by ilene - May 7th, 2015 2:01 am
Financial Markets & Economy
Federal Reserve Chairwoman Janet Yellen’s warning issued Wednesday on stocks is likely going to be just talk unless the U.S. central bank is prepared to follow up with policy actions, a former top Fed official said Wednesday.
Yellen said Wednesday that valuations are “quite high” and that there are potential dangers.
Flash Crash a Perfect Storm for Markets (Ritholtz Blog)
Great couple of graphics from the WSJ this AM.
This is the simple version, a short explanatory overlaid on a graph:
Irving Khan was the head of Khan Brothers Group, a registered investment advisor and money manager. He wass oldest, active living investment professional, until he passed away recently. He served as a teaching assistant forBenjamin Graham, the legendary investor known as the “father of value investing.”
Based on its filing, Khan Brothers increased its stake in three companies, sold out its positions in eight companies and reduces its holdings in 22 stocks.
Mohamed El-Erian warns of trouble as bond liquidity dries up (Market Watch)
The leap in German bund yields over the last two weeks is another sign that liquidity issues could eventually present serious problems for financial markets, former Pimco Chief Executive Mohamed El-Erian on Wednesday warned at the annual SALT investment conference in Las Vegas.
“There isn’t the countercyclical risk-taking we need,” said El-Erian, chief economic adviser at Pimco parent Allianz ALV, +1.54% That could spell trouble when there is a big shift market positioning, he warned at SALT, a gathering of around 1,800 hedge-fund and investment-industry professionals.
Ever wonder why it's often so hard to find a doctor, especially if you don't live in a big city?
Ever wonder why the government has such a hard time understanding or following the law of supply and demand?
by ilene - May 6th, 2015 10:51 pm
Courtesy of Mish.
Credit Yahoo!Finance for the inane headline of the day: Employers shrug off Obamacare, robbing Republicans of a campaign issue.
Just 18 months ago, a Republican fantasy seemed about to come true.
The Affordable Care Act was in the midst of a disastrous rollout plagued by dialup-stye technology snafus. President Obama had sabotaged his own health-reform plan by falsely promising that everybody happy with their health plan could keep it. As frozen computer screens and canceled policies generated a tsunami of bad publicity, it seemed plausible that Obamacare might be such a flop that voters would clamor for its repeal when the next presidential election came around.
But Americans are warming to the controversial program. A recent Gallup poll shows a sharp rise in public approval of how the government handles healthcare, from 29% in 2013 to 43% today. By the time the 2016 election arrives, Obamacare bashers may have an even tougher time making the case against the law. Here’s why:
Obamacare hasn’t killed jobs. Republicans repeatedly lambasted Obamacare as a “job killer,” but it doesn’t seem to be that, either. Since the law fully took effect at the beginning of 2014, employers have created about 3.5 million new jobs, a very strong pace of job growth comparable with the late 1990s. The Gallup job-creation index, meanwhile, recently hit the highest levels since 2008. It's unlikely Obamacare is directly contributing to job growth, but it sure doesen’t seem to be harming it.
No Obamacare did not "kill jobs". In fact it created millions of them, albeit in a superficial manner. By classifying full-time employment at 30 hours, corporations reduced hours of employees to 25. Employees that used to work 32 hours were cut to 25 and they then picked up second part-time jobs.
Because the BLS does an inadequate job of calculating the double-counting job growth has been severely overstated. Don't blame the BLS. It's not their fault, because as amazing as it may seem they do not have access to the data they want.
Here's the kicker from the above link.
There are still plenty of problems with the ACA and with the U.S. healthcare system overall. Costs are still rising faster than inflation, with a growing portion of
by Zero Hedge - May 6th, 2015 10:30 pm
Submitted by Tyler Durden.
The consequences and patterns of war, whether by one nation against another or by a government against the citizenry, rarely change. However, the methods of war have evolved vastly in modern times. Wars by elites against populations are often so subtle that many people might not even recognize that they are under attack until it is too late. Whenever I examine the conceptions of “potential war” between individuals and oligarchy, invariably some hard-headed person cries out: “What do you mean ‘when?’ We are at war right now!” In this case, I am not talking about the subtle brand of war. I am not talking about the information war, the propaganda war, the economic war, the psychological war or the biological war. I am talking about outright warfare, and anyone who thinks we have already reached that point has no clue what real war looks like.
The recent exposure of the nationwide Jade Helm 15 exercise has made many people suspicious, and with good reason. Federal crisis exercises have a strange historical tendency to suddenly coincide with very real crisis events. We may know very little about Jade Helm beyond government admissions, claims and misdirections. But at the very least, we know what “JADE” is an acronym for: Joint Assistance for Deployment and Execution, a program designed to create action and deployment plans using computer models meant to speed up reaction times for military planners during a “crisis scenario.” It is linked with another program called ACOA (Adaptive Course of Action), the basis of which is essentially the use of past mission successes and computer models to plan future missions. Both are products of the Defense Advanced Research Projects Agency (DARPA).
As far as I know, no one has presented any hard evidence as to what “HELM” really stands for, but the JADE portion of the exercise explicitly focuses on rapid force deployment planning in crisis situations, according to the government white paper linked above. This fact alone brings into question statements by the Department of Defense that Jade Helm is nothing more than a training program to prepare military units for “foreign deployment.” This is clearly a lie if Jade Helm revolves around crisis events (which denotes domestic threats), rather than foreign operations.
by Zero Hedge - May 6th, 2015 10:00 pm
Submitted by Tyler Durden.
A long time ago, in a financial galaxy far, far away, a “fringe” blog raised the topic of gold market manipulation during the London AM fix. Several years later (which, incidentally, is about average in terms of the lag time between when something is actually going on and when the mainstream financial media finally figures it out and reports on it), it was revealed that in fact, shenanigans were likely afoot and indeed, regulators are still trying to sort out what happened.
Via WSJ earlier this year:
The precious-metals probes are the latest example of regulatory scrutiny into how the world’s biggest financial institutions influence widely used benchmarks. Until last year, prices for gold, silver, platinum and palladium were set using a decades-old practice of once- or twice-a-day conference calls between a small group of banks. The process for setting each of the price “fixes” has since been overhauled…
Last year, the FCA fined Barclays £26 million ($40.2 million) for lax controls after one of its traders allegedly manipulated the gold fix at the expense of a client…
Swiss regulator Finma settled last year allegations of foreign-currency manipulation with UBS. The regulator said it found “serious misconduct” among precious-metals traders at UBS, including “front running,” or trading ahead of, the silver-fix orders of one client…
More than 25 lawsuits have been filed against Barclays, Deutsche, HSBC, Bank of Nova Scotia and Société Générale over their alleged role in setting the gold fix.
The ‘fix’ for the ‘fixed’ gold fix (only in the world of corrupt high finance is such a hilariously absurd passage possible) is supposedly a new system whereby the fixings are derived electronically, but as Reuters notes, there’s a new kid on the block when it comes to benchmarking the price of gold. Here’s more:
China conducted trial runs for the planned launch of a yuan-denominated gold fix last month, three sources familiar with the matter said, in a sign the world’s second-biggest bullion consumer was moving closer to creating a benchmark price.
The state-run Shanghai Gold Exchange (SGE), on whose international platform the fix will be launched, conducted the trial with major Chinese banks and a few foreign banks, the sources said this week…
China plans to launch a yuan gold fix this year through trading of a 1
by Zero Hedge - May 6th, 2015 9:30 pm
Submitted by Tyler Durden.
The UK General Election will be held tomorrow. The polls close at 10 pm. We should have a pretty clear picture of the overall seat count by 5 to 6 am on Friday morning. The result, as SocGen notes, is almost certain to be a hung parliament.
Then the fun will really start.
The leader of the incumbent Conservative/ Liberal Democrat coalition (David Cameron) stays in power until or unless it becomes clear that he does not have the ability to form a new government. Most polls are showing that the Conservatives will win the most seats but fall far short of an absolute majority. That will then lead to a contest between them and the Labour party to negotiate with the other parties to form some type of formal or informal coalition. The first test of the new government will be the vote on its legislative programme which is then presented in the Queen’s speech (tentatively scheduled for 27 May). That vote should be in the early part of June.
The main concern for the markets should be whether or not a Conservative-led coalition is formed that is sufficiently supportive of the Conservative’s plans to allow them to hold the promised Brexit referendum by the end of 2017.
Here are the possible outcomes (along with SocGen's probabilities)…
As a reference, here are 2010's results:
And here are the key features of tomorrow's election relative to that result…
1) A reduction in Conservative seats and an increase in Labour seats;
2) A major fall in support for the Liberal Democrats who could easily see the number of seats won fall to less than 30;
3) A surge in the SNP seats from 6 to maybe even more than 50;
4) The poor performance of the UKIP (UK Independence Party), despite its heavy influence on Conservative party policy in recent years. As the chart above shows, they won NO seats in 2010. They currently have two seats as a result of defections from the Conservative party but they will be lucky to win even one more seat than that. So, in the absence of the most unlikely outcome of the Conservatives being only one or two seats short of a stable government, UKIP would have no role in the formation of the next
by Zero Hedge - May 6th, 2015 9:25 pm
Submitted by Tyler Durden.
Having put off the decision to devalue the Vietnamese currency in March, the Dong has pressured the weaker limit (1% trading band) of the reference rate ever since. This has led to Vietnam’s central bank devaluing the dong reference rate to 21,673 (from 21,458) for the 2nd time this year. This is the softest the dong has ever been relative to king dollar, pushing them deeper into the currency wars.
- *VIETNAM CENTRAL BANK DEVALUES DONG
- *VIETNAM DEVALUES DONG REFERENCE RATE TO 21,673 PER DOLLAR
As Bloomberg notes,
The State Bank of Vietnam devalued the dong for the second time this year in a bid to spur exports and accelerate economic growth.
The central bank weakened its reference rate by 1 percent to 21,673 dong per dollar. The Vietnamese currency is allowed to trade as much as 1 percent either side of the daily fixing, which was also cut by 1 percent on Jan. 7.
by Zero Hedge - May 6th, 2015 9:00 pm
Submitted by Tyler Durden.
Over the past decade or so, "transparency" has become one of the buzzwords that has guided the Federal Reserve's culture. The word was meant to convey the belief that central banking was best done for all to see in the full light of day, not in the murky back rooms of Washington and New York. The Fed seems to be on a mission to prove that its operations are benevolent, fair, predictable, and equitable. Part of that transparency movement took shape in 2007 when the Fed began publicizing its Gross Domestic Product (GDP) forecasts, which previously (to the frustration of investors) had been kept under wraps. Most of the Fed's policy moves are tied to how strong, or how weak, it believes the economy will be in the coming year. As a result, its GDP forecast is perhaps the single most important estimate it makes.
So the good news for investors is that the Fed now tells us where it thinks the economy is headed. The bad news is it has been consistently, and sometimes spectacularly, wrong. Talk about the blind leading the blind.
In the eight years that the Fed has issued GDP forecasts in the prior Fall, only once, in 2010, did the actual economic performance come in the range of its expectations (referred to as its "central tendency.") And even in that year, Fed forecasters did not manage to put the ball through the goal posts. Instead it just hit the upright (the low end of its range: 2.5% in actual growth vs. a central tendency of 2.5% to 3.5%). In all other years the Fed missed the mark completely on the downside. The tale of the tape tells the story:
The biggest misses clearly came during the recession years of 2008 and 2009. The Fed clearly had no idea that trouble was brewing, or that the trouble would last once it started. In 2008 the actual growth came in 2.1% below the low end of its forecast range and 2.5% below the midpoint of its estimates. In 2009 it was 2.6% below the low end and 3.2% below the midpoint. 2011 wasn't much better, with the Fed missing by 1.4% and 1.7% for the same criteria. The rest of the years had more pedestrian…
by Zero Hedge - May 6th, 2015 8:30 pm
Submitted by Tyler Durden.
With more than 80% of America’s non-farm workers laboring under non-existent wage growth, and with central bank policies serving not only to exacerbate the gap between the wealthy and everyone else while wiping out what’s left of the Middle Class in the process, but also creating conditions whereby pension funds are unable to meet their obligations without assuming inordinate amounts of risk, the idea of a comfortable retirement could become more elusive than ever in the new paranormal. Exacerbating the problem are rock bottom yields on traditional savings vehicles and risk-free assets, and the simple fact that generally speaking, people just aren’t saving enough in a world driven by rampant consumerism. Here’s NY Times on the latter issue:
On average, a typical working family in the anteroom of retirement — headed by somebody 55 to 64 years old — has only about $104,000 in retirement savings, according to the Federal Reserve’s Survey of Consumer Finances.
That’s not nearly enough. And the situation will only grow worse.
The Center for Retirement Research at Boston College estimates that more than half of all American households will not have enough retirement income to maintain the living standards they were accustomed to before retirement, even if the members of the household work until 65, two years longer than the average retirement age today.
Using a different, more complex model, the Employee Benefit Research Institute calculates that 83 percent of baby boomers and Generation Xers in the bottom fourth of the income distribution will eventually run short of money. Higher up on the income scale, people also face challenges: More than a quarter of those with incomes between the middle of the income distribution and the 75th percentile will probably run short.
Fortunately, some forward-thinking members of the world’s workforce have devised a clever workaround (no pun intended): they’ll just rely on funds they imagine they’ll receive when family members die. According to a new study commissioned by HSBC (which has in the past developed its own innovative take on the ‘tax advantaged’ retirement savings plan), one in three working age people are banking on an inheritance to partially or fully fund their retirement. Here’s more:
Many working age people are banking on receiving an inheritance. Almost two thirds (66%) of those who have
by Zero Hedge - May 6th, 2015 8:13 pm
Submitted by Tyler Durden.
As Japanese markets re-open after Golden Week, the bond market is extremely active (which in itself is unusual given its total lack of liquidity). Playing catch up to the rest of the world’s igniting bond markets, 10Y JGB yields are up over 6bps (and even the 20Y is trading). The last few days have seen yields spike from 28bps to 43bps – a colossal move only seen before in May 2013 (after the initial euphoria of QQE).
Biggest absolute yield swing in bonds since May 2013…
Which drags yields to 2-month highs…
by Zero Hedge - May 6th, 2015 8:00 pm
Submitted by Tyler Durden.
Barack Obama is secretly negotiating a global economic treaty which would destroy thousands of American businesses and millions of good paying American jobs. In other words, it would be the final nail in the coffin for America’s economic infrastructure. Obama knows that if the American people actually knew what was in this treaty that they would be screaming mad, so the negotiations are being done in secret. The only people that are allowed to look at the treaty are members of Congress, and even they are being banned from saying anything to the public. American workers are about to be brutally stabbed in the back, and thanks to all of this secrecy and paranoia they won’t even see it coming.
The name of this new treaty is “the Trans-Pacific Partnership”, and it is being touted as perhaps the most important trade agreement in history. But very few people in this country are talking about it, because none of us are allowed to see it. An article that was just released by Politico detailed the extreme secrecy that is surrounding this trade agreement…
If you want to hear the details of the Trans-Pacific Partnership trade deal the Obama administration is hoping to pass, you’ve got to be a member of Congress, and you’ve got to go to classified briefings and leave your staff and cellphone at the door.
If you’re a member who wants to read the text, you’ve got to go to a room in the basement of the Capitol Visitor Center and be handed it one section at a time, watched over as you read, and forced to hand over any notes you make before leaving.
And no matter what, you can’t discuss the details of what you’ve read.
This treaty is going to affect the lives of every man, woman and child living in this nation, and yet it is deemed so “important” that none of us can know what is in it?
Are you sure that we still live in a Republic?
This treaty will cover 40 percent of the global economy, and U.S. officials hope that the EU, China and India will become members eventually as well…
Right now, there are 12 countries that are part