ISIS Beheads British Aid Worker In "Message To Allies Of America"

Rather disturbingly, ISIS had just announced the execution of another captive:

  • *ISLAMIC STATE RELEASES VIDEO SHOWING BEHEADING OF DAVID HAINES

Video is similar to ones in which James Foley, Steve Sotloff were killed, SITE says.

Jihadist monitoring website comments on today’s beheading in statement on its website

British captive David Haines, who SITE says is beheaded in video, addresses U.K. PM Cameron in video

Video purportedly shows David Haines saying he holds David Cameron “entirely responsible” for his “execution” before being murdered

“You entered voluntarily into a coalition with the United States against the Islamic State, just as your predecessor Tony Blair did, following a trend amongst our British prime minister who can’t find the courage to say no to the Americans,” SITE quotes Haines as saying

SITE says executioner appears to be same as in previous videos.

“IS Beheads Briton David Haines, Threatens to Execute Another Briton, Alan Henning,” SITE Intel Group says on Twitter.

  • *ISLAMIC STATE THREATENS TO EXECUTE BRITISH HOSTAGE HENNING:SITE
  • *SITE SAYS BEHEADING VIDEO ENTITLED `A MSG TO ALLIES OF AMERICA’
  • *SITE SAYS VIDEO SIMILAR TO BEHEADINGS OF FOLEY, SOTLOFF
  • *SITE COMMENTS ON TODAY’S BEHEADING IN STATEMENT ON ITS WEBSITE
  • *HAINES ADDRESSES U.K.’S CAMERON IN VIDEO, SITE SAYS
  • *SITE SAYS EXECUTIONER APPEARS TO BE SAME AS IN PREVIOUS VIDEOS

*  *  *

Link to video can be found here (warning: extremely graphic)

*  *  *


As The Guardian reports,

In London, the Foreign Office has said it is aware of the video and “working urgently to verify” its content.

 

Haines, who was 44, was kidnapped last year. He had been in Syria for just three days when he was kidnapped and handed over to Isis militants.

 

The murder comes one day after the Haines’ family released a statement urging his captors to contact them.

 

The aid worker was taken while working for Acted in Syria in March 2013.

*  *  *

The 44-year-old Haines has a teenage daughter in Scotland from a previous marriage and a four-year-old daughter in Croatia from his present marriage.

Educated at Perth Academy secondary school, he has worked for aid agencies in some of the world’s worst trouble spots.

He was in Libya during its civil war in 2011, working as head of mission for Handicap International, which helps disabled people in poverty and conflict zones around the world.




via Zero Hedge http://ift.tt/1sMzLMr Tyler Durden

Artist’s Impression Of ISIS Reaction To Obama’s ‘Strategy’

Presented with no comment…

 

 

Source: Cagle

Rather disturbingly, ISIS had just announced the execution of another captive – in this case, a Brit named David Haines:

  • *ISLAMIC STATE RELEASES VIDEO SHOWING BEHEADING OF DAVID HAINES

  • *ISLAMIC STATE THREATENS TO EXECUTE BRITISH HOSTAGE HENNING:SITE
  • *SITE SAYS BEHEADING VIDEO ENTITLED `A MSG TO ALLIES OF AMERICA’
  • *SITE SAYS VIDEO SIMILAR TO BEHEADINGS OF FOLEY, SOTLOFF
  • *SITE COMMENTS ON TODAY’S BEHEADING IN STATEMENT ON ITS WEBSITE
  • *HAINES ADDRESSES U.K.’S CAMERON IN VIDEO, SITE SAYS
  • *SITE SAYS EXECUTIONER APPEARS TO BE SAME AS IN PREVIOUS VIDEOS

Link to video can be found here (warning: extremely graphic)





via Zero Hedge http://ift.tt/1sMkQSu Tyler Durden

Artist's Impression Of ISIS Reaction To Obama's 'Strategy'

Presented with no comment…

 

 

Source: Cagle

Rather disturbingly, ISIS had just announced the execution of another captive – in this case, a Brit named David Haines:

  • *ISLAMIC STATE RELEASES VIDEO SHOWING BEHEADING OF DAVID HAINES

  • *ISLAMIC STATE THREATENS TO EXECUTE BRITISH HOSTAGE HENNING:SITE
  • *SITE SAYS BEHEADING VIDEO ENTITLED `A MSG TO ALLIES OF AMERICA’
  • *SITE SAYS VIDEO SIMILAR TO BEHEADINGS OF FOLEY, SOTLOFF
  • *SITE COMMENTS ON TODAY’S BEHEADING IN STATEMENT ON ITS WEBSITE
  • *HAINES ADDRESSES U.K.’S CAMERON IN VIDEO, SITE SAYS
  • *SITE SAYS EXECUTIONER APPEARS TO BE SAME AS IN PREVIOUS VIDEOS

Link to video can be found here (warning: extremely graphic)





via Zero Hedge http://ift.tt/1sMkQSu Tyler Durden

Will iWatch Announcement Translate to Profit for Wearable-Tech Industry?

Apple commanded headlines this week by announcing the new iPhone
6, Apple Pay, and iWatch. The seamless integration between these
goods and services is also noteworthy, as it seems to be Apple’s
way of guiding us into the wearable revolution one step at a time.
Yet skeptics are still wary of whether we the people are ready to
fully embrace the geek. Over at CNN, Jeff
Yang writes
:

The question I’m interested in is whether Apple’s long-awaited
arrival in the buzzy wearables category finally means that
people—regular people, that is, not pixel-pushing pundits and
Tesla-driving tech titans—are ready to wear them.

The fact is, while wearables have generated a lot of attention,
they’re being used a lot less than the fanfare might suggest.

According to the
NPD Group
and
Strategy Analytics
, only about 14 million fitness bands and
activity trackers and about 2 million smartwatches were sold
globally over the 12 months ending this past March. (Everything
else—Google Glass, cloud cameras, digital jewelry, wi-fi socks,
connected underwear—basically represents a rounding error.) Compare
that with the number of smartphones sold around the world: 964
million. That’s the difference between a niche product and an
emerging necessity.

As Yang notes, Google Glass (for instance) may not have the
numbers. However Glass has helped pioneer the path into wearable
tech, and provoked questions of privacy and connectivity that will
surely arise as wearables gain popularity. Reason TV delved into
some of these questions earlier this year: 

“Google Glass: Privacy, Journalism, and the Dawn of
Wearable Technology,” produced by Tracy Oppenheimer.
About
7 minutes.

Original release date was May 16, 2014, and the original writeup
is below.

“I do believe that our mobile phones are going to be outdated
and are going to be replaced with wearables,” says University of
Southern California journalism professor
Robert Hernandez
. “So my end goal is augmented reality, or AR
storytelling. This is technology that’s emerging, and Glass is a
really great wearable platform that is very early, but has a lot of
potential to do that.”

Hernandez is incorporating Google Glass into his journalism
class curriculum next year, and plans to take this technology and
build a media platform around it. He sat down with Reason TV’s
Tracy Oppenheimer to discuss how Google Glass works and its
potential capabilities. He also addresses privacy concerns and
other critiques of this wearable technology.

“The truth is that we don’t have privacy, and in public places
there are all these cameras recording us all the time. So if this
is going to help you realize and be aware, and be a more engaged
citizen, that’s great,” says Hernandez.

About 7 minutes.

Produced by Tracy Oppenheimer. Camera by Paul Detrick and Alexis
Garcia.

Scroll down for downloadable versions and subscribe
to Reason TV’s YouTube channel
for notifications when new
material goes live.

from Hit & Run http://ift.tt/1qxEQc2
via IFTTT

America’s Poor Have Never Been Deeper In Debt

Ever since the Lehman bankruptcy, one of the main reasons given by the perpetual apologists about why i) the so-called “recovery” has been the worst in US history and ii) the Fed has been “forced” to conduct 6 years of wealth transferring policies, boosting the stock market to all time highs and creating a record wealth split in US society between the super rich and everyone else (one that surpasses even that seen during the roaring 20s) is that the US consumer, scarred by the economic crash, has been rushing to deleverage and dump as much debt as possible.

There are two problems with that story:

  • First, as we first pointed out in 2012, US households are not deleveraging, they are defaulting, a huge difference which goes to motive and intent, and shows that instead of actively paying down debt households are instead loading up on as much debt as they can, which at some point they simply stop servicing (for a detailed analysis of this disturbing trend, read our series on the student loan bubble).
  • Second, when it comes to the poorest quartile of US society, some 14 million people, it is dead wrong. In fact, as the Fed’s triennial Survey of Consumer Finances, released last week showed, America’s poorest have never been more in debt!

As usual, the full story is one of nuances. As Bloomberg reports, as a result of the first point – mass defaults – US household debt has indeed declined on an average basis. Indeed, average debt burden for all families stood at about 105% of pretax income in 2013, down from about 125% in 2010 and the lowest level since the 2001 survey.

Of course, since economists are unable to grasp the difference between default and deleveraging, one look at the chart above gives them reason for hope. As Bloomberg summarizes:

The improved finances, along with more recent signs that consumers are feeling comfortable about borrowing again, has given some economists cause for optimism: The more progress households make in getting out from under their debts, the logic goes, the greater the chances that renewed spending will boost growth.

In reality, the “improved finances”, namely those tens of trillions in financial assets that have been artificially reflated courtesy of the Fed’s monetary policies, have benefited the tiniest sliver of US society – about 1% or less depending on whose calculations one uses. Everyone else, the bulk of US society, was forced to simply stop paying down their credit card and thus “delever.”

But for a good perspective of what the part of society that is at the opposite end of the 1%, namely those 14 million or so Americans who comprise the poorest quartile of households, look no further than the chart below, which shows just what Americans are really doing up until that point where default does equal “deleveraging”, even if it means loss of access to all credit for a period of several years:

 

 

 

From Bloomberg: “The poorest quartile of families is the only group that owes more than it owns. Thanks to declines in the value of assets, the group’s average leverage ratio — debt as a percent of assets — increased to 137.5 percent in 2013, the highest on record since the survey started in 1989.”

And there you have it – not only is America not actively delveraging, on the contrary, it is loading up on as much debt as it possibly can (or banks will allow it judging by the decline in mortgage-type debt, driven mostly by supply constraints and qualification factors) until the band snaps and in a perverse circle of illogic, releveraging becomes default becomes deleveraging.

Bloomberg has some ideas here, including commenting on the one observations we have been making since 2011: the relentless rise in installment debt, i.e., student and car loans:

There are various possible explanations for the poorest families’ financial predicament. Incomes have declined, making debt burdens look worse. Some previously wealthier people probably migrated into the group as the value of their homes fell below what they owed on mortgages. More ominous is a steady increase in installment debt, a category that includes both student and auto loans — areas that have recently seen a lot of questionable lending to lower-income borrowers.

 

 

Bloomberg’s conclusion:

Whatever the drivers, the data suggest that the 2008 crisis and subsequent economic malaise have left a troubling legacy: A group of the poorest families, numbering roughly 14 million, whose precarious finances make them vulnerable to shocks and limit their ability to contribute to future growth. That’s hardly a strong foundation for a healthy recovery.

But mass “deleveraging” is good, they said. It means tons of pent up releveraging and recovery, they said…

While the lying is understandable – after all confidence must be rebuilt at all costs – what is worse is that the Fed believes it can withdraw from QEasing because it is convinced that US society as a whole is able to take on more debt, when in reality a record number of Americans are locked out of the debt market (due to recent or imminent defaults) for years. As a result the Fed’s entire logic for pulling out of the market is based on an epically flawed assumption. Which is why, as we explained back in late 2013, we give the Fed a few months of POMO-ess shock and awe for the S&P500 mixed with fears of what a rate hike will do to the market, pardon economy, before the Untaper and the reZIRP fully enter the financial lexicon.

Finally, while we have shown this chart in the past, here it is again. It really does explain everything.




via Zero Hedge http://ift.tt/1tOsgCE Tyler Durden

America's Poor Have Never Been Deeper In Debt

Ever since the Lehman bankruptcy, one of the main reasons given by the perpetual apologists about why i) the so-called “recovery” has been the worst in US history and ii) the Fed has been “forced” to conduct 6 years of wealth transferring policies, boosting the stock market to all time highs and creating a record wealth split in US society between the super rich and everyone else (one that surpasses even that seen during the roaring 20s) is that the US consumer, scarred by the economic crash, has been rushing to deleverage and dump as much debt as possible.

There are two problems with that story:

  • First, as we first pointed out in 2012, US households are not deleveraging, they are defaulting, a huge difference which goes to motive and intent, and shows that instead of actively paying down debt households are instead loading up on as much debt as they can, which at some point they simply stop servicing (for a detailed analysis of this disturbing trend, read our series on the student loan bubble).
  • Second, when it comes to the poorest quartile of US society, some 14 million people, it is dead wrong. In fact, as the Fed’s triennial Survey of Consumer Finances, released last week showed, America’s poorest have never been more in debt!

As usual, the full story is one of nuances. As Bloomberg reports, as a result of the first point – mass defaults – US household debt has indeed declined on an average basis. Indeed, average debt burden for all families stood at about 105% of pretax income in 2013, down from about 125% in 2010 and the lowest level since the 2001 survey.

Of course, since economists are unable to grasp the difference between default and deleveraging, one look at the chart above gives them reason for hope. As Bloomberg summarizes:

The improved finances, along with more recent signs that consumers are feeling comfortable about borrowing again, has given some economists cause for optimism: The more progress households make in getting out from under their debts, the logic goes, the greater the chances that renewed spending will boost growth.

In reality, the “improved finances”, namely those tens of trillions in financial assets that have been artificially reflated courtesy of the Fed’s monetary policies, have benefited the tiniest sliver of US society – about 1% or less depending on whose calculations one uses. Everyone else, the bulk of US society, was forced to simply stop paying down their credit card and thus “delever.”

But for a good perspective of what the part of society that is at the opposite end of the 1%, namely those 14 million or so Americans who comprise the poorest quartile of households, look no further than the chart below, which shows just what Americans are really doing up until that point where default does equal “deleveraging”, even if it means loss of access to all credit for a period of several years:

 

 

 

From Bloomberg: “The poorest quartile of families is the only group that owes more than it owns. Thanks to declines in the value of assets, the group’s average leverage ratio — debt as a percent of assets — increased to 137.5 percent in 2013, the highest on record since the survey started in 1989.”

And there you have it – not only is America not actively delveraging, on the contrary, it is loading up on as much debt as it possibly can (or banks will allow it judging by the decline in mortgage-type debt, driven mostly by supply constraints and qualification factors) until the band snaps and in a perverse circle of illogic, releveraging becomes default becomes deleveraging.

Bloomberg has some ideas here, including commenting on the one observations we have been making since 2011: the relentless rise in installment debt, i.e., student and car loans:

There are various possible explanations for the poorest families’ financial predicament. Incomes have declined, making debt burdens look worse. Some previously wealthier people probably migrated into the group as the value of their homes fell below what they owed on mortgages. More ominous is a steady increase in installment debt, a category that includes both student and auto loans — areas that have recently seen a lot of questionable lending to lower-income borrowers.

 

 

Bloomberg’s conclusion:

Whatever the drivers, the data suggest that the 2008 crisis and subsequent economic malaise have left a troubling legacy: A group of the poorest families, numbering roughly 14 million, whose precarious finances make them vulnerable to shocks and limit their ability to contribute to future growth. That’s hardly a strong foundation for a healthy recovery.

But mass “deleveraging” is good, they said. It means tons of pent up releveraging and recovery, they said…

While the lying is understandable – after all confidence must be rebuilt at all costs – what is worse is that the Fed believes it can withdraw from QEasing because it is convinced that US society as a whole is able to take on more debt, when in reality a record number of Americans are locked out of the debt market (due to recent or imminent defaults) for years. As a result the Fed’s entire logic for pulling out of the market is based on an epically flawed assumption. Which is why, as we explained back in late 2013, we give the Fed a few months of POMO-ess shock and awe for the S&P500 mixed with fears of what a rate hike will do to the market, pardon economy, before the Untaper and the reZIRP fully enter the financial lexicon.

Finally, while we have shown this chart in the past, here it is again. It really does explain everything.




via Zero Hedge http://ift.tt/1tOsgCE Tyler Durden

Girl Tries to Kill Family; Sheriff’s Office Blames…Slender Man?

Slender Man, Slender Man/Does whatever a Slender canEarlier this month, a Florida
teenager tried to burn down her family’s home while her mother and
brother were inside it. Here’s how ABC News opened its
story
on the crime:

A 14-year-old girl was arrested after allegedly setting
her family’s house on fire in what authorities suspect is the
latest case of Slender Man-inspired violence.

Slender Man is a character in a variety of online stories,
films, and games. This past spring, two girls stabbed a classmate
as part of a bizarre plan to prove the fictional creature was real.
It was the sort of crime that gets a lot of press attention because
of how singularly strange it is. But many reporters seemed to think
it was not a weird one-off but a harbinger of a new trend, and a
short burst of Slender Man
media hysteria
followed, with journalists attempting to link
the mythical monster to a variety of crimes. Even Jerad and Amanda
Miller’s
shooting spree
in Las Vegas got
roped in
, on the grounds that Jerad, who made money by dressing
up as various characters and posing for photos, had been known to
wear a Slender Man costume.

So what’s the supposed Slender Man connection in the new story?
Here’s how one local outlet, WFLA-TV,
covered the arson
:

Detectives say the girl told them that she decided to
set the home on fire while reading the online book “Soul Eater,”
which made her upset about past bullying and her mother
disciplining her. The teen sprayed a rum and bleach mixture onto a
towel and bed sheet that she put on the floor of the family’s
garage. She then set them on fire and walked out of the garage,
according to an arrest affidavit….

The teen had also visited sites related to The Slender Man,
according to investigators. She admitted to using the websites
Creepypasta.com and SoulEater.com, which are associated with The
Slender Man.

From this, it sounds like she felt she decided to kill her
family because she felt mistreated—not an unusual motive for this
sort of crime. Apparently Soul Eater (described here as an
“online book,” though she was probably actually referring to
this
anime and manga series) played a role in her thought process.
And…

And that’s it. She also “admitted” to “using” (which I assume
means “reading”) Creepypasta.com, a vast depository of
online horror stories that is “associated with The [sic] Slender
Man” in the sense that he is one of the many characters one might
encounter there. But I’m not sure why that’s relevant.
(“SoulEater.com” does not appear to exist.)

So how did we get the idea that Slender Man might have inspired
the fire? Is this leap something the press did on its own, or was
it following someone else’s lead?

Here’s ABC News again:

“She had visited the website that contains a lot of the
Slender Man information and stories,” Eddie Daniels of the Pasco
Sheriff’s Office told ABC News. “It would be safe to say there is a
connection to that.”

Ah.

A few more piece of press coverage before we go. While WFLA
mentions Slender Man without offering a reason to think he’s
connected to the crime, and while ABC News puts Slender Man in its
lede but at least uses conditional language, The New York
Post
‘s
headline
 claims forthrightly that the arsonist was
“obsessed” with Slender Man. (The text of the Post piece
offers nothing to support this.)
Gawker
,
BuzzFeed
, the New York
Daily News
, and
The Daily Mail
use the word “obsessed” as well; the only
evidence of obsession that any of them offer are that she wrote
about the character and posted about him on Facebook.
And this
outlet
lays blame squarely on the fictional monster’s
shoulders:

The first 10 words of the article are “Slender Man has inspired
another act of teenage violence.” Well, he’s certainly inspiring
something.

[Via
Infocult
.]

from Hit & Run http://ift.tt/1sLSg3I
via IFTTT

Girl Tries to Kill Family; Sheriff's Office Blames…Slender Man?

Slender Man, Slender Man/Does whatever a Slender canEarlier this month, a Florida
teenager tried to burn down her family’s home while her mother and
brother were inside it. Here’s how ABC News opened its
story
on the crime:

A 14-year-old girl was arrested after allegedly setting
her family’s house on fire in what authorities suspect is the
latest case of Slender Man-inspired violence.

Slender Man is a character in a variety of online stories,
films, and games. This past spring, two girls stabbed a classmate
as part of a bizarre plan to prove the fictional creature was real.
It was the sort of crime that gets a lot of press attention because
of how singularly strange it is. But many reporters seemed to think
it was not a weird one-off but a harbinger of a new trend, and a
short burst of Slender Man
media hysteria
followed, with journalists attempting to link
the mythical monster to a variety of crimes. Even Jerad and Amanda
Miller’s
shooting spree
in Las Vegas got
roped in
, on the grounds that Jerad, who made money by dressing
up as various characters and posing for photos, had been known to
wear a Slender Man costume.

So what’s the supposed Slender Man connection in the new story?
Here’s how one local outlet, WFLA-TV,
covered the arson
:

Detectives say the girl told them that she decided to
set the home on fire while reading the online book “Soul Eater,”
which made her upset about past bullying and her mother
disciplining her. The teen sprayed a rum and bleach mixture onto a
towel and bed sheet that she put on the floor of the family’s
garage. She then set them on fire and walked out of the garage,
according to an arrest affidavit….

The teen had also visited sites related to The Slender Man,
according to investigators. She admitted to using the websites
Creepypasta.com and SoulEater.com, which are associated with The
Slender Man.

From this, it sounds like she felt she decided to kill her
family because she felt mistreated—not an unusual motive for this
sort of crime. Apparently Soul Eater (described here as an
“online book,” though she was probably actually referring to
this
anime and manga series) played a role in her thought process.
And…

And that’s it. She also “admitted” to “using” (which I assume
means “reading”) Creepypasta.com, a vast depository of
online horror stories that is “associated with The [sic] Slender
Man” in the sense that he is one of the many characters one might
encounter there. But I’m not sure why that’s relevant.
(“SoulEater.com” does not appear to exist.)

So how did we get the idea that Slender Man might have inspired
the fire? Is this leap something the press did on its own, or was
it following someone else’s lead?

Here’s ABC News again:

“She had visited the website that contains a lot of the
Slender Man information and stories,” Eddie Daniels of the Pasco
Sheriff’s Office told ABC News. “It would be safe to say there is a
connection to that.”

Ah.

A few more piece of press coverage before we go. While WFLA
mentions Slender Man without offering a reason to think he’s
connected to the crime, and while ABC News puts Slender Man in its
lede but at least uses conditional language, The New York
Post
‘s
headline
 claims forthrightly that the arsonist was
“obsessed” with Slender Man. (The text of the Post piece
offers nothing to support this.)
Gawker
,
BuzzFeed
, the New York
Daily News
, and
The Daily Mail
use the word “obsessed” as well; the only
evidence of obsession that any of them offer are that she wrote
about the character and posted about him on Facebook.
And this
outlet
lays blame squarely on the fictional monster’s
shoulders:

The first 10 words of the article are “Slender Man has inspired
another act of teenage violence.” Well, he’s certainly inspiring
something.

[Via
Infocult
.]

from Hit & Run http://ift.tt/1sLSg3I
via IFTTT

Art Cashin: “Things Could Theoretically Turn Into What I Call A Lehman Moment”

Courtesy of Finanz und Wirtschaft, interview by Christoph Gisiger

Wall Street veteran Art Cashin does not fully trust the record levels at the stock market and draws worrisome parallels between the geopolitical tensions over Ukraine and the Cuban missile crisis.   

From the assassination of President Kennedy via the stock market crash of 1987 and the Fall of the Berlin Wall through to the burst of the dotcom bubble, the terror attacks of 9/11 and the collapse of Lehman Brothers: Art Cashin has experienced all the major world events of the last half century at the floor of the New York Stock Exchange. Currently, the highly respected Wall Street veteran keeps a close eye on the geopolitical tensions in the Middle East and on the situation in Ukraine which reminds him of the Cuban missile crisis «The markets are edgy and nervous», says the Director of Floor Operations for UBS Financial Services while constantly checking the quotation board. Like many traders here, he is somewhat skeptical of the huge stock market rally that started in March 2009. «I think it is a question of the extraordinarily low interest rates», he explains.

Mr. Cashin, September is historically the most difficult month of the year for equities. What is your take on September 2014 so far?

It is strange that September still lingers as a particularly weak month. It goes back to when America was more of an agrarian society and we depended on what would happen with the crop cycles. If a cooking factory for example had to buy wheat from the farmers it would send a check out drawn on an account at a city bank and the country bank would then cash it and put the money in the farmer’s account. Before the Federal Reserve was created, there was a wide spread between the time that money was asked for and when it was replaced. For centuries, this caused bank panics around this time of the year, most notably the panic of 1907. You would think that now that we are no longer an agrarian society, those changes would ease up on the financial pressures. But the market has kind of an echo.

So what are traders talking about at the present time here at the New York Stock Exchange?

We are concerned about two questions. First, how will the Fed do in keeping money reasonably easy without causing inflation? Second, where do we stand with the current geopolitical challenges? For now, these challenges seem to be short term concerns. But should we begin to see a financial contagion and pressure building on banks in Europe, perhaps out of the Ukraine situation, things could theoretically turn into what I call a «Lehman moment». That is when markets come under pressure but seem to be under control, and then things change suddenly.

How do you handle these concerns in your daily business as stock market operator?

Having done this over half a century now, the market tends to have recurring cycles of some type or other. For example, at the beginning of the Cuban missile crisis no one thought that it would turn into a major event. Yet, as time went on and neither side relented, it began to look like we might be on the verge of a nuclear war. That had great reverberations in the financial markets. Then, finally the Russian convoy that was going to resupply the Cuban missiles turned and headed back. Immediately, the stock market began to rally on that sense of relief and that rally continued for months. So you can have these theoretical events – whether they are geopolitical or not – and you get two sweeping changes: First, you can get further and further pressure on prices. And then suddenly, when it releases, you can get almost a rocket shot to the upside.

What are the signals you are looking for to stay on top in such a market?

Over the years, we on the floor have taken to look at what we call the risk monitors. For instance, the yield on the 10-year Treasury note is usually an indicator for the flight to safety. People are looking to get over to the United States protected by the two large oceans. You also look at the gold market where people invest who are concerned that things are changing radically and who think they need some currency protection. And then, particularly in situations like this, you look at things like oil because that is inextricably involved with Russia and with the Middle East and what is going on with the Islamic terror organization ISIS.

And what are the risks monitors signaling?

Right now, it almost looks like peace is breaking out. The price of oil is sharply lower, both Texas West Intermediate and Brent. That indicates a lot less stress there. Although traders can be believers in conspiracies too. There is some wonder if perhaps Saudi Arabia and the United States are encouraging downward pressure on oil prices which would in turn put pressure on Russia and limit the availability to finance what they are doing. So there may be either market forces or government forces behind this.

And how stable is the situation on the stock market? Equities have stalled somewhat lately. Nevertheless, at the End of August the S&P 500 closed over 2000 for the first time and so far equities have performed quite well this year again.

I think it is a question of the extraordinarily low level of interest rates. There are very few places that investors can go to and get some return. So some people are using historic yard sticks and they are saying: «If rates are this low and the economy is this okay then the value of stocks should go higher.» But some of us question that since rates are artificially low.

So what is your take on those super low rates?

I think it means that there are still deflationary pressures out there and that the central banks all around the world are fighting off that deflation risk by keeping rates low. Rates are incredibly low in Europe, they are incredibly low in Japan, they are incredibly low in England and in the United States. That drives people to look at some other avenue to get a return and they have been driven into the stock market.

With the looming end of the QE3 program, the stock market soon will have to pass an important test. But surprisingly, in contrast to the end of QE1 and QE2 investors do not seem to be so nervous this time.

But we are seeing a rather similar reaction in the bond market. Perversely, when they ended the earlier QEs, treasury yields went down instead of going up. So we are seeing a little of that. I think the reaction of the stock market has to do with something that is referred to as the Greenspan put, and later as the Bernanke put. Investors believe that the Fed is concerned about its own independence and therefore it cannot let anything drastic happen. Our government has not been able to do anything on a fiscal basis. So the Fed has gone out and developed tons and tons of access free reserves. If that fails the central bankers know that it will be quite convenient for all the politicians to point the finger at the Fed. Hence, not only is the Fed interested in maintaining the economy but also in its own independence.

During your career on Wall Street, you have seen the coming and going of several Fed chiefs. How would you grade Janet Yellen so far?

I think it is a little too early to tell because she has not been fully able to implement her policies. We have not been done with the taper and she has not clearly defined what yardsticks or mileposts she is using. She is a scholarly woman and has done a great deal of studying, like Mr. Bernanke. Also, I have a new person to look at in the Fed and that would be Stanley Fischer. He brings a lot of experience in as vice chairman. As we begin to look at his speeches and comments, we will see that he is going to have an enormous influence and we may be begin to see him helping Ms. Yellen. He is not going to confront her but helping her to, perhaps, understand why things have to change a little.

With the end of QE3 and the return to a somewhat more traditional monetary policy, investors will likely put their focus more on the fundamentals like revenues, profit margins and earnings. In what shape is Corporate America?

That is one of the great debates here. It really breaks down to on what do you view the stock market is based on. On one side, there are the skeptics. They look at macroeconomics like the GDP numbers, the unemployment rate and a variety of other things. Those people tend to have been skeptical all the way through this rally. On the other side, there are the believers in the stock market and the recovery. They have seen the earnings go up and have been spot on so far. But there is a couple of asterisks that you have to put in. Thanks to the low interest rates, companies are finding that they can improve their balance sheets and they are buying back their own shares. So even when you are earning a little less money, if there are fewer shares around, than the price earnings ratio looks pretty good. That is why the critics of the stock market say that it is all part of financial engineering. Nevertheless, the supporters will respond: «Well, here is the earnings and we are at seventeen times earnings and that is very good for us.»

On what side of this debate are the traders here on the floor at?

The view of the traders is a slight degree of skepticism. As I say, having done this over fifty years, traders are always making sure they know the way out. When I go into a room, the first thing I look for is the exit sign. So when things turn bad I know which way to go.

Also, some skeptics argue that you cannot trust this really since it is based on unusually low trading volumes. Especially at the end of August we have seen some of the lowest volume days over the past seven years.

Over the years, I was always thought that volume equals validity. Just as you would not want to elect a president with only ten or twelve people voting. You want to see a broad consensus. Likewise, you would like to see a broad consensus on what is going on at the stock market. But these days, some of that lack of volume is structural. We have new products like Exchange Traded Funds. So you can with one purchase buy the five hundred stocks in the S&P 500 instead of the five hundred transactions that would have taken place in the past. That contributes to a lower volume, too.

How did the trading business change over the last few years in general?

We are going through a transition into automated electronic trading and we are still adapting to that. The new owners of the New York Stock Exchange, the Intercontinental Exchange, said that they would like to revamp what is going on, change some of the rules and perhaps produce a little more visible activity. I for one miss some of the old trading, especially the simple things. When there was a big crowd, noise would tell me things. When the noise level picked up I would know the activity is picking up. And if you are doing it as long as I am, you could almost tell by the pitch of the noise whether they were buyers or sellers: The buyers sound a little more like a Russian chorus. The sellers, on the other hand – I guess because they were nervous – would have a higher pitch when they shout «Sell! Sell! Sell!»

Today, the silent machines of high frequency traders do most of the trading. How do you cope with those superfast computers and highly sophisticated algorithms?

They may be faster but they are not necessarily smarter. Sometimes an old dog can still learn variations of new tricks and get things done. They might get the first step out of the building but you have to think on behalf of your clients what other impact will that have. If they are doing something in General Motors, what does it mean to Ford or someone else? So in this business, your clients expect you to be able to relate something that is happening in a particular stock with something in the rest of the market.

In May of 2010, the Flash Crash made the world suddenly aware of what can happen when robots are in charge in the trading arenas. How vulnerable is the US stock market today to a similar threat?

I am, of course, prejudiced. I prefer the trading system that we have had through the years. Here on the floor, not one stock traded at a penny during the Flash Crash. That was only in the electronic markets. And that was because here were humans who looked at each other and said: «That does not make any sense. There is no news out, there is no event. Let’s slow down and see where things are going.» As a consequence, the prices here on the floor tended not to be distorted in a manner that they were in other places. So as far as market structure is concerned, I think it is very helpful to have humans around. I prefer that somebody is watching the market as trades are being executed – just as I would not want to fly in an airplane with no pilot.




via Zero Hedge http://ift.tt/Xe8NRI Tyler Durden