WTF Chart Of The Day: VIX "Noise" Edition

Yesterday – amid multiple options-based exchange “breakages”, the VIX feed across various platforms appeared massively noisy. We assumed it would be cleaned up and brushed under the carpet in the new normal. Today, it is just as bad…it appears the plunge in stocks has been a catalyst for amplification of VIX pricing noise… so far no desks have a reason for this.

 

Yesterday’s various options-exchange breakages…

And VIX “noise” exploded…

Note the “before” and “after” as stocks began to collapse and the VIX noise got amplified.

Click image for massive version




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Wall Street Will Always Find An Excuse For Not Raising Rates

By EconMatters

 

Reasons or Excuses?

 

The reasons for the Fed not raising rates keep getting more bizarre and outside the scope of what used to constitute the Fed`s purview. First it was the financial crisis, then it was GDP growth not being up to par, then it was inflation not being robust enough, then it was employment being too soft, next it became China is slowing, then it became Europe is slowing, then it was Wall Street will sell off and there will be too much volatility, then it became lack of wage growth, next it was the Dollar was too strong, and now it is that Energy is too cheap. I am sure I missed at least 5 other reasons that have come and gone for the Fed not raising rates over the last 7 plus years of this ZIRP Fed Wall Street Welfare program. 

 

7 Years is almost a Decade – The US Should Learn from the Japan Model

 

Remember we are not discussing whether or not the Fed Funds Rate should be 5% or 6 %, we are talking about basically 0% Wall Street Financing Handouts for 7 plus years. If Wall Street cannot get their act together in 7 plus years of essentially 0% financing, then they will never be able to get their house and structural holdings in order and stand on their own two feet.

 

We said it first:  Oil is the Next Major Commodity to Crash (June 28, 2013)

 

 

Risk-Taking & Leverage are at Financial Crisis Proportions – Bubbles Galore

 

The risks to the financial system are off the charts, there are asset bubbles all over the place, directly correlated to 7 plus years of ZIRP, and the bubbles and complacency are getting worse by the month. The overzealous chasing of yield at any cost incentivized by ZIRP in the bond markets is the most dangerous bubble the Fed needs to get real concerned about, price and yield return relative to risk of any of these bonds being remotely in the same ‘Value Stratosphere” over 10 and 30 year duration periods, and the fact that all the major banks (which are the purview of the Federal Reserve) have balance sheets filled to the gills with these mispriced assets due primarily to ZIRP Handouts by the Federal Reserve should be their only concern right now!

 

 

Read More: Some Interesting Facts Regarding US Oil Supplies

 

ZIRP was never intended to be Permanent – it was intended for 1-2 Years Max

 

Forget how cheap energy becomes, or Wall Street selling off before every Fed meeting to show the Fed look to much volatility, can’t raise rates now, or there is not enough multiple expansion in the Dow, or the Baby Boomers are going to start pulling money out of the market, or a myriad of other reasons. Just set a target date, a rate hike schedule for 2015, and stick to it regardless of the individual noise and micro events that take place every day in the world. If one looks hard enough there will always be a reason why the Federal Reserve has to continue these Wall Street Handouts which ultimately cause more harm than good by creating massive, systemic risk bubbles that always negate all the good intentions in one fell swoop of unintended consequences.

 

 

If the Fed cannot Raise Rates Now, almost a Full Business Cycle Wasted

 

After the latest economic data for the last three months if the Fed cannot stand up and set out a rate hiking schedule for 2015 starting by my calculations in March of 2015 with a 25 basis point rate hike, and ending 2015 at the 1.75% to 2% area for the Fed Funds Rate, then just abolish the Federal Reserve because they obviously serve no purpose except for show. Just make ZIRP Economic Law, and all debt is ultimately Null and Void, canceled in the end. This may seem like an attractive option to the Paul Krugman`s of the world, but the end game has nasty consequences that make adopting a simple rate hiking schedule the preferable option even for these folks when push comes to shove. And my point is that push has come to shove and the global labor markets are getting tighter and we are starting to experience wage inflation in the third quarter Bloomberg Article on Rising Wages and once wage inflation starts spiking, it oftentimes really spikes, comes out of nowhere, and all the sudden Central Banks get more than they bargained for because this means instead of progressive 25 basis point rate hikes spread out over several months, they are forced to raise rates in 50 basis point increments over a much shorter time period, and then markets will show the Fed what real volatility looks like.

 

 

Deferred Gratification in Reverse Equation

 

There used to be an Oil Product Commercial that vehicle owners can change their oil and update their filter according to the maintenance schedule or pay a much bigger price down the line in the form of the cost of a blown engine. The Fed can pay a little now, or a whole lot later on, and the risks versus benefits of ‘Can-Kicking’ Rate Hikes down the line any further have reached their breaking point as the spike in wages is sending clear cut signals that the US labor market is getting tighter by the month with an additional 200k new jobs added to the economy each month.

 

 

Complete 2015 Rate Hiking Schedule in Detail – Wall Street Needs Concrete Dates to Finally Realize the Inevitable at this FOMC Meeting

 

It is time to raise rates, deal with it Wall Street there will never be a perfect time to raise rates based upon Wall Street`s criteria. Lower energy prices are a good thing, how often do we say if we could just find a cheaper energy source, the global productivity would take off to the next level, it would really be a game changer. We finally get cheaper global energy costs, and now everybody is complaining; these same people were probably complaining about too high of energy costs just 6 months ago. A normalized rate curve is a good thing, CD`s that actually have a more normalized return for saving money is a good thing, normalizing financial markets are a good thing, reducing financial risks to the system in terms of asset bubbles is a good thing, and it is time for the Federal Reserve to stop this ‘data dependent nonsense’ and lay out an actual full rate hiking schedule in interest rates for 2015, and the place to do it is this FOMC Meeting as the financial markets are going to need ‘considerable time’ to adjust to this change in Fed policy after 7 plus years of ZIRP.

 

Read More: December FOMC Meeting to Provide Clarity on 2015 Rate Hikes


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Crude Contagion Spreads To Investment Grade Credit: Spreads Burst To 14-Month Wides

This morning’s bounce in stocks off the overnight lows is being entirely ignored by credit markets. US HY Energy spreads just broke 1050bps – record highs, worst than during the 98 crisis. Broad HY spreads have surged wider to 18-month wides. But perhaps most worrisome, investment grade credit spreads are ‘relatively’ underperforming, bursting to 77.5bps – the widest in 14 months.

 

Equity bounce ignored by credit…

 

Broad HY markets are surging wider as managers seek any protection and HY energy breaks 1050bps…

 

But it is IG credit’s surge that is most worrisome….

 

As contagion wreaks havoc.




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What If Sony Sued to Keep the Press from Publishing Info Acquired by Hackers?

No comment.Sony’s attorney David Boies has sent a
letter
to The Wall Street Journal, The New York Times, The
Hollywood Reporter,
and other outlets about the data hackers
recently
seized from the studio
. “We have reason to believe that you may
possess, or may directly or indirectly be given, illegally obtained
documents or other information,” Boies wrote. Sony, he informed
them, “does not
consent to your possession, review, copying, dissemination,
publication, uploading, downloading, or making any use of the
Stolen Information
.” He urged the papers to
immediately inform him of any material from the hack that they
have, and then to destroy it. If they ignore this request and
publish stories based on the material, the company may sue
them.

Would Sony prevail in such a suit?

Eugene Volokh doesn’t think so. Writing in The Washington
Post
, the UCLA law prof
points to two precedents
that would spell trouble for the
studio:

..and then it would sue for alienation of affection.First, let’s look at
Bartnicki v. Vopper
(2001)
. Vopper was a radio commentator
who received a tape recording of an illegally intercepted
conversation; he apparently wasn’t involved in the illegal
interception, but a reasonable recipient of the recording should
have realized that the conversation had been illegally intercepted,
and Vopper likely actually did realize this. Vopper played parts of
the conversation on his program, and was sued under a federal
statute that made both the interception and the use of such
conversations illegal (both a crime and a tort).

But the Supreme Court held that Vopper’s broadcast incorporating
the intercepted communication was protected by the First Amendment.
Though the interception was illegal (and could constitutionally be
kept illegal), the playing of illegally intercepted material under
these circumstances was constitutionally protected, at least when
the broadcaster wasn’t involved in the illegal interception, and
the communication was on “a matter of public concern.” (The
particular conversation involved union leaders who were allegedly
discussing physically attacking managers.)

Not a Sony picture.The second precedent is
Pearson v. Dodd
(D.C. Cir. 1969)
—not a Supreme Court
precedent, but still influential. Some ex-employees of Sen. Thomas
Dodd, in league with some current employees, took some documents
from the senator’s office without permission, photocopied them, and
then sent the copies to investigative reporters Drew Pearson and
Jack Anderson. Pearson and Anderson published articles based on the
documents. Dodd sued, claiming the publication was an invasion of
privacy, and also constituted “conversion,” which is to say
basically use of stolen property.

The D.C. Circuit rejected these theories, concluding that the
publication just wasn’t tortious (and thus not having to reach the
First Amendment issue). When information is on a matter of public
concern, the court held, the fact that it was illegally leaked
doesn’t make publishing it an invasion of privacy. And the
information in the copied letters does not “fall under the
protection of the law of property, enforceable by a suit for
conversion.”

Volokh adds some caveats, including a note that if someone were
to publish an entire script—the hackers’ booty apparently includes
the screenplay for an upcoming James Bond movie—that
would open the publisher to charges of copyright infringement. For
the most part, though, any media outlet sued by Sony for violating
the commands in Boies’ letter would have a pretty strong
defense.

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Peter Suderman on Edge Politics Versus Center Politics

Last
week, the House faced a momentary crisis as it attempted to pass a
$1.1 spending bill—the “cromnibus,” which combined 11
appropriations bills with a continuing resolution. Conservative
Republicans objected because the spending bill did not stop
President Obama’s executive action on immigration; liberal
Democrats, urged on by Sen. Elizabeth Warren (D-Mass.) opposed a
tweak to derivatives regulation in the Dodd-Frank financial reform
law.

White House support for the bill helped overcome last-minute
Democratic objections, and the Republican leadership attempted to
quell dissatisfaction on the right. The bill passed in the House,
and moved on to the Senate, where it was backed by the Democratic
leadership. Over the weekend, it passed, but not before first
losing a chunk of Democratic support over the financial reform, and
then facing an unexpected procedural delay from Sen. Ted Cruz
(R-Texas), who forced a vote signaling opposition to Obama’s
immigration move before allowing the spending bill to pass.

In the end 21 Senate Democrats and 18 Republicans joined
together in opposition to the bill. The Democratic objectors
were among the party’s most liberal members; the Republicans some
of the GOP’s most conservative. And yet, despite their different
objections, they were, in some sense working together—to defeat the
bill and the wishes of the leadership of their own parties.

For years, writes Senior Editor Peter Suderman, we have heard
about increasing polarization in American politics and the growing
divide between the left and the right. But the spending bill vote
reveals another battle emerging—not the left versus the right, but
the edge versus the center.

View this article.

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Bill de Blasio: He's Chronically Late and Struggles to Get Out of Bed in the Morning

“Giuliani began each work day…with an 8 a.m. meeting, an
almost military-style briefing with his top staff,” wrote Fred
Siegel in his 2005 biography of Rudy, The Prince of
the City
.
“The importance of the ‘8 a.m. morning
meeting,'”— writes Siegel quoting Giuliani—”‘cannot be
overstated…I consider it the cornerstone to efficient
functioning.'”

Our current mayor is more likely to be found buried under a heap
of blankets at that ungodly hour,
notes
New York magazine’s Jessica Roy:

Bill de Blasio, who’s notoriously tardy for everything from
memorials to speeches, was so late for a flight from JFK in
November that he kept passengers from boarding for 20 minutes. New
York’s mayor is so perennially late that
the Post once gifted him
a West Elm alarm clock (without a snooze button).

Last month, Hizzoner
missed
most of a ceremony to honor the victims of Flight 587,
after arriving half-an-hour late New York City Mayor Bill de Blasio (D) ||| Rob Bennett for the Office of Mayor Bill de Blasiofor an 8:05 a.m. ferry. His
aides initially blamed the mayor’s tardiness on “heavy fog,” but de
Blasio later admitted that he was recovering from a “rough night”
and was feeling “really sluggish.” When he was public advocate,

notes
the Observer, de Blasio “sometimes had
difficulty waking up in the morning…leaving staffers waiting for
hours outside his home or showing up late to morning events.”

I go to the same YMCA as de Blasio in Brooklyn’s Park Slope, and
just this morning I caught him slowly peddling away on an exercise
bike at 8:20 a.m. If de Blasio’s going to make good on
his promise
to solve the “inequality crisis” and turn the Big
Apple into a progressive paradise, he’ll need get to the office.
Sweet dreams, Mr. Mayor.

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Tesla Drivers Don't Be Too Smug: Electric Cars Are Not So Green Says Study

Tesla plugged inIn a
new study
in The Proceedings of the National Academy of
Sciences
University of Minnesota researchers report in various
scenarios that vehicles using alternative fuels are often more
harmful to human health than are conventional gasoline-powered
automobiles. From the abstract:

We find that powering vehicles with corn ethanol or with
coal-based or “grid average” electricity increases monetized
environmental health impacts by 80% or more relative to using
conventional gasoline.

Air Pollution Vehicle Deaths

The AP
reported
:

“It’s kind of hard to beat gasoline” for public and
environmental health, said study co-author Julian Marshall, an
engineering professor at the University of Minnesota. “A lot of the
technologies that we think of as being clean … are not better
than gasoline.”

Not surprsingly, the study does find that vehicles powered by
electricity derived from wind and solar power have the least health
effects. Keep in mind, however, that solar
provided 0.23 percent
and wind 4.13 percent of U.S. electricity
in 2013.

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US Manufacturing PMI Plunges To 11 Month Lows, Misses By Most On Record

But what about the massive cajillion-dollar tax cut for American manufacturers from the oil-drop? US Manufacturing PMI collapsed to 53.7 in December, missing expectations of a rebound to 55.2 by the most on record and falling to its lowest since January 2014 – the middle of the Polar Vortex. This is the 4th monthly drop in a row off the mid-year "yay recovery is here" record highs and 4th miss in a row as economists continue to 'price in' the hockey-stick. The employment sub-index dropped to its lowest since July and new orders collapsed to its lowest since January. This comes on the heels of Germany's 18-month lows for its Manufacturing PMI. No decoupling after all.

 

 

 

As Markit noted about Germany,

“Overall, the data are consistent with only marginal GDP growth in the fourth quarter at best, with the average PMI reading in the latest three months the weakest since the second quarter of 2013. The possibility of a renewed downturn at the start of next year is clearly becoming more and more likely, especially if the survey data continue to disappoint.”

And added on USA,

“Softer output and employment numbers merely represent a cooling in the pace of expansion from unusually strong rates earlier in the year, but also send a warning light to policymakers that the fourth quarter is likely to see a weakening in the pace of economic growth, which is starting to hit hiring.

 

“We expect this weakening to become evident in the official data early in the new year, meaning rate setters will continue to err on the side of caution in terms of when the economy may be ready for higher interest rates, especially as the survey data also highlight a further drop in inflationary pressures.

Charts: Bloomberg




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It's Not Just Russian Stocks: Middle East In Freefall

Dubai’s Financial Market General Index is now down 40% since the peak in oil prices in June this year. For now, only Qatar is clinging to gains year-to-date as the rest of the Middle Eastern equity markets give up 30-60% gains from mid-year and tumble to negative. Dubai and Abu Dhabi alone are down over 8% since Friday.

Year-to-date, Kuwait is now down almost 20% with only Qatar clinging to gains…

 

as All Middle Eastern equity markets have collapsed since oil peaked…

 

 

Charts: Bloomberg




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As Seen In Front Of A Russian Currency Exchange Office

And bank dealers thought bid/ask spreads on CDS were wide. Perhaps US banks with sliding revenues should just open a few FX kiosks by the Moscow train station and make up for all that lost income from hundreds of billions in FX-rigging legal settlements?




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