SAN LUIS OBISPO, Calif. (MarketWatch) — Global risks are accelerating. This is our fourth major poll update of industry leaders: A critical review of their warnings from early last year when we first predicted a 87% risk of a crash: Bernanke’s Fed saw an “unsustainable bubble” … Gross: “credit supernova” … Gundlach: “kaboom ahead” … Ellis: “Don’t own bonds” … Shilling: “shocker” … Roubini: “Prepare for perfect storm” … Shiller: “Irrational exuberance is back” … Schiff: “Doubling down” on “doomsday” prediction … InvestmentNews’ warning 90,000 advisers: “tick, tick … boom!”

A few weeks later the crash risk was up to 98%. Then a dramatic preholiday uptick in investor sentiment. America’s collective unconscious tired of negativity after a Halloween headline: “Economic guillotine dead ahead.” A week later, 2014 became the “Year of the Boom.” Bank of America’s chief strategist screamed: “Bet on the bulls now.” The Great Gatsby spirit was celebrating the holidays: “Even old grumpy Dr. Doom, celeb economist Nouriel Roubini, began humming a happy tune all over television: “A global recovery is going to occur, get into equities.”

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Mar 18

putin smile_0

- Putin Formally Annexes Crimea, City Of Sevastopol To Russian Federation (ZeroHedge, March 18, 2014):

And there it is:

  • PUTIN ASKS FOR CRIMEA, CITY OF SEVASTOPOL TO BE ADDED TO RUSSIA
  • PUTIN SAYS WILL SUBMIT DRAFT LAW ON BRINGING CRIMEA INTO RUSSIA TO PARLIAMENT ON TUESDAY
  • PUTIN CALLS FOR RATIFICATION OF TREATY ON CRIMEA, SEVASTOPOL

And the inevitable conclusion:

  • RUSSIA, CRIMEA, SEVASTOPOL SIGN AGREEMENT ON ENTERING ACCESSION
  • REPUBLIC OF CRIMEA CONSIDERED PART OF RUSSIA FROM DATE OF SIGNING AGREEMENT – KREMLIN

And futures, stocks, and risk in general is soaring, sending the Kremlin precisely the message it needs to know that there is absolutely nothing wrong with this. Perhaps if Russia had annexed all of Ukraine, or the Baltics, or maybe even Poland, the S&P would have soared over 2000 already?

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Mar 17

- Russian Stocks, Ruble Respond To Obama’s Sanctions By Extending Gains (ZeroHedge, March 17, 2014):

Despite no move in gold, silver, or US Treasuries, US equities (and JPY crosses) remain bid. But perhaps the most intriguing reaction to Obama’s escalation is the surge higher in Russian stocks and rally in the Ruble… Putin and his oligarch friends must be pleased…

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Charts: Bloomberg

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Mar 15

- Gazprom Chairman Sold All His Shares Just Before Russia Invaded Crimea (ZeroHedge, March 14, 2014):

We are sure it is just coincidence – and awkward combination of luck and suspicious timing – but Vedomosti reports that Viktor Zubkov, the Chairman of Russia’s massive energy monopoly Gazprom, dumped his entire stake in the company just a few weeks before Vladimir Putin crossed the red line. Gazprom shares have dropped 25% in the last 3 weeks so his timing was impeccible.

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Via Vedomosti (Google Translate),

The Chairman of the Board of Directors “Gazprom” Viktor Zubkov has sold his stake in the company, it follows from the monopoly.

The change in share occurred February 11, 2014, the issuer learned about it on March 13.

Now Zubkov 0% stake in the company.

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Mar 14

- Russia Crashes Into Bear Market As Europe Drops Most In 9 Months (ZeroHedge, March 14, 2014):

Broad European stocks dropped 3.3% on the week – the biggest fall since June of last year. Despite a late-day surge on the back of surprising relief from Lavrov’s comments on not invading Ukraine (well, he’s hardly going to pre-announce) Germany has seen its worst 2-week drop in 28 months. Sovereign bond spreads rose 10-13bps on the week for the peripheral nations (which is actually notable given how tight they trade now). Russian stocks have plunged 22% from Feb 18th highs and Russian 10Y bond yields surged to near 10% yields. Ukraine’s short-date bonds remain at yields around 50% and the Hyrvnia is losing ground.

Germany’s DAX is back at 5-month lows and this is the worst 2-week slide since Nov 2011…

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Russia enters a very fast bear market…

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As Russian 10Y yields surge… Continue reading »

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Mar 07

Prepare for collapse.


- Obama’s Growth Forecast Bullish, Wall Street Exuberant, Corporate Insiders Freak-Out Bearish (Testosterone Pit, March 4, 2014):

In his budget for fiscal 2015, President Obama assumed courageously or just conveniently that the US economy would grow 3.1% in 2014, quite a jump after having lumbered along at 1.9% in 2013, and given what looks to be a soft start for the year. But according to the budget proposal, the economy would boom. It would be the fastest growth rate since 2005. It would be the most exciting economy in nine years.

That level of growth would solve a lot of problems. Citing the rebound in housing – the price bubble, apparently, though sales are plunging – along with strength in manufacturing and oil production, the budget statement claimed that there were “encouraging signs emerging across industries.” And so the economy “is moving forward and businesses are creating jobs, but our top priority must be accelerating that growth….”

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Feb 19

This…

- What I Saw When I Crashed A Wall Street Secret Society: One-Percent Jokes And Plutocrats In Drag

… needs to get more coverage.


What I Saw When I Crashed a Wall Street Secret Society

- Kappa Beta Phi Exposed (Redux) (ZeroHedge, Feb 18, 2014):

As we initially exposed over five years ago, with luminary frat brothers and sister such as Jimmy Cayne, Richard Fuld, Stan O’Neil, Martin Gruss, Michael Bloomberg, Jon Corzine, Mary Shapiro, Alan Schwartz, Larry Fink, Larry Fink, Wilbur Ross, James McDonald, this “secret” organization puts the Masons, Bilderbergs, Skull and Bones, Templars, Fight Club and all other secret societies to shame. Now, as New York Magazine infiltrates the inner workings of the “Kappa Beta Phi” society, Liberty Blitzkrieg’s Mike Krieger notes the following will confirm what everyone already thought – that a great many of these oligarch financiers are complete and total sociopaths and a menace to society.

Via ZeroHedge,

I can still remember
How the Dow Jones used to make me smile.
And I learned my trade and had my chance
The music played I did my dance
And I made seven figures for a while.
I can’t remember if I cried
when they pulled the plug on Countrywide…
It sucks that Iceland is out of ice….
Bye, Bye to my piece of the pie…
Now I travel coach whenever I fly…
Maybe this will be the day that I die.

 

Via Mike Krieger via Liberty Blitzkrieg blog,

Here’s What Happened When a Journalist Crashed a Wall Street Secret Society

Before we get into this post, let’s review the definition of Antisocial Personality Disorder according to the U.S. National Library of Medicine: Continue reading »

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Feb 15

20 Signs That The Global Economic Crisis Is Starting To Catch Fire

- 20 Signs That The Global Economic Crisis Is Starting To Catch Fire (Economic Collapse, Feb 14, 2014):

If you have been waiting for the “global economic crisis” to begin, just open up your eyes and look around.  I know that most Americans tend to ignore what happens in the rest of the world because they consider it to be “irrelevant” to their daily lives, but the truth is that the massive economic problems that are currently sweeping across Europe, Asia and South America are going to be affecting all of us here in the U.S. very soon.  Sadly, most of the big news organizations in this country seem to be more concerned about the fate of Justin Bieber’s wax statue in Times Square than about the horrible financial nightmare that is gripping emerging markets all over the planet.  After a brief period of relative calm, we are beginning to see signs of global financial instability that are unlike anything that we have witnessed since the financial crisis of 2008.  As you will see below, the problems are not just isolated to a few countries.  This is truly a global phenomenon.

Over the past few years, the Federal Reserve and other global central banks have inflated an unprecedented financial bubble with their reckless money printing.  Much of this “hot money” poured into emerging markets all over the world.  But now that the Federal Reserve has begun “tapering” quantitative easing, investors are taking this as a sign that the party is ending.  Money is being pulled out of emerging markets all over the globe at a staggering pace and this is creating a tremendous amount of financial instability.  In addition, the economic problems that have been steadily growing over the past few years in established economies throughout Europe and Asia just continue to escalate.

The following are 20 signs that the global economic crisis is starting to catch fire: Continue reading »

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