Category: zerohedge

It’s one thing to fade broad Goldman trade recommendations (and thus trading alongside Goldman and against muppets). It is, however, a gift from god when such a trade comes from none other than the greatest (once again, if you bat 0.000 or 1.000 on Wall Street you are great in both cases) FX strategist of all time: Goldman’s Tom Stolper, whose fades over the past 5 years have generated over 20,000 outright pips. So what does Stolper see? “All told, there are a number of reasons why the Canadian Dollar has scope to weaken. Some of these have been a factor for some time but the notable weakening in the external balance, the gradual shift in the BoC communication and the prospect of Fed tapering and the associated risks all suggest that 2014 may be the year when the CAD weakens more materially after many years in narrow trading ranges. In line with our recently changed forecasts, we expect $/CAD to rally to 1.14 on a 12-month basis, with a stop on a close below 1.01. This would imply a potential return of 7% including carry.” So one Goldman 2014 Top Trade generates a total return of 7% in 12 months – and one should do this why when one can make 7% in the Russell 2000 at its current daily pace of increase of 1.0% in one week. That said, the only question is: 1.01 in how many days?

From Goldman:

Top Trade Recommendation #3: Long $/CAD on external deficits, tapering risks

A weak external position suggestive of a weakening CAD

Since the Global Financial Crisis, significant external imbalances have built up in the Canadian economy. In 2008, the current account balance fell from a surplus of 1% of GDP to a deficit of 3% – and it has remained stable at this level since then. The main reason for this has been a decline in manufacturing exports, which fell by about 30% during the crisis. Employment in the manufacturing sector declined by about 20% during the crisis and has not recovered. On the commodity export side, the rise in crude production linked to tar sands in Alberta roughly offset the decline in the value of natural gas exports. The overall trade balance in energy-related products has remained unchanged during this period.

The decline in the Canadian current account position into deficit was initially funded easily. A strong banking sector that weathered well the GFC made Canada a safe haven currency with strong portfolio inflows. Early rate hikes in 2010 created a small interest rate differential in favour of the CAD and a particularly strong reserve diversification flow into Canada also contributed to solid capital inflows. From 2008 to 2012 the Canadian BBoP (= current account + portfolio flows + net FDI) remained very strong, recording a surplus of about 2% of GDP. But this has changed in 2013.

Over the past few quarters, capital inflows have slowed rapidly, pushing the BBoP into deficit of about 1% of GDP currently. Slowing reserve diversification has almost certainly contributed to this. According to the latest COFER data, EM central bank holdings of CAD have remained broadly stable in the first half of 2013 – a trend that has likely continued since. Without continued additional reserve diversification inflows, the CAD has likely lost one of the primary funding sources for the sticky external deficit.

Low inflation and weak exports to keep policy rates low

As Robin Brooks and Mike Cahill discussed in the latest Week Ahead piece for Canada, the weakness in exports has increasingly become a concern of the Bank of Canada (BoC), together with persistent low inflation. Markets have already revised substantially their expectations for monetary policy. Cumulative rate hikes priced through the end of 2014 have declined from about 50bp in September to around 5bp currently. Our forecast is for the BoC to stay firmly on hold until the Fed starts raising rates in 2016. That said, with house prices already very elevated, as documented by Hui Shan in a recent Global Economics Weekly, it is likely that private consumption will no longer be the kind of positive impulse to the economy that it was in the past, and we expect Canada’s growth in 2014 (2.1% on our forecast) to lag behind that of the US (2.9%) for that reason. In addition, as we have been flagging, CPI inflation has been stuck at the lower end of the BoC’s 1-3% inflation target band. This could become a more material issue for the BoC should inflation not move back towards the middle of the band in coming months. Again, our baseline is for the BoC to be on hold, but since the money market curve is pricing a small chance of hikes through end-2014, we see risks here also skewed to the downside. Again, this is supportive of CAD weakness.

It is also important to highlight that the Canadian Dollar remains clearly overvalued on our GSDEER fair value model. Combined with the weak current account position, there are therefore good fundamental reasons for a weaker CAD. Should a more accommodative policy by the BoC lead to a weaker CAD, it is unlikely that policymakers in other countries would complain about an explicit attempt by the Canadian authorities to gain an unfair competitive advantage.

Combining all these factors, we see good reasons for gradual CAD weakness to persist for idiosyncratic reasons. The kind of price action consistent with external weakness is a steady drift weaker and gradual underperformance relative to other major currencies, in particular the USD.

A possible sharp acceleration on Fed tapering

The reason why the down move in the CAD could accelerate notably would be the expectation for tighter monetary policy in the US. In particular a sell-off in intermediate rates in the US could lead to a widening interest rate differential at the 5-year point in the curve of the US.

Purely from an interest rate differential angle, this would likely add a factor in favour of a rising $/CAD. There is an additional risk that the sell-off extends into the front end of the US curve in response to stronger growth, as we discussed in some detail in the outlook for 2014. The risk of this scenario materialising is also linked to the asymmetric risks to interest rates, coming from very low levels. Running our Correlation Cruncher, we find that in recent months $/CAD has been almost twice as sensitive to a move in US 2-year rates as to the Canadian 2-year rate. Therefore, and if these correlations persist, even a simultaneous sell-off in Canadian front-end rates would remain a net negative event for the CAD.

Finally, it is worth putting the risk of higher US rates into the context of the external funding needs. It will likely become more difficult for Canada to attract the necessary inflows to fund the current account deficit if bond yields rise in the US.

External deficits, reserve flows, growth and tapering

All told, there are a number of reasons why the Canadian Dollar has scope to weaken. Some of these have been a factor for some time but the notable weakening in the external balance, the gradual shift in the BoC communication and the prospect of Fed tapering and the associated risks all suggest that 2014 may be the year when the CAD weakens more materially after many years in narrow trading ranges.

In line with our recently changed forecasts, we expect $/CAD to rally to 1.14 on a 12-month basis, with a stop on a close below 1.01. This would imply a potential return of 7% including carry.

via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/UrTa7WUbBU4/story01.htm Tyler Durden

In a carry-trade driven world in which news and fundamentals no longer matter, the only relevant “variable” is whether the JPY is down (check) and the EUR is up (check) which always results in green equities around the globe and green futures in the US, with yesterday’s sudden and sharp selloff on no liquidity and no news long forgotten.

The conventional wisdom “reason” for the JPY underperformance against all major FX is once again due to central bank rhetoric, when overnight BOJ’s Kiuchi sees high uncertainty whether 2% CPI will be reached in 2 years, Shirai says bank should ease further if growth, CPI diverge from main scenario. Also the BOJ once again hinted at more QE, and since this has proven sufficient to keep the JPY selling momentum, for now, why not continue doing it until like in May it stops working. As a result EURJPY rose above the 4 year high resistance of 138.00, while USDJPY is bordering on 102.00. On the other hand, the EUR gained after German parties strike coalition accord, pushing the EURUSD over 1.36 and further making the ECB’s life, now that it has to talk the currency down not up, impossible. This is especially true following reports in the German press that the ECB is looking at introducing an LTRO in order to help promote bank lending. Since that rumor made zero dent on the EUR, expect the ongoing daily litany of ECB rumors that the bank is “technically ready” for negative rates and even QE, although as has been shown in recent months this now has a half-life measured in minutes as the market largely is ignoring whatever “tools” Draghi and company believe they have left.

As for everything else that is “going on” in the market, DB’s Jim Reid summarizes it perfectly: “There have certainly been more interesting weeks than this one has been so far and yesterday proved to be another fairly dull affair for markets. The lack of any key market moving developments and the Thanksgiving-shortened week is certainly not helping.” Complacency all around.

Previewing today’s main events we’ll get a deluge of US data given tomorrow’s holiday. Initial jobless claims, UofM Consumer Sentiment, mortgage applications are some of the notable ones but we suspect focus will firmly be on durable goods orders for October and the Chicago PMI for November. Expectations for these two are reasonably low with the market expecting durable goods headline to fall 2% in October from the 3.8% increase we saw in September. Chicago PMI will be an important read ahead of next week’s ISM and the market is expecting November’s print (60.0) to be nearly 6pts lower than last month. Data aside we have a 7yr Treasury auction today following a fairly decent 5yr auction yesterday.

US event calendar

• US: Initial jobless claims, cons 330k (8:30)
• US: Durable goods orders m/m, cons -2.0% (8:30)
• US: Chicago PMI, cons 60.0 (9:45)
• US: Univ. of Michigan confidence (F), cons 73.1 (9:55)
• US: sells US$29bn 7y notes (11:30)

Overnight news bulletin from Bloomberg and Ransquawk:

• Treasuries little changed before week’s auctions conclude with $29b 7Y notes, yield 2.065% in WI trading; noncompetitive and competitive closing times at 11:00 a.m. and 11:30 a.m. ET, respectively.
• U.S. fixed-income markets closed for Thanksgiving Day tomorrow, close at 2pm on Friday
• Reports that the ECB is looking at introducing an LTRO in order to help promote bank lending has failed to weigh on EUR. However, Favourable seasonal flow, together with touted real money buying EUR saw EUR/ JPY advance to its highest level since 2009 this morning.
• German Chancellor Merkel and SPD reached grand coalition agreement, according to CDU’s Grosse-Broemer. There were also earlier reports that the new German Cabinet will not be named until mid-December according to the DPA.Ifo institute’s index of Germany’s business climate rose to 109.3 in Nov., highest since April 2012 and above all estimates in a Bloomberg survey
• Obama’s agreement with Iran is part of a high-stakes set of diplomatic initiatives that is unnerving Middle East allies concerned that his goal is to reduce U.S. commitments in the region
• Two unarmed American B-52 bombers flew through disputed areas of the East China Sea covered by China’s new air defense zone, a show of support for Japan as Abe seeks to expand his nation’s military
• The Supreme Court will take up a challenge to part of Obamacare by companies claiming a religious exemption to the requirement that they provide birth- control coverage for employees
• Sovereign yields mostly higher; EU peripheral spreads narrow as bund yields rise. Asian stocks mixed, European stocks, U.S. equity-index futures gain. WTI crude falls; copper and gold higher

Market Re-Cap from Ransquawk

Reports that the ECB is looking at introducing an LTRO in order to help promote bank lending has failed to weigh on EUR, which instead benefited from broad based JPY weakness which drove EUR/JPY above 138.00 level (highest since 2009) and also touted real money buying of EUR. Nevertheless, stocks traded broadly higher, with peripheral EU based financials among the best performing as credit spreads tightened further amid reports of a new LTRO which is said to be with a 9-12 month term. Looking elsewhere, despite the supply from Buba, Bunds traded steady, with peripheral bond yield spreads trading marginally tighter. On that note, analysts at Goldman Sachs noted that they believe that Spanish and Italian 2y spreads vs. Germany could halve in 2014, citing what they believe is market’s incorrect pricing of a potential negative ECB deposit rate, or extension of full-allotment term funding. Going forward, market  participants will get to digest the release of the latest weekly jobs report, Chicago PMI and also the weekly DoE data.

Asian Headlines

BoJ board member Shirai commented that they should stick to 2% price target now, instead of setting target in a range and that targeting an inflation range is an option once CPI tops 1%. Shirai was more cautious on GDP and CPI outlook than BoJ’s median forecast, but stated that current conditions don’t warrant additional easing.

EU & UK Headlines

German Chancellor Merkel and SPD reached grand coalition agreement, according to CDU’s Grosse-Broemer. There were also earlier reports that the new German Cabinet will not be named until mid-December according to the DPA. The agreement says individual EU states will be responsible for winding down their own banks if the common resolution fund is insufficient. Funds used by EU member states to rescue banks should be excluded from 3%/GDP deficit rule, but states may apply to the ESM should national funds be insufficient.

ECB weighing new

The IMF are discussing plans to impose upfront losses on bondholders the next time a country in the euro area requests a bailout according to unsourced reports.

Italian Prime Minister Enrico Letta’s government won a confidence vote on the 2014 budget in the Italian senate with a vote of 171 to 135

German GfK Consumer Confidence (Dec) M/M 7.4 vs Exp. 7.1 (Prev. 7.0, Rev. 7.1)

Goldman Sachs sees Spanish and Italian 2y spreads vs. Germany possibly to halve in 2014
UK GDP (Q3 P) Q/Q 0.8% vs Exp. 0.8% (Prev. 0.8%) – Strongest Q/Q since Q2 2010
UK GDP (Q3 P) Y/Y 1.5% vs Exp. 1.5% (Prev. 1.5%)
Barclays month-end extensions: Euro Aggr (+0.04y)
Barclays month-end extensions: Sterling Aggr (+0.06y)

US Headlines

After setting a deadline to fix the HealthCare.gov website, Obama administration officials have offered largely inexact measures of success. That has prompted Republicans to accuse the White House of moving the goal posts.

Barclays month-end extensions: Treasuries (+0.10y)

Equities

Equities are seen up across the board this morning with the outperformer this being Colruyt following their premarket earnings. Furthermore Banco Popolare are up just over 3% following reports that the Co. are said to be holding extraordinary board meeting to discuss possible reorganisation including Credito Bergamasco Unit. Vivendi are also seeing some upside following reports that the Co. may distribute SFR shares to Co. shareholders after the Co.’s board validates demerger plan. Co. says to submit demerger plan to works councils. In terms of laggards, Accor are down around 4.50% following reports of a shake up to the Co.’s board. Solvay are also seeing some downside following reports that the Co. have cut 2016 adj. EBITDA goal to EUR 2.3-2.5bln vs. Est. 2.35bln.

FX

Favourable seasonal flow, together with touted real money buying EUR saw EUR/JPY advance to its highest level since 2009 this morning. The cross also benefited from grind higher by USD/JPY, which remains vulnerable to downside demand given the erasure of RKO barriers. Elsewhere, USD weakness also supported GBP/USD in the first half of the trading session, which advanced to its highest level in 11-months and broke above touted barrier level at 1.6300.

Goldman Sachs 3rd Top Ten 2014 Trade is long USD/CAD; targeting 1.14

Credit Suisse now sees USD/JPY at 110.00 in 3 months and at 120.00 in 12 months

Commodities

Heading into the North American open, WTI crude futures are trading in negative territory following a large build in API crude oil inventories of 6.9mln, whilst Brent crude futures trade with gains for the session in a continuation of recent trade given troubles in Libya and caused a widening of the WTI-Brent spread.

Furthermore, WTI has been trading in a tight range for the past month around the USD 93 level, below this there is little in the way of support for prices until just above the USD 90 level which was seen in June, therefore today’s DoE release could act as a catalyst to break out of this range.

SocGen revised Brent outlook down by USD 2 to USD 108/bbl in 2014, revised WTI outlook down by USD 4 to USD 99/bbl and forecast an average 2014 NYMEX natural gas price of USD 3.65/MCF. Sees gold averaging USD 1135/Oz in 2014, silver at USD 19/Oz, platinum at USD 1550/ Oz, palladium at USD 790/Oz and sees 2014 aluminium price at 1,900/T and 2015 at 1,950/T.

Iran’s Oil Minster Zanganeh has held meetings with European Co.’s in an attempt to get them back to Iran following the nuclear deal struck over the weekend.

Morgan Stanley said that Brent is unlikely to average below USD 95-100 per barrel, adding that downside risk is concentrated in 2014, 2015 and that Brent is likely range-bound over the medium term.

 

Jim Reid from DB concludes the overnight event roundup

Away from the equity markets, primary market activities in credit slowed down sharply ahead of Thanksgiving. Supply was on the quiet side as investors were
largely focused on month-end rebalancing given the upcoming holiday. Investors were still net buyers of bonds though, to the tune of US$383m in the US, according to FINRA TRACE data which noted that US$12.7bn of bonds were swapping hands yesterday. As we mentioned yesterday US credit spreads have had a pretty good ride since their wides in early October and we suspect the search for yield mentality will continue to prevail into year-end absence any surprises from the Fed.

Recapping the main data events of yesterday, the US risk sentiment was actually well supported early on by some positive housing data. Building permits (974k v 935k) was better than expected while the Case-Shiller home price index also rose more than consensus (+1.03% v +0.90%) in September. The Richmond Fed manufacturing survey bucked the recent trend in similar surveys with a better-than-expected headline (13 v 4) but all eyes will be on the Chicago PMI today. The consumer was the main softness in yesterday’s data flow with the confidence reading down to 70.4 v 72.6 expected. The decline
was largely driven by a drop in consumer expectations (69.3 v 72.2) although labour market related sub-indicators showed some monthly improvement.

Turning to the overnight session the Asian equities session is mixed with Chinese (+0.7%) and Hong Kong (+0.6%) markets outperforming the rest. The rally in Chinese stocks overnight also marks the first gain in five days largely driven by railway makers, brokers and defence companies. The latter was likely driven by the escalating military tension between China and the US that seems to be getting increasing press focus overnight. According to Bloomberg news two unarmed US B-52 bombers yesterday flew into a disputed air-defence zone claimed by China. The area is said to include a chain of islands in the East China Sea controlled by Japan. Pentagon said that the flights were a longplanned training mission and insisted that the US would continue to  operate in what it considers to be international air space. FT said that the Chinese were not informed of the flights. Per the Japanese government’s instructions, ANA and Japan Airlines have also stopped providing flight information to China which they did overnight as they flew through a new Chinese air-defense zone without notice.

In other overnight news, Chancellor Merkel’s CDU has reached a coalition agreement with the Social Democrats after a lengthy discussion overnight. According to the BBC the breakthrough came after 17 hours of talks with both parties reaching agreement on issues including minimum wage, a lower retirement age and changes to dual citizenship rules. Away from politics and on a less cheerful note, S&P said that the biggest US banks may have to spend another US$104bn to resolve mortgage related issues with investors and counterparties. The top end of this estimate would eliminate about two thirds of the $154.9bn litigation costs already provided for by the banks but would not erode into their regulatory capital (FT).

via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/NHCaIaWk91g/story01.htm Tyler Durden

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Yes, it will Snow-den after all in time for Xmas perhaps this year and it will be white all around from the fall-out as the bomb hits. Edward Snowden has recently revealed that he has a secret cache of ‘doomsday’ material that will blow the world apart and the US in particular. Oh, please let it Snow on ‘em before Xmas! The National Security Agency and British Intelligence have both made unofficial comments saying that they are indeed worried about the classified material that Snowden has encrypted and stored on a data cloud. Aren’t they able to access it the poor things?

Snowden’s Doomsday

According to the Guardian newspaper that has been the mouthpiece of Edward Snowden from the very beginning, there is information concerning intelligence personnel names in both the USA and in the rest of the world as well as current former US officials. People that were informed have also been listed in the data. Apparently, Snowden has played the boys at the NSA at their own game and has encrypted the information with multiple passwords and a sophisticated form of encryption. So, it is possible to protect something so well that nobody (not even the NSA) can get their peeping-Tom eyes on it? Why didn’t they do it before? The question hardly needs answering as we all know that everybody was in on the act.

It’ll be Doomsday for Christmas from Snowden this year, but it’s not certain that Santa got that on his list when the NSA sent in their letter to the North Pole, via Russia. The passwords are in the hands of three different people and they change regularly, while remaining open for a very short time-slot each day. All very secretive and sounds like either a sect or a religion, or the Coca-Cola story. Maybe Snowden has the perfect recipe for make things go pop. If he gets arrested, caught or worse, then those three have the task of making the information available to the public.

Whether or not the cache actually exists, the NSA has declined to comment and so has British Intelligence (Government Communications Headquarters or GCHQ). Whatever happens, it is most certainly Snowden’s insurance of protection from being bumped off. Remember the men in black can do whatever they like apparently. According to Obama administration officials, Snowden has enough material to keep the papers going for another two years. He has somewhere between 50 and 200 thousand documents that have been downloaded in his possession. According to estimates, there have been only some 500 documents that have actually been made public to date.

Just the tip of the iceberg.

The NSA and GCHQ had better listen up if they don’t want that top-secret information being revealed. Maybe if the names of spies are on the documents as Snowden has stated, then they will start to become more open to discussion. Snowden just got bargaining power.

Forgotten Snowden

Edward Snowden may be forgotten by the start of 2014 as other things take over our minds and the mainstream media starts to drop him from their pages.

Snowden shouldn’t be dropped and we should make sure that we still care about what the NSA and British Intelligence forces did to our rights as citizens in countries that were supposed to leave us with a minimum of privacy instead of violating that and selling it on to others. We should still care, but how many will still believe that Snowden was a traitor to his country because he told the truth? How many would have preferred not to know? How many will say ‘I knew it all along’?

There are few out there in the world that will actually stand up and shout that yes Snowden admitted what we should have been told long ago. Stop violating our rights. But by January he’ll be just a voice from the past. We will have moved on to greater, more interesting things like the post-festive season sales and how many people are spending the money they don’t actually have (including the US government). That’s far more riveting for some than knowing that our rights have been violated. It’s surprising the number of people that actually believe Snowden to be a traitor.

Those very same people condemn the sheeple for not waking up to reality, but they are so fast asleep that they have done exactly what the US state told them to do: condemn Snowden for revealing the truth. It’s the latter that are even worse than the sheeple, it might seem. The sheeple honestly don’t know they are asleep, at least. There are still 49%(October 2013) of US citizens that believe that Snowden was a traitor to their country and to hell with being monitored by their state. If Snowden does reveal the names of spies and therefore puts those people in danger, then he may just become the traitor he wasn’t meant to be, however. But, he hasn’t done it yet.

You can’t distrust the Obama administration and consider that Obama is dishonestand at the same time believe that Snowden was a traitor. Time to wake up!

Originally posted: It’ll Snow-den in Time for Xmas

 The Stooges are Running the Show, Obama |  Banks: The Right Thing to Do | Bitcoin Bonanza | The Super Rich Deprive Us of Fundamental Rights |  Whining for Wine |Cost of Living Not High Enough in EU | Record Levels of Currency Reserves Will Hit Hard | Internet or Splinternet | World Ready to Jump into Bed with China

 Indian Inflation: Out of Control? | Greenspan Maps a Territory | Gold Rush or Just a Streak? | Obama’s Obamacare: Double Jinx | Financial Markets: Negating the Laws of Gravity  |Blatant Housing-Bubble: Stating the Obvious | Let’s Downgrade S&P, Moody’s and Fitch For Once | US Still Living on Borrowed Time | (In)Direct Slavery: We’re All Guilty |

Technical Analysis: Bear Expanding Triangle | Bull Expanding Triangle | Bull Falling Wedge | Bear Rising Wedge | High & Tight Flag

 

 

via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/xO7lgfgv9OI/story01.htm Pivotfarm

Submitted by Mike Krieger of Liberty Blitzkrieg blog,

Nor, of course, is that the end of their contribution to the wider good. These types of people are always the first target of the charity fund-raisers, whether they are looking for a new church roof or a children’s cancer ward. These are the people who put bread on the tables of families who – if the rich didn’t invest in supercars and employ eau de cologne-dabbers – might otherwise find themselves without a breadwinner. And yet they are brow-beaten and bullied and threatened with new taxes, by everyone from the Archbishop of Canterbury to Nick Clegg.

So according to Boris, we couldn’t survive with oligarchs. Why not just bring back royalty? Oh wait…

The rich are resented, not so much for being rich, but for getting ever richer than the middle classes – and the trouble is that the gap is growing the whole time, and especially has done over the past 20 years. It is hard to say exactly why this is, but I will hazard a guess. Of all the self-made super-rich tycoons I have met, most belong to the following three fairly exclusive categories of human being:

It’s not hard to say exactly why the gap has widened. I’ve basically been writing about it for years. His conclusion; however, exposes his embarrassing bias.

(1) They tend to be well above average, if not outstanding, in their powers of mathematical, scientific or at least logical reasoning. (2) They have a great deal of energy, confidence, risk-taking instinct and a desire to make money. (3) They have had the good fortune – by luck or birth – to be able to exploit these talents.

I know a lot of people that demonstrate the above qualities. Many, many people, and none of them are oligarchs. So please give it a rest.

We should be helping all those who can to join the ranks of the super-rich, and we should stop any bashing or moaning or preaching or bitching and simply give thanks for the prodigious sums of money that they are contributing to the tax revenues of this country, and that enable us to look after our sick and our elderly and to build roads, railways and schools.

Now he’s totally off the deep end. I hear the Onion is looking for writers…

Indeed, it is possible, as the American economist Art Laffer pointed out, that they might contribute even more if we cut their rates of tax; but it is time we recognised the heroic contribution they already make. In fact, we should stop publishing rich lists in favour of an annual list o
f the top 100 Tax Heroes, with automatic knighthoods for the top 10.

Knighthoods. Makes a lot of sense actually since there generally seems to be a strong negative correlation between folks being knighted and being decent human beings.

If this was your attempt at continuing to inflate a oligarch housing bubble in London, congrats Mr. Johnson. Well done. Perhaps some day, you’ll receive your precious knighthood.

Full article here.

via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/gyThQgioBOs/story01.htm Tyler Durden

Submitted by Mike Krieger of Liberty Blitzkrieg blog,

Nor, of course, is that the end of their contribution to the wider good. These types of people are always the first target of the charity fund-raisers, whether they are looking for a new church roof or a children’s cancer ward. These are the people who put bread on the tables of families who – if the rich didn’t invest in supercars and employ eau de cologne-dabbers – might otherwise find themselves without a breadwinner. And yet they are brow-beaten and bullied and threatened with new taxes, by everyone from the Archbishop of Canterbury to Nick Clegg.

So according to Boris, we couldn’t survive with oligarchs. Why not just bring back royalty? Oh wait…

The rich are resented, not so much for being rich, but for getting ever richer than the middle classes – and the trouble is that the gap is growing the whole time, and especially has done over the past 20 years. It is hard to say exactly why this is, but I will hazard a guess. Of all the self-made super-rich tycoons I have met, most belong to the following three fairly exclusive categories of human being:

It’s not hard to say exactly why the gap has widened. I’ve basically been writing about it for years. His conclusion; however, exposes his embarrassing bias.

(1) They tend to be well above average, if not outstanding, in their powers of mathematical, scientific or at least logical reasoning. (2) They have a great deal of energy, confidence, risk-taking instinct and a desire to make money. (3) They have had the good fortune – by luck or birth – to be able to exploit these talents.

I know a lot of people that demonstrate the above qualities. Many, many people, and none of them are oligarchs. So please give it a rest.

We should be helping all those who can to join the ranks of the super-rich, and we should stop any bashing or moaning or preaching or bitching and simply give thanks for the prodigious sums of money that they are contributing to the tax revenues of this country, and that enable us to look after our sick and our elderly and to build roads, railways and schools.

Now he’s totally off the deep end. I hear the Onion is looking for writers…

Indeed, it is possible, as the American economist Art Laffer pointed out, that they might contribute even more if we cut their rates of tax; but it is time we recognised the heroic contribution they already make. In fact, we should stop publishing rich lists in favour of an annual list of the top 100 Tax Heroes, with automatic knighthoods for the top 10.

Knighthoods. Makes a lot of sense actually since there generally seems to be a strong negative correlation between folks being knighted and being decent human beings.

If this was your attempt at continuing to inflate a oligarch housing bubble in London, congrats Mr. Johnson. Well done. Perhaps some day, you’ll receive your precious knighthood.

Full article here.

via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/gyThQgioBOs/story01.htm Tyler Durden

Lately, the CNBC management team and show producers, and certainly the Comcast C-suite, have been engaged in a flurry of activity: from the departure of the iconic money honey Maria Bartiromo, to the retention of virtually every nubile (and not so nubile) Bloomberg TV anchor, it seems the station that was once known for breaking and analyzing financial news is more focused on the perfect mix of TV anchors. Supposedly in lieu of relevant, actionable content, this will offset the boost viewership. Or so the thinking goes. Sadly this is the same sort of thinking that has made slideshows, kittens, and all-caps headlines an ubiqutous click bait fixture of web media. Unfortunately for CNBC (and perhaps explaining Bartiromo’s decision to jump ship after decades of loyalty) it is not working. According to the latest Nielsen Research data, in November, CNBC’s core 25-54 demographic saw its fourth consecutive month of declines, and dropped to just 31,000 – a declined of over 40% from a year earlier, and the lowest since February 1993: a fresh 13 year low.

 

Some other highlights. CNBC has seen a constant decline in its viewership starting with 2008 when it attracted a total of 274,000 viewers, and 88,000 in its demo, for its full day audience. Subsequently viewership dropped as follows:

• 2009: P2: 226,000; 25-54: 75,000
• 2010: P2: 208,000; 25-54: 65,000
• 2011: P2: 199,000; 25-54: 60,000
• 2012: P2: 171,000; 25-54: 52,000

And the full 2013 breakdown: P2: 147,000; 25-54: 42,000.

In short – total viewership has plunged by 46% in the total audiences, and by 52% in the demographic over the past five years. Which incidentally follows the volume of the “stock market” nearly tick for tick.

What this means is that Bartiromo may have been the latest high profile departure from the station, but she certainly won’t be the last one – the writing on the wall is very clear.

The “good” news is that one can expect progressively more eye candy to grace the mute ticker, as instead of focusing on the only thing that matters to viewers – content – the station follows virtually all other dying legacy (and social) media in pursuing the lowest common denominator, which usually comes in high heels and a mini skirt.

Finally, if interest in CNBC is indeed comparable to overall retail (and institutional) participation in the market as many believe, then not only is the retail investor not coming back, ever, contrary to what the doctored propaganda from assorted funds would like to represent (because strength is always in herds, pardon, numbers) but Bernanke better hope that the “BT(F)D mentality” so eloquently popularized by the abovementioned now ex-CNBC anchor, never departs or else there will be nobody to pick up the pieces on the way down when the selling begins.

via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/E20vX9dygdA/story01.htm Tyler Durden

The Economist found, rather sadly, despite all the glad-handing and happy-talk, that 53% of financial services executives believed that strict adherence to ethical conduct would make career progression difficult. As this former Wall Street trader told The Guardian, “a precedent needs to be set, to slow down Wall Street’s wild behavior. A reminder that rules are there to be followed, not exploited.” The reason, among others, is summed up by the following, “if a customer wants a red suit, you sell them a red suit. If that customer is Japanese, you charge him twice what it costs.”

 

Via The Guardian,

My first year on Wall Street, 1993, I was paid 14 times more than I earned the prior year and three times more than my father’s best year. For that money, I helped my company create financial products that were disguised to look simple, but which required complex math to properly understand. That first year I was roundly applauded by my bosses, who told me I was clever, and to my surprise they gave me $20,000 bonus beyond my salary.

 

The products were sold to many investors, many who didn’t fully understand what they were buying, most of them what we called “clueless Japanese.” The profits to my company were huge – hundreds of millions of dollars huge. The main product that made my firm great money for close to five years was was called, in typically dense finance jargon, a YIF, or a Yield Indexed Forward.

 

Eventually, investors got wise, realizing what they had bought was complex, loaded with hidden leverage, and became most dangerous during moments of distress.

 

I never did meet the buyers; that was someone else’s job. I stayed behind the spreadsheets. My job was to try to extract as much value as possible through math and clever trading. Japan would send us faxes of documents from our competitors. Many were selling far weirder products and doing it in far larger volume than we were. The conversation with our Japanese customers would end with them urging us on: “We can’t fall behind.”

 

When I did ask, rather naively, if this was all kosher, I would be assured multiple times that multiple lawyers and multiple managers had approved the sales.

 

One senior trader, consoling me late at night, reminded me, “You are playing in the big leagues now. If a customer wants a red suit, you sell them a red suit. If that customer is Japanese, you charge him twice what it costs.”

 

I rationalized that our group was careful by Wall Street standards, trying to stay close to the letter of the law. We tried to abide by an unwritten “five-point rule”: never intentionally make more than five percentage points of profit from a customer.

 

Some competitors didn’t care about the rule. They were making 7% or 10% profit per trade from clients, selling exotic products loaded with hidden traps. I assumed they would eventually face legal charges, or at least public embarrassment, for pushing so clearly away from the spirit of the law.

 

They didn’t. Rather, they got paid better, were lauded as true risk takers, and offered big pay packages to manage similar businesses.

 

Being paid very well also helped ease any of my concerns. Feeling guilty, kid? Here take a big check. I was, for the first time in my life, feeling valued for my math skills – the ones I had to hide throughout my childhood, so as not be labeled a nerd or egghead. Ego and money are nice salves for any potential feeling of guilt.

 

After a few years on Wall Street it was clear to me: you could make money by gaming anyone and everything. The more clever you were, the more ingenious your ability to exploit a flaw in a law or regulation, the more lauded and celebrated you became.

 

Nobody seemed to be getting called out. No move was too audacious. It was like driving past the speed limit at 79 MPH, and watching others pass by at 100, or 110, and never seeing anyone pulled over.

 

Wall Street did nod and wave politely to regulators’ attempts to slow things down. Every employee had to complete a yearly compliance training, where he was updated on things like money laundering, collusion, insider trading, and selling our customers only financial products that were suitable to them.

 

By the early 2000s that compliance training had descended into a once-a-year farce, designed to literally just check a box. It became a one-hour lecture held in a massive hall. Everyone had to go once, listen to the rushed presentation, and then sign a form. You could look down at the audience and see row after row of blue buttoned shirts playing on their Blackberries. I reached new highs on Brick Breaker one year during compliance training. My compliance education that year was still complete.

 

By 2007 the idea of ethics education fell even further. You didn’t even need to show up to a lecture hall; you just had to log on to an online course. It was one hour of slides that you worked through, blindly pushing the “forward” button while your attention was somewhere else. Some managers, too busy for such nonsense, even paid younger employees to sit at their computers and do it for them.

 

As Wall Street grew, fueled by that unchecked culture of risk taking, traders got more and more audacious, and corruption became more and more diffused through the system. By 2006 you could open up almost any major business, look at its inside workings, and find some wrongdoing.

 

After the crash of 2008, regulators finally did exactly that. What has resulted is a wave of scandals with odd names; LIBOR fixing, FX collusion, ISDA Fix.

 

To outsiders they sound like complex acronyms that occupy the darkest corners of Wall Street, easily dismissed as anomalies. They are not. LIBOR, FX, ISDA Fix are at the very center of finance, part of the daily flow of trillions of dollars. The scandals are scarily close to what some on Wall Street believe is standard business practice, a matter of shades of grey.

 

I imagine the people who are named in the scandals are genuinely confused as to why they are being singled out. They were just doing what almost everyone else was, maybe just more aggressive, more reckless. They were doing what they had been trained to do: bending the rules, pushing as far as they could to beat competitors. They had been applauded in the past for their aggressive risk taking, no doubt. Now they are just whipping boys.

 

That’s the paradox at the core of the settlements we’re seeing: where is the real responsibility? Others were doing it, yes. Banks should be fined, yes. But somebody should be charged. Yet the people who really should be held accountable have not. They are the bosses, the managers and CEOs of the businesses. They set the standard, they shaped the culture. The Chuck Princes, Dick Fulds, and Fred Goodwins of the world. They happily shepherded and profited from a Wall Street that spun out of control.

 

A precedent needs to be set, to slow down Wall Street’s wild behavior. A reminder that rules are there to be followed, not exploited.
The managers knew what was going on. Ask anyone who works at a bank and they will tell you that.

 

The excuse we have long accepted is ignorance: that these leaders couldn’t have known what was happening. That doesn’t suffice. If they didn’t know, it’s an even larger sin.

via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/zUFHLr0gHUY/story01.htm Tyler Durden

The Economist found, rather sadly, despite all the glad-handing and happy-talk, that 53% of financial services executives believed that strict adherence to ethical conduct would make career progression difficult. As this former Wall Street trader told The Guardian, “a precedent needs to be set, to slow down Wall Street’s wild behavior. A reminder that rules are there to be followed, not exploited.” The reason, among others, is summed up by the following, “if a customer wants a red suit, you sell them a red suit. If that customer is Japanese, you charge him twice what it costs.”

 

Via The Guardian,

My first year on Wall Street, 1993, I was paid 14 times more than I earned the prior year and three times more than my father’s best year. For that money, I helped my company create financial products that were disguised to look simple, but which required complex math to properly understand. That first year I was roundly applauded by my bosses, who told me I was clever, and to my surprise they gave me $20,000 bonus beyond my salary.

 

The products were sold to many investors, many who didn’t fully understand what they were buying, most of them what we called “clueless Japanese.” The profits to my company were huge – hundreds of millions of dollars huge. The main product that made my firm great money for close to five years was was called, in typically dense finance jargon, a YIF, or a Yield Indexed Forward.

 

Eventually, investors got wise, realizing what they had bought was complex, loaded with hidden leverage, and became most dangerous during moments of distress.

 

I never did meet the buyers; that was someone else’s job. I stayed behind the spreadsheets. My job was to try to extract as much value as possible through math and clever trading. Japan would send us faxes of documents from our competitors. Many were selling far weirder products and doing it in far larger volume than we were. The conversation with our Japanese customers would end with them urging us on: “We can’t fall behind.”

 

When I did ask, rather naively, if this was all kosher, I would be assured multiple times that multiple lawyers and multiple managers had approved the sales.

 

One senior trader, consoling me late at night, reminded me, “You are playing in the big leagues now. If a customer wants a red suit, you sell them a red suit. If that customer is Japanese, you charge him twice what it costs.”

 

I rationalized that our group was careful by Wall Street standards, trying to stay close to the letter of the law. We tried to abide by an unwritten “five-point rule”: never intentionally make more than five percentage points of profit from a customer.

 

Some competitors didn’t care about the rule. They were making 7% or 10% profit per trade from clients, selling exotic products loaded with hidden traps. I assumed they would eventually face legal charges, or at least public embarrassment, for pushing so clearly away from the spirit of the law.

 

They didn’t. Rather, they got paid better, were lauded as true risk takers, and offered big pay packages to manage similar businesses.

 

Being paid very well also helped ease any of my concerns. Feeling guilty, kid? Here take a big check. I was, for the first time in my life, feeling valued for my math skills – the ones I had to hide throughout my childhood, so as not be labeled a nerd or egghead. Ego and money are nice salves for any potential feeling of guilt.

 

After a few years on Wall Street it was clear to me: you could make money by gaming anyone and everything. The more clever you were, the more ingenious your ability to exploit a flaw in a law or regulation, the more lauded and celebrated you became.

 

Nobody seemed to be getting called out. No move was too audacious. It was like driving past the speed limit at 79 MPH, and watching others pass by at 100, or 110, and never seeing anyone pulled over.

 

Wall Street did nod and wave politely to regulators’ attempts to slow things down. Every employee had to complete a yearly compliance training, where he was updated on things like money laundering, collusion, insider trading, and selling our customers only financial products that were suitable to them.

 

By the early 2000s that compliance training had descended into a once-a-year farce, designed to literally just check a box. It became a one-hour lecture held in a massive hall. Everyone had to go once, listen to the rushed presentation, and then sign a form. You could look down at the audience and see row after row of blue buttoned shirts playing on their Blackberries. I reached new highs on Brick Breaker one year during compliance training. My compliance education that year was still complete.

 

By 2007 the idea of ethics education fell even further. You didn’t even need to show up to a lecture hall; you just had to log on to an online course. It was one hour of slides that you worked through, blindly pushing the “forward” button while your attention was somewhere else. Some managers, too busy for such nonsense, even paid younger employees to sit at their computers and do it for them.

 

As Wall Street grew, fueled by that unchecked culture of risk taking, traders got more and more audacious, and corruption became more and more diffused through the system. By 2006 you could open up almost any major business, look at its inside workings, and find some wrongdoing.

 

After the crash of 2008, regulators finally did exactly that. What has resulted is a wave of scandals with odd names; LIBOR fixing, FX collusion, ISDA Fix.

 

To outsiders they sound like complex acronyms that occupy the darkest corners of Wall Street, easily dismissed as anomalies. They are not. LIBOR, FX, ISDA Fix are at the very center of finance, part of the daily flow of trillions of dollars. The scandals are scarily close to what some on Wall Street believe is standard business practice, a matter of shades of grey.

 

I imagine the people who are named in the scandals are genuinely confused as to why they are being singled out. They were just doing what almost everyone else was, maybe just more aggressive, more reckless. They were doing what they had been trained to do: bending the rules, pushing as far as they could to beat competitors. They had been applauded in the past for their aggressive risk taking, no doubt. Now they are just whipping boys.

 

That’s the paradox at the core of the settlements we’re seeing: where is the real responsibility? Others were doing it, yes. Banks should be fined, yes. But somebody should be charged. Yet the people who really should be held accountable have not. They are the bosses, the managers and CEOs of the businesses. They set the standard, they shaped the culture. The Chuck Princes, Dick Fulds, and Fred Goodwins of the world. They happily shepherded and profited from a Wall Street that spun out of control.

 

A precedent needs to be set, to slow down Wall Street’s wild behavior. A reminder that rules are there to be followed, not exploited. The managers knew what was going on. Ask anyone who works at a bank and they will tell you that.

 

The excuse we have long accepted is ignorance: that these leaders couldn’t have known what was happening. That doesn’t suffice. If they didn’t know, it’s an even larger sin.

via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/zUFHLr0gHUY/story01.htm Tyler Durden

From Abe Gulkowitz’ The Punch Line

Meager Growth but the Market Roars…

An interim deal on Iran’s nuclear program pushed oil prices lower and sent global equities higher as investors’ risk appetite rose on an easing of some Middle East tensions. As we close in to year-end and the start of a new year, one finds little evidence of serious inflationary concerns. Indeed, the opposite is feared.

Major economies face debilitating deflation pressures. In Europe, for example, the latest annual inflation statistics fell in twenty-three Member States, remained stable in one and rose in only four. The HSBC/Markit Flash China PMI came in at 50.4 in November, marking a two-month low and missing expectations. The survey still indicated that the Chinese economy is expanding but it also raised fears that growth may be tailing off in the fourth quarter. China will be lucky if it manages to hit its official target of 7.5% growth in 2013, a far cry from the double-digit rates that the country had come to expect in the 2000s.

Growth in India (around 5%), Brazil and Russia (around 2.5%) is barely half what it was at the height of the boom. In Europe, the Markit Flash Eurozone PMI fell from 51.9 to 51.5, the lowest reading for three months. The French index was particularly weak – the PMI was at its lowest level since June. Germany continued to improve but the rest of the eurozone seems to be languishing. Questions abound whether the EU risks following the path carved by the sluggish Japan in the 1990s. Yet financial assets point to a worrisome asset inflation environment. Many have written off the likelihood that the Federal Reserve would begin QE tapering this year.

As stocks hit new records and small investors—finally—return to the market, some analysts are getting worried. Risk assets have rallied to previous bubble conditions. Powered by unprecedented refinancing and recap activity, 2013 is now the most productive year ever for new-issue leveraged loans, for example. This has been great for corporations as financing and refinancing has put them on a stronger footing. Where M&A activity still lags the highs of the last boom, issuers have jumped into the opportunistic pool with both feet. And why not? Secondary prices are high and new-issue clearing yields remain low. Yet very inadequate movement has been evidenced on the hiring front.

And after all the improvement in ebitda, where do we go from here? Forward guidance will clearly be harder. One might argue that we are back in a Goldilocks fantasy world, where the economy is not so strong (as to cause inflation and trigger serious monetary tightening) or so weak (as to cause recession and a collapse in profits) but “just right”. Yet, it seems unlikely that issuers with weaker credit quality could find it so easy to sell debt without the excess liquidity created by the Fed and other central banks.

Weaning everyone off the “liquidity fix” may be tough!

The full Punchline including 17 pages of off the charts that’s fit to print below (pdf)

via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/MlGZHzlhgNM/story01.htm Tyler Durden

To paraphrase Mark Twain, “It isn’t the stuff you don’t know that will kill you – it’s the stuff you’re sure about but is totally wrong that will do you real harm.”  As a corollary to this fateful phrase, Convergx’s Nick Colas has collected a list of market “knowledge” that is questionable at best and harmful at worst.

Via ConvergEx’s Nick Colas,
 
For years I had a pet theory about how your abilities improve over time in any given vocation.  My thought was that every year you work, you learn one critical aspect of the job. Over the first few years, the percentage improvement in your knowledge is quite impressive: 50% in the second year, 33% in the third, and so on as you pick up new and important insights.  And while years 15-20 might offer up slower growth, you also have less competition from your more junior peers.  They’ve figured out fewer points, after all.

A few examples of these critical lessons from my 20+ years analyzing stocks, markets, and the economy on both the buy side and sell side:

Rule #1: The marginal buyer and seller set prices for everything.  You may have point of view on value, but the actors setting the price don’t care about your opinion.  Seriously – they don’t.

 

Rule #2: If you don’t know what to do or say, don’t do or say anything.  Boredom is investor’s greatest enemy.  Thrashing around is for mosh pits and three year olds.

 

Rule #3: If you can’t explain your competitive advantage in three sentences, you don’t have one.  That’s true for analysts, portfolio managers, company executives, startup companies, writers, etc.

 

Rule #4: It is OK to be wrong.  Just don’t lie to yourself or anyone else about being wrong.

The second part of my imaginary rule set was that there were 20 questions that mattered to any job, so two decades of experience should get you to the end of the journey.  I can tell you that, with 22 years in the business of analyzing financial assets, this part is wrong.  And in keeping with Rule #4, I am fessing up.  The true count is probably more like 100, which is why only vampires have a shot of figuring everything out. Zombies would have a shot, too, if it weren’t for the whole mindless existence thing.

To be fair, part of the problem of harvesting those elusive 20 – 100 points from the sea of capital markets aphorisms and rules is that there are so many false leads.  At first they look useful, but like a poorly made tool they eventually shatter under heavy use.  Since I am prone to list-making, I have also kept a short collection of these false gods.

The balance of this report is a Top 10 list of those as well as a brief assessment of where and why they go off the rails. I use questions rather than statement to lead off each point.  After all, these are points that seem right but are – ultimately – misunderstood.

#1 – Why the fixation on price earnings multiples?  Say a stock trades for 10 times projected earnings.  Does that make it a better investment than one trading for 20 or 100 times?  The short answer is no.  Valuation is a three dimensional chess game of the returns a business can generate, its competitive position, and its growth prospects.  No matter how much you try to stuff the duffle bag that is P/E analysis with those bulky items, you simply aren’t going to get them all in.

 

#2 – Why do technical analysts use an arithmetic price axes instead of log scales?  Don’t get me wrong – I love good technicians. They are the shamans and storytellers of the capital markets, drawing pictures and relating price levels to events in the past. But look at the average technician’s work and you’ll see that all the price charts treat the move from $10 to $20 the same way as $90 to $100.  One is a double; the other is only an 11% move.  That could all be solved with a logarithmic scale for the Y-axis, but very few people do it that way.

 

#3 – Why do investors care about the price at which a company buys back its stock?  It isn’t the Chief Financial Officer’s job to figure out if his/her stock is over or undervalued.  That’s for investors to do; it’s pretty much the job description, actually.  Stock buybacks return money to shareholders rather than allowing the company to reinvest it in the business.  That’s it.  Now, if a company is going to blow a quarter, maybe the CFO should lighten up the repo and buy lower.  Fair enough.  But CFOs aren’t stock pickers.  So if the market tumbles and company with a repurchase plan in place happens to buy higher than current prices, don’t complain.  Stock picking is your job.

 

#4 – Why does the negative case for an investment always sound smarter than the positive one?  Remember that over the long term (really, really long term, anyway), most equities rise in value.  Short sellers therefore typically have to do more work to find the right ideas.  Their rap is, therefore, generally stronger than the “Sit tight, be right” crowd.  I think, however, that humans are generally wired to be scared by a negative story and it therefore holds our attention better.  It’s not always right, but our innate biases make us remember it.

 

#5 – Why is there a Nobel Prize in Economics?  There are only five “Real” Nobels, instituted by the old man himself: Peace, Chemistry, Physics, Medicine/Physiology, and Literature.  Alfred Nobel invented dynamite, among his +300 patents, and these prizes were essentially a way of being remembered for something other than arms dealing and the industrializing of human misery.  Unlike these awards, which started in 1901, the Economics “Nobel” is a newcomer, with the first prize given in 1969 by Swedish Central Bank.  Putting the social science of economics on par with either the hard sciences or human ideals such as peace or literature seems odd, at best.  At worst, it imbues the discipline with a notional precision that it can never attain.  If you need any further proof, consider this year’s award to Gene Fama and Robert Shiller.  One believes markets are efficient, one doesn’t.  Its sort of like the committee  is saying “You figure it out…”

 

#6 – Why is investor and social attention negatively correlated with stock market direction?  When the global equity markers were imploding in 2008-2009, cable business news channels enjoyed relatively high ratings.  Now that the U.S. equity market is hitting new highs, no one but Wall Street seems to tune in.  We’re used to equating social attention with value (the valuation of social media stocks is a great example), but with the stock market, the opposite is true.

 

#7 – What ever happened to “Growth” and “value” investing?  When I started in the business, mutual fund and other institutional managers differentiated themselves by these monikers.  The hedge funds came along, with much broader mandates.   After that, passive management with low fees and transparent trading through exchange traded funds became popular.  Managers still use the terms, to be sure, but the delineation is nowhere near as rigid as it used to be.  Most investors just want to find stock
s that go up.

 

#8 – Why does it take capital markets so long to embrace technological change in its own back yard?  Over the last 20 years, equity trading has moved from three exchanges to scores of virtual venues.  You can see the same process occurring throughout modern society.  Online shopping supplants old brick and mortar retailers.  Mobile apps replace singles bars.  You can play scrabble with a friend in another country on your smartphone.  Yet, somehow, the clever people in capital markets seem shocked that their jobs are subject to the same technological advances.  There’s no going back to the old days…  Sorry.

 

#9 – Why does anyone doubt the value of gold?  Humans have valued gold for 5,000 years. Some of the first money – coins minted in ancient Anatolia – was minted with the stuff.  The world functioned on a gold standard of sorts until 1971.  I think the reason some people dislike gold as an investment is because it reminds them that humans are the same across space and time.  We like to think we are “Better” than the ancient Romans with their gladiatorial spectacle and will never again need a portable method of transferring wealth like the European refugees of the 1940s and 1950s.  Gold was the fiscal anchor of the former and the salvation of the latter.  Are we so different?  Let’s see how the next 100 years turn out.

 

#10 – Why do humans always fight the last battle rather than focus on future challenges?  Put another way, would it be so bad if we banished the word “Bubble” from our collective consciousness for the next decade?  Humans are prone to herd behavior – we like the security of crowds.  If our ancestors had been rugged individualists they would have never made it out of Africa.  And if any of them were, they certainly succumbed to the local fauna. And their genes died with them.  Bubbles are as much a part of human behavior as breathing, and it will always be thus.  At the same time, not everything that rises quickly in value is a bubble.  Using that rubric and hearkening back to other asset price collapses is lazy, at best. 

Now – watch CNBC for an hour and check off how many of these ‘red flags’ you hear…

via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/1azCbH8JNqE/story01.htm Tyler Durden