Tag: finance

While we are told that QE was “easing” but tapering is not tightening, it is worth remembering that “conventional” balanced portfolios have performed dramatically worse when the Fed is not easing. However, what is more worrisome for the 60/40 crowd is the following chart as “excess” returns suggest a period of disappointing performance lies ahead. As we’ve asked before, is this as good as it gets?

 

 

Source: Wadhwani Asset Management

via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/BOa_8XDvZu0/story01.htm Tyler Durden

The long anticipated and often rumored move of Facebook to the S&P 500 has finally arrived, only this time one gets two for the price of one. From BBG:

• FACEBOOK TO JOIN S&P 100 AND S&P 500

We can’t wait for TWTR to move up in sympathy. As for the reasons behind the move – one must do whatever is needed to keep what little is left of retail speculators happy.

And in other news, Alliance Data Systems (ADS) and Mohawk (MHK) are also joining the S&P 500

via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/u5bwvsNsx4Y/story01.htm Tyler Durden

The long anticipated and often rumored move of Facebook to the S&P 500 has finally arrived, only this time one gets two for the price of one. From BBG:

• FACEBOOK TO JOIN S&P 100 AND S&P 500

We can’t wait for TWTR to move up in sympathy. As for the reasons behind the move – one must do whatever is needed to keep what little is left of retail speculators happy.

And in other news, Alliance Data Systems (ADS) and Mohawk (MHK) are also joining the S&P 500

via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/u5bwvsNsx4Y/story01.htm Tyler Durden

For the last year or two, European banks have engaged in the ultimate of self-referential M.A.D. trades – buying the sovereign debt of their own nation in inordinate size to maintain the ECB's illusion of control (even as their economies collapse and stagnate). Today though, as The FT reports, a top official at the European Central Bank has signalled it will try to force eurozone banks to hold capital against sovereign bonds, in an attempt to stop weak lenders using its cash to hoover up the debts of crisis-hit countries.

This is a problem as banks assume zero risk-weights (under BIS III) to these "assets" as they swap them for cash with the ECB and, as Praet notes, if sovereign bonds were treated “according to the risk that they pose to banks’ capital” during the health check, then lenders would be less likely to use central bank liquidity to buy yet more government debt.

 

Via The FT,

A top official at the European Central Bank has signalled it will try to force eurozone banks to hold capital against sovereign bonds, in an attempt to stop weak lenders using its cash to hoover up the debts of crisis-hit countries.

 

…

 

the central bank could combine its new powers as chief banking regulator with its existing role as currency issuer to toughen up the requirements on sovereign bonds, which have been traditionally classed as risk-free.

 

…

 

Mr Praet said if sovereign bonds were treated “according to the risk that they pose to banks’ capital” during the health check, then lenders would be less likely to use central bank liquidity to buy yet more government debt.

 

The vicious cycle that has seen banks use central bank cash to buy government bonds has been partly blamed for prolonging the eurozone financial crisis.

But do not worry – should this decision to force banks to hold more capital against their massive sovereign bond books backfire (though credit creation is already dismal), the ECB will save the day…

If the health check were to choke off lending to eurozone households and businesses then the ECB would provide another round of cheap loans, Mr Praet said.

 

He said monetary policy would be used “without hesitation” if the ECB’s data on money and credit showed banks were continuing to shrink their loan books. The ECB would ensure any liquidity was used to spur lending to the real economy by attaching tougher requirements to banks’ holdings of sovereign debt.

And ever the optimist,

“Perhaps paradoxically, a rigorous AQR and stress test helps monetary policy [function],” Mr Praet said.

but the kicker is…

“Should the procyclical impact of the AQR be significant, then monetary policy would be able to act – without hesitation and being reassured that the side effects of a liquidity injection that we have seen for the 2011-2012 [three-year long term refinancing operations] would be minimised.”

Though it appears to us that the "side effects" of massive liquidity-driven demand for the bonds of the distressed nations smashing their risk to record lows while the economies of those nations languishes – is exactly what they wanted…

So again – it comes back to their reliance on the ECB's "we'll collateralize any-old-shit at Par" programs, its unintended consequence of driving the banks and the sovereigns even more symbiotically intertwined, and its inept belief that the stress tests to be undertaken next year will solve all the problems…

 

And Italy is screwed…

Wondering why the Italian bond market has been stable and "improving" in recent months, with yields relentlessly dropping as a mysterious bidder keeps waving it all in despite the complete political void in the government and what may be months of uncertainty for the country, and despite both PIMCO and BlackRock recently announcing they are taking a pass on the blue light special offered by BTPs? Simple. As the Bank of Italy reported earlier today, total holdings of Italian bonds by Italian banks hit an all time record of €351.6 billion in February.

 

 

Why are local banks loaded to the gills in the very security that may and will blow up their balance sheets when the ECB loses control of the European sovereign risk scene as it tends to do every year? Because courtesy of ECB generosity, Italian debt continues to be "cash good collateral" with the ECB, and as a result Italian banks can't wait to pledge and repo it with Mario Draghi in exchange for virtually full cash allottment.

In other words, the more debt the Italian Tesoro issues, the more fungible cash the Italian banks have to spend on such things as padding up their cap ratios and making their balance sheets appear like medieval (any refernce to Feudal Europe is purely accidental) fortresses.

Until – the ECB changes the rules…

via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/HrLn5pd61eM/story01.htm Tyler Durden

With the Ukraine situation increasingly precarious, and now even the US state department getting involved with the occasional unexpected harsh warning…

• U.S. MAY CONSIDER SANCTIONS ON UKRAINE: STATE DEPT

… into what Putin has made very clear is his brand new sphere of influence (it is unclear just why the US is responding in such a way: did the pro-Europe protesters did not use Made in the US tear gas?), Russia casually threw it out there earlier today that it would use nuclear weapons if it comes under an attack. As vice prime minister and defense industry chief made clear, “One can experiment as long as one wishes by deploying non-nuclear warheads on strategic missile carriers. But one should keep in mind that if there is an attack against us, we will certainly resort to using nuclear weapons in certain situations to defend our territory and state interests.” Just in case it wasn’t quite clear…

Rogozin pointed out that this principle is enshrined in Russia’s military doctrine. Any aggressor or group of aggressors should be aware of that, he said. “We have never diminished the importance of nuclear weapons – the weapon of requital – as the great balancer of chances,” Rogozin said.

More from RT:

Russia’s Fund of Perspective Researches (FPI) will develop a military response to the American Conventional Prompt Global Strike (PGS) strategy, Dmitry Rogozin told the State Duma.

 

So far, the FPI has already looked at over a thousand proposed ideas and plans to work on 60 projects, eight of which are top priority, the politician said. He refused to disclose any details, but said that one of those projects is focused on preparing a response to the PGS, which is the “main strategy” that the Pentagon is nurturing.

 

PGS would allow the United States to strike targets anywhere on the planet, with conventional weapons in as little as an hour.

 

As Rogozin explained earlier, the strategy would give America an advantage over a nuclear state, thanks to their better technical capabilities with weaponry, including the speed, RIA Novosti cited.

So if nothing else, at least the primary deterrence strategy of the cold war has just made a roaring comeback. We can only hope that with such skilled heads of the State Department as John Kerry, that the nuclear exchange that was avoided for the duration of the first cold war doesn’t somehow become a GDP-boosting reality.

via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/un6-BezFeAs/story01.htm Tyler Durden

On a day when Sebelius faces more music, but small golf-claps are heard around Democrat offices at the sign-up rates for Obamacare, The Hill reports – rather dishearteningly, Capitol Hill staffers who signed up for ObamaCare through the Washington, D.C. healthcare exchange are being told to confirm their enrollments in person, and not to rely on data provided by the website… “Do not rely on your ‘My Account’ page or other correspondence from DCHL… do not assume you are covered.”

 

Via The Hill,

The Hill obtained an email sent to staffers on Wednesday warning them, “it is essential that you confirm your coverage in DCHL through the Disbursing Office.”

 

“Do not rely on your ‘My Account’ page or other correspondence from DCHL,” the email reads.

 

“Please do not assume you are covered unless you have seen the confirmation letter from the Disbursing Office,” the email continues.

 

Capitol Hill workers had until Monday to sign up for healthcare in D.C., where members and their staffs are eligible for a generous employer healthcare subsidy from the government.

 

…

 

After weeks of pressure from journalists, the Centers for Medicare and Medicaid Services (CMS) said that as much as 25 percent of enrollment transmissions sent from the federal portal to insurers were either garbled or contained bad data.

 

Based on HHS’s enrollment figures, upwards of 30,000 applications might need to be re-evaluated before the end of the year.

via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/-hMzeuTpdNU/story01.htm Tyler Durden

On a day when Sebelius faces more music, but small golf-claps are heard around Democrat offices at the sign-up rates for Obamacare, The Hill reports – rather dishearteningly, Capitol Hill staffers who signed up for ObamaCare through the Washington, D.C. healthcare exchange are being told to confirm their enrollments in person, and not to rely on data provided by the website… “Do not rely on your ‘My Account’ page or other correspondence from DCHL… do not assume you are covered.”

 

Via The Hill,

The Hill obtained an email sent to staffers on Wednesday warning them, “it is essential that you confirm your coverage in DCHL through the Disbursing Office.”

 

“Do not rely on your ‘My Account’ page or other correspondence from DCHL,” the email reads.

 

“Please do not assume you are covered unless you have seen the confirmation letter from the Disbursing Office,” the email continues.

 

Capitol Hill workers had until Monday to sign up for healthcare in D.C., where members and their staffs are eligible for a generous employer healthcare subsidy from the government.

 

…

 

After weeks of pressure from journalists, the Centers for Medicare and Medicaid Services (CMS) said that as much as 25 percent of enrollment transmissions sent from the federal portal to insurers were either garbled or contained bad data.

 

Based on HHS’s enrollment figures, upwards of 30,000 applications might need to be re-evaluated before the end of the year.

via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/-hMzeuTpdNU/story01.htm Tyler Durden

US equities fell their most in 5 weeks on marginal volume today as a budget deal (moar fiscal means less moar monetary policy) and a potentially hawkish Stan Fischer on the Fed spread taper fears across all assets with gold lower, Treasury yields higher, and USD rising. New 52-week-lows spiked to 4 month highs as higher beta muppetry took Trannies down most in almost 4 months. The S&P tested back below the payrolls-data and FOMC Minutes launchpad levels from last week as rather notably, while most sectors are still up 5-10% from the debt-ceiling lows, Utilities are now unch. Treasuries weakened back to unchanged from the payrolls print for 5Y (though 7s-130s are -3 to 4bps still). This is the biggest jump in VIX in 2 months as the term structure is the most inverted since US downgrade levels in Aug 2011. Dow <16,000; S&P <1,800; NASDAQ ~4,000 – Retirement Off!

 

 

New 52-Week Lows spiked to its highest in over 2 months…

 

And the advance-decline peaked a few months back… (as breadth remains weak as we warned)

(h/t @Not_Jim_Cramer)

 

The S&P 500 had a bad day… 50DMAs are coming back into focus on all the major indices… the S&P saw its lowest close in 3 weeks.

 

Utilities are now unchanged since the debt-ceiling lows and sectors are giving gains back in a hurry…

 

VIX saw its biggest pop in 2 months as the term structure is the most inverted (short-term risk the most above medium-term) since Aug 2011…

 

Treasury yields were banged higher – back to unch from payrolls…

 

Charts: Bloomberg

via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/UmmEw_s9ffs/story01.htm Tyler Durden

Productivity. Every employer loves it, and every employee is fascinated by it, especially if it comes in cute colors, a retina screen, and weighs under a pound… at least until such time as “productivity” results in the loss of the employee’s job, which in turn makes the employer love it even more as it results in even higher profits, even if it means one more pink slip and a 91 million people outside the labor force.

With a labor force already in turmoil as millions drop out every year never to be heard from again, made obscolete by the latest technological and computerized innovation, and students stuck in college where they pile up record amounts of student loans (at last check well over $1 trillion) hoping form some job, any job, upon graduation, unfortunately the future is not bright at all.

In a recently published paper, “The Future of Employment: How Susceptible are Jobs to Computerisation,” Oxford researchers Frey and Osborne, look at the probability of computerization by occuption. What they find is shocking for nearly half of the US labor force, and especially those in the transportation, production, office support, sales, service and extraction professions.

JPM’s Michael Cembalest summarizes it as follows:

Life after college: be prepared for technology to continue changing the job landscape

There’s plenty of data on unemployment rates and salaries by undergraduate major (the majors with the lowest unemployment rates and highest salaries: computer, chemical, electrical, civil and mechanical engineering; math/physics; and economics. Drama and film majors are a recipe for living at home). A more important long-run issue to think about may be how technology affects your career. Researchers at Oxford just published an analysis assessing what jobs might be computerized in the future. Their conclusion: a staggering 47% of the US workforce, spanning a range of career types. There are vigorous debates about outsourcing, but increasingly, computerization may grow as a factor affecting employment conditions.

 

 

In The Man in the White Suit, Alec Guinness invents a suit that never has to be cleaned or replaced. London’s tailors and dry cleaners angrily chase him down in the street  to destroy his invention. They are relieved when the suit finally starts to unravel, since the fiber’s design is flawed. Productivity improvements are great things, but there might be a point at which too much power shifts to capital over labor. Anyway, when you think about a career, remember that in some professions, eventually a computer might be able to do it too, or reduce the economic value of you doing it (e.g., the impact of the internet on print journalism).

The good news: those iPad apps are cheap, and most unemployed workers – who were put out of a job thanks to one – can afford them. The bad news: anyone lamenting the return of America’s employment golden age, is kindly encouraged to exhale.

via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/rBSC_Oq8uzE/story01.htm Tyler Durden

Former OMB director David Stockman rages to none other than Rick Santelli that the budget deal is a “betrayal and a joke” and “the final surrender of the House Republican leadership to beltway politics.” The dismal reality – that little to no one in the mainstream media will dare utter – the budget adds $70 billion to spending this year and next year, and “then they’re going to pretend to save it in ’22 and ’23.” Stockman blasts, “they’ve not only kicked the can down the road, but kicked it into low-earth orbit.” The only hope of getting our fiscal house in order was if House Republicans stand up, and Stockman warns “will trigger an enormous negative reaction from Tea-Party Republicans.” The truth hurts…

Santelli “we’re not talking about kicking the timeline can til the mid-terms, ” – “this is a two-year vacation on the fiscal budget.”

“Just from the momentum built-in, our debt load will be $25 trillion by the end of the next Presidential cycle.”

 

via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/suPoCkT9sqE/story01.htm Tyler Durden