For Crispen Odey The “Endgame” Arrives After Assets Plunge 60%

One month ago, we wrote that “For Crispin Odey This Is The Engame: Hedge Fund Billionaire Goes All In Betting On “Violent Unwind” Of QE Bubble” in which we noted that while “many financial commentators have warned that current monetary policy has inflated a bubble that will one day violently pop, few of them have risked money betting on the precise manner in which a chaotic unwinding of quantitative easing will play out through financial markets. This makes the portfolio of Crispin Odey, a London-based hedge fund manager, an interesting outlier. Mr Odey is one of only a handful of investors who has backed up his dire prognosis for the global economy with a series of large, leveraged trades designed to pay off in the event of a crash.

As we noted three  months ago, Odey’s bets are predicated on a collapse of Japanese bond prices, a surge in the price of gold and immolation of equities. As the FT put, it, “if it works he may make hundreds of millions of dollars for his clients. If wrong his fund may not survive.” Oh, and it better work quick due to the large cost of carry and rising margin calls: his biggest short bet by value – Tullow Oil Plc – has rallied almost 60 percent.

Indeed, the problem for Odey was that in doubling down for the last time, the hedge fund manager had started the clock on how long central banks have to maintain market stability; alternatively he also launched the countdown to the collapse of his own hedge fund, should his doomsday trade not materialize in time.

Unfortunately, Odey’s time may have run out, because as Bloomberg reports, assets under management at Crispin Odey’s flagship European hedge fund have plunged 60% this year after clients demanded their money back as his bearish bets fell apart in the wake of central-bank interventions and near-zero interest rates.

The Odey European fund held €422 million at the end of September, down from €1.1 billion at the start of the year, according to investor documents seen by Bloomberg News. The fund lost 37.5% during the period and 43 percent through Oct. 14. Even defenders of the Odey “experience” are having a tough time: “He still has a good track record and he is a contrarian,” said Laith Khalaf, senior analyst at Hargreaves Lansdown, which sells funds to individuals in Britain. “Investors do need to take that on board, though this year so far is no doubt a bitter pill to swallow.”

Of course, Odey is not alone, with active managers suffering the worst outflows since the financial crisis, as investors – angry at high fees and poor returns – have shifted a total of $60 billion from hedge funds and big-name traders to computer-driven funds, where algorithms are employed to bet on macro-economic trends, and are also much cheaper. Needless to say, the inevitable outcome of having the bulk of assets managed by robots in ETFs will be a disaster but as Steve Eisman said in a Bloomberg TV interview yesterday, “as long as the markets keep going up, ETFs are fine,” he said. “One day there will be a market correction and you wish you were in a hedged product.”

While the major correction so far is elusive, courtesy of central banks intervening every time there is even a 10% pullback, that will not comfort those Odey’s LP who have lost more than half their money in the past year. Furthermore, whereas many other hedge funds are simply boring, unwilling to risk much in a confusing market, Odey’s company manages more than $8 billion, placing it among the largest hedge-fund firms in Europe, and it’s the rollercoaster returns of his own European Inc. fund that attract attention. This year’s losses follow an almost 13 percent decline in 2015.

Still, for those who invested early, the recent dip is mostly noise: it’s up more than 900 percent since it started in June 1992, and in that time annual gains of more than 50 percent have been achieved four times.  “If you have been invested with someone like him for 10 years, you are still in the money and hope that he could recover,” said Jacob Schmidt, chief executive officer at investment advisory firm Schmidt Research Partners.

The question is how much of Odey’s AUM is from those who have been with him for less than 10 years, and who are pulling their money.

Making matters worse, Thursday was another rough day after a court ruled that the U.K. must hold a vote in Parliament before starting the two-year countdown to Brexit. Most of his 18 short bets rose, according to data compiled by Bloomberg. Lancashire Holdings Ltd., Odey Asset Management’s fourth-largest short position by value, gained the most in eight years as the company posted better-than-expected profits.

As reported previously, Odey predicted that U.K. stocks could plummet 80 percent. “An 80 percent fall suggests a pretty seismic collapse in capitalism,” Hargreaves Lansdown’s Khalaf said. “In that scenario, I’m not sure you’d want to be invested in anything apart from baked beans and bottled water.” Sadly for Odey, at the current rate his AUM may be the first to hit that particular bogey.

No matter what happens to his fund, however, Odey will be fine: in 2012, he got planning permission to build a 130,000-pound Palladian-style chicken house on his country estate a two-hour drive northwest of London. The irony, of course, if Odey’s fund does shutter is that he is ultiamtely right: the billionaire remains a vocal critic of central banks’ intervention in the economy; alas, his fate may be just one more very vivid demonstration that when fighting central banks, getting the timing right is everything.

via http://ift.tt/2eZ9vyE Tyler Durden

Healthcare Stocks Crater: DOJ Preparing Massive Probe Into Generic Drug Price-Fixing

Generic drug-maker stocks are collapsing following headlines suggesting the Justice Department’s probe into collusion and drastic price increases will see the first charges brought by year-end.

As Bloomberg reports, U.S. prosecutors are bearing down on generic pharmaceutical companies in a sweeping criminal investigation into suspected price collusion, a fresh challenge for an industry that’s already reeling from public outrage over the spiraling costs of some medicines.

The antitrust investigation by the Justice Department, begun about two years ago, now spans more than a dozen companies and about two dozen drugs, according to people familiar with the matter. The grand jury probe is examining whether some executives agreed with one another to raise prices, and the first charges could emerge by the end of the year, they said.

 

Though individual companies have made various disclosures about the inquiry, they have identified only a handful of drugs under scrutiny, including a heart treatment and an antibiotic. Among the drugmakers to have received subpoenas are industry giants Mylan NV and Teva Pharmaceutical Industries Ltd. Other companies include Actavis, which Teva bought from Allergan Plc in August, Lannett Co., Impax Laboratories Inc., Covis Pharma Holdings Sarl, Sun Pharmaceutical Industries Ltd., Mayne Pharma Group Ltd., Endo International Plc’s subsidiary Par Pharmaceutical Holdings and Taro Pharmaceutical Industries Ltd.

And they are all being sold hard…

 

As Bloomberg reminds readers, while attention so far has been focused mainly on branded drugs, which are more expensive, the Justice Department probe is now bringing the generics industry into the fray.

While the government may bring the first cases by the end of December, the situation is fluid and timing could slip, according to the people. The investigation is likely to continue after the first cases are filed, said the people, and has the potential to mirror the antitrust division’s long-running probe into auto-parts cartels. That price-fixing investigation has resulted in $2.8 billion in penalties and charges against 46 companies and 65 individuals, of which 31 received prison sentences, according to the Justice Department.

*  *  *

Did the pharma industry just change its vote from Hillary to Trump?

via http://ift.tt/2e660Hs Tyler Durden

Passive Negligence

Submitted by 720Global.com's Michael Lebowitz, via RealInvestmentAdvice.com,

The stock market is an essential cornerstone of capitalism, not a game of roulette. Well-functioning and free capital markets properly regulate the cost of capital, which is a vital input allowing companies to analyze the cost and benefit of investing and the economy to run efficiently.

The Federal Reserve (Fed), in historic efforts to increase debt and further stimulate consumption, has taken extraordinary actions to lower interest rates to levels never seen before. Low interest rates encourage consumers to borrow and spend. They also encourage investors to speculate instead of investing in more productive endeavors. From the Fed’s perspective, speculative behavior drives financial asset prices higher and generates a so-called “wealth effect”. The hope is that, as investors grow wealthier, they consume more goods and services. Additionally, the increased value of assets can be used as collateral for new debt, allowing for further growth in debt and consumption.

One of the consequences of a “managed” economy, such as the one the Fed has created, is that the normal functions of a capitalistic society erode. Capital is misallocated in a behavioral response to policy, and asset price inflation emerges in a divergence from economic fundamentals.   One of the manifestations of this reaction by investors is the recent rise in popularity of passive equity investing. This mindless style of investing has implications that few investors appear to consider. It is important for investment managers to understand the consequences of passive investing. The sizeable and growing source of demand for equities due to interest in passive strategies may generate a short-term boost to valuations, which helps explain the cheerleading, but the intermediate to longer-term effects seem destined to be quite damaging.

 

Passive Investing is in Favor

Passive index strategies are all the rage. Investors, desperate for “acceptable” returns are investing in funds whose value is directly linked to stock market indices. Unlike active funds, indexed funds do not perform investment analysis and are not looking for sectors or companies that offer greater return potential than the market. They do one thing, and that is replicate a particular equity index.

A recent Wall Street Journal Article entitled  “The Dying Business of Picking Stocks” reported:

Over the three years ended Aug. 31, investors added nearly $1.3 trillion to passive mutual funds and their brethren—passive exchange-traded funds—while draining more than a quarter trillion from active funds, according to Morningstar Inc.”

The exodus from actively managed funds is likely occurring for two primary reasons. For one, management fees on passive funds are low as the funds do not require investment analysis. In fact, an excel spreadsheet with a few lines of macro coding can replace a traditional portfolio manager. The WSJ article found that fees are almost eight times higher for active funds than passive ones (.77% vs. .10%). Secondly, and probably more significantly, passive funds have recently outperformed actively managed funds. In the aforementioned article, the WSJ found that over the last five years a meager 11.2% of U.S. large-company mutual funds (actively managed) outperformed the Vanguard 500 passive index fund.

 

Consequences

Poor Valuation – Since the great financial crisis (2008), the Fed’s zero interest rate policy has effectively pushed investors into riskier assets in efforts to earn “respectable” returns. This investment approach, also called yield chasing, is a topic we have covered in prior articles. In “Mm Mm Good”, for instance, we showed how the stock price of Campbell’s Soup Company (CPB) trades at a valuation traditionally associated with high growth firms. This has occurred despite less than 1% annual revenue growth for CPB over the last 25 years and little reason to suspect that revenue growth will improve in the future. In the article, we deduce that fundamentals offer no case for what is motivating investors and thus, recent performance is more likely due to demand for dividend yield. (Read More On Valuations Here)

In retrospect, we left out an important part of the story. Another source of demand for CPB stock is passive index investors. Many of these investors have no idea or concern that CPB is trading at valuations associated with high growth. In fact, most of them probably do not even know that they are investing in the company at all.

This highlights a much larger problem. As money flocks into passive strategies, the cash flows are affecting the valuations of companies. In CPB’s case, its valuation is not rising because of news and data but due to the gaining popularity of passive funds. Typically, market index changes are the result of the movement in underlying constituents. Today, market index changes are the driver of the underlying constituents.

When investors disregard valuation metrics and instead bet on overall market direction they are taking a serious leap of faith. To quote Jesse Felder of the Felder Report:

Embracing passive investing is exactly this sort of ‘cover your eyes and buy’ sort of attitude. Would you embrace the very same price-insensitive approach in buying a car? A house? Your groceries? Your clothes? Of course not. We are all very price-sensitive when it comes to these things. So why should investing be any different?”

 Economic Inefficiencies- As mentioned, passive investing requires little homework. Therefore, regardless of whether a company within an index is rich or cheap, its price will be swayed by passive investors. The more popular passive investing becomes, the more influence passive investors have, and the more commoditized pricing becomes. In other words, the prices of underlying stocks will increasingly rise and fall together in correlation with the market and not based on their individual merits.

Efficient markets rely upon investors performing proper fundamental analysis and buying what they believe to be cheap while selling what they believe to be rich. Over time, these individual decisions in aggregate lead to equity prices that tend to reflect consensus expectations with regard to the growth and return potential of a company. This does not mean prices are fairly valued at all times, but it does mean the collective wisdom of the market has weighed in on the risks and rewards and assigned an appropriate market valuation.

Efficient markets differentiate between “good” companies and “bad” companies. As such, they dictate the relative costs of capital for all public companies. For instance, well run companies with high growth potential are rewarded with a lower cost of capital which makes it cheaper and easier for these companies to invest in their own future. Conversely, poorly managed firms with few growth prospects have a higher cost of capital and are not as easily able to make such investments. This form of corporate Darwinism allows for more productive companies to prosper and helps eliminate those companies that are not economically viable. Without this function, investment dollars are poorly allocated towards unproductive projects.  As we have repeatedly stated, lower productivity growth results in lower profits, wages, and weaker economic activity in the long run.

 

Summary

As the appeal of passive index funds increases and such funds garner a larger portion of investors’ dollars, the distortions to valuations and cost of capital will intensify.

A quote from the aforementioned Wall Street Journal article sends a stern warning:

“It is time to acknowledge the truth,” said a March shareholder letter from Cohen & Steers Inc., manager of real-estate and other specialized active funds. Stock picking in its current form ‘is no longer a growth industry.’ Active-fund firms that don’t ‘position themselves for the sea change’ will be “relegated to the dustbin of history.”

That quote appears to be a startling endorsement in support of investor negligence. Nobody is going to ring a bell at the top of a market, but there are plenty of warped investment strategies and narratives from history that serve the same purpose — remember internet companies with no earnings and sub-prime CDOs to name two. Investors need to be cognizant of them and understand why the chorus of arguments in favor are short-sighted and flawed. The meteoric rise in passive investing is one such “strategy” sending an important and timely warning.

via http://ift.tt/2fztjL5 Tyler Durden

Leaked Emails Expose Podesta Pissed At CNBC’s John Harwood For “Honest” Reporting

Just when you thought the sickeningly deep collusion between the Clinton campaign and the mainstream media could not get any more, well, deplorable, it does.

The latest effusion of Wikileaks emails exposes a discussion between CNBC's John Harwood, Clinton campaign Chairman John Podesta, and Clinton campaign Director of Communications Jennifer Palmieri.

The story starts with CNBC's John Harwood writing a story in May 2015: "How's Hillary Doing? Wish We Could Tell You"

I've been inside Hillary Clinton's national campaign headquarters in Brooklyn.

 

I've talked with "senior officials" about her bid for the White House. They sat in these chairs.

 

Wish I could tell you more. But they said very little.

 

Notice that I typed very little and not "very little," because under the ground rules of Thursday's briefing reporters were not allowed to quote their words directly.

 

Not exactly the most damning of stories, but clearly made John Podesta angry – in that it did not suck up enough to his candidate – judging by his terse email to Harwood…

"Won't waste your time again."

Which prompted a very quick reply from Harwood (with 20 minutes)…

"He's joking, right?"

To which Jennifer Palmieiri snapped back, clearly disappointed in the reporters' honesty…

"No, he is not joking. He and I are both put off by your piece.

 

The briefing was just meant to help give context to the press for how we are thinking about the race and how summer is likely to go. Never intended for it to be newsmaking event.

 

We thought it would be helpful and you turned it into another hit piece on how our campaign interacts with the press.

 

Seemed like a cheap shot. And odd coming from you."

Which clearly shocked Harwood, who rapidly penned the following apology letter…

"I don't take cheap shots at Hillary Clinton or anybody else.

 

But this wasn't a shot of any kind. It was humor. I was poking fun at a campaign ritual.

 

I didn't expect big news either. Did you notice I didn't ask a single question in the briefing? I don't really care where her announcement will take or whether Charlotte will be onstage or when she'll take her vacation or how many rallies she'll have.

 

I knew that the stuff I care about – most importantly what she plans to do on the economy – was not going to yield answers now. You've told me that and I believe you.

 

I just thought it was funny to go through the ground rules jazz and have all these reporters firing questions and scribbling notes with Fox live truck parked outside with few definitive answers about anything.

 

Did it matter? No. Have you heard me complaining on any media about how Hillary is campaigning or interacting with the press? No. Do I participate in the whole Politico-style meme/narrative bullshit conversation along these lines? No.

 

But when my bosses asked me to write what I learned, humor seemed more honest and appropriate than anything else.

 

The value of the event, to me, was seeing you guys."

And that, dear American average joes, is how your independent media works.

While Donna Brazile was fired by CNN for what some leaked/unofficial/Russian-propaganda emails said, one wonders how long CNBC can defend their own staff's clear lack of independence.

Is it any wonder, Trump calls this election a "last stand" against the media's omnipotence and control (fwd to 2:47)

via http://ift.tt/2esdrHj Tyler Durden

Trump Wants Former Goldman Partner And Soros Employee To Serve As Treasury Secretary

Six months ago, Steven Mnuchin became finance chair for the Trump campaign. Having succesfully helped to raise 10s of millions of dollars for the campaign, the former Goldman Sachs partner and Soros Fund management employee is now positioned for something much larger as Donald Trump reportedly told his aides today that he wants Mnuchin to serve as his Treasury Secretary.

 

Ironically, Trump has often criticized Clinton (and his former competitor Ted Cruz) for their links to the big banks:

"I know the guys at Goldman Sachs. They have total, total control over him. Just like they have total control over Hillary Clinton,” Trump said in one debate.

But as we noted previously, he had no qualms, however, in hiring one of the most prominent Goldman alums to raise money for him.

In addition to Goldman, Mnuchin also worked at Soros Fund Management, whose founder, George Soros, has funded many left-leaning causes. Where it gets even more bizarre is that Mnuchin has donated frequently to Democrats, including to Clinton and Barack Obama.

 

As a hedge fund manager, Mnuchin is part of a group of businesspeople Trump has excoriated. In August, Trump said hedge fund managers were "getting away with murder" as he touted his proposal to end the so-called carried interest loophole, which gives private equity and hedge fund managers preferential tax treatment.

 

"The hedge fund guys didn't build this country," Trump said at the time on CBS' Face the Nation. "These are guys that shift paper around and they get lucky," he said. "They are energetic. They are very smart. But a lot of them—they are paper-pushers. They make a fortune. They pay no tax. It's ridiculous."

 

They apparently are also very good at raising money.

*  *  *

Some more on Mnuchin's background: starting his career in the early 1980s as a trainee at Salomon Brothers before moving to Goldman Sachs in 1985, Mnuchin was front and center for the advent of instruments like collateralized debt obligations and credit default swaps. He has called securitization “an extremely positive development in terms of being able to finance different parts of the economy and different businesses efficiently.” The pitfalls of the financing method came later, he's said.

Mnuchin's father, Robert Mnuchin, was a partner at Goldman Sachs in the 1960s. The second-youngest of five siblings, Steven attended the prestigious Riverdale Country School and then Yale University, where his roommate was Edward Lampert, who would go on to become a hedge-fund manager and owner of Sears.

More recently, in October 2014 Mnuchin became co-chairman of the board of the Hollywood studio Relativity Media due to Dune's fascination with movies. Dune has provided financing for batches of winning movies, like the “X-Men” franchise and “Avatar,” Hollywood’s all-time box-office champion.

Relativity Media filed for bankruptcy last summer, just a few months after Mnuchin's arrival. According to Variety, Dune was intimately involved in the studio's failure.

The money-man and fellow investors in a Dune Capital fund are said to have lost as much as $80 million — equity that is almost certain to be lost for good, said two sources familiar with the situation. And disgruntled Relativity investors privately are questioning how a bank Mnuchin once headed –OneWest Bank of Pasadena – was allowed by Relativity to drain $50 million from the studio just weeks prior to the July 30 insolvency filing.

 

Mnuchin had left Relativity just days before the company reached an agreement with OneWest to extend the loan deadline and allow the bank to claim that money.

*  *  *

To be sure, Hillary Clinton, who in turn has been attacked for her paid speeches to Goldman Sachs (and her public-private positioning for them), also has a high-ranking Goldman official in her ranks, former CFTC commissioner Gary Gensler, who is the former secretary of state’s chief financial officer and whom she is grooming for a potential Treasury Secretary.

But for Trump, a self-professed "anti-establishment" candidate, who has repeatedly stated he is not "for sale to special interest groups", his sudden call for the seemingly most "Wall Street" of Wall-Streeters to become Treasury Secretary may come as a big surprise to some and will leave many of his supporters demanding an explanation.

via http://ift.tt/2f5viCv Tyler Durden

Wikileaks Reveals Potential Rigging Of Primaries By Clinton Campaign As Early As 2014

Until the latest Podesta leaks created turbulence for the Clinton campaign, Wikileaks; most recent accomplishment was getting former DNC chair Debbie Wasserman-Shultz to resign following revelations the DNC had rigged the primary campaign in favor of Hillary Clinton and against her primary challenger, Bernie Sanders.

However, in a leaked document from the latest round of Podesta emails, we learn that the Clinton campaign may have been strategizing how to “rig” the primaries as early as 2014.

In a March 2014 email from Clinton campaign manager Robby Mook to Cheryl Mills, David Plouffe and John Podesta, the democrat recounts a conversation he had with Jeffery Berman, Barack Obama’s 2008 delegate guru, who would later be hired by the Clinton campaign to run the math for her primary campaign.

In the email,  Mook discusses how to coordinate the schedule for Democratic primaries to maximize benefit for Hillary Clinton “if she gets a significant primary challenger.” In such a case, Mook writes, “we need to consider changing course and getting N.Y., N.J. and maybe others to move their dates earlier to give her hefty early wins,” Mook wrote.

And the punchline of the proposed strategy:

We may need allies to help in this process but we’re going to look at each state one step at a time, limiting as much as possible the perception of direct intervention by the principals.”

As a reminder, accusations of “principal intervention” by his challenger, was one of Bernie Sanders’ recurring laments during this primary campaign. As such, this email provides additional evidence that the Democratic National Committee and Clinton campaign colluded to rig the primaries for Hillary Clinton.

As the Observer further notes, other emails released by WikiLeaks confirmed the debate schedule was coordinated to the Clinton campaign’s preference. A recent thread revealed then-DNC Chair Debbie Wasserman Schultz was directed to hold phony meetings with other Democratic candidates to provide the Clinton campaign and DNC with plausible deniability that they were coordinating with one another.

Ultimately,  Bernie Sanders, who was written off as a fringe candidate due to his tenure as an Independent, managed to energize progressive Democrats and Independent voters by the millions. Yet despite his  surging popularity, he had no chance from the beginning, as the last few months of email revelations has shown.

via http://ift.tt/2e5XOXF Tyler Durden

A Warning About Market Liquidity From Interactive Brokers

The market may be (even) more illiquid than you think.

In a stark warning to its clients, popular online brokerage Interactive Brokers has advised traders to avoid using market orders at all if possible, and alternatively, to split them up into smaller orders trading over time, something legacy sellside platforms have effectively done over the years by splitting “parent” orders into smaller, “child” orders.

In a notice, IB warns that it has “noticed that you have recently submitted Market Orders in your account(s). Please see important information below regarding this order type.” It then provides the following guidance:

  • Please note that a Market Order is an instruction to trade your order at any price available in the market, subject to any additional instructions for handling/simulating the particular order type you specified and other order conditions you specify when submitting your order. A Market Order is not guaranteed a specific trade price and may trade at an undesirable price. If you would like greater control over the trade prices you receive, please submit your order using a Limit Order, which is an instruction to place your order at or better than the specified limit price, or submit an algorithmic Market Order (IBALGO).
  • In accordance with our obligations as a broker, large Market Orders may be split into smaller orders, which will be traded over time. This is designed to reduce the impact of these large orders on the market, including the impact your order has on the market price.

There are two potential implications from this: one is that the HFTs are growing restless, and are aggressively frontrunning any and all market orders, thereby inciting microvolatility once large market orders hit the tape. The second, and more troubling implication, is the implicit suggestion that even a handful of large market orders can expose just how illiquid the market truly is, once “liquidity providing” HFTs all align on the same sign of the trade to be frontrun, potentially leading to even more micro, or macro, flash crashes.

And with liquidity only set to decline over the next two trading days heading into the election, we would like to underscore IB’s warning: anyone wishing to trade in or out of positions, is advised to use limit orders, even if it means leaving a few pennies on the table, as the alternative could be far less pleasant.

via http://ift.tt/2e5TkAx Tyler Durden

Trump, Brexit, the Bond Bubble, the Elites, and the Blue Collar Man

The following post appeared 10/3/2016 at Trader Scott’s Market Blog:

Styx “Blue Collar Man” written by Tommy Shaw:

Give me a job, give me security
Give me a chance to survive
I’m just a poor soul in the unemployment line
My God, I’m hardly alive
My mother and father, my wife and my friends
I see them laugh in my face
But I’ve got the power, and I’ve got the will
I’m not a charity case
I’ll take those long nights, impossible odds
Keeping my eye to the keyhole
If it takes all that to be just what I am
Well, I’m gonna be a blue collar man Make me an offer that I can’t refuse
Make me respectable, man
This is my last time in the unemployment line
So like it or not I’ll take those Long nights, impossible odds
Keeping my back to the wall
If it takes all that to be just what I am
Well, I’m gonna be a blue collar man Keeping my mind on a better life
Where happiness is only a heartbeat away
Paradise, can it be all I heard it was
I close my eyes and maybe I’m already there. I’ll take those long nights, impossible odds
Keeping my back to the wall
All that be just what I am
Well, I’m gonna be a blue collar man
You don’t understand. I’ll take those long nights, impossible odds
Keeping my eye to the keyhole
If it takes all that be just who I am
Well I vow to be a blue collar, gotta be a blue collar,
Gonna be a Blue collar man. Believe it.
Courtesy azlyrics.com.

 

 

It’s no coincidence that the popularity of Brexit and Donald Trump is appearing contemporaneously in this current time of mankind.  Beppe Grillo in Italy and Marine Le Pen in France are also examples. They are all symptoms of the effects of the 70+ years push by the elitists to force globalism and open borders on all of us. The good news is the elitists got too greedy and they are now very concerned their “Utopian” dream (for them) is in big trouble. The bad news is they will go down fighting. And the rest of us are their targets.

 

The globalists’ plan was to have control of/by a relatively small number of multinationals which would dominate the rest of the 99.9% of our fellow humans. From what I’ve cobbled together there were several parts to the plan, such as: getting us addicted and very comfortable taking on debt (debt/leverage scares me – the only time I use leverage is for short term trading); having one world characterized by open borders; having one global governing body (U.N.); having a few global banks working with the IMF, et al; having control of the media and the “educational” system. And more, but the point is to have total domination of this Planet. And it was looking good for them up until a few decades ago, but just like what most people do in markets – they got blinded and off focus due to greed.

 

So now for a few decades the masses have gotten restless, as we have seen our wages stagnate, our taxes soar, and our cost of living rise relentlessly (even with “deflation” allegedly omnipresent). But we have reached the critical limit where the restlessness has gone from apathy to fear and then to anger, and it’s accelerating. And the Trump, Sanders, Grillo, Le Pen, Brexit, etc. phenomena are “confirmations” of the new trend. That trend is the peaking and the eventual loss/downtrend in the confidence levels in hedge funds (oops, I mean Central Banks), Governments and globalism. And the peaking/distribution in those confidence levels can best be seen in the massive distribution in the US Long Term Treasury price, which can be seen (inverted) in the Long Term Treasury yield, The true acceleration in the loss of confidence will be reflected in and accompanied by the beginning of the acceleration of the major downtrend in global Government Bond markets. This situation is close at hand. The short term rates in the US bottomed in Fall 2011. With approximately a six year lag, we should start seeing the final bottoming in the longest term yields within the next twelve months. There will be a few more attempts to push below the July lows of 2.1% in the US Long Bond yield. But from here forward the pushes down in yield will not likely have any staying power and will fairly quickly bounce back up. The big capital is using the price rallies (drops in yield) to sell into. The geniuses at the central banks are some of the biggest buyers into those low yields (price highs). Disaster awaits the insanely leveraged balance sheets of the world’s Central Banks when yields begin their relentless move higher over the next many, many years. And this will be occurring at the same time as the loss of control over the rest of us by the global elitists and their agenda. Thus begins the Revenge of the Blue Collar Man.

via http://ift.tt/2flzY6x Trader Scott

Equity Derivatives Flash Brexit-Like “Panic Signal”

Equity market implied correlation is flashing a ‘panic’ warning according to BMO quant Mark Steele as the little-known derivative indicator suggests traders fear a major ‘high correlation’ event and are aggressively hedging systemic risk.

As Bloomberg notes, Steele warns that many asset classes are in a “funk” as weaker oil prices hurt high yield and Donald Trump’s staying power in the polls “pressures the status quo.”

And the massive spike in implied correlation – soaring 7 straight days from 35 to 70 – indicates fear may have turned into panic.

Chart: Bloomberg

As a reminder, implied correlation measures the relative demand for macro overlays (index hedges) vs micro risk (individual stock hedges/concerns). The higher it is, the more systemically worried investors are and the more traders believe a high correlation ‘event’ is due (typically the high correlation event is a big downturn in stocks).

But as BMO’s Steele concludes, just as we saw with Brexit, a rebound in sentiment “can be just as ferocious, and that carries the day for broad equity markets,” seemingly suggesting to buy the dip as he notes there’s “no sign of a banking system threat” that pressures equities systemically.

via http://ift.tt/2eDTqvm Tyler Durden