Bill Gross: “All Risk Asset Prices Artificially High”

First it was JPMorgan, now it is PIMCO’s turn.

Alas, by now everyone but the Fed realizes there is a bubble in practically every asset class. As such, Gross’ tweeter time may be better spent engaging in smack talk with Carl Icahn: it is far more entertaining and engaging.


    



via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/-0mAdwwkDrs/story01.htm Tyler Durden

Guest Post: System Reset 2014-2015

Submitted by Charles Hugh-Smith of OfTwoMinds blog,

Resets occur when the price of everything that has been repressed, manipulated or obscured is repriced.

The global financial system will reset in 2014-2015, regardless of official pronouncements and financial media propaganda hyping the "recovery." Despite the wide spectrum of forecasts (from rosy to stormy), nobody knows precisely what will transpire in 2014-2015, so we must remain circumspect about any and all predictions– especially our own.

Even as we are mindful of the risks of a forecast being wrong (and the righteous humility that befits any analysis), it seems increasingly self-evident that financial systems around the world are reaching extremes that generally presage violent resets to new equilibria–typically at much lower levels of complexity and energy consumption.

John Michael Greer has described the process of descending stair-step resets (my description, not his) as catabolic collapse. The system resets at a lower level and maintains the new equilibrium for some time before the next crisis/system failure triggers another reset.

There is much systems-analysis intelligence in Greer's concept: systems without interactive feedbacks may collapse suddenly in a heap, but more complex systems tend to stair-step down in a series of resets to lower levels of consumption and complexity–for example, the Roman Empire, which reset many times before reaching the near-collapse level of phantom legions, full-strength on official documents, defending phantom borders.

In the present, we can expect the overly costly, complex, inefficient, fraud-riddled U.S. sickcare (i.e. "healthcare") system to reset as providers (i.e. doctors and physicians' groups) opt out of ObamaCare, Medicare and Medicaid; like the phantom armies defending phantom borders of the crumbling Empire, the vast, centralized empire of sickcare will remain officially at full strength, but few will be able to find caregivers willing to provide care within the systems.

Just as much of the collateral supporting the stock, bond and housing bubbles is phantom, many other centralized systems will reset to phantom status. As local and state governments' revenues are increasingly diverted to fund public union employees' sickcare and pension benefits, the services provided by government will decline as the number of retirees swells and the number of government employees actually filling potholes, etc. drops.

Local government will offer services that are increasingly phantom, as stagnating tax revenues fund benefits for retirees rather than current services. On paper, cities will remain responsible for filling potholes, but in the real world, the potholes will go unfilled. In response, cities will ask taxpayers to approve bonds that cost triple the price of pay-as-you-go pothole filling, as a way to dodge the inevitable conflict between government retirees benefits and taxpayers burdened with decaying streets, schools, etc. and ever-higher taxes.

As for phantom collateral–the real value of the collateral will be undiscovered until people start selling assets in earnest. As long as everyone is buying, the phantom nature of the collateral is masked; it's only when everyone tries to get their money out of asset bubbles is the actual value of the underlying collateral discovered.

When assets go bidless, i.e. there are no buyers at any price, the phantom nature of the supposedly solid collateral is revealed. Price discovery is one way of describing reset; transparent pricing of risk is another way of saying the same thing.

When risk has been mispriced via state guarantees, fraud, willful obfuscation, complexity fortresses, etc., then the repricing of risk also resets the system.

Resets occur when the price of everything that has been repressed, manipulated or obscured is repriced. The greater the manipulation and financial repression, the more violent the reset. What been manipulated, obscured or repressed? Virtually everything: risk, credit, assets, labor, currency, you name it. Everything that has been manipulated by central banks and central states will be repriced.

Trust is difficult to price. Every reset erodes trust in the capacity of the centralized status quo to manipulate/repress price to its liking. Once trust in the system is lost, it cannot be purchased at any cost.


    



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

Fayette man arrested in F'ville armed robbery

An armed robbery early Monday morning at the BP station at 450 North Glynn Street in Fayetteville left the store’s employee injured after being beaten in the head with a metal pipe. A Fayette County man was arrested a short time later in south Fulton County and has been charged with the armed robbery and aggravated assault.

William Paul, 33, of Hilo Road south of Fayetteville, was charged with armed robbery, aggravated assault and battery, according to Fayetteville Det. Mike Whitlow.

read more

via The Citizen http://www.thecitizen.com/articles/10-29-2013/fayette-man-arrested-fville-armed-robbery

Fayette man arrested in F’ville armed robbery

An armed robbery early Monday morning at the BP station at 450 North Glynn Street in Fayetteville left the store’s employee injured after being beaten in the head with a metal pipe. A Fayette County man was arrested a short time later in south Fulton County and has been charged with the armed robbery and aggravated assault.

William Paul, 33, of Hilo Road south of Fayetteville, was charged with armed robbery, aggravated assault and battery, according to Fayetteville Det. Mike Whitlow.

read more

via The Citizen http://www.thecitizen.com/articles/10-29-2013/fayette-man-arrested-fville-armed-robbery

NQ Responds To Muddy Waters Fraud Allegations With Paperweighty 97-Page Presentation

If the investing school of “Ackman-Tilson” is correct, in which nobody actually cares about the content, just the number of pages in a given “investing presentation” slideshow, then recently troubled Chinese mobile internet provider NQ just got the upper hand over Muddy Waters. Recall that on Thursday, with a “Strong Sell” report bashing NQ alleging the company is a fraud, Muddy Waters managed to cut the price of the company in question by over 50%. The size of that presentation: 81 pages. Moments ago NQ came out with its point by point rebuttal to Muddy Waters. The size of NQ’s presentation: a whopping 97 pages.  Game, set, match to NQ, duh.

P.S. For those confused, the above statement is sarcasm, wrapped in a farce, inside an absurdity. Just like this here “Bernanke market.”


    



via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/i4CrkdBGgA8/story01.htm Tyler Durden

ECB's "Frankness" Sparks EURJPY Spike Sending US Stocks To Higher All Time Highs

Aside from the fact that this morning’s dismal confidence data likely inspired more Fed-inspiration, the fact of the matter is that US equities remain beholden to the ebb and flow of JPY-carry trades. This morning’s surge in the latter (EURJPY) can be attributed to ECB’s Nowotny, who dropped this little tape-bomb earlier:

  • *ECB’S NOWOTNY SAYS ‘NO REALISTIC PROSPECT’ OF RATE CUT: MNI
  • *NOWOTNY SAYS ECB UNLIKELY TO CUT BENCHMARK OR DEPOSIT RATE: MNI
  • *NOWOTNY SAYS POLICY MAKERS ‘HAVE TO LIVE WITH’ STRONG EURO: MNI

Which strengthened the EUR (against the JPY) and thus – in the new normal interconnected world (disconnected from fundamentals) – US equities spike.

 

 

At some point we assume reality will dawn that carry trades can’t carry us all the way to inifinity but for now, that seems to be the case at the margin – and the margin is all that matters…


    



via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/wVxFvoGa4Qg/story01.htm Tyler Durden

ECB’s “Frankness” Sparks EURJPY Spike Sending US Stocks To Higher All Time Highs

Aside from the fact that this morning’s dismal confidence data likely inspired more Fed-inspiration, the fact of the matter is that US equities remain beholden to the ebb and flow of JPY-carry trades. This morning’s surge in the latter (EURJPY) can be attributed to ECB’s Nowotny, who dropped this little tape-bomb earlier:

  • *ECB’S NOWOTNY SAYS ‘NO REALISTIC PROSPECT’ OF RATE CUT: MNI
  • *NOWOTNY SAYS ECB UNLIKELY TO CUT BENCHMARK OR DEPOSIT RATE: MNI
  • *NOWOTNY SAYS POLICY MAKERS ‘HAVE TO LIVE WITH’ STRONG EURO: MNI

Which strengthened the EUR (against the JPY) and thus – in the new normal interconnected world (disconnected from fundamentals) – US equities spike.

 

 

At some point we assume reality will dawn that carry trades can’t carry us all the way to inifinity but for now, that seems to be the case at the margin – and the margin is all that matters…


    



via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/wVxFvoGa4Qg/story01.htm Tyler Durden

Shorts Crucified As Most Shorted Russell 2000 Stock Gets Takeover Proposal

As we pointed out a month ago (and initially over a year ago) in this completely broken, levered-beta, mad dash for yield market, the only alpha-generating strategy that even remotely works, is to be long the most shorted stocks. This was confirmed based on the 1 year “New Normal” return of the S&P vs the “most shorted sotcks” – a trade we first suggested in September 2012 – demonstrated by the chart below.

 

Amusingly, as part of the trading basket of only stocks worth owning, i.e., the most shorted ones on the Russell 2000, where the beta is by far the highest, the top stock listed, the one with the highest short interest as a percentage of the total float, was none other than Blyth, Inc., as per the chart from one month ago.

According to the latest Bloomberg data, since then the short interest only rose even more, hitting an unprecedented 82.79% of all shares in the float held short.

Well, overnight a lot of shorts suddenly screamed out in terror and were suddenly silenced, not to mention carted out feet first, when none other than the most shorted Rusell 2000 stock received an unsolicited takeover proposal valuing the stock at $16.75/share, and sending it to the highest level since May.

Blyth, Inc. (BTH), a direct to consumer company and leading designer and marketer of health & wellness products, beauty products and candles and accessories for the home sold through the direct selling and direct marketing channels, today confirmed that it has received an unsolicited proposal from CVSL, Inc. to acquire, subject to conditions, all of the public common shares of Blyth for a per share consideration of $16.75, or approximately $269 million payable in CVSL shares or cash.

 

The proposal is conditioned on diligence and the negotiation of definitive documentation and is not supported by financing.  The proposal references a meeting last week between principals of Blyth and principals of CVSL; the Company noted this meeting was held at the request of CVSL and the principals did not discuss a business combination of Blyth and CVSL.

For the shorts who still believe in a rational, fundamentally-driven market: our condolences. For everyone else – just keep betting that career-risk driven idiocy will be the dominant investing strategy until the Fed’s central planning implodes, and buy what that anachronism in a market without risk, hedge funds, are shorting the most.

 

 


    



via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/U0xQg38XsXE/story01.htm Tyler Durden

Consumer Confidence Plunges Most In 2 Years

Following the lowest UMich confidence print in 2013, Gallup's economic confidence collapse, and Bloomberg's index of consumer comfort signaling major concerns among rich and poor in this country (in spite of record highs in stocks), today's Conference Board Consumer Confidence data  continues to confirm a problem for all those 'hoping' for moar multiple expansion. From 80.2 in September, confidence collapsed to 71.2 (the largest MoM drop in 2 years) to its lowest in six months, and notably below expectations. As we have noted in the past a 10 point drop in confidence has historically led to a 2x multiple compression in stocks (which suggests the Fed will need to un-Taper some more to keep the dream alive). Hope for the future dropped to 7-month lows but what is perhaps most intriguiging, just as with the Bloomberg surveys, we are seeing the wealthiest cohorts confidence plunging (even as stocks soar to new highs). It would appear the Fed has lost its wealth effect inpiration.

 

 

Once again we remind that it's all about confidence and hope appears to be fading…

As we have noted previously – this move in confidence is key…

But, it's all about confidence… investors will not be willing to pay increasing multiples unless they are confident that the future streams of earnings are sustainable and forecastable… And simply put, the current levels of Consumer Sentiment need to almost double for the US equity market tp approach historical multiple valuation levels…

 

 

 

and the cycle appears to be shifting…

Via Citi,

Is consumer confidence set to turn?

Consumer Confidence is once again following a dynamic where we see it move higher for 4 years and 4 months before beginning to collapse

  • Moves higher from 1996-2000 with a smaller dip halfway through in October 1998
  • Moves higher from 2003-2007 with a smaller dip hallway through in October 2005
  • Moves higher and so far tops out in June 2013. Also sees a small dip halfway through in October 2011.

 

Higher yields do not help confidence…

 

A sharp rise in mortgage rates has a negative feedback loop to consumer confidence. For those families and individuals that were now looking/able to enter the housing market, the recent spike in rates acts as a headwind.

 

In addition to the economic backdrop, there is plenty of tail risk as we head into the end of the year. Oil prices have been rising since the summer began (and in reality since the Summer of 2012), partially due to geopolitical risks which are very much “top of mind.” A bigger spike due to a supply shock would choke the economic recovery.(In our view)

In the US, the appointment of a new Fed Chairman and the upcoming budget/debt ceiling debates are likely to bring added volatility. Tapering itself can also induce concern as the “Bernanke put” is being removed from markets.

In Europe, many of the structural problems related to the single currency union have not actually been addressed and the peripheral countries could still create turmoil going forward (see Fixed Income section focusing on Italy in particular for more on this). There has also been little concern with both the German elections and the German Court decision on the constitutionality of the OMT program. A surprise in either of these could be cause for concern.

Emerging Markets are still not out of the woods yet as growth has been weak relative to expectations and countries with current account deficits are beginning to feel pressure in their FX and Bond markets. This is an issue we believe is only starting to develop which we will continue to expand on at later dates.(We have also looked at this in our EM FX section this week)

Overall, the weak economic backdrop, poor housing recovery and potential for tail risk events over the next few months suggest that we have topped out in Consumer Confidence, a warning sign for equity markets.

 

The relationship between Consumer Confidence is clear, and IF June did mark the high and Confidence continues to decline, then we would expect to see that translate to weakness in the equity markets. The removal of the “Bernanke put” only adds to this concern.

A major turn has taken place in equity markets on average four months after Consumer Confidence turns, which would point to a decline beginning around September-October. As we have previously expressed, we remain of the bias that a correction in equity markets on the order of 20%+ is likely this year/ into 2014 and the current dynamics support such a move.

Should we see a decline of that magnitude, it is almost certain that yields would move lower in a rush to safe assets.

 


    

via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/zwqfs9gPo5s/story01.htm Tyler Durden

Administration Updates House On Obamacare Enrollment – Live Webcast

The House Ways & Means Committee holds a hearing to receive testimony from Marilyn Tavenner, Administrator of the Centers for Medicare & Medicaid Services (CMS) at the U.S. Department of Health and Human Services (HHS). Grab your popcorn, nom nom nom

 


    



via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/s8dtGaZFfTU/story01.htm Tyler Durden