Small Caps Hit One-Year Lows As 30Y Treasury Yield Drops Below 3%

With the cash bond market closed today, we get our cues from an admittedly thin Treasury futures market. Prices are up across the board with 10Y yield down 3bps at 2.25%, 30Y back under 3%, and 5Y down 4bps at 1.49%. The rates market, once again is leading stocks lower – not getting as exuberant as stocks out of the gate… The Russell 2000 is at one-year lows (Oct 9th 2013 to be exact)

Bond futures implied rates…

 

as bonds drag stocks lower back to reality…

 

Russell 2000 dropped to one-year lows intraday…

 

Charts: Bloomberg




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Latest Salon Interview with Liz Warren Even More Nauseating Than Usual

WarrenSalon political columnist
Thomas Frank spoke
with his dream candidate
, Sen. Elizabeth Warren, in a
hard-hitting interview that posed tough questions like, “Is there
anything someone can do about all the things we’re describing,
short of being president?” Wow, he went there.

To his credit, Frank did go after President Obama for being a
“disappointment” on the issues Frank cares about: financial
regulation, prosecuting Wall Street bankers, etc. Warren agreed
that Obama let Wall Street off the hook too easily, though she did
praise the president for getting her consumer protection agency
approved.

The rest of the interview consists of Frank telling Warren how
brilliant she is, and Warren spouting off her usual faux-populist
screed. (Reminder:
Warren is in favor of the Export-Import Bank
.) The conversation
eventually turned to higher education affordability:

Is it time to do something about college
tuition?

Absolutely. Yes it is. But let’s get the right frame on this.
Because I think this is really important, and it’s the right
question to ask. But start with this: three out of four kids in
college are in public universities. A generation ago, state support
for public universities was strong enough that three out of four
dollars to educate those kids came from taxpayers and the family
had to make up the difference for the fourth dollar. Today, that
has basically reversed itself. That is, that the states are putting
up, just generally across the country, about one out of four
dollars and the families have got to come up with the other three
out of four dollars. This matters because it is the state
universities that are the backbone of access to higher education
for middle class families, and I think that’s the place you have to
start the conversation. I’m not going to let anybody off the hook,
but I think it’s the critical part of the conversation. And I say
this — it’s like I talk about in the book — this is personal for
me. I graduated from a commuter college that cost $50 a semester in
Texas.

Warren is technically correct: Public funding for higher
education has generally declined across the country. But large
state universities are still raking in cash. Warren’s own solution
to the college affordability program—massive
loan subsidization
—is one of the main reasons the price is
still climbing. Universities can keep jacking up the price as long
as the government keeps finding ways to help students pay in the
short term while concealing the true cost from them until they are
already on the hook for it.

Doesn’t Warren want to go after rich CEOs (i.e., college
presidents) at corrupt crony corporations (i.e., public
universities) who extort consumers (i.e., students)? Only in the
private sector, it seems. When it comes to higher education
affordability, Warren is very much a part of the problem.

Full Salon interview
here
.

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Virginia Postrel: Why Neal Stephenson, Peter Thiel Are Wrong About the Future

Former Reason Editor Virginia Postrel
has a great piece up at
Bloomberg View
. She notes recent books by science fiction
writer Neal Stephenson and libertarian venture capitalist Peter
Thiel that “lament the demise of grand 20th-century dreams and the
optimistic culture they expressed.” Cue Apollo program
nostalgia.

But as Postrel shows, the idea that we were somehow more upbeat
about the future when the baby boomers were still wet behind the
ears isn’t ahistorical:

Americans in the mid-20th century were not in fact sanguine
about the future. Anxieties about the march of technology were
common. In February 1961, a statistics-filled Time magazine
feature warned that automation was wiping out jobs
and, worse, “What worries many job experts more is that automation
may prevent the economy from creating enough new jobs.” At least
nine episodes of the original “Star Trek” series were about
threatening or out-of-control computers. (Still others involved
menacing androids or ominous artificial intelligences whose exact
nature was vaguely defined.) Movies such as “Colossus: The Forbin
Project” (1970) and, of course, “2001: A Space Odyssey” (1968)
picked up the scary-computer theme. Nor was the space program as
universally popular as we nostalgically imagine. Americans liked
the moon race, but only in July 1969—the month of the moon
landing—did a majority
deem the Apollo program “worth the cost.”

Thiel writes about the need to recapture a “definite future,”
one in which specific tasks are undertaken that can concretely
succeed or fail (his book Zero to One, which I’m reading, is
genuinely interesting). Stephenson is calling for “more interesting
Apollo-like projects” and fiction that celebrates the bounty of
possible futures. Postrel counters:

Optimistic science fiction does not create a belief in
technological progress. It reflects it. Stephenson and Thiel are
making a big mistake when they propose a vision of the good future
that dismisses the everyday pleasures of ordinary people—that, in
short, leaves out consumers. This perspective is particularly odd
coming from a fiction writer and a businessman whose professional
work demonstrates a keen sense of what people will buy. People are
justifiably wary of grandiose plans that impose major costs on
those who won’t directly reap their benefits. They’re even more
wary if they believe that the changes of the past have brought only
hardship and destruction. 

Postrel writes that people in the
mid-20th century believed the future would be better than the
present because they believed their present was better
than the past. They either had emerged from a pretty brutal recent
past or the memories of just how rotten things had been were kept
alive via historical consciousness and other forms of storytelling.
In many ways, we’ve lost that sensibility despite ongoing
improvements that are both large and small in our daily
lives. 

Storytelling does have the potential to rekindle an ideal of
progress. The trick is not to confuse pessimism with sophistication
or, conversely, to demand that optimism be naive. The past, like
the present and the future, was made by complicated and imperfect
people. Recapturing a sense of optimism requires stories that
accept the ambiguities of history—and of life—while recognizing
genuine improvements.

Postrel also makes a compelling case for the TV show The
Knick
, which chronicles “decidedly flawed characters living in
an exciting but brutal period and improving surgery through clever,
risky and—by today’s standards—often-high-handed medical
procedures. 


The whole piece is well worth reading.

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Leading Economists Urge SCOTUS to Reject Occupational Licensing Abuse

Tomorrow the U.S. Supreme Court will hear oral
argument in North Carolina State Board of Dental Examiners v.
Federal Trade Commission
. At issue is whether that state
board—which is comprised almost entirely of licensed
dentists—engaged in illegal anticompetitive practices by preventing
non-dentists from performing teeth-whitening services. Last week, a
group of 45 leading economists filed a
friend of the court brief
urging the Supreme Court to rule
against the state board. “When self-interested economic actors—such
as licensed dentists—are given the power to influence or, as in
this case, actually write the rules by which others will compete
with them,” the brief observes, “they behave as self-interested
private actors, rather than as stewards of the public
interest.”

Meanwhile, at The Washington Post, George Will argues
that this case provides the Supreme Court with a rare opportunity
to
champion economic liberty
against government overreach. “If the
court directs a judicial scowl at North Carolina’s State Board of
Dental Examiners,” Will writes, “the court will thereby advance a
basic liberty—the right of Americans to earn a living without
unreasonable government interference.”

For more on North Carolina State Board of Dental Examiners
v. FTC
, click
here
.

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Prepare For Another Whiplashy Session: Liquidity Non-Existent

With no bond-market-police to corral the machines, it is not entirely surprising that – on the heels of AUDJPY – US equity futures have levitated this morning to provide a comfortably green open (as the world held its breath for a black monday – particularly inappropriate on Columbus Day). However, there’s a long way to go in the day and liquidity is – in a word (or two) – non-existent (lowest in at least 18 months). That means intraday volatility will be extreme to say the least…

 

Liquidity is at its lowest in at least 18 months

 

And sure enough…the highs…

 

which was instantly whiplashed to the lows

 

But NASDAQ is back in the red (for now)

 

And then there is the Trannies…

 

Source: Nanex LLC @nanexllc




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Is The Selling Overdone: WTI Momentum Hits Oversold For Only Third Time In Six Years

Another day, another attempt by the Saudis to topple Putin and kick the Kremlin where it hurts: the oily bottom line. And, as a result, another 2% drop in the price of West Texas Intermediate and various other crude grades around the globe.

But is the selling finally overdone, as some suggest happened to the S&P (as an alternative view to the PPT stepping in, the same PPT even Bloomberg is happy to bring up in casual conversation)? Well, according to the 1-year z-score of large speculator net position as % total open interest, is the lowest it has been since late 2011, early 2012, when the Fed was forced to bail out the world and Europe was crashing (as usual) into a deflationary vortex.

Also of note, per last week’s COT report, large speculators decreased WTI crude oil longs to $26.1bn from $27.0bn notional.

But perhaps the clearest indication that not even the Saudi’s can keep pushing the price of oil much further here is that from a purely technical standpoint, oil is so hated, that the daily RSI has reached oversold only for the 3rd time in six years!

So will someone (perhaps the Kremlin’s various preferred Swiss energy trading companies out of Zug) finally make a move and try to trap the crude bears in the coming days? If so, the move could be violent if and when the short squeeze finally begins.




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Should We Expect Ground Troops Soon in the Fight Against ISIS?

ISIS“Kobani
does not define the strategy of the coalition,” Secretary of State
John Kerry insisted
yesterday
. That’s probably a good thing, because even as the
Obama administration has committed the United States and whatever

coalition partners
it can talk into dropping a few bombs to
degrade
and destroy
” Islamic State/ISIS/whatever, the Kurdish city is

poised to become conquered territory
.

This is no shocker given that the Pentagon admitted
last week
, “Airstrikes alone are not going to do
this….They’re not going to save the town of Kobani.”

But, for a town that “does not define the strategy of the
coalition,” Kobani and ISIS’s advance in Iraq is consuming a lot of
U.S. diplomatic effort. The State Department has been busily
negotiating
with Turkey for access to its military bases and
apparently
gained just that
—a commitment from Turkey that its turf can be
used for training more moderate Syrian fighters and launching
further airstrikes, neither of which, as the Petagon points out,
are getting it done.

With its long border with both Syria and Iraq, Turkey could also
act as an effective staging ground for a ground war against ISIS.
Not that President Obama would ever break his
promise to never do anything of the sort
.

Unfortunately, the U.S. commitment to “degrade and destroy” ISIS
wth airstrikes—and what passes for local military forces—isn’t
working in Iraq, either. The Iraqi government now just controls one
large town, Haditha, in Anbar province. Having had their heads
handed to them figuratively, and getting ever closer to having it
done literally, provincial leaders are openly
calling for U.S. troops
to intervene.

Hmmm… Maybe that
presidential vow
that “I will not commit you and the rest of
our Armed Forces to fighting another ground war in Iraq” is looking
a bit shaky, after all.

Just a reminder, Mr. President: The majority of the American
people
aren’t fond of repeating that mistake
.

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Greg Beato: The Surprising Power of Subtitles

SubtitlesThe 1979
movie Jesus features an English actor you’ve
probably never heard of in the title role. Its special effects are
amateurish. But in the 35 years since it made its
debut, Jesus has achieved an impact far greater than
other more celebrated 1979 releases, such
as Alien and Apocalypse Now. The secret to its
success? Two years after an initial run in theaters, its producer,
a former gourmet food entrepreneur named Bill Bright, had the movie
translated into Tagalog.

Other translations followed, and soon missionaries were lugging
portable generators and projectors to remote African villages and
screening the movie on bed sheets in India. Jesus has now
been translated into more than 1,100 languages, and because of this
accessibility, it has been viewed an estimated 6 billion times.

As the parable of Jesus shows, massive global
audiences await those who make the effort to make their content
more accessible through translation. TED, the annual “ideas”
confab, has embraced this notion whole-heartedly. The conference
started encouraging volunteers to translate TED Talk videos in
2009, and began using Amara as its platform for doing so in 2012.
During this time, approximately 27,000 volunteers have provided
translations for more than 33,000 videos in more than 100
languages.

View this article.

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ATTN D.C. Reasonoids: Damon Root Discusses His New Book on the Supreme Court at Cato on Nov. 3

On November 3, Reason Senior Editor Damon Root will
speak at the Cato Institute about his new book Overruled: The
Long War for Control of the U.S. Supreme Court
(pre-order
your copy now
). Here’s the event description followed by

registration details
:

Overruled: The Long War for
Control of the U.S. Supreme Court

Featuring the author Damon Root, Senior Editor,
Reason magazine and Reason.com; with comments by Jeffrey
Rosen
, Professor of Law, George Washington University, and
President & CEO, National Constitution Center; and
Roger Pilon, Vice President for Legal Affairs,
Cato Institute, and Director, Cato Center for Constitutional
Studies; moderated by Walter Olson, Senior Fellow,
Cato Institute.

What is the proper role of the Supreme Court under the
Constitution? Should the Court be “active” or “restrained”? Or is
that even the proper way to look at the question, however much
we’ve heard it put that way for several decades now? In his new
book, Damon Root traces this debate from the Constitution’s
conception to the present. His central focus, however, is on the
emergence of the modern libertarian approach, which cuts through
the often sterile debate between liberals and conservatives and
points to the Constitution itself by way of determining the proper
role of the Court under it. Please join us for a refreshing account
of this recent history.

To register to attend this event,
click here
and then submit the form on the page that opens, or
email events@cato.org, fax (202) 371-0841, or call (202) 789-5229
by noon on Friday, October 31, 2014.

Luncheon to Follow

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When Even Bloomberg Jokes About It…

When even Bloomberg jokes about the market’s levitation…

 

You know the central planners have gone too far…

Last week, markets were under a lot of pressure; over the weekend, the good old plunge protection team, with some new teammates, got back to work; we had Fischer’s comments, bunch of other doves also came out, we are concerned about rest of world, if economy slows, we might raise rates slower; lo and behold, we find stocks bouncing very nicely into the U.S. opening, Bloomberg’s Richard Breslow writes.

 

Stocks once again ahead of bonds…

 

Driven by AUDJPY

 

One of the problems is that policy makers are truly data dependent and are playing it by ear; in the “old” normal world, the market would start to price things as it thought appropriate; now markets are in “we can’t fight City Hall” mode, can’t fight sov wealth funds; the CBs are the most aggressive investors right now, for them to complain about markets, is somewhat disingenuous and depressing.

Source: Richard Breslow via Bloomberg




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