As stocks have soared, so the implied volatility of the S&P 500 has also – very unusually – risen…
In fact VIX and the S&P are up for 3 straight weeks – the longest streak since Feb 2013.
Typically this is interpreted negatively as it would seem people are paying up for downside protection as stocks go ever higher and ever more parabolic.
But 2018 is anything but typical… Everyone’s buying calls into the rally!!
Thus the rise in VIX (which measures the ‘around the money’ implied vol of the S&P) is being driven higher but exceptional demand for calls… upside levered bets that this crazy melt-up continues; as demand for downside protection slides lower!!
And finally this is what real market madness looks like.
The normally extremely high correlation between upside implied volatility and downside implied volatility has totally and utterly collapsed…
Who needs protection when there’s levered equity risk to buy with both hands and feet!?
Despite all the recent media attention being paid to the Tide Pod challenge, in which social media users dare each other to bite into one of the colorful laundry packets, most people recognize it for what it is: a very weird joke. Few teens are actually swallowing laundry detergent. There have been 86 so far in January, which is more than all of last year but still not very many. If you want to worry about people eating laundry-room poison, worry about young children who ingest it by accident—that number’s in the thousands each year.
But Fox News contributor Tomi Lahren isn’t one to let a good outrage go to waste, particularly if it involves kids these days and can somehow be blamed on the left. The Tide Pod challenge doesn’t actually meet those criteria, because 1) it’s not real, and 2) it has nothing to do with the left. And yet, in a recent video rant, Lahren blamed the “detergent-eating craze” on the breakdown of the American family and the left’s monopoly on popular media.
“I know what you’re thinking, the Tide Pod challenge couldn’t possibly be political, could it?” Lahren says in the video, vocalizing my very thoughts as I watched. “Actually, yes, it is. It’s just the latest symptom of a larger problem: the breakdown of the American family.”
According to Lahren, “parents nowadays” give their kids too much freedom and let them do whatever they want, “but this modern loosey-goosey method of parenting doesn’t teach right from wrong or sane from insane.” Under liberalism, apparently, nobody tells kids what to do, so they’re eating Tide Pods. Thanks, Obama.
Again, most of the people eating Tide Pods are toddlers, and they’re not doing it because their parents made them moral relativists. And since when have 21st-century parents been too removed from their children’s lives? As Reason‘s Lenore Skenazy documents on a weekly basis, the government routinely punishes parents for giving their kids too much freedom: letting them walk to school, play in the park, chill at home by themselves, etc. If anything, kids and teens are being oversupervised, both at home, and in schools.
In fact, I’m tempted to parse the Tide Pod challenge as some kind of misguided teen rebellion against our increasingly bubble-wrapped world. But I won’t, because there’s nothing to parse. Because deliberately eating Tide Pods isn’t really a thing. Joking about it is.
Immigration and Customs Enforcement (ICE) now has access to a national database of license plates, allowing it to track millions of cars on a daily basis regardless of the owners’ immigration status.
A no-bid contract awarded in December by the Department of Homeland Security will allow ICE “access to a commercially available License Plate Reader (LPR) database.” Though the contract recipient is not identified in public documents, The Verge (which first uncovered the contract’s existence) reports that ICE will use a database built and maintained by Vigilant Solutions, a California-based company that partners with law enforcement agencies across the country to collect scans of law-abiding citizens’ plates.
Each snapshot included in the database includes the license plate number, the attached vehicle’s make and model, the state of registration, the GPS coordinates, and a timestamp, according to a “privacy impact assessment” released by DHS. License plate scanners are often attached to police cars, but some jurisdictions have them at fixed locations, including toll booths, bridges, and even ordinary road signs.
“Some LPR systems also capture within the image the environment surrounding a vehicle, which may include drivers and passengers,” the assessment notes. “Information can be collected from all vehicles that pass the camera.”
Despite the obvious privacy issues, the DHS assessment concludes that it’s fine for ICE to have access to the database, in the name of “public safety and national security.”
Automated license plate readers have been a point of concern for the American Civil Liberties Union (ACLU) since 2013, when the organization released a report based on public records requests submitted to 600 police departments. The ACLU said the scanners were “becoming a tool for mass routine location tracking and surveillance.”
While license plate scanners can be used for legitimate law enforcement functions as part of criminal investigations, the ACLU says those instances account for “a tiny fraction” of the millions of license plate records tracking drivers, most of whom have no idea that they’re in the database.
The DHS contract states that “ICE is neither seeking to build nor contribute to a national public or private LPR database.” But the immigration cops are happy to put the existing database to use.
According to The Verge, ICE will be able to query the database for five years’ worth of data, enough to track nearly every movement that a target might have made during that time. Agents will also get immediate email alerts when a particular license plate is spotted again.
“Knowing the previous location(s) of a vehicle can help determine the whereabouts of subjects of criminal investigations or priority aliens to facilitate their interdiction and removal,” the privacy assessment explains. “In some cases, when other leads have gone cold, the availability of commercial LPR data may be the only viable way to find a subject.”
The Verge also reports that DHS experimented with giving ICE access to license plate scanner databases in 2012, but the Obama administration ultimately backed away from the idea because of privacy concerns. The Trump administration, which has made it a priority to apprehend and deport illegal immigrants—even ones who pose no apparent risk to public safety or national security—seems to have no such qualms.
To be clear, the national LPR database maintained by Vigilant Solutions does not discriminate between cars owned by illegal immigrants and those owned by legal residents of the United States. For that matter, it does not discriminate between vehicles owned by people suspected of committing any crime and everyone else. It’s a blanket surveillance tool that tracks an estimated 100 million people every month as they commute, run errands, and visit friends. It even covers cars that are just parked on their owners’ driveways.
This database shouldn’t exist at all, whether or not ICE uses it. In the meantime, millions of innocent Americans can have their vehicles tracked by the immigration police—whether they are immigrants or not—for no reason at all.
Yesterday, I reported that the oft-cited, debate-driving statistic that Americans use 500 million plastic straws a day was the product of a 9-year-old’s guesstimations. Despite those shaky factual foundations, the 500 million figure has quickly spread, virus-like, across the media landscape and even into our shops and schools.
Visitors to the D.C. tea house Teaism—just a short walk from Reason‘s D.C. office—will be confronted with the questionable fact on a small poster adorning the restaurant’s single-use straw dispenser, replete with a picture of a cute sea turtle. Meanwhile, impressionable children at the Mount Vernon Community School in nearby Alexandria, Virginia, are coming home with “Straw Wars” handouts citing the same dubious figure.
It’s easy to understand how the school could have been led astray, given how ubiquitous this claim is in the media. Please see below for a list of just a few of the news outlets that have cited this “fact”—or otherwise quoted people saying it without any critical pushback—in their reporting:
And of coure government officials have embraced the number too. The National Park Service has touted it. So has California Assemblyman Ian Calderon. It’s in the text of a Hawaii bill that would ban the distribution of plastic straws in the state.
It’s sad that so many outlets are treating the rigorous survey work of an elementary school student as the statistic about plastic straw use. But it’s not very surprising. Attempts to ban plastic straws—or indeed any plastic product—have as much to do with signaling your environmentalist bona fides as they do with actually cleaning up the oceans or saving the planet. So people pushing the claim have little incentive to investigate it. And the media have every incentive to hype the impact of a phenomenon they’re covering.
Let this serve as a reminder: A statistic’s popularity does not prove its accuracy.
After that week, we suspect more than a few FX traders feel the same way…
Let’s get a little context before we start – this is the most overbought (by a bloody mile) that US equities have ever been…
And…98% of global equity markets trading above 50 & 200 day moving averages.
This is the best start to a year for the Dow and the S&P 500 since 1987…
While Nasdaq is 2018’s big winner, this is only its best start to a year since 2004. S&P, Dow, & Nasdaq have only seen 4 down days in 2018
On a side note, China’s H-share index broke its record daily streak this week, but…with its seventh week of gains, the Chinese index reaches its longest run of gains since October 2010.
Today was pure panic-buying euphoria…
On the week, Trannies suffered as Airlines crashed (Transports worst week in over 3 months)…
This is the 4th weekly gain in a row for the S&P 500, Dow, and Nasdaq (and 9th of the last 10 for Dow and S&P)
Having surpassed Goldman’s 2018-Year-End Target of 2850, at 2863, the S&P becomes the 2nd largest US equity bull market of all-time, and BofA’s Q1 target.
For a brief few panic-buying minutes there, NASDAQ actually went vertical on massive volume as the machines ran it up to 7500!!
A VIX Close above 11.27 for the week would be the 3rd week in a row of gains for both VIX and the S&P 500 (something that hasn’t happened since Feb 2013 and has only happened 5 times in history before – always followed by equity weakness)… everyone’s buying calls.
A stunning week for Tech with AAPL plunging and FANGs surging… (NOTE this is the biggest weekly divergence between the two since FANGs started trading – bigger than April 2016)
In FX Fantasy-land… Trump’s Rescue Bid failed and the dollar pressed down towards cycle lows… (NOTE the dollar is down 7 weeks in a row – the longest streak since Aug 2010) The Mnuchin Massacre managed the worst week for the dollar in 8 months
One could be forgiven for thinking this is a Trump-driven dump…
This is the worst start to a year for the dollar since 1987…
And the ultimate correlation has broken…
Treasuries were very mixed on the week. Despite the bloodbath in the dollar, the Long Bond rallied (-2.25bps on the week) as 2Y yields spiked almost 6bps…
10Y Yields bumped up against 2.67% three times and rallied lower in yield each time…
And the yield curve continued to crater… today is the first time that the 2s30s spread has closed below 80bps since Oct 16th 2007…
Away from the Dollar Index, today saw more chaos in USDJPY as Kuroda spoke then The BoJ reportedly clarified his comments… but it seems FX traders weren’t buying the denial… Of course asymmetrically echoed the sudden spike in USDJPY (ignoring its demise)…
A weak dollar helped send all major commodities higher on the week…
Gold continues to lead The Dow since The Fed hiked rates in December…
Another not-very-pretty week for cryptos amid South Korean crackdowns and Japanese exchange hacks…Ethereum managed to hold on to a 1% gain while the rest fell led by a 21% plunge in Ripple…
Bitcoin stabilized around $11,000…
Finally, we leave you with this… for no good reason…
Ian Calderon wants restaurateurs to think long and hard before giving you a straw.
Calderon, the Democratic majority leader in California’s lower house, has introduced a bill to stop sit-down restaurants from offering customers straws with their beverages unless they specifically request one.
Under Calderon’s law, a waiter who serves a drink with an unrequested straw in it would face up to 6 months in jail and a fine of up to $1,000.
“We need to create awareness around the issue of one-time use plastic straws and its detrimental effects on our landfills, waterways, and oceans,” Calderon explained in a press release.
This isn’t just Calderon’s crusade. The California cities of San Luis Obispo and Davis both passed straws-on-request laws last year, and Manhattan Beach maintains a prohibition on all disposable plastics. And up in Seattle, food service businesses won’t be allowed to offer plastic straws or utensils as of July.
The Los Angeles Times has gotten behind the movement,endorsing straws-on-request policies in an editorial that also warned that “repetitive sucking may cause or exacerbate wrinkles on the lips or around the mouth.” Celebrity astronomer Neil DeGrasse Tyson (always up for a little chiding) and Entourage star Adrian Grenier have appeared in videos where an octopus slaps them in the face for using a plastic straw.
The actual number of straws being used is unclear. Calderon, along with news outlets writing about this issue—from CNN to the San FranciscoChronicle—unfailingly state that Americans use 500 million plastic straws a day, many of them ending up in waterways and oceans. The 500 million figure is often attributed to the National Park Service; it in turn got it from the recycling company Eco-Cycle.
Eco-Cycle is unable to provide any data to back up this number, telling Reason that it was relying on the research of one Milo Cress. Cress—whose Be Straw Free Campaign is hosted on Eco-Cycle’s website—tells Reason that he arrived at the 500 million straws a day figure from phone surveys he conducted of straw manufacturers in 2011, when he was just 9 years old.
Cress, who is now 16, says that the National Restaurant Association has endorsed his estimates in private correspondence. This may well be true, but the only references to the 500 million figure on the association’s website again points back to the work done by Cress.
More important than how many straws Americans use each day is how many wind up in waterways. We don’t know that figure either. The closest we have is the number of straws collected by the California Costal Commission during its annual Coastal Cleanup Day: a total of 835,425 straws and stirrers since 1988, or about 4.1 percent of debris collected.
Squishy moderates on the straw issue have pushed paper straws, which come compostable at only eight times the price. Eco-Cycle skews a bit more radical, with their “Be Straw Free” campaign—sponsored in part by reusable straw makers—that urges the adoption of glass or steel straws. Because we all know how good steel smelting is for the environment.
In any case, criminalizing unsolicited straws seems like a rather heavy-handed approach to the problem, especially since we don’t actually know how big a problem it is. But don’t take my word for that. Ask Milo Cress.
“If people are forced not to use straws, then they won’t necessarily see that it’s for the environment,” he tells Reason.“They’ll just think it’s just another inconvenience imposed on them by government.”
* * *
Update: Reason spoke with Voleck Taing, a senior assistant to Assemblyman Calderon, who said they intend to amend the bill to remove the fines.
Early last month, we showed that one of Bank of America’s “guaranteed bear market” indicators, namely the three-month earnings estimate revision ratio (ERR) which since 1988 has had a 100% hit rate of predicting upcoming bear markets, was just triggered. As Bank of America explained at the time, “since 1986, a bear market has followed each time that the ERR rule has been triggered.”
The only weakness of that particular indicator is that while a bear market always followed, the timing was unclear and the upcoming bear could arrive as late as two years after the trigger hit.
Well, fast forward to today when overnight another proprietary “guaranteed bear market” indicator created by the Bank of America quants was just triggered.
As we explained earlier today, as part of the unprecedented, historic rush to dump cash and buy any stocks that one can find, BofA’s “Bull & Bear indicator” surged to 7.9 – effectively 8 – a level that is indicative of broad market euphoria, and the highest it has been since March of 2013, or nearly 5 years ago.
There is another, far more important, reason why the triggering of the Bull and Bear Indicator is a remarkable event: according to Bank of America back-tests, not only does this particular indicator also have a 100% hit rate once triggered…
… but on 11 out of 11 signals since 2002, the market dropped on average 12% after it was triggered.
And yes, it also works in the opposite direction: the last Bull & Bear indicator flashed was a buy signal of 0 on Feb 11th 2016. Since then the S&P has been up on 22 of the next 23 months.
Finally, and most importantly, unlike other “bear market” indicators which confirm if a crash is imminent but not when, this one gives an explicit time window: the market always dumps within the next 3 months once a Sell signal has been trigerred.
Here is BofA explanation:
BofAML Bull & Bear indicator surges to 7.9, highest since last sell signal >8 triggered Mar’13;
BofAML Bull & Bear indicator has given 11 sell signals since 2002; hit ratio = 11/11; average equity peak-to-trough drop following 3 months = 12% (backtested, Table 1); note the last Bull & Bear indicator flashed was a buy signal of 0 on Feb 11th 2016
BofA’s conclusion: “a tactical S&P500 pullback to 2686 in Feb/Mar now very likely.“
As a result, buying some 3 month puts here is probably not a bad idea, especially after today’s latest furious meltup which has made the cost of all downside protection virtually nil, and at this rate, delta hedgers may soon be giving away puts for free.
Television critic Glenn Garvin sat down with Netflix documentary Wormwood, which suggests that there was yet another conspiracy to blame for the death of CIA employee Frank Olson, who had been secretly dosed with LSD:
There’s no denying that much of the country was pretty stunned to learn, in 1975, that a CIA employee named Frank Olson jumped out a 10th-floor hotel window after being secretly dosed with LSD by his own boss as part of a U.S. government mind-control experiment. Toppling governments in Guatemala or Iran at least had some sense of purpose, however foul; Olson’s death sounded more like a tawdry, callous frat prank, a profound and pointless repudiation of the very concept of morality.
Five decades later, investigative filmmaker Errol Morris’ Wormwood is trying to convince us that it was something even worse, the ruthless murder of a political dissident with his six-part documentary Wormwood, a razzle-dazzle exercise in multimedia virtuosity that substitutes sinister showmanship for facts and silly sophistry for deductive logic. American innocence may have been lost a long time ago, but the casual acceptance of Wormwood‘s empty claims certainly suggests that the tides of American citizens’ cynicism about their government are teaching new high points.
The blow-off orgy in the stock markets is supposedly America’s consolation prize for what many regard as the electoral bad acid trip of the Trump presidency.
Sorry to tell you, it’s just another hallucination, something you’re going to have to come down from. Happy landings!
While the markets have roared parabolically up, in Technicolor, with sugar-on-top; that ole rascal, Reality, is working some hoodoo in the other rings of this psychedelic circus: namely the dollar and the bond market. The idiots on NPR’s Marketplace and the Cable TV financial shows haven’t noticed the dollar tanking the past several months or the interest rates creeping up in the bond markets. Well, isn’t that the point of living as if anything goes and nothing matters, the mantra of the age?
Alas , things are connected and consequences await. It would be rich if a flash crash ripped the Dow, S & P, and the Nasdaq to shreds twenty minutes after the Golden Golem of Greatness finished schooling the weenies of Davos on the bigly wonderfulness of his year in office. In fact, it would be a crowning comic moment in human history. I can imagine Trump surrounded by the fawning Beta Boys of Banking as the news comes in. Poof! Suddenly, he is alone in the antechamber backstage, nothing left of his admirers but the lingering scent of aftershave. The world has changed. The dream is over. In the mirror he sees something that looks dimly like Herbert Hoover in a polka-dot clown suit, with funny orange wig….
A financial smash-up is really the only thing that will break the awful spell this country is in: the belief that everyday life can go on when nothing really adds up. It seems to me that the moment is close at hand. Treasury Secretary Mnuchin told the Davos crowd that the US has “a weak dollar” policy. Is that so? Just as his department is getting ready to borrow another $1.2 trillion to cover government operations in the year to come. I’m sure the world wants nothing more than to buy bucket-loads of sovereign bonds backed by a falling currency — at the same time that the Treasury’s partner-in-crime, the Federal Reserve, is getting ready to dump an additional $600 billion bonds on the market out of its over-stuffed balance sheet. I’d sooner try to sell snow-cones in a polar bomb-cyclone.
When folks don’t want to buy bonds, the interest rates naturally have to go higher. The problem with that is your country’s treasury has to pay the bond-holders more money, but the only thing that has allowed the Treasury to keep borrowing lo these recent decades is the long-term drop of interest rates to the near-zero range. And the Fed’s timid 25-basis-point hikes in the overnight Fed Fund rate have not moved the needle quite far enough so far. But with benchmark ten-year bond rate nosing upward like a mole under the garden toward the 3.00 percent mark, something is going to give.
How long do you think the equity indexes will levitate once the bond market implodes? What vaporizes with it is a lot of the collateral backing up the unprecedented margin (extra borrowed money) that this rickety tower of financial Babel is tottering on. A black hole is opening up in some sub-basement of a tower on Wall Street, and it will suck the remaining value from this asset-stripped nation into the vacuum of history like so much silage.
Thus will begin the harsh era of America screwing its head back on and commencing the salvage operation. We’ll stop ricocheting from hashtag to hashtag and entertain a few coherent thoughts, such as, “…Gee, it turns out you really can’t get something for nothing….” That’s an important thought to have when you turn around and suddenly discover you’ve got nothing left.
Ishu Patel‘s film The Bead Game (1977) is a five-and-a-half-minute history of creatures killing each other. It starts with single-celled organisms and then progresses through the animal kingdom; hominids show up about midway through, then weapons appear and get increasingly destructive. The whole thing is told through stop-motion animation, and every image is created out of nothing but glass beads.
(For past editions of the Friday A/V Club, go here.)
Immigration and Customs Enforcement (ICE) now has access to a national database of license plates, allowing it to track millions of cars on a daily basis regardless of the owners’ immigration status.
Yesterday, I 
Television critic Glenn Garvin sat down with Netflix documentary Wormwood, which suggests that there was yet another conspiracy to blame for the death of CIA employee Frank Olson, who had been secretly dosed with LSD:
