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Unrigged…

 

Just as stocks dipped after the opening squeeze and as the afternoon began.. and again into the close… VIX was rammed lower in an awkwardly-timed “well it must be a fat finger” trade that sparked a rebound in the all-time-high trending stock market.

 

 

But note the closing ramp did not work…

*  *  *

It appears more than a few were aggressively buying protection ahead of tomorrow’s FOMC minutes.

 

Charts: Bloomberg

via Zero Hedge http://ift.tt/11pXPtY Tyler Durden

From its lowest 5-day range in history and near-longest streak of closes above its short-term average, the S&P 500 broke to new record highs today (as did the Dow) above 2,050, leaving every other asset class in the dust (besides USDJPY of course). The incessant push for the stops above 117.00 dragged the S&P higher on no catalyst whatsoever. Treasury yields traded 2-3bps lower on the day (and HY credit spreads widened) in the face of equity exuberance. The USD faded on the day back to unchanged on the week on the back of EUR strength (post-Germany). Gold rallied to $1195 (+0.5% on the week) and silver rose modestly but the USD weakness did nothing for the rest of the commodity complex. Copper was whacked (after China housing data) but the big story is WTI Crude plunged again (-2% on the week) closing just shy of 4-year lows. Russell 2000 and Trannies close in the red for the week.

In summary: Stocks Up, Gold Up, Bonds Up… USD Down, Oil Down, Copper Down ahead of Fed Minutes tomorrow (credit and stocks protected).

Off the Bullard lows, the Nasdaq is now up over 14%, Dow, S&P, & Russell up around 12% and Trannies up near 18%…

 

Despite gains today, Trannies and Small Caps remain red on the week….

 

USDJPY was in charge from the US Open…

 

And while VIX did drop, the decoupling remains clear…

 

Treasury yields and HY credit decoupled remarkedly from stocks at the US open…

 

And don't forget this…

 

The USD fell today as EUR rallied on the back of better than expected German data

 

USDJPY tested up to 117.00 and reversed (twice) but Nikkei is unable to recover the post-GDP losses (yet)

 

Gold & Silver gained on the day (gold up for the week) but oil and copper were slammed…

 

As oil roundtrips once again from Friday's gains

 

Charts: Bloomberg

Bonus Chart: This is the 23rd day in a row that the S&P has closed above its 5-day moving-average – nearly an all-time high in terms of sustained rallies in all of market history… (h/t MKM's Mike Kransky)

 

Bonus Bonus Chart: Prior to today's push, the 5-day closing range of the S&P is the lowest ever (at 7.7bps) – since 1928 when Bloomberg data began… (h/t @JackDamn)

via Zero Hedge http://ift.tt/11pT43L Tyler Durden

Authored by Mark Perry at AEI via Contra Corner blog,

The Congressional Budget Office (CBO) just released its annual report on “The Distribution of Household Income and Federal Taxes” analyzing data through 2011 on American household’s: a) average “market income” (a comprehensive measure that includes labor income, business income, and income from capital gains), b) average household transfer payments (payments and benefits from federal, state and local governments including Social Security, Medicare and unemployment insurance), and c) average federal taxes paid by households (including income, payroll, corporate, and excise taxes).

Some additional analysis and commentary will be provided here that reveal a yet-to-be discussed major implication of the CBO report – almost the entire burden: a) of all transfer payments made to American households and b) of all non-financed government spending, falls on just one group of Americans – the top one-fifth of US households by income.

That’s correct, the CBO study shows that the bottom three income quintiles representing 60% of US households are “net recipients” (they receive more in transfer payments than they pay in federal taxes), the second-highest income quintile pays just slightly more in federal taxes ($14,800) than it receives in government transfer payments ($14,100), while the top 20% of American “net payer” households finance 100% of the transfer payments to the bottom 60%, as well as almost 100% of the tax revenue collected to run the federal government. Here are the details of that analysis.

The figures in  the graph above show the amount of federal taxes paid by the average household in each income quintile minus the average amount of government transfers received by those households in 2011. For each of the three lower income quintiles, their average government transfer payments exceeded their federal taxes paid by $8,600, $12,500, and $9,100 respectively, and therefore the entire bottom 60% of US households are “net recipients” of government transfer payments. Averaged across all three lower income quintiles, we could say that the lowest 60% of American households by income received an average transfer payment of about $10,000 in 2011. And because the government has no money of its own, where did those transfer payments come from to finance the “net recipient” households? Where else, but from the top two income quintiles, and realistically almost exclusively from Americans in the highest quintile.

Specifically, the average household in the fourth quintile paid slightly more in federal taxes ($14,800) than it received in transfer payments ($14,100) in 2011, making the average household in the second-highest income quintile a “net payer” household in the amount of $700 in 2011. Basically, households in the fourth income quintile paid enough in taxes to cover their transfer payments, and then made a minor contribution of $700 on average to help cover the transfer payments of the “net recipient” households in the bottom 60% and make a small contribution to the federal government’s other expenditures.

But the major finding of the CBO report is that the households in the top income quintile are the real “net payers” of the US economy. The average household in the top one-fifth of American households by income paid $57,500 in federal taxes in 2011, received $11,000 in government transfers, and therefore made a net positive contribution of $46,500. The second-highest income quintile basically just barely covers its transfer payments, so it’s really the top 20% of “net payer” households that are financing transfer payments to the entire bottom 60% AND financing the non-financed operations of the entire federal government.

Here’s another way to think about the burden of the “net payer” top income quintile. The average household in that income quintile made a contribution net of transfers in 2011 in the amount of $46,500. That would be equivalent to the average household in the top quintile writing four checks: 1) one check in the amount of $8,600 that would cover the average net transfer payments of a household in the bottom quintile, 2) another check for $12,500 to cover the average net transfers of a household in the second lowest quintile, 3) a third check in the amount of $9,100 to cover the average net transfer payments to a household in the middle income quintile, and 4) then finally writing a check for the balance of $16,300 that would go directly to the federal government, which for the households in the quintile as a whole would have covered almost 100% of the non-financed federal government spending in 2011.

So except for a small contribution net of transfers in the amount of $700 from the average household in the fourth quintile, the highest income quintile is basically financing the entire system of transfer payments to the bottom 60% AND the entire operation of the federal government. And yet don’t we hear all the time that “the rich” aren’t paying their fair share of taxes and that they need to shoulder a greater share of the federal tax burden?

Hey, they (the top 20%) are already shouldering almost the entire federal tax burden along with almost the entire system of entitlements and transfer payments! And that’s not “fair” enough already?

The chart above shows another way that the CBO data reveal an extremely unequal distribution of government transfer payments and federal taxes by displaying the ratio of “dollars received in government transfers per dollar paid in federal tax revenues” by income quintile in 2011 (these data are from row 8 in the table above). The average household in the lowest quintile received $9,100 in government transfer payments in 2011 and paid only $500 in federal taxes, for a ratio of $18.20 in transfer payments for every $1.00 paid in federal taxes that year.

In contrast, the average household in the top income quintile received $11,000 in government transfers in 2011, but paid $57,500 in federal taxes, for a ratio of 19 cents in government transfer payments per dollar paid in federal taxes. This analysis is a further illustration that the bottom three quintiles are “net recipient” households that received more than $1 in government transfer payments for every $1 paid in federal taxes in 2011, while households in the fourth quintile were minor “net payers” in 2011 and received slightly less than a dollar in transfer payments on average ($0.95) for every $1 paid in federal taxes. “Net payers” in the top quintile received only $0.19 in government transfer payments per $1 paid in federal taxes in 2011.

This final chart shows average tax rates by quintile in 2011, both before and after government transfer payments. The blue bars in the chart show the average tax rates by income quintile from the CBO report (Table 4) and are also displayed in the top table above in row 5, calculated by dividing federal taxes paid (row 4) into “Before Tax Income” (row 3, Market Income + Government Transfers).

Adjusting for government transfers received, the brown bars in the chart are calculated by dividing “federal taxes paid minus government transfers received” (row 6 in the table) into Before-Tax Income (row 3), and show average tax rates by income quintile after government transfers. For example, the average “net recipient” household in the lowest income quintile received a “negative tax” payment of $8,600 in 2011, had an average before-tax income of $24,600, for a negative tax rate of 35%.

Reflecting their “net recipient” status, all three lower income quintiles had negative average tax rates in 2011, and only the “net payer” households in the top two income quintiles had positive after-transfer tax rates of 0.7% for the second-highest quintile and 18.9% for the top quintile. This further demonstrates that after transfer payments, households in the bottom 60% are “net recipients” with negative income tax rates, while only the top two “net payer” income quintiles had positive tax rates after transfers in 2011…….

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

As we noted previously, one of the glaring omissions from the list of banks that were charged with rigging FX markets, and subsequently promptly settled with nobody going to prison as usual, which consisted of:

• Barclays PLC
• HSBC Holdings PLC
• Royal Bank of Scotland Group PLC
• UBS AG
• Citigroup
• J.P. Morgan Chase
• Bank of America Corp. Bank of America

Was none other than the bank which according to recent revelations, has undue control over the NY Fed, Goldman Sachs. And yet, moments ago the WSJ reported that Goldman Sachs just fired a currencies trader who “allegedly was involved with the misconduct before he joined the firm.”

So how is it possible that Goldman, which housed one of “The Cartel’s” (or was it Bandits?) riggers, was never busted in the first place? Because apparently Goldman had no clue of his impecable FX-rigging chat room credentials when it hired him from HSBC back in 2012.

Incidentally, when Cahill was hired by HSBC from Barclays, the bank said the following:

“Frank is a talented trader and we look forward to welcoming him to the team, where he will run our GBP/USD book. His hire is part of our continued build-out of our overall product and distribution capability.”

Talented indeed. As for Frank’s FX-rigging credentials, we find it very believable that he never again used these while employed by Goldman because the moment he walked through the door at 200 West, he was a changed man, doing merely god’s work and nobody else’s.

Frank Cahill, who joined Goldman Sachs in 2012 as a currencies trader after working at HSBC Holdings PLC, was asked to leave Goldman’s London offices on Tuesday as a result of his alleged involvement in the currencies-rigging affair, according to a person familiar with the matter.

 

“This relates to a period before he joined Goldman Sachs and he has now left the firm,” a Goldman Sachs spokeswoman said.

And then when he joined Goldman, he dropped everything, never entered another chat room ever again, and everyone lived happily ever after. Until now that is, because someone had to take the fall: that someone was Mr. Cahill was also happens to be a “cable rigger“, no pun intended.

Mr. Cahill, a sterling trader, worked at Barclays PLC before joining HSBC in 2010, according to U.K. regulatory records. He was one of a number of unidentified HSBC traders whose conversations in electronic chat sessions were quoted by the U.K.’s Financial Conduct Authority and the U.S. Commodity Futures Trading Commission as part of their settlements with the British bank last week, according to people familiar with the chat transcripts.

Which is ironic, because the FCA complaint involving HSBC revolves precisely around a manipulator of sterling. Let’s recall just how that one particular chat session, which generated $162K in profit for HCBS and Mr. Frank Cahill who ran HSBC’s Cable book and almost certainly is the participant in the chat session – went:

An example of HSBC’s involvement in this behaviour occurred on one day within the Relevant Period when HSBC attempted to manipulate the WMR fix in the GBP/USD currency pair. On this day, HSBC had net client sell orders at the fix which meant that it would benefit if it was able to move the WMR fix rate lower.10 The chances of successfully manipulating the fix rate in this manner would be improved if HSBC and other firms adopted trading strategies based upon the information they shared with each other about their net orders.

 

In the period between 2:50pm and 3:44pm on this day, traders at four different firms (including HSBC) inappropriately disclosed to each other via chat rooms details of their net orders in respect of the forthcoming 4pm WMR fix in order to determine their trading strategies. The other three firms are referred to in this Final Notice as Firms A, B and C, as well as two other firms as Firms D and E. HSBC participated in a series of actions described below in an attempt to manipulate the fix rate lower.

1. At 2:50pm, Firm A disclosed in a chat room (including to HSBC) that it had net sell orders for more than GBP100 million at the fix. At 3:25pm, Firm A indicated that the orders were for approximately GBP130 million.
2. At 3:25pm, HSBC disclosed to Firm A in a one-to-one chat that it had net client sell orders for GBP400 million at the fix. Since HSBC and Firm A each needed to sell GBP at the fix each would profit to the extent that the fix rate at which it bought GBP was lower than the average rate at which it sold GBP in the market.
3. Firm A informed HSBC that it now had net sell orders of GBP150 million at the fix. HSBC responded by saying “lets go”,11 to which Firm A replied “yeah baby”. The Authority considers these statements to refer to the possibility of HSBC and Firm A co-ordinating their actions in an attempt to manipulate the fix rate downwards.
4. At 3:28pm in a chat room which included HSBC, Firm A expressed the hope that other traders would also have sell orders at the fix (“hopefulyl a fe wmore get same way and we can team whack it”). At 3:36pm, Firm B, which was a participant in the chat room, confirmed to the other traders that he now also had net sell orders for GBP40 million at the fix.
5. At 3:28pm, HSBC informed Firm C via a one-to-one chat room that he had net client sell orders of around GBP300 million at the fix and asked the trader to do some “digging” to see if anyone else had orders in the same direction at the fix. Firm C replied at 3:34pm and disclosed to HSBC that it now also had net sell orders of GBP83 million at the fix.
6. At 3:36pm, Firm D asked Firm A in a chat room (which included HSBC), for an update on its net sell orders. Firm A disclosed that it had now increased to GBP170 million. Firm D noted that it did not have any fix orders at that time, but commented that he expected Firm A to “bash the fck out of it”.
7. At 3:38pm, HSBC commented simultaneously into chat rooms in which Firms A, C and D participated that it had net client sell orders at the fix for GBP in a “good amount”.
8. At 3:42pm, in a one-to-one chat Firm A warned HSBC that another firm which was not a participant in the chat room (Firm E) was “buidling” in the opposite direction to them and would be buying at the fix.
9. At 3:43pm, Firm A updated HSBC by indicating that it had netted some of its sell order off with Firm E and “taken him out… so shud have giot rid of main buyer for u…im stilla seller of 90… gives us a chance”. The Authority considers that this refers to Firm A’s belief that Firm E would no longer be transacting its orders in the opposite direction at the fix. It also confirmed that Firm A still held net sell orders for GBP90 million to trade at the fix and could still participate in the co-ordinated behaviour. This is an example of Firm A “clearing the decks”.

In the period from 3:32pm to 4:01pm, HSBC sold GBP381 million on Reuters and other trading platforms. Approximately GBP70 million (or 18%) of this volume was sold by HSBC in advance of the 60 second fix window around 4pm. During the period from 3:32pm to the start of the fix window, the GBP/USD rate fell from 1.6044 to 1.6009. These early trades were designed to take advantage of the expected downwards movement in the fix rate following the discussions within the chat rooms described above.

 

In the first five seconds of the fix window, HSBC entered a further nine offers to sell GBP101 million. During the first five seconds, the bid rate fell from 1.6009 to 1.6000. HSBC continued to enter offers throughout the remainder of the fix window and the bid rate fluctuated between 1.6000 and 1.6005.

 

HSBC sold GBP311 million during the fix window on Reuters and other trading platforms. The amount it sold on Reuters accounted for 51% of the volume sold in the GBP/USD currency pair on the Reuters platform during the fix window. Cumulatively HSBC and Firms A to C accounted for 63% of selling during the fix window. Subsequently, WM Reuters published the 4pm fix rate for GBP/USD at 1.6003.

 

The information disclosed between HSBC and Firms A, B and C, regarding their order flows was used to determine their trading strategies. The consequent trading by HSBC during the fix window was designed to decrease the WMR fix rate to HSBC’s benefit. HSBC’s trading in GBP/USD in this example generated a profit of approximately USD162,000.

 

Subsequent to the fix, traders in the chat rooms congratulated one another by saying: “nice work gents…I don my hat”, “Hooray nice team work”, “bravo…cudnt been better” and “have that my son…v nice mate” and “dont mess with our ccy [currency]”. One of the traders commented “there you go … go early, move it, hold it, push it”. HSBC stated “loved that mate… worked lovely… pity we couldn’t get it below the 00” and “we need a few more of those for me to get back on track this month”.

There you go indeed Mr. Cahill: “go early, move it, hold it, push it”, and don’t le the door hit you on your wait out when your new employer realizes that you were just guilty of the biggest crime possible in finance: getting caught.

As for Goldman, we expect the firm to never be charged with any rigging crimes: after all none of said riggers actually every abused their privilege while working at 200 West. They merely were hired for such manipulative skills.

via Zero Hedge http://ift.tt/1zAEm5S Tyler Durden