The Current Repo Fails Issue Rebukes Any Notion That The Fed Is In Control

As we have discussed at length, the issue of the surge in Treasury fails (and the Fed's panicked "sell your bonds" response) suggests things are far less 'stable' than they would like the world to believe. Simply put, "Repo Matters" as Alhambra's Jeffrey Snyder discusses below:

The current repo fails problem “directly rebukes” the idea that the Fed has “all possible scenarios covered.”

  • For the Fed to have all scenarios covered would mean that the NY Fed’s SOMA portfolio has to maintain a “broad enough inventory” to satisfy the market
  • “That, on its face, is a patently unrealistic assumption since it will be impossible to predict exactly what repo markets need in even the immediate future, let alone during any drawn out ‘normalization’”
  • Recent spike in repo fails is important because RRP is supposed to “directly alleviate a collateral shortage of this kind”
  • To lose control of short-term rates during an anomaly would be “potentially dangerous” especially if it were to take place during “normalization, where instability would be beyond elevated”
  • Where the Fed failed to “enforce a floor during the worst days of panic in 2008 and into 2009” there is “much confidence here that flaws have been found and addressed positively”

The question for financial participants is whether or not a less solid and shrinking repo market is unrelated to continuous and orderly function. History suggests, decidedly, it is not.

For central banks, it seems to follow that they are content, at least outwardly, to simply manage expectations with the idea that will be enough to create and maintain “resiliency.”

 

By persisting with the PR campaign that the world is fixed and close to attaining near-perfection that is supposed to be enough to offset very real weakness in liquidity and emergency balance sheet capacity? Then again, if you actually believe that of the economy and markets then the chances for a financial “shock” are probably trivial in your estimation. But it pays to remember that last year’s bond selloff was also “unexpected” as well.

 

It’s not exactly the idea of currency elasticity imagined when the Fed was first dreamed up, but then again that function was also mostly PR.

As Snyder concludes,

The FOMC wants, actually needs, to instill confidence that it can transform itself from its QE legacy (however much tarnished it has grown). This only heightens the idea that stability is a paperlike illusion that may be undone with only the slightest “shock” or disruption – the hidden asymmetry that is the hallmark of fragility. This severely, in my opinion, undermines the credibility of even the idea of the rate floor.

* * *

The Fed's market domination has meant massive collateral shortages (as we have detailed previously) and now more even that during last year's taper-tantrum, the repo market is trouble.

*  *  *

But why do I care about some archaic money-market malarkey? Simple, Without collateral to fund repo, there is no repo; without repo, there is no leveraged positioning in financial markets; without leverage and the constant hypothecation there is nothing to maintain the stock market's exuberance (as we are already seeing in JPY and bonds).

Crucially, it should be inherently obvious to everyone that the moves we see in the stock market is not about mom and pop choosing to invest in the stock market (or not) as the 'cash on the slidelines' fallacy is "completely idiotic' but about the marginal leveraged machine (or human) quickly jumping oin momentum.

The spike in "fails to deliver" highlights a major growing problem in the repo markets that provide that leverage… and thus the glue that holds stock markets together.

Wondering why JPY and bond yields have diverged so notably from stocks in recent days… repo effects (it's just a matter of time before it hits stocks)…

 

And while the world breathlessly ignores it because stocks are going up for now, here's what it meant in 2009:

“If you have fails, then the market isn’t functioning properly,” said Eric Liverance, head of derivatives strategy at UBS AG in Stamford, Connecticut, another primary dealer. “That is what we saw last fall when we had massive fails. If you can lend a bond out and count on it coming back the next day, then those are properly functioning markets and it enhances liquidity.”

 

“That is telling you that dealers really don’t know what all this will mean,”

 

“People are being prudent and saying I am not going to have a Treasury short now and I’ll wait to see how this pans out over the next two months.”

 

“The market’s heightened state of anxiety looks likely to produce unintended and unfortunate consequences,” said Ciaran O’Hagan, the Paris-based head of fixed-income at Societe Generale. “The fails penalty adds to the security of the market at the cost of liquidity. All this suggests that liquidity will be hurt across the board for U.S. Treasuries.”




via Zero Hedge http://ift.tt/1rZxRc3 Tyler Durden

Guest Post – Rethinking the Concept of Retirement

Rethinking the Concept of Retirement

By Mrs. Cog

 

 

Cognitive Dissonance: Lately Mrs. Cog and I have been thinking about the expected fallout of the unfolding global financial/social/political crisis. Slowly but surely we are visiting, and re-visiting, the concept of ‘retirement’, something we were both sold on as ‘real’ all our ‘working’ lives. Considering many of us are depending upon various retirement income streams, especially those income streams not based upon actual cash in hand but rather on promises made by private corporations and public entities, it might be in our best interest to revisit our basic assumptions and premises. Simply put, we’re not in Kansas anymore.

Mrs. Cog shares her thoughts on this subject below.


To subscribe to ‘Dispatches’, a periodic newsletter from Cognitive Dissonance and TwoIceFloes Creations, please click here.

 

It’s a funny thing how certain concepts have permeated throughout our culture and are just simply accepted as ‘normal’ without question. Even when faced with the reality that a given ‘normal’ situation is in jeopardy or worse, may all together cease to exist, we as a society still measure and plan our lives based upon what we thought was supposed to happen. If we feel we are entitled to it, then not only do we cling to it, but we do so with anger and righteous indignation.

One of the most brilliant public relations campaigns launched in modern times is the concept of retirement. The idea of working hard all our lives while carefully saving and investing so that we may spend our twilight years financially independent while relaxing, playing and enjoying all the things life has to offer as a reward is romantic and hard to resist. The people who believe this is still the norm will be the same ones who claim “I did everything right. I played by all the rules. It’s not fair. I was robbed.”

To add insult to injury, those of us who will not benefit from this version of the bought and sold concept of retirement were a party to watching the generations before us experience precisely that. In the world’s greatest recorded wealth cycle and bubble of all ages, where the world eventually levered over a quadrillion dollars in bets, the wealth effect has been tremendous and many in the Western world were able to jump on for the ride. Overdue for the boom to go bust, the latter generations will not enjoy the picturesque golden years in style and comfort as sold to us in the retirement brochures.

 

Life Choices

 

Even as the more aware and savvy among us understand the wheels are coming off the economic bus presently on a worldwide centrally planned disaster tour, the continuity bias is astounding as I watch those with assets address this as an “extra rough patch” to get through rather than the clear paradigm shift it has been telegraphed to be. Furthermore, even those who see what is now underway and acknowledge this as a game changer think they can game the system, escape the worst of it or hedge enough to have one of their winning bets fall somewhere solid.

No, it isn’t fair. But blaming the generations who prospered before us or the central planners and bankers who we enabled will not bring back that comfy old age experience we had hoped and planned for. As painful of a time as this will be, perhaps this is a good time to think about “if not retirement, then what”.

For a brief time it may appear that working a low wage job in a position perceived far beneath our qualifications is the only future the system has left for us. And it may very well be so if we still allow the same system that sold us on ‘retirement’ to define what we will do, or be, without it.

Perhaps it’s time to give deep consideration to rethinking any concept that depends upon the way the system is supposed to work. Public and private pensions, social security and annuity payments will not be getting the job done. We fully expect IRA and Roth retirement investment vehicles will be largely forced to convert some or all holdings into U.S. Treasuries……for your own safety of course. Capital controls and changing the financial and social rules will become the new normal. Cash and any residual savings can simply be ‘bailed in’ to ‘bail out’ the big boys through the banks and brokerages that hold the funds.

Finally even if these retirement vehicles could be liquidated and placed in currency stacks before us, after we pay outrageous penalties and taxes of course, there is no sure way to preserve it. Certainly there are no ‘good’ (read relatively ‘safe’) investments to grow it. The overt and stealth creation of money at the Federal Reserve will continue to erode the purchasing power of all who depend upon the money to be there when it matters the most.

If we put all emotion aside for the moment we can see that the government, while seeing itself as separate from the people, will gladly point out that it is of and for the people. So whatever the ‘collective’ needs to sacrifice in order to keep it going is the right thing to do. There is logic to this viewpoint if one believes the alternative is chaos and anarchy and lives in fear of those scenarios. Many involved in public policy setting do not think people are capable of governing themselves, let alone protecting themselves. This now seems to include planning for their elder years, both how one might live as well as die.

 

Soup

 

So what is the alternative? How might we view our elderly future? What can be done?

With our eyes wide open, questioning everything is a good start. Rethinking our needs and wants, reevaluating our priorities, and assessing what we might really value versus what society has told us is important. These are no small tasks and indeed can be a most humbling process to consider, but the upside of doing so could make all the difference.

While Cog and I continue to question and rethink our plans, these are the ways we have gone about replacing the concept of retirement with a different type of perceived security.

1. Getting our money out of money has perhaps been the most difficult step to take. The world still operates with money and the US dollar still spends. Sure, things cost a bit more, but nothing has spun out of control on a day to day basis to change the function of money just yet. But because the US dollar ‘trigger event’ and its timing will remain unknown to us plebs until it unfolds, we are erring on the side of caution and assume there won’t be time to re-jigger our finances then.

What does this mean? We begin by only keeping enough cash in the bank to cover bills and immediate shopping and spending needs. Savings accounts and money markets don’t earn interest, so they were eliminated.

2. Minimizing our counter-party risk was similar to a Wild West shoot out. Everywhere we looked targets had to be taken out. The rules for musical chairs (Calvinball style) say that whoever doesn’t possess a seat when the music stops loses. And furthermore the rules can be changed at any time. So as we looked at just where our assets were distributed it turned out that most, if not all, of them were dependent upon a third party (oftentimes several layers of third parties) to do (or be) something in order to return the value of our investment to us.

Most obvious to us were brokerage accounts and safety deposit boxes that we closed out. Eliminating counter-party risk involves taking possession of any assets and items that will store earnings and wealth. Taking possession of precious metals, aka stacking gold and silver, is the most common way discussed. More contrarian ‘experts’ are now coming forth to say farm land, useful tools and investing in the knowledge of an valuable trade or skill are some of the best assets one can possess, none of which depends upon another party.

3. Arranging not to be at the mercy of rising interest rates is a key element to forwarding our plan for independence. This means getting rid of any debt which may be subject to rate increases. Ben Bernanke may have stated that interest rates will not rise in his lifetime, but he has been mistaken and/or disingenuous in the past. I cannot adequately express the personal relief it has brought us to not be subject to credit card interest or the worry about resets on mortgages with an ARM in five years.

When the day finally arrives when interest rates begin to raise substantially, certain costs will go up in tandem. Government entities on the Federal, State and local levels will get socked with rising interest payments payable on new or reissued bonds, and all taxes will rise accordingly. The same is true of corporations that depend upon debt issuance such as utilities. Supplying ourselves with alternatives at today’s prices may be a bargain in hindsight.

4. Creating streams of income not reliant on a collapsing job market or an employer with constraints is providing us continuity in a rapidly changing landscape. Charles Hugh-Smith has recently written about the emergence of a new type of entrepreneur he has labeled Mobile Creatives. http://ift.tt/R7y3Wt That article is a fascinating analysis of an emerging class of workers; this idea seeks to eliminate income dependency upon the state and corporations.

5. More self sufficient living arrangements was an essential step in preparing for our second half of life from several aspects. We collapsed previously diversified ‘retirement’ funds into a home with some land that has no debt as well as resources and tools that supply us with the ability to feed ourselves. By doing so, we now enjoy a much healthier lifestyle while converting our ‘money’ into tangible assets that will retain value for us.

6. We have taken charge of our health (care) because the current system is so dysfunctional and the previous methods for doing so (a good health insurance plan and reliable medical care) are now largely obsolete. Cog and I have made the decision to take complete responsibility for our own wellness. What this translates into is no dependency upon prescription or regular over the counter medicines. Nature provides far more potent remedies including powerful antibiotics and anti-cancer substances. We have elected to maintain our high deductible ‘health insurance’ policies in case the need for emergency medical treatment arises. Most important we do not mentally or emotionally rely on the members of the medical profession to keep us well or ‘heal’ sickness. I personally feel this has been the most empowering of all the steps we have taken to become more self-reliant.

Without question there are things we cannot provide for ourselves. No man is an island. As we get older, we recognize that we may need help with things and act accordingly by trying to assist others in the spirit of the Golden Rule.

There is little doubt that the years ahead bring promises of drastic and unknown changes. By addressing our future years and making changes while we are able, we are both less dependent upon our community and have an increased ability to contribute. It is never too late to reevaluate the way we take responsibility for ourselves.

 

Mrs. Cog

07-10-2014

 

Old Age




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Thursday Humor: The New US Tax Return

The recent IRS scandal is sure to go down as one of the most ridiculous of scandals in U.S. history. As Andrea Combs scoffs (rightly), the more that is uncovered, the more unbelievable the story becomes. So, in the interests of “fairness” – a topic this administration holds at its core – we present the new tax return, with addenda…

 

 

h/t @BuzzPo




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Millennials Prefer Small Government If Large Government Requires High Taxes

Download the PDFReason-Rupe has a new survey and report out
on millennials—find the report
here
.

At first glance millennials appear to prefer a “larger
government providing more services” (54%) over a “smaller
government providing few services” (43%). However, once tax rates
are mentioned support for large government flips. Instead 57
percent favor “smaller government, providing fewer services, with
low taxes” and 41 percent want “larger government providing more
services, with high taxes.” We also find that the race/ethnicity
gap on the size of government disappears among Hispanic, Asian, and
white millennials once tax rates are explicit.

Other
surveys
 have asked the first version of this question, in
which taxes are not mentioned, finding millennials are the only
generation to support large government. In stark contrast,
Americans nationally favor smaller
government with fewer services over larger government providing
more services (35%).

Typically, “big government” has implied high taxes, heavy
regulation, and the power to play favorites and control
individuals. However, debate about the role of government was put
on hold in the aftermath of 9/11, when millennials came of a
politically impressionable age. Furthermore, the national enemy was
no longer a large totalitarian regime like the Soviet Union, but
terrorist groups from whose attacks our government sought to
protect us.

This raises the question: Do millennials know what the phrase
“big government” means? Recent evidence suggests they may
not.  If millennials don’t know what large government is, do
they know what it costs?  If not, perhaps their preference for
“more services” over “fewer services” drives their desire for
“larger government.”

To investigate this, Reason-Rupe divided the sample in half and
asked one half:

“If you had to choose, would you rather have a smaller
government providing fewer services, or a larger government
providing more services?”

It then asked the other half of the sample the same question but
with explicit tax rates:

“If you had to choose, would you rather have a smaller
government providing fewer services with low taxes, or a larger
government providing more services with high taxes?”

When taxes are mentioned, millennials’ preference for large
government flips, and a majority (57%)— favor small government and
41 percent favor large government.

Our results indicate that millennials don’t immediately make the
connection between larger government and the high taxes it
requires. Consequently, support for “larger government providing
more services” among millennials doesn’t necessarily imply an
endorsement for a large activist government that levies heavy
taxes. Instead, many are favoring “more services” rather than more
services plus high taxes. Perhaps older Americans would also favor
more over less government services if they felt it wouldn’t cost
them.

Are Non-white Millennials More Likely To Support Large
Government?

Congruent with findings from
the Pew Research Center, white millennials (50%) are considerably
more likely to favor smaller government when taxes are not
mentioned than African-American (32%), Latino (36%), and Asian
American (29%) millennials. Consequently, at first glance,
non-white millennials are far more likely to favor larger
government.

However, after considering taxes, the racial gap on the
preferred size of government starts to disappear. The share of
Latino, Asian, and white millennials preferring small government is
statistically identical, with roughly six in 10 in support.
African-American millennials are divided, with a slim majority
favoring larger over smaller government, even if that means higher
taxes (53 to 46 percent). It appears that white millennials are
more likely to implicitly associate large government with high
taxes.

Available data suggest that Latino and Asian millennials, many
of whom are themselves immigrants or children of recent immigrants,
will likely experience a good deal of upward income mobility. For
instance, the Pew Research Center reports that
the median annual household income for first generation Hispanics
is $34,600, and this increases to $48,400 among the second
generation. Since higher incomes often diminish
support for government services
, our results indicate that
desire for activist government may decline over the next decade if
large government and high taxes are explicitly connected in voters’
minds.

Millennials Respond More Favorably to Concrete Proposals to
Limit Government Than Abstract References About Government’s
Size

If the abstract notion of government’s “size” does not convey
the same substantive meaning for millennials that it has for
previous generations, perhaps more concrete policy proposals would
garner greater support than calls to “reduce the size of
government.”

To test this, the survey presented millennials with several
policy proposals aimed at reducing the scope of government,
including cutting government spending by five percent, cutting
taxes, and reducing the number of regulations. They were asked if
each proposal would primarily hurt or primarily help the economy.
The survey then compared responses for these concrete proposals to
responses for whether the relatively abstract act of “reducing the
size of government” would primarily help or harm the economy.

Concrete policies that effectually reduce government’s scope
receive greater support than the proposal to reduce government’s
size. Cutting government spending receives the greatest support,
with 65 percent saying it would “primarily help” rather than harm
the economy, followed by cutting taxes (58%), reducing the number
of regulations (55%), and reducing government’s size (53%).
Intensity of support also reflects this pattern, with a quarter of
millennials saying that cutting government spending would help “a
lot,” compared to 14 percent who have a similar favorable intensity
for shrinking government.

In sum, cutting spending and taxes garners more support than
reducing government’s size. Offering explicit methods for how to
reduce the power and scope of government may better resonate among
millennials than just asserting the need to rein in “big
government.”

To learn more about millennials, check
out Reason-Rupe’s new report.

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Animosity Between Germany and U.S. After Caught Spy, UT Austin President Holds On, George R.R. Martin Doesn’t Need You Breathing Down His Neck: P.M. Links

  • Ray NaginThe fallout from the discovery of two U.S. spies
    within the German government is
    creating bad blood
    between the two nations. Germany has asked
    the U.S.’s CIA station chief in Berlin to leave the country.
  • University of Texas at Austin President Bill Powers
    does not have to resign
    , after all. Allies of Republican Gov.
    Rick Perry had pressured Powers to quit after a
    scandal over law school admissions
    , but an outpouring of
    support from faculty and students persuaded administrators to let
    him keep his job.
  • “Game of Thrones” author George R.R. Martin
    had choice words
    for fans worried that he will die before
    finishing the series: “Fuck you.” The Washington Free
    Beacon’s
    Sonny Bunch
    writes that Martin should calm down
    , before he hurts
    himself.
  • Ex-New Orleans Mayor Ray Nagin
    was sentenced
    to 10 years in prison for numerous corruption
    charges. “I’ve been targeted, smeared, and tarnished,” he
    said.
  • Millennials are not the government-loving Democrats they are
    made out to be,
    according to a Reason-Rupe survey.

Follow Reason and Reason 24/7 on
Twitter, and like us on Facebook. You
can also get the top stories mailed to you—sign up
here
.

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Waiting for Mom Outside a Bathroom Shouldn’t Land You in a Terrorism Database, Lawsuit Argues

We didn't poll millennials about this behavior, but I bet they're opposed.One man attempted to take a
photo of a storage tank painted in rainbow colors. One man
attempted to purchase several computers at once. One man had a
flight simulator game operating on his home computer. And one man
was standing around, waiting for his mother outside the bathrooms
of a train station.

All of this behavior drew the attention of the police and landed
the men in databases for engaging in what authorities decided was
suspicious behavior that could potentially indicate terrorist
leanings. They are men who have had what are called suspicious
activity reports (SARs) made up about them and stored in
antiterrorism databases. And now they’re suing, with the help of
the American Civil Liberties Union and the Asian Americans
Advancing Justice — Asian Law Caucus. Wired
makes note of the lawsuit
, filed today in northern
California:

[D]ue to the standards the government uses for determining
suspicious activity that might be related to terrorism, all of the
plaintiffs found themselves written up in reports stored in
counterterrorism databases and were subjected to unwelcome and
unwarranted law enforcement scrutiny and interrogation, according
to the lawsuit.

“This domestic surveillance program wrongly targets First
Amendment-protected activities, encourages racial and religious
profiling, and violates federal law,” said Linda Lye, staff
attorney with the ACLU of Northern California. “The Justice
Department’s own rules say that there should be reasonable
suspicion before creating a record on someone, but the government’s
instructions to local police are that they should write up SARs
even if there’s no valid reason to suspect a person of doing
anything wrong.”

The complaint accuses the police of profiling on the basis of
the backgrounds of the affected men and violating their civil
liberties. The guy with the flight simulation game on his computer?
He was a convert to Islam in Chicago. A police officer deemed him
suspicious on the basis of his reluctance to interact with police
(in Chicago? How could that be?), and on a later occasion, the
officer searched the man’s residence briefly looking for a suspect
in a completely unrelated domestic violence case. The officer noted
he appeared to be accessing a flight simulator game. That was
pretty much all. And so the officer made up a record of his
behavior.

In the train station case, a security officer in California
deemed a man of Middle Eastern descent suspicious on the basis of
him “meticulously” observing his surroundings of the Santa Ana
station, then hanging outside the bathrooms until a woman (wearing
a burqa) exited the restroom and joined him. That woman was his
mother.

Read more about the cases at Wired or read the lawsuit yourself

here
. Reason TV’s Paul Detrick recently
won
a SoCal Journalism Award for his own investigation of how
similar behavior by authorities in Los Angeles resulted in the
harassment
of a photographer
taking pictures of the L.A. subway system.
Watch below:

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Police Trolling Personal Ads to Trick People Into Sex Crimes

From CBS Sacramento, your daily example of the
disgusting and perverse
lengths law enforement will go to in order to catch “sex
criminals.”
Yesterday it was Virginia cops
taking pictures of a teen boy’s junk
 to compare to the
photos he’d texted his girlfriend, for which they were now
prosecuting him for chlid pornography. Today brings us the story of
California cops trolling online personal ads to trick lonely men
into arranging dates with fake underage girls. 

Daniel Eugene Kirschner, 28, apparently placed an ad online
saying he was looking for a girlfriend. He did not say he was
looking for an underage girlfriend, mind you, nor did
undercover Placer County cops pretend to be underage when they
initially reached out to him. But after a while, the “girl”
revealed that she was only 13.

After that, Kirschner continued the correspondance and
eventually agreed to come to the county jail, where cops said she
would be for her mom’s boyfriend’s court appearance. When Kirschner
showed up, he was immediately arrested and charged with
“communicating with a minor with the intent of committing a sexual
act” and “attempted lewd and lascivious acts with someone under
14.”

A lot of people would probably look at this and say, meh,
he’s a creep or a criminal and deserves it. He should have backed
off when he found out she was 13
. And, sure, he should have.
But people are flawed. We don’t know much about Kirschner, but we
do know he was looking online (on what sounds like Craigslist, but
the police are merely calling “a popular website) for a girlfriend.
Maybe he was lonely, vulnerable, in a bad place. A female responds
to his ad and seems friendly and eager (and probably quite mature,
since she is actually a team of cops). She gains his trust and
affection. Then she says she’s only 13.

Under those circumstances, deciding to continue the relationship
certainly reveals a lapse in judgement from our grown perp. But it
doesn’t necessarily reveal him
as predatory
or pedophilic. It doesn’t even reveal that he
would have gone through with any sexual activity with this alleged
13-year-old. To me the whole set-up seems similar to the
undercover cops who befriend young people
by pretending to be
their age, goad them into selling them pot, then throw them in jail
for it.

How is any of this not entrapment? And by what logic does it
make sense to entice people into crimes they probably wouldn’t
otherwise commit just to arrest them for those crimes?

I’m serious about the entrapment question; the second one, I
guess, is rhetorical. It makes sense when your job, budget, and
prestige depend on making more arrests. I’m sure it’s easier to
arrest regular people you nudge into criminal-ish activity than
people engaged in more stealth and serious criminal behavior. Cops
get their 15-second soundbites about “sex traffickers” and “sexual
predators” on the evening news, communities get to feel safe and
like their cops are actually competent, and if some people and
rights get thrown under the bus along the way, that’s just the
price of doing business. 

This
isn’t the first time this year that Placer County cops
have
gone undercover as a 13-year-old girl. Unlike “to catch a predator”
plots past, they seem to be reaching out to men seeking
girlfriends, rather than putting up ads from “teens” and seeing who
responds. The department has also been busy with undercover
operations to lure people into
buying alcohol for minors

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Gold Nears 4-Month Highs As Stocks Dump-And-Pump

European markets were ugly going in: Portugal's largest bank on the ropes and macro data weak. US earnings calls confirmed no Q2 bounce back and macro data piled on (along with various GDP downgrades). Equity markets opened gap down with a big flush of "most shorted" longs and Russell 2000 dipped into the red for 2014. Then the rally-monkey turned up, slamming VIX and lifting USDJPY to squeeze shorts and drag stocks "off the lows." Once shorts reache dunch, stocks limped lower "off the highs." Away from the v-shaped recovery in stocks, Gold broke above $1340 (4-month highs) and silver gained. Oil turned around early losses closing up for 1st time in 9 sessions ($103). The USD rose (on EUR weakness) but remains lower on the week. VIX ened 0.8 vols higher at 12.5 (well off its intraday highs though). The day ended with Carl Icahn warning that "it's time be cautious about US markets." VIX pushed higher into the close as investors remember Europe opens in 8 hours.

 

V-Shaped recovery… but still ugly from Payrolls…

 

Cash indices remain down on the week with Russell still the lagard

 

The short slam was ramped all the way back to unch…

 

As USDJPY was large and in charge bouncing off 101.00

 

VIX ramped higher out of the gate then fell back.. but pushed higher as everyone remembered EEurope opens in 8 hours…

 

Stocks remain in a land of their own as repo, growth, and EU bank strains weigh on FX and bond markets….

 

PMs ramped…as did oil

 

and Treasury yields dumped and pumped…

 

Charts: Bloomberg




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

What’s Wrong With This Chart?

The consensus estimate for US GDP growth in 2014 has collapsed. 4 months ago, the world of serial extrapolators and mean-reverters prognosticated that 2014 GDP would reach the lofty heights of 2.9%. Today – on the heels of numerous micro- and macro-fundamental realities, consensus US GDP growth for 2014 has been marked down to 1.7%. Is it any wonder US equity markets are within 1% of their all-time highs?

 

Don;t worry though – the Fed is still bullish:

  • *FED’S GEORGE SAYS 2014 U.S. GROWTH TO BE IN 2%-2.5% RANGE

You can’t make this stuff up!!

Chart: Bloomberg




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Did I Accidentally Prove that Obamacare is a Success?

New
York’
s Jonathan Chait
needles me
for having “accidentally” shown “how Obamacare is
succeeding.” To make his point, Chait summarizes and briefly quotes
several posts I wrote between January and the second week of March
of this year noting low or overstated enrollment figures in various
parts of Obamacare, and then jumps forward to a post I wrote
earlier this week arguing that a recent estimate combining all of
Obamacare’s coverage expansion provisions is almost certainly too
high. 

“We have gone from learning that the law has failed to cover
anybody to learning it would cover a couple million to learning it
would cover a few million to learning that it has probably insured
fewer than 20 million people halfway through year one,” he
concludes, as if the items he links to are all discussing
comparable components of the law’s coverage expansion.

But Chait’s argument relies on on selective quotations from
posts of mine that examine different aspects of the law that aren’t
really comparable, stringing them together in a way that implies
they are all referring to the same thing. And he fails
to mention other posts I wrote, between March and July, noting the
law’s late-March enrollment surge and effects on covering the
uninsured.

Mostly, then, his item serves to demonstrate is that enrollment
in Obamacare’s insurance exchanges was, as was widely reported,
sluggish from the beginning of the year until the middle of
March, and that it grew afterwards. (Until the very end, it lagged
behind the administration’s own projections.)

Throughout the year, I noted the low enrollment figures as they
came in, arguing that the numbers weren’t promising. And when the
enrollment did pick up at the end of March, I also wrote items on
the surge and its effects on multiple occasions—including a March
31
post
noting a “last-minute sign-up surge,” an April 1
post
noting the White House’s announcement that 7 million had
signed up for coverage, an April 17
post
noting the administration’s report that 8 million had
signed up for coverage, and a May post
specifically saying that early speculation that the law might have
no or negative effect on coverage was not plausible.

Chait does not mention any of these items in his post, which
does not quote or link to any post I wrote between March 11 and
this month. He also says my posts are useful as a “lagging
indicator of Obamacare’s progress.” But all of these posts were
written within a day of the information becoming public.

Chait also fails to quote my own caveats in the posts he does
cite, or to provide important context for comparing the posts he
quotes. For example, he quotes me
saying
on January 21 that “it appears possible that there has
been no net expansion of private coverage at all.” Note that this
is presented as a possibility, not a certainty, and that I also
wrote in the same post that that even if this were true, “there’s
still time for that to change. As the administration is keen to
remind us, people who want coverage have until the end of March to
sign up for coverage this year.”

The
March 11 post
Chait quotes from, meanwhile, dealt specifically
with the question of how much effect Obamacare was having on the
uninsured rate, based on a Gallup survey, which turns out to be a
completely different metric from what’s being looked at in the next
post he selects.

The Gallup survey, I said, was the “best evidence” that
Obamacare was reducing the rate of the uninsured. This effect,
which was measured prior to the late-March surge, is separate from
the question of how many people now have coverage through some
coverage-expanding provision in the law. But the total-coverage
question is what the next post he quotes from (a July
item
taking issue with a New England Journal of
Medicine
(NEJM) study estimating 20 million total covered
by Obamacare, through the exchanges, Medicaid, and other
provisions) discussed.

The authors of that study specifically note that, unlike the
Gallup survey, it was not an attempt to judge the law’s effect on
the uninsurance rate. As the authors of the study say, “We do not
know yet exactly how many of these people were previously
uninsured…”

Chait pairs the two posts without much context, implicitly
suggesting that they are looking at the same thing. They are
not.

The July post on the NEJM‘s total-coverage estimate is
also not really comparable with the
the February 24 post
that Chait quotes from, which specifically
deals with President Obama’s claim that almost 7 million people had
gained coverage under Obamacare just through the law’s Medicaid
expansion.

Obama’s claim was wrong at the time. It’s still wrong. I was not
the only journalist to say so at the time. (The Washington
Post
’s fact checker
gave
Obama’s statement four Pinocchios.) By now even the
administration has backed off that number for the Medicaid
expansion, saying only that total enrollment in the program (which
additionally counts the surge month after Obama made the 7 million
claim) has increased by 6 million following Obamacare’s coverage
expansion, and that
not all of that increase is directly attributable to the law
.
If you read that post on the day that it was published, you got an
accurate and real-time impression that President Obama was wrong.
If you read it now, you get an accurate impression that Obama was
overstating the health law’s coverage effects.

Obamacare has, without question, enrolled far more people since
January, and the evidence is pretty strong that it has cut the rate
of the uninsured by several points. But even as the coverage
figures have increased, what you also see is that the president,
his administration, and the law’s backers have consistently relied
on dubious, misleading, or incomplete metrics to overstate what can
be known about the law’s impact based on the information
available.

Chait may see my posts noting this as inadvertent proof that
Obamacare is actually a success, but to me it looks more like
evidence that the administration and its supporters are desperate
to convince people that it is more of one than the evidence
supports.

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