Lunes 03/03/15 semana del empleo

[Fenix]

Self-Aware? World's Largest Hedge Fund Shifts Strategy To Artificial Intelligence
Submitted by Tyler D

Despite warnings from the likes of Elon Musk and Stephen Hawking (and of course, Sarah Connor), Ray Dalio's $165 billion AUM hedge fund Bridgewater will start a new, artificial-intelligence unit next month. Despite the "new normal"'s total reversal of any and every historical rational trading pattern, the unit will attempt to create trading algorithms that make predictions based on historical data and statistical probabilities, as "machine learning is the new wave of investing for the next 20 years and the smart players are focusing on it." Does this mean the talking heads of CNBC, with their 'memes', 'myths', and 'mumbling' rationales for it always being a good time to buy are now obsolete? Or did the market just become self-aware?

As Bloomberg reports,The world’s largest hedge fund manager is banking on machines...

Ray Dalio’s $165 billion Bridgewater Associates will start a new, artificial-intelligence unit next month with about half a dozen people, according to a person with knowledge of the matter. The team will report to David Ferrucci, who joined Bridgewater at the end of 2012 after leading the International Business Machines Corp. engineers that developed Watson, the computer that beat human players on the television quiz show “Jeopardy!”

The unit will create trading algorithms that make predictions based on historical data and statistical probabilities, said the person, who asked not to be identified because the information is private. The programs will learn as markets change and adapt to new information, as opposed to those that follow static instructions. A spokeswoman for Westport, Connecticut-based Bridgewater declined to comment on the team.

“Machine learning is the new wave of investing for the next 20 years and the smart players are focusing on it,” Dolfino said.

Some data scientists have been leaving firms outside of finance for larger paychecks at hedge funds, according to Dolfino. Quantitative firms have been on a winning streak and last year produced some of the highest returns in the $2.8 trillion hedge fund industry, by capturing price discrepancies across markets, making money from a plunge in oil prices and by purchasing government bonds that human traders dismissed.

Is it just us or does it seem that everyone has forgotten the flash-crash and the quant crash before that when all the machines chased down the same rabbit holes?



China Cuts Interest Rates, Takes Number Of Central Banks Easing In 2015 To 21

Hours ago on Saturday, the country whose currency is largely pegged to the dollar which itself is now anticipating a rate hike in the coming months, surprised the world by confirming its economic slowdown yet again following a recent rate cut just this past November when it lowered its benchmark rate by 40 bps, after it again cut benchmark lending and deposit rates by 25 bps starting on March 1. Specifically, the PBOC will lower the one-year lending rate to 5.35% from 5.6% and its one-year deposit rate to 2.5% from 2.75%. It also said it would raise the maximum interest rate on bank deposits to 130% of the benchmark rate from 120%.

From the PBOC announcement:

People's Bank of China decided to cut financial institutions RMB benchmark lending and deposit interest rates since March 1, 2015. The one-year benchmark lending rate by 0.25 percentage point to 5.35%; year benchmark deposit rate by 0.25 percentage points to 2.5%, while the combination of market-oriented reforms to promote the interest rate, the upper limit of the floating range of interest rates on deposits of financial institutions by the deposit base 1.2 times to 1.3 times the interest rate adjustment; adjusted lending rates and individual housing provident fund deposit and other deposit and lending rates.

As the WSJ notes, "the latest move took place just as China’s legislature, the National People’s Congress, prepared to gather Thursday for its annual meeting. The gathering is usually when China unveils its economic growth target for the year. Last year’s growth of 7.4% came in just below the 2014 target of about 7.5%. It was the lowest growth rate in nearly a quarter century."

However, just so the rate cut is not seen as being, well, a rate cut and an easing shift to China's monetary policy especially considering that the November rate cut did absolutely nothing to boost China's all important housing market, the PBOC was quick to note that the second rate cut in 4 months is "to keep real interest rates at level to adapt to economic growth, prices, employment trends, and does not represent a sound monetary policy changes. China's economic development has entered a new normal, and development conditions and development environments are changing, and its core is to change the way of economic development and economic structure."

In other words, when is a rate cut not a rate cut? When it's in China. The PBOC also provided the following stock announcement explaining what happens next:

Next, we will continue to follow the CPC Central Committee and the State Council, the strategic plan, adhere to the general tone of the work while maintaining stability and macroeconomic policy should be steady, micro policies to live the general idea, more actively adapt to the economic development of the new normal, the transfer and adjustment structure in a more important position, maintain the continuity and stability of policy and continue to implement a prudent monetary policy, pay more attention to an appropriate degree, comprehensive use of various monetary policy tools, timely and appropriate fine-tuning for the adjustment of economic structure and the transformation and upgrading Moderate to create a neutral monetary and financial environment, and promote economic science and sustainable development. At the same time, more focus on innovation, blending in regulatory reform among the tight monetary policy combined with the deepening of reform, timely for businesses and individuals through the introduction of certificates of deposit, etc., continue to expand the financial institution independent pricing space, orderly interest rate reform and further improve the rate-control system, improve the interest rate transmission mechanism and constantly enhance the ability of the central bank interest rate regulation and macro-control effectiveness.

Said otherwise, a whole lot of reform promises. Kinda like Greece. Of course, what is not said is that as long as the Fed keeps threatening to and eventually actually hiking rates, not to mention the global economic contraction persists, China will have no choice but to engage in non-monetary, non-policy rate cuts for the indefinite future.

Here is Goldman's recap of what China did:

The People's Bank of China (PBOC) announced that benchmark lending and deposit rates will both be cut by 25 bps, effective from March 1. In addition, the deposit rate ceiling will be raised from 1.2 times to 1.3 times the benchmark interest rates, which effectively lowers the maximum deposit rate by 5 bp from 3.3% pa to 3.25% pa.



Economic growth is widely viewed as weak in early 2015, despite modestly better HSBC flash PMI data for February. The official PMI data to be released tomorrow (which should be known to senior government officials at this point and may well have remained below 50) might have been one factor behind the decision to cut now. The central bank also has a tendency not to take major policy actions during the CPPCC and NPC, which will start on March 3 and close on March 15. Waiting until after those events would have then implied more than two full weeks of delay.



The decision to cut benchmark interest rates again has been widely expected by the market (including us). There was also some speculation that the deposit rate ceiling would be increased. While the raise in the ceiling did come about, we believe a larger cut to the benchmark deposit rate arguably would have been more desirable as it could help lower funding costs more broadly in the economy. The increase in deposit rate ceiling is also a small further step towards interest rate liberalization. The cut to the benchmark lending rate is also smaller than the last cut in November (40 bps). This may make some observers view the move as cautious.



We expect further policy loosening in the coming months. The next move is likely to be a RRR cut, likely in 2Q, but a cut towards the end of 1Q cannot be ruled out (RRR cut is also a tool of liquidity management). Further benchmark interest rate cuts are also possible. The government is also loosening other policies such as allowing the exchange rate to depreciate modestly against the USD and stepping up infrastructure investments. These measures will likely provide some support for short-term growth, though the cautious nature of the measures so far may raise some questions in terms of whether the economy will experience a rebound as significant as the one seen in Q2 2014.

In conclusion, expect markets to soar even more on Monday while China continues to stealthily devalue the Renminbi in order to fight a housing market collapse that is now worse than what the US experienced after Lehman failed.

* * *

And for all those asking, here is the revised list of now 21 countries who have cut interest rates in just the first 2 months of 2015:

For those asking, here is the full, updated list of 20 central banks easing so far in 2015 courtesy of Reuters:

1. Jan. 1 UZBEKISTAN

Uzbekistan's central bank cuts its refinancing rate to 9 percent from 10 percent.

2. Jan. 7/Feb. 4 ROMANIA

Romania's central bank cuts its key interest rate by a total of 50 basis points, taking it to a new record low of 2.25 percent. Most analysts polled by Reuters had expected the latest cut.

3. Jan. 15 SWITZERLAND

The Swiss National Bank stuns markets by scrapping the franc's three-year-old exchange rate cap to the euro, leading to an unprecedented surge in the currency. This de facto tightening, however, is in part offset by a cut in the interest rate on certain sight deposit account balances by 0.5 percentage points to -0.75 percent.

4. Jan. 15 INDIA

The Reserve Bank of India surprises markets with a 25 basis point cut in rates to 7.75 percent and signals it could lower them further, amid signs of cooling inflation and growth struggling to recover from its weakest levels since the 1980s.

5. Jan. 15 EGYPT

Egypt's central bank makes a surprise 50 basis point cut in its main interest rates, reducing the overnight deposit and lending rates to 8.75 and 9.75 percent, respectively.

6. Jan. 16 PERU

Peru's central bank surprises the market with a cut in its benchmark interest rate to 3.25 percent from 3.5 percent after the country posts its worst monthly economic expansion since 2009.

7. Jan. 20 TURKEY

Turkey's central bank lowers its main interest rate, but draws heavy criticism from government ministers who say the 50 basis point cut, five months before a parliamentary election, is not enough to support growth.

8. Jan. 21 CANADA

The Bank of Canada shocks markets by cutting interest rates to 0.75 percent from 1 percent, where it had been since September 2010, ending the longest period of unchanged rates in Canada since 1950.

9. Jan. 22 EUROPEAN CENTRAL BANK

The ECB launches a government bond-buying programme which will pump over a trillion euros into a sagging economy starting in March and running through to September next year, and perhaps beyond.

10. Jan. 24 PAKISTAN

Pakistan's central bank cuts its key discount rate to 8.5 percent from 9.5 percent, citing lower inflationary pressure due to falling global oil prices. Central Bank Governor Ashraf Wathra says the new rate will be in place for two months, until the next central bank meeting to discuss further policy.

11. Jan. 28 SINGAPORE

The Monetary Authority of Singapore unexpectedly eases policy, saying in an unscheduled policy statement that it will reduce the slope of its policy band for the Singapore dollar because the inflation outlook has "shifted significantly" since its last review in October 2014.

12. Jan. 28 ALBANIA
Albania's central bank cuts its benchmark interest rate to a record low 2 percent. This follows three rate cuts last year, the most recent in November.

13. Jan. 30 RUSSIA
Russia's central bank unexpectedly cuts its one-week minimum auction repo rate by two percentage points to 15 percent, a little over a month after raising it by 6.5 points to 17 percent, as fears of recession mount following the fall in global oil prices and Western sanctions over the Ukraine crisis.

14. Feb. 3 AUSTRALIA
The Reserve Bank of Australia cuts its cash rate to an all-time low of 2.25 percent, seeking to spur a sluggish economy while keeping downward pressure on the local dollar.

15. Feb. 4 CHINA
China's central bank makes a system-wide cut to bank reserve requirements -- its first in more than two years -- to unleash a flood of liquidity to fight off economic slowdown and looming deflation.

16. Jan. 19/22/29/Feb. 5 DENMARK
The Danish central bank cuts interest rates a remarkable four times in less than three weeks, and intervenes regularly in the currency market to keep the crown within the narrow range of its peg to the euro.

17. Feb. 13 SWEDEN
Sweden's central bank cut its key repo rate to -0.1 percent from zero where it had been since October, and said it would buy 10 billion Swedish crowns worth of bonds

18. February 17, INDONESIA
Indonesia’s central bank unexpectedly cut its main interest rate for the first time in three years

19. February 18, BOTSWANA
The Bank of Botswana reduced its benchmark interest rate for the first time in more than a year to help support the economy as inflation pressures ease.
The rate was cut by 1 percentage point to 6.5 percent, the first adjustment since Oct. 2013, the central bank said in an e-mailed statement on Wednesday.

20. February 23, ISRAEL

The Bank of Israel reduced its interest rate by 0.15 percentage points, to 0.10 percent in order to stimulate a return of the inflation rate to within the price stability target of 1–3 percent a year over the next twelve months, and to support growth while maintaining financial stability.

21. February 28, CHINA

The People's Bank of China cut its interest rate by 25 bps, when it lowered its one-year lending rate to 5.35% from 5.6% and its one-year deposit rate to 2.5% from 2.75%. It also said it would raise the maximum interest rate on bank deposits to 130% of the benchmark rate from 120%.

[Carlos38]

Houston, March 2, 2015 (GLOBE NEWSWIRE) -- BPZ Resources, Inc. (NYSE: BPZ) (BVL: BPZ) today announced that it will exercise a provision under the bond indenture for the 6.5% Convertible Notes due March 1, 2015 with an outstanding principal amount of $60 million ("collectively, the Notes"), whereby the Company will avail itself of the 10-day grace period provided for in the Indenture on principal and a 30-day grace period on interest due for a total amount due of approximately $62 million. Once exercised, the grace periods will expire on March 10, 2015 for principal and March 30, 2015 for interest.

The Company is engaged in discussions with representatives of certain holders of the Notes of the Company's Convertible Bonds issued with combined outstanding principal amounts of $229 million, maturing March 1, 2015 and October 1, 2017. These discussions include among other items, the potential terms under which one or both bond issues could be restructured to provide a capital structure which would allow the Company to continue developing its oil and gas assets. Discussions are also underway with other potential investors regarding alternative financing solutions.

While the Company is reviewing several options, an appropriate solution may not be found during the grace period. If the Company does not make the payment due on the 2015 Notes and a resolution cannot be reached by the end of the grace period, the Company would be in default under the terms of the 2015 Indenture. This action would result in cross-defaults to the 2017 Convertible Bond issue, and could force the Company to seek Chapter 11 Bankruptcy protection, which is designed to provide protection from creditors while a company seeks restructuring and financing solutions to enable it to remain an economically viable business.

ABOUT BPZ ENERGY

BPZ Energy, which trades as BPZ Resources, Inc. under ticker symbol BPZ on the New York Stock Exchange and the Bolsa de Valores in Lima, is an independent oil and gas exploration and production company which has license contracts covering approximately 1.9 million net acres in offshore and onshore Peru. The Company holds a 51% working interest in offshore Block Z-1, which it is developing in partnership with Pacific Rubiales Energy Corp. The Company also holds 100% working interests in three onshore blocks. Please visit www.bpzenergy.com for more information.

FORWARD LOOKING STATEMENT

This Press Release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. These forward looking statements are based on our current expectations about our company, our properties, our estimates of required capital expenditures and our industry. You can identify these forward-looking statements when you see us using words such as "will," "expected," "estimated," and "prospective," and other similar expressions. These forward-looking statements involve risks and uncertainties.

Our actual results could differ materially from those anticipated in these forward looking statements. Such uncertainties include: the availability and access, in general, of funds to meet principal and interest payment obligations under our debt and to fund our operations and necessary capital expenditures, either through cash on hand, cash flows from operating activities, further borrowings and alternative financing sources and, in particular, our ability to fund debt obligations; the outcome of our discussions with certain note holders regarding restructuring our bonds; our ability to comply with all covenants in our indentures, any violation of which, if not cured in a timely manner, could trigger a default of our other obligations under cross-default provisions; our ability to repay debt prior to or when it becomes due and/or successfully access the capital or credit markets to refinance that debt through new issuances, exchange offers or otherwise, including restructuring our balance sheet and leverage position, especially given recent volatility and disruption in the oil and gas industry; successful operation of our new platform in Corvina; the success of our project financing efforts; accuracy of well test results; results of seismic testing; well refurbishment efforts; successful production of indicated reserves; satisfaction of well test period requirements; successful installation of required permanent processing facilities; receipt of all required permits; the successful management of our capital expenditures; and other normal business risks. We undertake no obligation to publicly update any forward-looking statements for any reason, even if new information becomes available or other events occur in the future.

CAUTIONARY STATEMENT REGARDING CERTAIN INFORMATION RELEASES

The Company is aware that certain information concerning its operations and production is available from time to time from Perupetro, an instrumentality of the Peruvian government, and the Ministry of Energy and Mines ("MEM"), a ministry of the government of Peru. This information is available from the websites of Perupetro and MEM and may be available from other official sources of which the Company is unaware. This information is published by Perupetro and MEM outside the control of the Company and may be published in a format different from the format used by the Company to disclose such information, in compliance with SEC and other U.S. regulatory requirements.

Additionally, the Company's joint venture partner in Block Z-1, Pacific Rubiales Energy Corp. ("PRE"), is a Canadian public company that is not listed on a U.S. stock exchange, but is listed on the Toronto (TSX), Bolsa de Valores de Colombia (BVC) and BOVESPA stock exchanges. As such PRE may be subject to different information disclosure requirements than the Company. Information concerning the Company, such as information concerning energy reserves, may be published by PRE outside of our control and may be published in a format different from the format the Company uses to disclose such information, incompliance with SEC and other U.S. regulatory requirements.

The Company provides such information in the format required, and at the times required, by the SEC and as determined to be both material and relevant by management of the Company. The Company urges interested investors and third parties to consider closely the disclosure in our SEC filings, available from us at 580 Westlake Park Blvd., Suite 525, Houston, Texas 77079; Telephone: (281) 556-6200. These filings can also be obtained from the SEC via the internet at www.sec.gov.
- See more at: http://globenewswire.com/news-release/2 ... wLOVh.dpuf

[Fenix]

oudinot: In 2008 all the mjaor US banks went BOOM in 2008 but they are still 'alive' today.....

Burt Gummer's : First one to hyperinflation wins!

A.Fire:
Seems no nation can wait to collect death taxes- all must erode whatever anyone has saved in this currency war. No retirement, back to work slaves!

Colonel Walter E K:
Nice idea A.fire.

All you need to do is eliminate a couple major U.S. cities and think about all the death/estate taxes that the gubmint can collect. Easy way to pay down some debt plus no future SS and medicaid obligations. Win-win for all (as long as it is not my city)!

Monetas:
"I went to an ISIS public execution .... and a round of interest rate cuts broke out !" .... Monedas 1929 Comedy Jihad World Tour

Bumbu Sauce:
And...china-mulls-anti-terror-law-defining-speech-as-terrorism

miker: I still think my concept of "Snap Depression" may unfold. Essentially, it occurs when enough people finally get the big picture. Consumption drops signficantly and quickly (within months).

The world economy is filled with non-essential products and services. It wouldn't take much for this to snowball.

Monetas:
"Snap Beans" Depression .... one minute the consumers are buying steak .... the next minute .... they're buying cases of beans and toilet paper ?

Monetas:
Cans of extra spicy Nalley's chili con carne .... $1 .... the new coin of the realm .... use your fiat to wipe ?

Oldwood:
So the challenge is to calculate how much I can qualify to borrow at negative interest rates that will generate enough income to support a meager retirement. Its the same math we have always used to predict our retirement, but instead of living off of savings interest, it now about using our worthless savings as collateral on massive loans paying negative interest. The beauty of it is that you will die before the note ever (if ever) matures. So not only do you have the coupon, you can actually spend the principle.

Winston Churchill:
Just call it a reverse annuity.

Cautiously P:
Hey OW... there is always the Reverse Mortgage route too! I believe 'The Fonz' (a.k.a. Henry Winkler) when he says it is a great deal. Yeah, so there's that....

Bearwagon:This is just essential in order to create money. If anyone wants to create money, nowadays he has to lend that amount of money to someone. That is the way it is created. Not with a printing press - that's cash, and uninteresting. "Real" money is "loaned" into existence, so someone has to borrow it. Otherwise there'd be no money.

NoPension.
You need to learn the difference between money, currency and cash.
Some training over at Mike Maloney would help.

roddy6667.
If I borrow 4 million dollars and they pay me to take out the loan, I can live off that. Better yet, keep the 4 million, move somewhere else, and live much better.

mademesmile:
Did America start the interest rate cuts a few years ago?

Yen Cross:
I had a hunch the PBoC was going to go" Full retard" usd/cny is at 2012 levels.

1 US Dollar equals 6.27 Chinese Yuan

GMadScientist:
Well that'll fix their credit bubble right up.

"Only the wisest and stupidest of men never change." - Confucius

devo: That's a lot of free Chinese currency that will flow into US stocks. Big Monday upcoming.

disabledvet: "Free stuff Army" say hello to prices so low you are now insolvent.

[Fenix]

The day the Buffet "value-investing" fanatics have been looking forward to all year, almost as much as the annual pilgrimage to Omaha, has finally arrived - hours ago Warren Buffett released his historic, 50th annual letter to shareholders, which is extra special because as the Oracle notes in the foreword, "Fifty years ago, today’s management took charge at Berkshire. For this Golden Anniversary, Warren Buffett and Charlie Munger each wrote his views of what has happened at Berkshire during the past 50 years and what each expects during the next 50."

The foreword continues: "Neither changed a word of his commentary after reading what the other had written. Warren’s thoughts begin on page 24 and Charlie’s on page 39. Shareholders, particularly new ones, may find it useful to read those letters before reading the report on 2014, which begins below." The result is the magnum opus of Berskshire letter, one which weighs in at 43 pages and a massive 25,100 words compared to "only" 24 pages and about 14,700 words last year, and 15,300 the year before. Almost as if Buffett is telegraphing that this may be his last letter and savoring the moment...

But first, some of the details of Berkshire's performance, which was not quite the magnum opus Buffett may have expected, after Berkshire Hathaway posted lower earnings for the fourth quarter amid investment derivative gains of $192 million.

As summarized by the WSJ, Berkshire reported a net profit of $4.16 billion, or $2,529 a Class A share, compared with $4.99 billion, or $2,297 a share, a year earlier. Operating earnings, which exclude some investment results, were $2,412 a Class A share, versus $2,297 a share, thus missing Wall Street expectations of per-share operating earnings of $2,701. Book value per Class A share increased by 8.3% to $146,186 at Dec. 31.

So back to the letter: here are some preliminary observations and excerpts from the letter:

* Berkshire increased its ownership interest last year in each of its “Big Four” investments – American Express, Coca-Cola, IBM and Wells Fargo. We purchased additional shares of IBM (increasing our ownership to 7.8% versus 6.3% at yearend 2013). Meanwhile, stock repurchases at Coca-Cola, American Express and Wells Fargo raised our percentage ownership of each. Our equity in Coca-Cola grew from 9.1% to 9.2%, our interest in American Express increased from 14.2% to 14.8% and our ownership of Wells Fargo grew from 9.2% to 9.4%. And, if you think tenths of a percent aren’t important, ponder this math: For the four companies in aggregate, each increase of one-tenth of a percent in our ownership raises Berkshire’s portion of their annual earnings by $50 million.

* [W]ho has ever benefited during the past 238 years by betting against America? If you compare our country’s present condition to that existing in 1776, you have to rub your eyes in wonder. In my lifetime alone, real per-capita U.S. output has sextupled. My parents could not have dreamed in 1930 of the world their son would see. Though the preachers of pessimism prattle endlessly about America’s problems, I’ve never seen one who wishes to emigrate (though I can think of a few for whom I would happily buy a one-way ticket).

Of course there is the fact that global wealth inequality has never been greater and as a result the entire globe has approached - or crossed - its own "let them eat cake" moment, but let's forget all about that. After all, for Buffett the "long enough timeline" has almost dropped to zero.

Munger explains economies of scale and quasi-monopoly:

* in the early decades of the Buffett era, common stocks within Berkshire’s insurance subsidiaries greatly outperformed the index, exactly as Buffett expected. And, later, when both the large size of Berkshire’s stockholdings and income tax considerations caused the index-beating part of returns to fade to insignificance (perhaps not forever), other and better advantage came. Ajit Jain created out of nothing an immense reinsurance business that produced both a huge “float” and a large underwriting gain. And all of GEICO came into Berkshire, followed by a quadrupling of GEICO’s market share. And the rest of Berkshire’s insurance operations hugely improved, largely by dint of reputational advantage, underwriting discipline, finding and staying within good niches, and recruiting and holding outstanding people. Then, later, as Berkshire’s nearly unique and quite dependable corporate personality and large size became well known, its insurance subsidiaries got and seized many attractive opportunities, not available to others, to buy privately issued securities. Most of these securities had fixed maturities and produced outstanding results.

Buffett's take on the future:

* The bad news is that Berkshire’s long-term gains – measured by percentages, not by dollars – cannot be dramatic and will not come close to those achieved in the past 50 years. The numbers have become too big. I think Berkshire will outperform the average American company, but our advantage, if any, won’t be great. Eventually – probably between ten and twenty years from now – Berkshire’s earnings and capital resources will reach a level that will not allow management to intelligently reinvest all of the company’s earnings. At that time our directors will need to determine whether the best method to distribute the excess earnings is through dividends, share repurchases or both. If Berkshire shares are selling below intrinsic business value, massive repurchases will almost certainly be the best choice. You can be comfortable that your directors will make the right decision.

And Munger's:

* The next to last task on my list was: Predict whether abnormally good results would continue at Berkshire if Buffett were soon to depart. The answer is yes. Berkshire has in place in its subsidiaries much business momentum grounded in much durable competitive advantage. Provided that most of the Berkshire system remains in place, the combined momentum and opportunity now present is so great that Berkshire would almost surely remain a better-than-normal company for a very long time even if (1) Buffett left tomorrow, (2) his successors were persons of only moderate ability, and (3) Berkshire never again purchased a large business.
* But, under this Buffett-soon-leaves assumption, his successors would not be “of only moderate ability.” For instance, Ajit Jain and Greg Abel are proven performers who would probably be under-described as “world-class.” “World-leading” would be the description I would choose. In some important ways, each is a better business executive than Buffett.
* With Berkshire now so large and the age of activism upon us, I think some desirable acquisition opportunities will come and that Berkshire’s $60 billion in cash will constructively decrease.

FInally, some amusing comments by Buffet on the sudden need for liquidity and/or bialouts:

* [W]e will never engage in operating or investment practices that can result in sudden demands for large sums. That means we will not expose Berkshire to short-term debt maturities of size nor enter into derivative contracts or other business arrangements that could require large collateral calls. Some years ago, we became a party to certain derivative contracts that we believed were significantly mispriced and that had only minor collateral requirements. These have proved to be quite profitable. Recently, however, newly-written derivative contracts have required full collateralization. And that ended our interest in derivatives, regardless of what profit potential they might offer. We have not, for some years, written these contracts, except for a few needed for operational purposes at our utility businesses.

To be sure, when it comes to "major demands for large sums" in his investments, Buffett seems to forget that it was the US taxpayers themselves who ended up funding said collateral demands as recently as 2008, but that's what crony capitalism is all about: knowing that when the hammer hits, the US government is there to bail you out. As for Buffett phasing out derivatives, this makes sense: with available leverage declining (due to full collateralization), Buffett, who personally decried derivatives as financial weapons of mass destruction, can avoid being a hypocrite as he himself has no use for such massively leveraging instruments any longer.

Some other notes from the WSJ which has been diligently parsing the letter since its release:

* No successor named, as we expected. But on pages 36 and 37, Mr. Buffett discusses the qualities the CEO would need: “My successor will need one other particular strength: the ability to fight off the ABCs of business decay, which are arrogance, bureaucracy and complacency.” Munger notes: "under this Buffett-soon-leaves assumption, his successors would not be “of only moderate ability.” For instance, Ajit Jain and Greg Abel are proven performers who would probably be under-described as “world-class.” “World-leading” would be the description I would choose. In some important ways, each is a better business executive than Buffett."
* Warren Buffett adds his name to the list of those commenting on the effects of a strong U.S. dollar. In the letter Mr. Buffett says: “[We] expect that the per-share earnings of these four investees [American Express, Coca-Cola, IBM and Wells Fargo], in aggregate, will grow substantially over time (though 2015 will be a tough year for the group, in part because of the strong dollar).”
* Mr. Buffett reiterates the importance of preserving the firm’s culture and believes his son Howard is best suited to succeed him as non-executive Chairman:
* “To further ensure continuation of our culture, I have suggested that my son, Howard, succeed me as a nonexecutive Chairman. My only reason for this wish is to make change easier if the wrong CEO should ever be employed and there occurs a need for the Chairman to move forcefully.”
* Buffett says a dividend, share repurchase or both are possible as Berkshire’s earnings and capital resources will reach a level in the next 10 to 20 years that “will not allow management to intelligently reinvest all of the company’s earnings.” How the company will use its capital has been a hot topic of late. Mr. Buffett has previously said it’s unlikely he will pay a dividend in his lifetime, arguing that money can be spent to grow the company instead. However, a small group of investors have long been pushing for one.
* Mr. Buffett said massive repurchases will almost certainly be a better choice than distributing a dividend if Berkshire shares are selling below intrinsic business value.
* Buffett has more to say on page 31 on potentially spinning off certain businesses. That makes “no sense,” he said. “Our companies are worth more as part of Berkshire than as separate entities.” He explains again that Berkshire can move funds between its parts without incurring taxes, but also talks about things like the cost of a board of directors and other administrative expenses that would jump if these companies were split off. This dis-synergy defense sounds a lot like what J.P. Morgan’s executives had to say this week about why it shouldn’t break up.
* Buffett is never one to shy from calling out his mistakes in the letter, and this year he’s got a new one: an investment in U.K. grocery store giant Tesco. Buffett lost $444 million on the company when he sold out of it last year, he writes today, lamenting that he moved slowly as the company faced a barrage of issues and accounting problems. He says in 2013 he “soured somewhat” on the management team and had cut the position by a bit more than 25% but now wishes he had sold more. “My leisurely pace in making sales would prove expensive,” he writes. “Charlie calls this sort of behavior ‘thumb-sucking.’ (Considering what my delay cost us, he is being kind.)” Tesco really ran into trouble in 2014, losing market share, struggling with margins and the accounting issues. As Buffett put it: “You see a cockroach in your kitchen; as the days go by, you meet his relatives.”

[Fenix]

As Greece Scrambles To End Its Bank Run, JPM Throws A Wrench: Says Deposit Outflows Continued After "Deal"
28Feb
Just when Greece thought it had bought itself some breathing room in its desperate attempt to rebuild confidence in its financial system, here comes JPM and effectively calls Yanis Varoufakis a liar, suggesting that Greek deposit outflows have continued at a brisk pace despite the bailout extension "deal."



Spot The Birth Of High-Frequency Trading
One of these things is not like the other... one of these things just doesn't belong...

Since the 'enabling' of high-freqnecy trading on US equity exchanges, instead of 'stability' or 'liquidity', the only word this chart screams at us is... 'noise'.


Obama Decrees Ban On Ammo For The Most Popular Rifle In America
28Feb
Previously, the Obama administration attempted unsuccessfully to ban the AR-15. That didn’t work, so now Obama is going after the ammunition. This is yet another example of the war on preppers that is going on all over the nation. Whether you are a gun owner or not, this assault on our constitutional rights should disturb you greatly.



1987 Or 2015? The Gap Between Growth Expectations & Valuations Is "Ridiculous"

While the divergence between macro data 'dismalness' and equity price exuberance is by now well known, there is a greater threat looming to the rampapalooza that is underway. As forward Price-to-Earnings ratios have soared in the last year (aided and abetted - as Alan Greenspan explained - solely by The Fed's largesse) so bottom-up earnings growth expectations have cratered. So much so that veteran stock market investors and traders now see the divergence between multiple 'hope' and growth 'reality' as "ridiculous." Just how ridiculous? Worse than 1987, 2002, and 2011, when stocks fell over 20% upon realization of reality.

[Fenix]

Here Is The Reason Why Stocks Just Had Their Best Month Since October 2011

Despite ending the month with a whimper, after Fed vice-chairman's hawkish words spooked the market on Friday afternoon, February was the best month for equities in over three years - since October of 2011 - driven by a 7% Nasdaq surge on the back of a gigantic move higher in Apple. And yet, as we have shown time and again, none of this reflects the "decoupling" US underlying economy, which if anything has rapidly recoupled with the rest of the world following 38 data "misses" and only 6 "beats"- the worst "surprise" index in 12 months...

... a world which as Goldman recently showed is now in outright contraction for the first time since 2012.

It also certainly wasn't earnings: February was the first month in which we showed that as a result of plunging revenue and EPS guidance and deteriorating sales and profitability, 2015 will be the first year since Lehman when there will be a full year decline in year-over-year sales.

So if not the economy or fundamentals, and if not the Fed, which as we know is still on sabbatical after its massive QE1-2-Twist-3 $3 trillion liquidity injection, just what has pushed stocks up to jawdropping all time highs?

Here, courtesy of Deutsche Bank, is the answer:

In case it is unclear just what the chart above shows, here is DB's explanation: "buyback announcements have surged with February ($98bn) posting the largest monthly tally on record. The pace of actual buybacks tends to closely follow that of announcements."

And there you have it: the highest number of monthly buyback announcements in history, which for a market that may be broken but can still discount what companies will do (now that they have committed to buybacks) is merely frontrunning the most cost-insensitive buyer in the world: corporate management teams themselves.

It should thus come as no surprise why the S&P500 soared to record highs at a time when US economic data tumbled at the fastest pace in years. It should also explain the relentless buying of AAPL stock (among others), which pushed the Nasdaq to just why of 5000: recall that it was less than 3 weeks ago that AAPL announced it would proceed with merely its latest debt-funded share buyback.

It also explains why, in the absence of the Fed, stocks continue to rise as if QE was still taking place: simply said, bondholders - starved for any yield in an increasingly NIRP world - have taken the place of the Federal Reserve, and are willing to throw any money at companies who promise even the tiniest of returns over Treasuries, oblivious if all the proceeds will be used immediately to buyback stock, thus pushing equity prices even higher, but benefiting not only shareholders but management teams who equity-linked compensation has likewise never been higher.

To be sure, this theater of financial engineering - because stocks are not going up on any resemblance of fundamental reasons but simply due to expanding balance sheet leverage - will continue only until it can no longer continue.

What do we mean by that? Two things:

First, we have previously shown the case studies of Herbalife...

And IBM...

... both of which soared as long as they could lever up, and issue debt which it would promptly be used to repurchase stock which in an already massively illiquid market, meant soaring stock prices. However, once net debt got prohibitively large and creditors would no longer lend, the company had no choice but to halt the buybacks:

HLF:

and IBM:

We know what has happened to both companies' stock prices since.

The second issue is even more troubling. Recall also from one month ago that according to Goldman's calculations, the biggest source of net inflows, i.e., buyer of stocks, in 2015, will be companies themsleves. Aka: lots and lots of buybacks.... but apparently not enough.

According to Goldman, in 2015 buybacks will amount to a near record $450 billion, making corporations by far the biggest source of equity buying in the US stock market (at least until the Fed returns with QE4). In fact, corporations are now using the generous funds of creditors to offset a little over $400 billion in equity withdrawals (i.e., sales) by both households and pensions, which is also understandable: with Millennials now a lost generations courtesy of an economy that just refuses to recover (aside for the S&P500 of course), the retiring baby boomers who are liquidating ever greater amount of stocks as they retire in droves, are not being offset by a new generation of stock inflows.

For now, corporate buybacks are offsetting this record demand by an ever-older population to cash out of the market and do whatever retirees do in this day and age.

But once the debt levels of corporations, already at record high levels...

... starts becoming a concern to even the most desperate of fixed income managers of "other people's money", and even "Investment Grade" companies rapidly approach Herbalife's leverage levels - now that median EBITDA levels are the lowest relative to total market enterprise value in history - just who will step into a market that has already soaked up every last source of possible stock buying, and become the buyer of last, and only, resort?

Answer.

[Fenix]

Krugerrand Gold Coins
Price : $1,246.65 - $1,287.19
Prices from 15 Gold Dealers

American Gold Eagle Bullion Coins

American Gold Eagle Bullion Coins
Price : $1,249.68 - $1,330.60
Prices from 14 Gold Dealers

Canadian Gold Maple Leaf

Canadian Gold Maple Leaf
Price : $1,251.65 - $1,301.45
Prices from 17 Gold Dealers

American Buffalo Gold Coins

American Buffalo Gold Coins
Price : $1,262.80 - $1,294.93
Prices from 13 Gold Dealers

[Fenix]

Taking The Monetary Policy Ride Into The Theater Of The Absurd

There are any number of colloquialisms for monetary repression, “reach for yield” and serial asset bubbles being a few. In the vernacular of monetary policy itself, such color is disdained in favor of technocratic banality – “portfolio effects.” The idea is simple, which is to say that by repressing the returns on “safe” investments financial agents will be forced, not of their own volition, into “riskier” assets and asset classes. The prices of those risky assets rise, and that is supposed to contribute to economy-wide good feelings which loosen purse strings, in the equally prosaic terminology of the “wealth effect.”

There is, yet again, an unearned sense of precision about the task and the linkages to actual economic function that belies the chaos and mess of a real economic foundation. Removing organic profitability as a mechanism for resource distribution also obliterates constraints on methodical behavior. We may not think of such discipline as useful during periods of economic malaise, where “risk” seems to be lacking, but true discipline leads to the very processes which create sustainable economic advance. The allure of monetary-driven “risk” is an illusion of artificial bursts of at best short-term activity.

It seems we have come to a sort of crossroads state whereby past attempts at fostering economic advance through “reach for yield”, portfolio effects, directly interfere with current commanding efforts. Without admitting guilt, central banks and political regulators have combined to “make banks safer” largely through more complex banking regulation conspicuously free of free thought and common sense; especially Basel III. One component, which was “learned” of the Panic of 2008, was that banks “need” a liquidity buffer to withstand “market” funding withdrawal. There are, of course, formulas that determine these.

Banks especially in Europe were found wanting of such a buffer and have been “encouraged” to build their own around sovereign debt – which is believed, still, to be the most highly negotiable of all asset classes despite relatively close experience. That last problem was “dealt with” via Mario Draghi and the ECB’s implicit promises to “do whatever it takes.” That apparently includes undertaking QE.

The problem of QE is that it removes those same bonds in question from circulation, sequestered securely within the confines of the central bank (regardless of whether that central bank has made provisions for addressing the direct short-comings of just such an effort). The trade-off is one of bonds for “cash”, but more of modern liquidity concepts than cash, that will on balance lead to “portfolio effects.”

In one sense, the ECB in particular is saying that banks have become “too safe” and the European economy needs “more risk.” It intends not just to force just such an outcome but also to finance it. Banks, for their part, are not quite ready to “comply”:

Weeks before the European Central Bank begins a program to buy about 1 trillion euros ofeuro zone government bonds, banks, pension funds and insurers across the continent are hoarding them for regulatory or accounting reasons.



That may complicate implementation of the quantitative easing program, aimed at reviving growth and inflation in the euro zone. The ECB might have to pay way above market prices, or take additional measures to encourage investors to sell.



“We prefer to hold on to them,” said Antoine Lissowski, deputy CEO at French insurer CNP Assurances. “The ECB’s policy … is reaching its limits now.”

I especially like the phrase “take additional measures to encourage investors to sell”, as you can almost envision some Hollywood Mafioso-type threatening a poor, expensively-suited bank executive not over blood money but on behalf of “monetary” authorities to take their cash. There is an element of comedy here that is un-writable as fiction; nobody could dream just such a scene.

In that respect, perhaps monetary depredations have reached their inevitable logical limitations. The banks “must” be made safe because of the last panic, but banks must be made risky because of the economy.

ABOOK Feb 2015 ECB QE Regulation v Monetarism

Of course, the central bankers under this paradigm don’t think in such broad terms, as they see no incompatibility at all. Again, they think there is some precision or mathematics of regressions that can “find” harmony between two largely and seemingly contrary or even irreconcilable forces – as if banks can be made “just safe enough” while also “just risky enough.” That is because an actual economy does so, where organic profit governs that relationship – why can’t central banks simply do it instead by dual-mandate? This is the reason for the facileness and technocracy of jargon, as this is all supposedly objective mathematics rather than anything emotionally explosive like bubbles.

While there are any number of reasons commandment of this kind will fail, it really comes down to the market itself, namely that such forces of “safety” and “risk” are not really homogenous and harmonized unto themselves. It takes all sorts of agents and actions to produce stability from chaos, whereby many people “take the other side.” The relative movement of prices, free from directive interference, acts as ultimate arbiter of what constitutes “risk”; safety results from that. Central banks take no sides at all and simply decree based upon poorly constructed mathematics that are stale by the time they are implemented.

ABOOK Feb 2015 ECB QE Circular

And with such opposing policy intentions, is it any wonder how bubbles are formed? Which “side” wins out in the end? The amount of repression taken by monetary authorities will overwhelm any sense of propriety about even mathematically-drawn “prudence.” That is the case in every bubble, but in this one instance, especially in Europe, the tug-of-war is in the very instrument of both policies – government bonds. The ECB is demanding, reduced to constituent cases, that banks buy government bonds for every government bond they sell to the ECB. Banks are rightfully balking as “why bother?” It’s not just the naked convolution to the whole scheme, it is entirely emblematic and demonstrative as to why bank “capital” is so relatively expensive under monetary repression.

Since, however, the “risk” side always wins in these things, the ECB mafia will show up with the heaviest repression possible.

And yet, somehow, monetary policy is still believed neutral in the long run and that bubbles are market events. Central banks have shown why they cannot command economic performance, but that doesn’t mean they can’t give one hell of a comedic performance. We have taken a monetary ride now into the theater of the absurd.

[Fenix]

Meanwhile In California, Unambiguously Ungood...
March 1
In California, the low gas price "tax cut"for the consumer is officially over as gas prices soar by 60 cents to $3.23 per gallonn the last few weeks...


More Flash Crashes To Come As Shadow Banking Liquidity Collapses

Remember the algo-ignited, six sigma anomaly that sent 10-year yields down 30 bps in seemingly no time flat on the morning of October 15? Well despite the CFTC’s contention that it was “just a high volume day” without “any break in liquidity,” the Center for Financial Stability is out with a new report which cites the Treasury flash crash as a glaring example of what happens when an increasingly illiquid market collides head-on with “herding investment behavior.”
From the CFS:

On October 15, the deepest and most liquid market in the world demonstrated a six standard deviation move in less than two hours, a move that happens once in 506,797,346 days! It is impossible to suggest that this supersized move in the US Treasury market was due to downward assessment of economic expectations. Economic expectations shift weekly – if not daily. Clearly, a shift in the structure of the US Treasury market and substantial reduction of private sector market makers is at the core of recent complications. Similarly, this issue extends well beyond simply the sovereign debt market for US securities, as a result of the interconnectedness among markets and the unique role for Treasury debt as benchmark securities. To be sure, a sustained “flash crash” in the world’s leading fixed income market could readily unleash a pronounced slowdown of the global economy, or worse.

Put simply, excessive (and incessant) Fed meddling has fundamentally altered the market structure, creating all types of strangeness (the 2-, 5-, and 10-year all special for example) and in the process of sucking collateral from the system, the central bank has made things far more precarious. Recall what Bloomberg had to say about this back in October:

The amount of U.S. debt available to trade at one time without moving prices as of October has plunged 48 percent to $150 million since April, according to JPMorgan Chase & Co.

As the CFS report goes on to point out, the lack of liquidity in the market is readily observable by way of data on various shadow banking conduits. Incredibly, liquidity has plummeted by nearly half since the eve of the crisis:

...the reduction of market finance is excessively steep. The CFS measure of market finance is down a stunning 46% in real terms since its peak in March 2008! This phenomenon starves financial markets from needed liquidity and is detrimental to future growth by exposing the economy to potentially unnecessary shocks.

Even more alarming is the following table which shows that shadow banking has contracted for 82 consecutive months...
...and here’s Bloomberg again, with DB’s take:

A Deutsche Bank index that gauges liquidity by the three-month average size of daily dealer transactions in Treasuries relative to the variability of the 10-year note yield during that period is down to a reading of about 25, from over 500 in 2005. The current level is close to the low of about 19 at the depth of the financial crisis in 2009.

The problem isn’t confined to government debt. CFS also notes that the veritable dearth of liquidity in the secondary market for corporate paper (presumably related to regulation ostensibly aimed at eradicating prop trading) could lead to an “accident”:

...a recent report by BlackRock highlights how “the secondary trading environment for corporate bonds today is broken.” Data suggest that diminished corporate bond liquidity is in part due to limited participation by market makers. For example, debt holdings by primary dealers are down by 80 percent since a peak in October 2013. These examples signal that the probability of an accident is high and the stage is set for an adverse event meeting with an outsized impact on markets and possibly economies.

We predicted this 18 months ago, when we warned that “the slightest gust of wind, or rather volatility, threatens to shut down the secondary corporate bond market, which already is running on fumes.”

Of course the last thing you would want to see in this type of environment is a scenario wherein non-human actors are all programmed to move in exactly the same direction at exactly the same time, thus exacerbating the already amplified (thanks to the illiquidity issue) impact of a market-moving event. Thanks to the rise of the machines (a fifth of electronically executed Treasury trades will be executed by robots this year), we have precisely that, as even the zen masters at Bridgewater are starting an artificial intelligence unit. As we noted previously, “it seems that everyone has forgotten [what happens] when all the machines chase down the same rabbit holes?”
Perhaps the ultimate irony in the whole thing is that a Fed policy (i.e. QE) designed explicitly to stamp out tail risk (i.e. a three standard deviation move), is beginning to create six standard deviation moves in the space of just hours. Throw in the unintended consequences of new regulations and a growing legion of lightning fast (if often hapless) robots and you’ve got the makings of a truly impressive meltdown.

[Fenix]

"Spectacular Developments" In Austria: Bail-In Arrives After €7.6 Billion Bad Bank Capital Hole "Discovered"
march1
Slowly, all the lies of the "recovery", all the skeletons in the closet, and all the bodies swept under the rug are emerging. Moments ago, Austrian ORF reported that there have been "spectacular developments" in the case of the Hypo Alpe Adria bad bank, also known as the Heta Asset Resolution, where an outside audit of Heta's balance sheet exposed a capital hole of up to 7.6 billion euros ($8.51 billion) which the government was not prepared to fill, the Austrian Financial Market Authority said. The punchline: "The finance ministry noted that creditors can be forced to contribute to the costs of winding down Heta - or "bailed in" - under new European legislation that Austria adopted this year so that taxpayers do not have to shoulder the entire burden."



Paul Krugman Is The Brian Williams Of Economics Bloggers

Paul Krugman may (or may not) know a lot of economic theory and is a very clever writer, but you should never ever trust him to recount tales of battles between Keynesians and other schools of thought. His misrememberings in this realm are so astounding that they would impress Brian Williams.

For example, back in December Krugman informed his readers that “[r]ight-wing economists like Stephen Moore and John Cochrane…have some curious beliefs about history,” including their belief that “the experience of disinflation in the 1980s was a huge shock to Keynesians.” In contrast to this right-wing myth, Krugman explained, what actually happened is that “Keynesians came into the Volcker disinflation…with a standard, indeed textbook, model of what should happen. And events matched their expectations almost precisely.”

Now what was so astonishing about Krugman’s version of history–as I detailed here at Mises Canada–is that he conveniently ignored the fact that he himself had written a memo wondering if the U.S. were sitting on an “Inflation Time Bomb” in 1982. So if indeed the Keynesian textbooks of the day predicted the Volcker disinflation, Krugman must not have been reading them.

We’ve got yet another example of Krugman’s conveniently selective memory, this time concerning the earlier stagflation of the 1970s (rather than the disinflation of the early 1980s). On February 28, Krugman wrote a post in which he argued that the cohort of economists coming out of MIT in the late 1970s and early 1980s ended up wielding far more influence than their peers at Chicago. Krugman then went on to explain this dominance by the intellectual openness of the MIT group:

What I remember, then, was that the spirit of MIT economics in the 1970s was very much not one of intellectual imperialism. At Chicago they believed that they had The Truth, and all other views were nonsense to be consigned to the dustbin of history. At MIT, which had played such a large role in bringing Keynes to America, there was a lot of searching and self-doubt — my classmates would sometimes say things like “The rational expectations guys were right about stagflation, so might they be right about the rest?” There was almost a hint of an inferiority complex.

But not too much of one. Everyone was doing rational expectations in some version — Olivier and I worked out the geometry of anticipated shocks…But there was a generally shared view that perfect flexibility of prices was a bridge too far…

The result was that MIT macroeconomics was teched up — everyone learned how to write down and solve rational expectations models, everyone learned how to emulate Lucas disciples — but didn’t unlearn Keynesian insights.

I know plenty of economists who were bothered by this post from Krugman. (For example, David R. Henderson points out the bait-and-switch involved.) But what struck me in the above excerpt is Krugman’s offhand admission that the Chicago School crowd had been right about the stagflation of the 1970s, and that this indeed posed a serious challenge to the Keynesian school–it even caused soul-searching and self-doubt among Krugman’s classmates, with the solution that they had to amend the Keynesian apparatus they had inherited from the 1960s to incorporate the innovations of Lucas et al.

The reason this struck me as so odd, is that in other posts Krugman seemed to be saying that this type of intellectual history was a conservative myth. For example, back in 2009 Krugman wrote the following:

One argument you often hear from anti-Keynesians — it pops up in comments here — is that the experience of stagflation in the 1970s proved Keynesian[ism] wrong. It didn’t; what it did disprove was the naive Phillips curve, which said that there’s a stable tradeoff between unemployment and inflation. By the end of the 70s most macroeconomists had accepted some version of the Friedman/Phelps natural rate hypothesis, which says that sustained inflation gets built into price-setting, so that inflation can persist for a while even in the face of high unemployment. But that’s very far from rejecting the basic Keynesian insight that demand matters.

Still, many people continue to use the 70s to denounce all things liberal or activist.

What’s odd, though, is how little talk there is about the way the 70s ended — which I viewed at the time, and still do, as a huge vindication of Keynesianism.

Here’s what happened: the Fed decided to squeeze inflation out of the system through a monetary contraction. If you believed in Lucas-type rational expectations, this should have caused a rise in unemployment only to the extent that people didn’t realize what the Fed was doing; once the policy shift was clear, inflation should have subsided and the economy should have returned to the natural rate. If you believed in real business cycle theory, the Fed’s policies should have had no real effect at all.

What actually happened was a terrible, three-year slump, which eased only when the Fed relented.

It was 79-82 that made me a convinced saltwater economist. And nothing that has happened since — certainly not the current crisis — has dented that conviction.

Now as with all things Krugman, I haven’t here shown an outright contradiction. But when Krugman in 2009 wrote “One argument you often hear from anti-Keynesians — it pops up in comments here — is that the experience of stagflation in the 1970s proved Keynesian[ism] wrong,” did he give the impression that he heard this argument from his Keynesian classmates at MIT in real-time during the stagflation itself?

Of course not. In that 2009 post, Krugman made it sound like this was ex post myth invented by bitter supply-siders who were distorting history. Indeed, he has a whole series of posts (example here) talking about the myths of stagflation in the 1970s, and how those events didn’t really impact Keynesianism the way critics suggest.

There are two Krugmans the Historian, depending on the situation. When he wants to explain why Keynesianism is a better model of the economy, it’s nothing but tales of successful predictions, especially regarding (price) inflation, without mentioning the spectacular failures of actual Keynesians (including Krugman himself) in this regard. Yet when he wants to explain why Keynesians are better scientists, Krugman is quite open about the weaknesses of the approach, and recounts episodes where the Keynesians were indeed bested by their Chicago School (or other) rivals. None of this would be too problematic, except for the fact that the first Krugman will often denounce his critics for recounting history along the very same lines that the second Krugman does.

[Fenix]

Last week we noted that with the start of Q€ just around the corner, the ECB finds itself in a rather absurd situation. In what we called the ultimate easy money paradox (or, alternatively, the ultimate Keynesian boondoggle), Mario Draghi and crew are doomed to trip over their own policies as they (literally) attempt to monetize twice the net supply of eurozone fixed income this year.

The problem is two-fold: 1) the central bank’s adventures in NIRP-dom mean anyone willing to sell their EGBs would face the truly silly prospect of sending the proceeds right back where they came from, except at a cost of 20 bps (negative deposit facility rate), and 2) because the central bank’s easy money policies have compressed credit spreads, sellers who wanted to reinvest the cash they would theoretically receive for their EGBs would have to do so at ridiculously low rates, a scenario that would compound QE’s already negative effect on NIM for banks and would be absolutely untenable for insurers. So what we have “is one deflation-fighting policy stymying another [and] the central bank’s previous efforts to drive down rates thwarting its current plans to … drive down rates.”

Now, courtesy of Citi’s Matt King, it’s our distinct pleasure to present yet another wonderfully ridiculous paradox inadvertently created by central banks who apparently aren’t capable of understanding when they’re just pushing on a string: manufactured deflation or, more poignantly, just what the doctor did not order. Here’s Citi:

It’s that linkage between investment (or the lack of it) and all the stimulus which we find so disturbing. If the first $5tn of global QE, which saw corporate bond yields in both $ and € fall to all-time lows, didn’t prompt a wave of investment, what do we think a sixth trillion is going to do?


Another client put it more strongly still. “By lowering the cost of borrowing, QE has lowered the risk of default. This has led to overcapacity (see highly leveraged shale companies). Overcapacity leads to deflation. With QE, are central banks manufacturing what they are trying to defeat?”

Ultimately, the question is whether the ceaseless printing of money is actually creating any demand, and for King, the answer is pretty clearly “no”:

QE, and stimulus generally, is supposed to create new demand, improving capacity utilization, not reducing it. But ... it feels ever more as though central bank easing is just shifting demand from one place to another, not augmenting it.

This point is nicely illustrated by Citi in the following two charts (from a previous note) showing the evolution of inflation expectations over the last several years:

And so, stuck as we are in what looks like a chronic condition of oversupply and as it increasingly appears, in King’s words, that “the decoupling between EM GDP growth and global trade growth over the past decade [now looks] less like a benign shift away from exports to domestic consumption, and more like a world where GDP was temporarily boosted by a surge in credit, where suppliers ramped up capacity in anticipation of 10% nominal EM/Chinese demand growth continuing indefinitely, but where the limits of such credit-fuelled demand are suddenly being exposed,” more QE simply won’t move inflation expectations and certainly can’t do much to further stimulate aggregate demand (assuming it’s done anything in that regard thus far).

In other words, we’ve reached the limit of what can be accomplished and with NIRP creating new market perversions on an almost daily basis, the unintended consequences of continuing to delve deeper into the new paranormal are making the game ever more dangerous as we now have central banks accidentally creating deflation while simultaneously embedding enormous amounts of risk in fixed income markets by sapping every last vestige of liquidity.

Soon enough, expect the rest of the world’s central banks to one by one meet their own Waterloos just as the SNB did in January. In fact, the ECB is on its way there now as it appears everyone is coming to realize that Q€ simply cannot work as designed. On that note, we’ll give the last (rather depressing) word to King:

By definition, races to the bottom are not very positive affairs. And as the sell-off in commodities shows, at some point they can lead to casualties. But the lower yields go, the longer even previously unsustainable debt burdens can be sustained – just look at Japan. Competitive easing may do little to improve long-term growth prospects, but it should make the hunt for yield more powerful still. Even if QE does prove deflationary, until we start running into actual defaults, it is hard to see what stops this.


Guest Post: The 145 Solution - Sapience, Not Sentience
march 1
"...a small proposal for the emendation of such tatters of the Constitution as can be found: For voting in federal elections, we should employ a literacy test to disenfranchise the majority of the population, to the infinite betterment of the country. This wise move should be accompanied by an increase in the voting age to twenty-five. The necessity cannot be denied..."



"The Fed is out of control," exclaims David Stockman - perhaps best known for architecting Reagan's economic turnaround known as 'Morning in America' - adding that "people don't want to hear the reality and the truth that we're facing." Policymakers are "taking our economy in a direction that is dangerous, that is not sustainable, and is likely to fully undermine everything that's been built up and created by the American people over decades and decades."

[Fenix]

With key economic data either behind us (with the downward revised GDP), or ahead of us (the February payrolls on deck), and the Greek situation currently shelved if only for a few days/weeks until the IMF payment comes due and the farce begins anew, stocks are focuing on the widely telegraphed 25 bps Chinese rate cut over the weekend, which however has so far failed to inspire a broad based rally either in Asia (where the SHCOMP closed up 0.8% after first dipping in the red) or across developed markets. In fact, as of this moment futures are hugging the unchanged line as the USDJPY attempted another breakout of 120.000 but with numerous option barrier expiration stop at that level, it has since retracted all the overnight gains and is back to the Sundey lows, even as the EURUSD has seen a powerful breakout from overnight lows and is currently at the highest level since the US GDP print, following the release of the final European February PMI data, as a result of USD weakness since the European open.


Meanwhile, Over At The "New York" Stock Exchange... Lasers
The last time we looked at the most important tower in the world, about 4 months ago, it looked as follows:

The tower in question is the primary microwave relay into the ill-named "New York" Stock Exchange which actually is located just off MacArthur Boulevard and Route 17 in Mahwah, New Jersey, and in our opinion is the "most important tower" in the world, because without it, the financial industry, which these days means a few hundred thousands HFT algos and their math PhD creators, would grind to a halt as suddenly trading would revert back to the "caveman days" of 2007, when one actually traded not just to frontrun a whale order in some dark pool half way around the world, but actually cared about such things as "fundamentals" and "reality" (oh, and there wasn't some $12 trillion in cental bank created liquidity supporting every asset class).

The reason we bring up said tower, is because over the past several weeks there has been some furious work by engineers hanging off said tower some 100 feet in the air, resolutely adding a particular device to the primary microwave relay tower at the NYSE.

The device in question has been highlighted:

What is said new device? Extremetech explains:

High-frequency trading — the practice of making thousands of algorithmic stock trades per minute — is about to get a big boost in the USA. Anova, a company that specializes in deploying low-latency networks for stock trading, is completing an ultra-high-speed laser network between the New York Stock Exchange (NYSE) and the NASDAQ. The link will be just a few nanoseconds faster than the current microwave and fiber-optic links — but in the world of high-frequency trading (HFT), those nanoseconds could result in millions of dollars in profits for the trading companies. Such is the insanity of the stock markets; such is the unbelievable capacity of HFT to create money out of almost nothing.

If you want to get a signal quickly from point A to point B, you basically have three options: fiber-optic cables, a network of microwave dishes, or laser links. Electrical (copper wire) networks are feasible over short runs, but their reduced functionality and bandwidth over longer runs makes them less desirable than fiber. Microwave (and even higher-frequency millimeter wave) networks also aren’t very high-bandwidth, but because they’re purpose-built, they can take a very direct route, significantly undercutting the latency of an oft-congested and round-about fiber network. Laser networks have all the advantages of microwave/millimeter wave networks, but they have higher bandwidth, and some very clever adaptive optics means they’re not impacted by bad weather. (Microwaves really hate inclement weather.)


Last year, Anova completed a laser network link between the London and Frankfurt stock exchanges, and now, it seems the company is nearing completion on a similar laser network between the NYSE and NASDAQ data centers in Mahwah and Carteret, New Jersey. In the case of both networks, Anova is using equipment provided by AOptix, an American company that is contracted by the US military to produce similar laser-based systems for ground-to-aircraft communications. Each AOptix base station is capable of “carrier-grade” availability (five nines, 99.999%) over a distance of 10 kilometers (6.2 miles). The route, which is about 35 miles as the crow flies and skirts the center of Newark, will probably feature around six or seven base stations, each of which will have a direct line of sight with its two nearest neighbors. The link speed, according to the AOptix tech specs, will be around 2Gbps — not exactly massive by fiber-optic standards, but more than enough for a few thousand trades per second.


The cost of building the network won’t have been cheap — probably a few million dollars — but that’s absolutely pennies for stock traders. (The new fiber link between London and Tokyo, which is also primarily for stock traders, will cost $1.5 billion.)


The exact latency improvement of the NYSE-NASDAQ laser network isn’t yet known, but over a distance of just 35 miles we’re probably talking about nanoseconds. A microwave system currently in place between Chicago and NYC — a straight-line distance of around 800 miles — has a latency of 4.13 milliseconds. Scaling that down to 35 miles (dividing it by 23), you get a latency of 0.18 milliseconds between the NYSE and NASDAQ. I don’t know how fast the existing fiber/microwave links are, but even a difference of a few nanoseconds would be enough to beat out other high-frequency trading companies that are using older, slower networks. Anova, unsurprisingly, says it has dozens of trading firms who want to use the new laser network, all of which could stand to boost their profits. Though, as with all HFT technology, once everyone is using it (or something comparable) profit levels will revert.

And thus the craziness that is high-speed trading continues unabated, faster and more profitable than ever before

And some more from the WSJ:

In 2011, Mr. Persico read an article in a trade journal describing how a Silicon Valley company called AOptix Technologies Inc. had designed military technology using lasers to communicate in battlefield conditions. His first thought: "I wonder if they can put those on a tower?" The technology traced back to the 1990s, when two scientists designed a method to gather images from outer space that corrected for atmospheric distortions. They developed technology for telescopes with flexible mirrors that could adjust thousands of times a second.

Soon, they realized the technology could also be used to transmit data using lasers. They formed AOptix and contracted with the U.S. government to provide communication devices for military aircraft.

Mr. Persico asked AOptix whether its laser system could be used to send stock-market data. The company was confident it could, because stock data would only have to move from one fixed spot to another.


"Finding a tower isn't hard for us, because we can find airplanes" with the lasers, said the CEO of AOptix, Dean Senner.


Mr. Persico wasn't the only one who thought of adapting the lasers for stock orders. Several Wall Street firms also reached out to AOptix. After weighing offers, AOptix signed a deal with Anova in December 2012, partly, it says, because Anova had backing from a large Wall Street bank. The bank's identity couldn't be learned.


Some question whether Anova's lasers will provide a meaningful speed improvement over networks that are already in place, since microwave and millimeter-wave order transmissions also travel at near light speed. "The difference between networks is getting very small in the metro areas," said Stephane Tyc, co-founder of McKay Brothers LLC, an Oakland, Calif., company that provides fast trading networks. Still, firms such as Anova continue pushing to boost traders' speeds by increasingly tiny slivers of a second.


High-speed, computerized firms today trade everything from stocks to oil futures to government bonds, including securities whose prices move instantly when the government releases economic data such as jobs reports. To pare precious fractions of a second off the time it takes to transmit such data, Anova and other communications companies place networking equipment at a data center on 1275 K Street in Washington, physically close to government agencies.


In the latest tactic, some high-speed traders obtain news releases directly from distributors, avoiding the tiny time lag involved in going through the financial news media.


"We must think about why this technological arms race is happening and whether it poses any threats to our markets," said Kara Stein, a commissioner of the Securities and Exchange Commission, in a speech in November. "And we should candidly assess the costs and benefits to both investors and businesses."

The Treasury Department's Office of Financial Research in December labeled high-speed trading a "key source of operational risk across all markets."


"Speed makes markets way more efficient," said Peter Nabicht, a former high-speed trader who is now a senior adviser to Modern Markets Initiative, a trade group.


Mr. Persico set about securing rooftops and other spots to place his lasers between the New Jersey communities housing the NYSE and Nasdaq data centers. Anova said it has dozens of trading firms waiting to try the lasers when they go live. One firm that plans to use the system is XR Trading LLC of Chicago. It is a "very compelling technology," said XR's president, Matthew Haraburda. He said if it behaves as intended, it could be "a huge development" in trading technology.

In other words, everyone who splurged on the "brand-new" as recently as 2013 microwave technologies to give their HFT system a leg up... is now obsolete.

Welcome to lasers: where you are either part of the very expensive club, or are being frontrun. Which also means that if Michael Lewis is indeed writing a sequel to Flash Boys focusing on microwave signals and towers as the "next big thing", he may just want to burn the manuscript. As for what comes next:

Some dream of a replacement for the fiber-optic cables across the Atlantic and Pacific. The idea: Turbocharge intercontinental trading by floating balloons carrying microwave dishes over the ocean.

And that, ladies and gentlemen, is what "trading" has become.

[Fenix]

* Hilsenrath: Fed Ushering in New Era of Uncertainty on Rates (WSJ)
* Is Supreme Court's chief justice ready to take down ObamaCare? (The Hill)
* Netanyahu arrives in U.S., signs of easing of tensions over Iran speech (Reuters)
* Nemtsov Murder Fuels Suspicion, Fails to Spur Russia Selloff (BBG)
* ECB uncomfortable with leading role in Greek funding drama (Reuters)
* Video shows Los Angeles police shooting homeless man dead (Reuters)
* Iraq Military Begins Campaign to Reclaim Tikrit (WSJ)
* How Billionaires in London Use Secret Luxury Homes to Hide Assets (BBG)


The Best And Worst Performing Assets In February And YTD
03/02/2015 - 07:55

The best performing asset overall in 2015? Well, just tell Putin "spasibo"...



Following December's worse than expected drop in personal spending (and slowing groweth in incomes), analysts wewre expected the usual hockey-stick bounce... it did not happen. Despite all the exuberance over low gas prices, US personal spending dropped 0.2% in January - twice as bad as the 0.1% drop expected and the 3rd miss in a row. The spending drop was driven in large part by a slide in non-durables. Personal income also missed excpectations, rising just 0.3% (against a +0.4% expectation) hovering at its lowest growth since September. The savings rates surged to 5.5% - its highest since Dec 2012.



Crude oil prices are once again following the path of least deja vu resistance this morning. Having spiked into NYMEX close on Friday (exactly as they did following the rig count data the previous week), WTI is back to a $48 handle this morning following news that Saudi Arabia has increased production to its higest level since 2013. Iraq (another OPEC nation) stirred the pot further by forecasting increased supplies in the next month. This comes as US production hits record highs and vital Oklahoma storage tanks will fill up even sooner than expected, driving the "JK" spread above $2.50 (April delivery drastically cheaper than May). As on analysts noted, as "Cushing continues to fill massively, we could see a '3' handle on WTI."



The ink is not even dry on the much fought extension of the Greek bailout, so hated in Greece because it perpetuates the "austerity" memorandum conditions and already Spain is stoking the anti-austerity fire in Athens even more when moments ago Spain's Guindos revealed that not only is a third Greek bailout imminent, and will cost Europe's taxpayers between €30 and €50 billion, but that Spain, whose banks were completely insolvent as recently as 2 years ago and were only "saved" thanks to the ECB's direct and indirect (repo) bond monetization pathways will provide between 13% and 14% of the funding!

* "THIRD GREEK RESCUE' TO BE EU30B-EU50B: SPAIN'S DE GUINDOS
* SPAIN TO PROVIDE 13-14% OF EU30B-EU5O 3RD GREEK RESCUE: GUINDOS

What makes the announcement doubly ironic (the broke bailount out the insolvent, or is the bankrupt saving the liquidating?), is that just hours earlier Spain’s deputy minister for the European Union Inigo Mendez de Vigo said that "Greece should do less talking, do more reforms." But why if Spain will be so kind as to provide the funding needed for the next Greek bailout, and the bailout after that, and the one after



Despite a collapse in US macro data in February, Markit somehow managed to conjure a better than expected 55.1 print for US Manufacturing PMI. Under the covers employment creation was the slowest since July and inflationary pressures loom as selling prices rose notably. ISM Manufacturing printed 52.9 - a small miss vs 53.0 expectations - down for the 4th month in a row to 13-month lows, with employment at its weakest since June 2013. Construction spending's modest rebound in (seemingly un-weather-affected) December (after dropping in November) has been destroyed with a 1.1% drop in January (against expectations of 0.3% rise) for the biggest drop in 8 months.



Not "contained." Just six short months ago, the 2Y bonds of Austria's bank bank - HETA Asset Resolution AG - were trading well above par as the world and his mom reached for yield (~6%) in all the wrong places. Today, following the "spectacular development" over the weekend that the bank will be wound down due to the discovery of an $8.5bn "hole" in its balance sheet, the 2Y HETA bonds are trading below 50c on the dollar (at a yield of 54%). This is indeed Austria's "Lehman" moment as for the first time in the new European 'bail-in' era, senior debt is getting a massive haircut.


With Philly Fed's 10th president, Charles Plosser retiring effective March 1, 2015, algos were wondering if he would be replaced with another former Goldman partner, or if his seat would be filled with yet another academic. The answer, as the Pgilly Fed reported moments ago, is the latter. Meet the new president of the Philly Fed: Patrick T. Harker, 56, currently president of the University of Delaware, former dean of the Wharton School at UPenn, and a member of the Philadelphia Fed's board of directors. His career academic background: Harker has a Ph.D. in civil and urban engineering, a master's degree in economics, and an M.S.E. and B.S.E. in civil engineering from the University of Pennsylvania. Wait, so no econ PhD? There may be some hope yet...



The deterioration in the subprime auto market is perhaps the clearest sign yet that we have learned literally nothing from the crisis years. That is, this is precisely the same dynamic and it will end precisely the same way: defaults will rise, investors in assets backed by these loans will suffer outsized losses, and the assets themselves will become completely illiquid.


Mission Accomplished: Nasdaq 5000

Nothing to see here, move along.... (over/under on - number of times you will hear "it's different this time" today - 20/30)

[Fenix]

"None dare call it a “currency war” because that would be counter to G-10/G-20 policy statements that stress cooperation as opposed to “every country for itself”, but an undeclared currency war is what the world is experiencing. Close to the same thing happened in the 1930’s, a period remarkably similar to what many countries’ policies resemble today.... Negative/zero bound interest rates may exacerbate, instead of stimulate low growth rates in all of these instances, by raising savings and deferring consumption... Asset prices for stocks, high yield bonds and other supposed 5-10% returning investments, become stretched and bubble sensitive; Debt accumulates instead of being paid off because rates are too low to pass up – corporate bond sales leading to stock buybacks being the best example. The financial system has become increasingly vulnerable only six years after its last collapse in 2009.... Central banks have gone and continue to go too far in their misguided efforts to support future economic growth."



Can Greece "Just Print Drachmas"? Goldman Answers
03/02/2015 - 11:23

"Ultimately... it would be very hard for Greece to introduce a viable new currency unilaterally."

- Goldman Sachs



In November we exposed the market's ability to levitate magically when exchanges - most notably CBOE - break. Today we get another glimpse of the new paranormal. While the official CBOE site is not exposing it, numerous traders noted that CBOE options data was not being disseminated from around the open to shortly after 1030ET this morning. That 'coincidentally' occurred as NASDAQ ramped almopst unabated to 5000 (as VIX was clubbed from 13.9 to 13.1)...



This Is What The Entire World Frontrunning The ECB Looks Like

When everyone, truly everyone, decides to frontrun the ECB's monetization of European assets (first bonds, and soon everything else too), this is what the outcome looks like.



No matter how much oil the United States produces over the next few years, it will never become the next Saudi Arabia in the global oil market, according to Fatih Birol, the new executive director of the International Energy Agency (IEA). What's especially interesting about this forecast is that it directly contradicts what Birol said only three months ago, and he gave no explanation for his change of mind. “The United States will never be a major oil exporter. Their import needs are getting less but the US is not becoming Saudi Arabia,” Birol told the conference. “Their production growth is good to diversify the market but it will not solve the world’s oil problems.”



"The diversified hedge fund index was up 0.4% for the month of February, while the S&P 500 was up 6.0% on a price returns basis. CTAs unperformed the most in the month, down 1.9%, while Event Driven were up 2.4%."

- Bank of America



Even a brief glance at the facts suffices. Portugal is no less bankrupt than Greece. The country’s government debt, at 124% of GDP, might be lower than in Greece. However, government debt is just one – even though important – part of the full debt picture. On an aggregate level, Portugal’s overall debt level - at 381% of GDP when also including private households and non-financial corporations - is well above Greece’s total debt level (286% of GDP). So while Greece’s problems mainly manifest themselves via government debt, Portugal suffers from too much debt in all three sectors of the economy.



After trading at its steepest (short-term volatility lowest vs medium-term volatility) in 5 months last Monday, VIX rallied notably (and the curve flattened) on the week to 2015 lows. At the same time, in the 'traded' VIX product world, 2 rather notable things happened: first, VIX futures, which were at a record net long positioning at the end of January, have plunged to a net negative (short VIX) positioning once again; and second, and more stunningly, VXX (the VIX ETF) saw the biggest surge in units created since record began. Between these violent swings and the push-pull weights of oil's high vol and AAPL dominance of any dispersion, we suspect VVIX (vol of vol) will pick up notably from its 3-month lows. However, it is the fragility that this kind of move exposes that worries us the most.

[Fenix]

Greek short-term default risk jumped over 300bps today putting the odds of a restructuring at 50-50 within the next year as the warnings we issued last week with regard Greece's imminent default on its IMF loan loom. Seeking to reassure its lenders (and avoid yet more capital flight), Reuters reports the Greek government said it was "exploring solutions," including delaying payments to suppliers or try to raise up to 3 billion euros by borrowing from state entities such as pension funds. We are sure the Greek people will be enthused when they find out what the 'radical left' has in store for their funds...



The poet W.B. Yeats was right in 1919 when he said the center cannot hold, as if, following the first great industrial slaughter of modern times, he discovered the lethal vacuum at the center of modernity itself. Although, perhaps most remarkable in our time is not merely the presence of evil, but the eerie dearth of heroes.


When investor preferences are risk-seeking, overly loose monetary policy can have a disastrous effect by promoting reckless speculation and enhancing the ability of low-quality borrowers to issue debt to yield-starved investors. This encourages malinvestment and financial distortions that then collapse, as we saw following the tech and housing bubbles. Those seeds have now been sown for the third time in 15 years. In fact, the present moment likely represents the best opportunity to reduce exposure to stock market risk that investors are likely to encounter in the coming 8 years.


Tyler Durden's picture
The Internet Of Things: A Dystopian Nightmare Where Everyone And Everything Will Is Monitored
Our world is becoming increasingly interconnected, and that opens up some wonderful possibilities. But there is also a downside. What if we rapidly reach a point where one must be connected to the Internet in order to function in society? Will there come a day when we can’t even do basic things such as buy, sell, get a job or open a bank account without it? And what about the potential for government abuse? Could an “Internet of Things” create a dystopian nightmare where everyone and everything will be constantly monitored and tracked by the government? That is something to think about.



"The BOJ’s purchases have had a 'huge' impact on the market’s liquidity. Buying bonds at a faster pace would make it more difficult for the BOJ to exit from its easing policy when the time comes to reduce stimulus."



“They were people with great dignity,” Ivo Costamagna said of his neighbors who committed suicide in 2013. Romeo Dionisi, 62, and Anna Maria Sopranzi, 68, hanged themselves after Ms. Sopranzi’s pension evaporated. “Romeo just wanted a job.” But no jobs were available in the dismal Italian economy.

In what may be another case of research confirming common sense, a new study finds, in all four regions of the world studied, “unemployment was related to an increased relative risk of suicide by 20-30%." While the tragic consequences of ZIRP, bailouts, and multiple QEs have so far been ignored, a tsunami of suicides are coming as the under-saved American baby boom generation faces the stark reality of having to work until they die to survive.


"You want winners? [This] is what my fund is buying today to try to make money tomorrow and the next day and the next? You want my top 10 stocks for who is going to make it in the New World? You know what? I am going to give them to you. Right here. Right now. OK. Here goes. Write them down..."

Fifteen months later, Money magazine reported that [his] list had cratered 82%... Accountability ruins the game.



Presenting the Florida jobless claims website. According to the Miami Herald reports, on Friday, the state’s auditor general issued a scathing 45-page audit that joins mounting evidence that CONNECT - aka Florida's Online Reemployment Assistance System or said simpler, jobless claims website - is a system in disarray.



$4 Million In Gold Bars Stolen In 11th Largest Heist In History
03/02/2015 - 15:54

Less than 24 hours ago, an estimated 4 million in gold bars were commandeered on the side of Interstate 95 in what was the 11th largest gold bullion heist in history.
An unofficial count of the number of utterances of the word "different" on CNBC following NASDAQ hitting 5000 stands at 47 as of the close... There's only one thing for it...

For the first time since Q1 2009 (i.e. post Lehman), we have just had back to back drops in consumer spending...

and all but 1 data item missed today extending the string of shitty data and further inspiring stocks to record highs...

But all that mattered was that Nasdaq 5000 was achieved amid the broken market and then retested...

Perhaps this sums up that best...

What's not different this time: it's unanimous that it's different this time.

— Not Jim Cramer (@Not_Jim_Cramer) March 2, 2015


All equity markets rose today magically levitated during that broken market period amid terrible data... then melted up in the last hour


Notably, US futures got an initial bump from China PMI then pumped up at the European open (before dumping the S&P to unch... and then it took off)... a small dip as Europe closed was quickly turned around and then a panic-buying melt-up ensued into the close...

VIX was punched back under 13.. lowest close since Dec 5th...
Treasury yields sold off from the US equity open but we suspect given the massive upsizing in the Actavis bond issue that this was notable rate locks being on amid a low liquidity market... (i.e. this is not sustainable)

The US Dollar traded weak in the European session but started to rally back into positive territory as US markets opened, ending up 0.15% or so on the day...

Silver, gold, and copper were all sold non-stop from Europe's open. Crude was very weak but rallied spike-like in its entirely algo-ized manner into the European close... only top dump it all back to unch by the NYMEX close...

Seriously!! So next another leg down on into tomorrow's API data...?