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At this point the manipulations are getting ridiculous.

“Someone” decided to step in a prop up stocks yesterday.  How do we know it was a market prop and not real investors?

There were several “tells.”

They were:

1)   The jump in stocks was based on a sudden move in one of the key asset classes the PPT are using to prop up the markets (they are: Oil, the VIX and Yen).

2)   The price action was sudden and vertical: neither are the hallmarks of actual buyers.

3)   The trading session differed dramatically from recent other sessions.

Regarding  #1, as everyone knows, the majority of market action today is controlled by trading algorithms.

These trading algorithms operate based on correlations between asset classes. Currently two of the biggest correlations are Oil (a direct correlation, meaning when Oil rallies, algorithms buy stocks) and the VIX (an inverse correlation meaning when the VIX falls, algorithms buy stocks).

Yesterday, Oil staged a MASSIVE 5% intraday price move on the fact inventories rose less than expected. Yes, a 5% price move based on a single secondary data point (inventories are near record highs).

This was a clear manipulation as evinced by the fact that Oil slid for the rest of the day following the price move. Real buyers buying Oil based on perceived value would have maintained the price. Instead we had a vertical move followed by pronounced weakness.

This spike in Oil was what triggered the first “stock buying panic” from trading algorithms. In a matter of minutes around 11:15 AM, stocks exploded higher by almost 1% based on nothing other than the move in Oil.

This wasn’t the end of the manipulation either. There were two other instances in which stocks went vertical on NO NEWS.

How do we know these were interventions and not the products of real buyers?

Real buyers do not suddenly buy billions of dollars worth of futures contracts based on spurious news releases. Real investors use professional traders or algorithms to open positions in a careful manner so as not to boost prices.

After all, if the asset you are trying to buy on the cheap explodes higher the value is gone.

Compare that to yesterday’s price action where stocks staged an intraday rally of 2% with the bulk of the action coming in three near vertical ramp jobs, the first of which was triggered by an obvious intervention in Oil.

The financial media will claim the above analysis is conspiracy theory and that yesterday was the result of real buyers. This is bunk. Consider stocks’ price actions over the previous four trading sessions. Every day stocks opened up or down and then basically flat-lined for the rest of the session.

Yesterday’s session stands out like a sore thumb.

In short… yesterday stocks exploded higher, staging an intraday rally of 2% on no news other than a secondary data point in the Oil market. Either someone panic-bought at three separate instances buying billions of Dollars worth of futures contracts or this was an intervention.

Based on the above, I’m going with the latter.

The intervention may have bought some time but the trend is now down. Stocks have taken out their bull market trendline going back to 2009. The bull market is over.

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via Zero Hedge http://ift.tt/1THbshk Phoenix Capital Research

Submitted by Patrick Barron via The Mises Institute,

Despite zero-interest-rate-policy (ZIRP) and multiple quantitative easing programs — whereby the central bank buys large quantities of assets while leaving interest rates at practically zero — the world’s economies are stuck in the doldrums. The central banks’ only accomplishment seems to be an increase in public and private debt. Therefore, the next step for the Keynesian economists who rule central banks everywhere is to make interest rates negative (i.e., adopt negative-interest-rate-policy or “NIRP.”) The process can be as simple as the central bank charging its member banks for holding excess reserves, although the same thing can be accomplished by more roundabout methods such as manipulating the reverse repo market.

Remember, it was the central bank itself that created these excess reserves when it purchased assets with money created out of thin air. The reserves landed in bank reserve accounts at the central bank when the recipients of the central bank’s asset purchases deposited their checks in their local banks. Now the banks have liabilities that are backed by depreciating assets (i.e., the banks still owe their customers the full amount in their checking accounts), but the central bank charges the banks for holding the reserves that back the deposits. In effect, the banks are being extorted by the central banks to increase lending or lose money. The banks have no choice. If they can’t find worthy borrowers, they must charge their customers for the privilege of having money in their checking accounts. Or, as is happening in some European banks, the banks try to increase loan rates to current borrowers in order to cover the added cost.

In European countries where NIRP reigns, so far, the banks are charging only large account holders for their deposits. So, these large account customers are scrambling to move their money out of banks and into assets that do not depreciate. The scramble for high grade securities has resulted in some securities being sold at a premium (i.e., the customers will get back less than they invested).

How can this be? Well, the premium amount is less than the charge by the banks, so the large account customer is slightly less worse off. He loses somewhat less money. But this really does not solve the problem; it just means that the excess reserves are moved somewhere else, simply creating the same problem for a new set of banks that ended up with the money after the first group of investors ditched their cash for securities.

But that is not what the central banks want. The central banks want to force the commercial banks to lend money in order to avoid the excess reserve charge. They appear poised to increase the so-far-nominal cost of a half percent or less. If the central banks can charge a half percent, they can charge anything they wish and, given the Keynesian mindset that led to the insanity of negative rates in the first place, probably will do so.

What Interest Rates Are For

Negative rates violate numerous tenets of sound economics. For example, the basis of interest rates is consumer time preference, described by David Howden in an article written almost three years ago about the loss of Canadian manufacturing.

Time is a factor necessary for production, and unique in the sense that we cannot economically allocate it like other inputs. The choice of time is always “sooner or later” and never “more or less” (as is the case with other input factors). Interest rates help us determine how soon we should consume a good, or how long a production process should be. Low interest rates imply that the future is not heavily discounted. At a low rate you will be willing to wait a longer period of time to realise the enjoyment of consumption or the profits of an investment. High interest rates invoke the corollary — you will want to consume earlier, or employ production processes that pay off in as short a time as possible.

Dr. Howden goes even further to show how central bank production of money out of thin air in order to drive down the interest rate causes disequilibrium between borrowers, investors and savers. The very purpose of the interest rate in an unhampered economy, however, is to create equilibrium between these two groups.

Disequilibrium in the time structure of production (primarily an overinvestment in longer term projects), and an inevitable boom-bust business cycle that follows, results from the fact that real savings had not increased to provide the real goods necessary for the increased investments. First, businesses go bankrupt, then the banks, and then the population as a whole.

The Inevitable Bust

But can’t the central bank just print more helicopter money to save everyone? Unfortunately, no. More money cannot cure what too much money created.

Of course, an economy that has been thrown into disequilibrium by negative interest rates may display many weird anomalies before succumbing to the “crack up boom,” as described by Ludwig von Mises.

One early indication of loss of confidence in money is a commodity boom in precious metals. Prices rise faster and faster and production collapses. The public understands that the monetary authorities have no intention of reversing their negative interest rate policies and restoring sound money and banking. In a mad rush to save their wealth from total destruction, the public will start to buy what it hopes to be assets that will not depreciate. This sets off a huge boom in some asset categories; thus the “boom” portion of Mises’s “crackup boom” scenario. But the crackup follows on the boom’s heels.

The real pity is that the busts and crackups could all have been avoided if central bankers recognized that falling prices eventually create the conditions for a normal economic revival. Deflation is not a death spiral as the Keynesians believe. In a functioning market, the public’s demand to hold money will be satisfied when their reserves of money balances are sufficient in relation to the price level, when they are once again confident of the future, and when they are willing to invest for the long term.

Thus, the suppression of interest rates has been unnecessary and harmful. Nevertheless, expect more central banks to follow the early leaders — Switzerland, Sweden, Denmark, and even the European Central Bank itself — into negative interest rate territory. The crying shame is that it will not work and will cause great harm to hundreds of millions of people.

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

The issue of arms sales to Saudi Arabia by Western countries has always been a contentious topic in some circles.

At the conceptual level, something seems inherently wrong with selling advanced weapons to a government that promotes an ultra puritanical form of Islam that sanctions gruesome executions and treats women as second class citizens. Throw in the fact that Riyadh actively seeks to export this very same poisonous ideology and there’s a moral case to be made for not signing arms deals with what amounts to a terror state where the only claim to legitimacy is oil wealth.

But beyond the fact that Wahhabism isn’t exactly something civilized society should be supporting with billions in weapons shipments, the Saudis have also demonstrated a propensity to use those weapons in ways that are not exactly, “kosher” (to stick with the religious theme).

For instance, Saudi Arabia trains and arms Sunni extremists that exist not only as agents of sectarian strife but also as threats to the rest of the world. We’re seeing that in Syria as we speak.

Perhaps the most concrete example however, of why the West should not arm the Saudis is what’s taking place in Yemen, where Riyadh certainly seems to be deliberately targeting civilians in what we described last year as a kind of “you can’t make an omelette without breaking a few eggs” strategy. Indeed, a recent report from a UN panel found that the Saudis conducted 119 airstrikes against civilian targets in Yemen. 

Specifically, over the course of 119 discrete sorties, Saudi Arabi bombed refugee camps, weddings, civilian cars, buses, people’s homes, hospitals, schools, mosques, residential neighborhoods, an Oxfam warehouse, treated “entire cities as military targets,” and chased after fleeing civilians with attack helicopters.

As we put it late last month: that’s a laughably bad record and almost certainly constitutes war crimes.

Some UK lawmakers – including Jeremy Corbyn – are calling for an “immediate inquiry” into the report and a suspension of arms sales to the Saudis. As a reminder, here’s a look at UK arms sales to Riyadh:

Now, in a sign that the world is becoming increasingly frustrated with what is quite clearly a brutal, belligerent regime run by a family of fanatical religious oil barons, the European Parliament is calling for an outright embargo on arms shipments to the kingdom. 

“The European Parliament called on the European Union to impose an arms embargo against Saudi Arabia on Thursday, saying Britain, France and other EU governments should no longer sell weapons to a country accused of targeting civilians in Yemen,” Reuters reports. “Nearly 6,000 people have been killed since the coalition entered the conflict, almost half of them civilians, according to the United Nations, and the European Parliament said it was acting on humanitarian grounds.”

So what was billed as a kind of quick, in and out air campaign designed to drive the Houthis from Aden has turned into a year-long crusade (that’s probably a poor choice of words given the topic, but no one ever accused us of being PC) to eliminate all vestiges of Iranian influence from Yemen and if that means killing several thousand innocents in the process, well then so be it. 

“This is about Yemen. The human rights violations have reached a level that means Europe is obliged to act and to end arms sales to Saudi Arabia,” said Richard Howitt, a British center-left lawmaker who led efforts to hold the vote. 

In the same breath, Howitt says he hopes the Saudis don’t cut diplomatic ties over the vote. “The Saudis said to me they may cut off relations. I hope those are just words,” he said.

Right, Howitt “hopes those are just words” because everyone would hate to upset the Saudis.  

As Reuters goes on to note, the vote isn’t legally binding, so it’s exceptionally unlikely that anyone will forego billions in arms deals for the sake of a few thousand Yemenis whose country most Europeans couldn’t find on an unlabeled map. But for any EU officials (or American officials for that matter) interested in visual evidence of why an embargo should be imposed, below, find a few visuals from the warzone.

via Zero Hedge http://ift.tt/1TH8J7x Tyler Durden

Something is broken in the US bond market.

One day after the NY Fed unexpectedly announced yesterday’s Agency MBS POMO was cancelled (then rescheduled to later in the day) due to “technical difficulties“, moments ago the US Treasury announced that with 10 minutes to go before today’s 7 Year auction, that the auction is being rescheduled for tomorrow due to, drumroll, “technical issues.”

This is the full statement it said:

NEW CLOSING DATE AND TIMES FOR TODAY’S 7-YEAR NOTE AUCTION

 

The noncompetitive and competitive portion of the 7-year note auction originally scheduled to close today will now close Friday, February 26, 2016, at 11:00 a.m. and 11:30 a.m. ET, respectively. The close of the auction has been rescheduled due to a technical issue. The settlement date and all other aspects of the auction remain unchanged from the original announcement. Competitive and noncompetitive  bids that have been submitted will still stand, but bidders may review and update bids until the auction closes.

Just what is going on behind the scenes in the US bond market for such dramatic events to take place within 24 hours of each other, only the Fed and Treasury know. Of course, they won’t say and will merely chalk it down to “technical issues.”

What is more stunning is that just like yesterday’s POMO cancellation at 11:15am  sent yields surging, so today’s announcement has likewise pushed yields higher and stocks promptly followed.

Has the Fed/Treasury complex found a new way to manipulate markets: with the market delta hedging ahead of a POMO or auction, authorities yank the carpet from underneath everyone, and force a scramble to sell positions into the auction, pushing yields higher and unleashing a scramble into risk assets?

Keep an eye on the market: if stocks surge as a result of this unprecedented two-peat, we will have our answer.

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

It appears yesterday’s “capitulation” lows in Treasury yields… weren’t.

via Zero Hedge http://ift.tt/1oD0JYe Tyler Durden

As The Burning Platform's Jim Quinn notes, this isn’t actually a shocker.

When 40% of the working age population doesn’t work and another 10% only hold part-time jobs, they aren’t paying any Federal Income taxes. They are paying sales taxes, gasoline taxes, excise taxes, toll taxes, phone taxes, etc.

 

If it was up to me, I’d scrap all income taxes and replace it with a consumption tax. The politicians would lose a tremendous amount of corruptible power. The more you spend, the more you pay. Savers would be rewarded.

 

I do favor a High Frequency Trading tax on the Wall Street criminals, just like Bernie. We could use it to build Trump’s wall.

As MarketWatch's Catey Hill details, 77.5 million households in America do not pay Federal individual income tax…

Many Americans don’t have to worry about giving Uncle Sam part of their hard-earned cash for their income taxes this year.

An estimated 45.3% of American households — roughly 77.5 million — will pay no federal individual income tax, according to data for the 2015 tax year from the Tax Policy Center, a nonpartisan Washington-based research group. (Note that this does not necessarily mean they won’t owe their states income tax.)

Roughly half pay no federal income tax because they have no taxable income, and the other roughly half get enough tax breaks to erase their tax liability, explains Roberton Williams, a senior fellow at the Tax Policy Center.

Despite the fact that rich people paying little in the way of income taxes makes plenty of headlines, this is the exception to the rule: The top 1% of taxpayers pay a higher effective income-tax rate than any other group (around 23%, according to a report released by the Tax Policy Center in 2014) — nearly seven times higher than those in the bottom 50%.

 

On average, those in the bottom 40% of the income spectrum end up getting money from the government. Meanwhile, the richest 20% of Americans, by far, pay the most in income taxes, forking over nearly 87% of all the income tax collected by Uncle Sam.

 

 

The top 1% of Americans, who have an average income of more than $2.1 million, pay 43.6% of all the federal individual income tax in the U.S.; the top 0.1% — just 115,000 households, whose average income is more than $9.4 million — pay more than 20% of it.

 

When it comes to all federal taxes — individual income, payroll, excise, corporate income and estate taxes — the distributions of who pays what is more spread out. This is partially because nearly everyone pays excise taxes, which includes taxes on gasoline, alcohol and cigarettes.

 

via Zero Hedge http://ift.tt/1S41tBN Tyler Durden

Back In December, Spain held what turned out to be inconclusive elections.

To be sure, voters were clearly sick of the status quo. The country’s three decade old political duopoly was broken when PP and PSOE garnered their lowest combined share of the vote since the eighties.

Mariano Rajoy’s PP still won the most seats, but fell short of a majority and with a grand coalition comprised of PP and PSOE largely out of the question, the quest to build consensus and form a government has been stuck in the mud for two months.

Late last month, Rajoy delayed a confidence vote after failing to secure the support he felt he needed to lead and eventually, the PP chief threw in the towel altogether.

Now, it’s up to Socialist leader Pedro Sanchez to win the support of lawmakers who will vote for or against his program next week.

Podemos – the anti-austerity party led by firebrand Pablo Iglesias – put the entire effort in jeopardy on Wednesday by suspending negotiations with PSOE after Sanchez announced he would seek to create an alliance with Ciudadanos (the fourth place finisher in the December vote).

“It wasn’t easy for the Socialist party and Ciudadanos — which have different projects — to be able to put what unites them… above what separates them,” Ciudadanos chief Albert Rivera said yesterday.

“Sanchez and Rivera shook hands to applause after signing the agreement, which centres on what a new government led by the Socialists would look like,” AFP reports. “It includes proposals for major judicial reforms, including changing the constitution to modify rules governing lawmakers’ immunity from prosecution [and] social reforms such as bringing back Spain’s prized universal healthcare system, which has suffered from major spending cuts over the past years of austerity.”

Without the support of Podemos, the PSOE/Ciudadanos bid to form a government will likely fail.

Iglesias was willing to accept a deputy PM role in a government led by Podemos and the Socialists, but wants nothing to do with Ciudadanos. Meanwhile, PSOE is leary of Podemos if no other reason that Iglesias clearly has designs on making his party the ascendant leftist force in Spanish politics in the years to come. Making him deputy PM would bolster that effort. 

(Iglesias poses for a picture while inexplicably peeking from around a tree)

“Podemos leaders want the Socialists to ditch Ciudadanos in favour of a hard left coalition government, and insist they have no intention of allowing Mr Sánchez to govern on the basis of a deal with the pro-business centrists,” FT notes. “Lurking behind that stance is a strategic consideration: Podemos was founded to replace the Socialists as the leading voice of the Spanish left, not to serve as the party’s coalition appendix.” 

The Times goes on to note that Sanchez has seen his popular support rise over the course of the fraught coalition building process. That means he may be able to convince Podemos to through their support behind his program rather than explain to voters why the anti-austerity party shunned a fellow leftist party and effectively sided with Mariano Rajoy, whos austerity policies Iglesias has pledged to roll back. 

March 5 is the deadline. If a government isn’t formed by then, Spain will have to head back to the polls where PSOE would be playing from a position of strength. 

As for the possibility that Iglesias will ultimately fold and support Sanchez, the PSOE’s effort is “doomed to failure,” Podemos promises.

“They’re lying and they know it,” a PSOE spokesman retorted.

So more political turmoil ahead in the periphery, turmoil which has the potential to rattle markets. But perhaps the most important thing to note about everything said above is this: a leftist-led government is now a virtual certainty. It’s only a matter of what form it will take. That means the religious adherence to Berlin-style fiscal rectitude is going to come to a rather unceremonious end sooner or later. That, in turn, means the relative calm shown in the following chart may well give way to carnage by the end of the year.

Because if this is what “austerity” looks like…

…then we’d hate to see what happens under an “anti-austerity” platform.

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