Gold Completes Golden Cross

For the first time in 13 months, gold’s 50-day moving-average is above its 200-day moving-average. This so-called “golden cross” occurred in Feb 09 before gold surged over 100% in the following years (but also occurred ‘falsely’ in September 2012.

 

 

Some technicians are reflcting on the last big run that gold had…


    



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Gas Talks Between Ukraine And Gazprom Cancelled, Naftogaz Chairman Detained On Corruption Probe

Yesterday we warned that the honeymoon is over as Ukraine expects gas prices to rise 40% as Russian discounts fade. Today it appears the situation is even worse:

  • *NAFTOGAZ, GAZPROM TALKS FOR MARCH 20-21 CANCELLED: INTERFAX
  • *UKRAINE POLICE DETAINS NAFTOGAZ CHAIRMAN BAKULIN: AVAKOV
  • *UKRAINE NAFTOGAZ RAID PART OF CORRUPTION PROBE, AVAKOV SAYS

The issues up for debate, of course, are supply and pricing of gas from Russia and the payment for over $2bn of existing debt owed. While Interfax reports that this was because the Ukraine gas company executive was unable to leave the country, which now appears due to corruption allegations ("there's corruption going on here?") but merely exacerbates any Russian gas retaliation concerns.

Via Interfax,

Talks originally planned to take place on March 20 and March 21 between Ukraine's national oil and gas company Naftogaz Ukrainy and Russian gas giant OJSC Gazprom (MOEX: GAZP) have fallen through at the last minute, a source from the Ukrainian government told Interfax.

 

"The Naftogaz Ukrainy delegation was prepared to fly out [for the meeting], but the head of the company [Naftogaz Ukrainy] was not allowed to leave the country at the last minute," the source said.

 

The main issues to be discussed were supposed to be the purchase and transit of natural gas, as well as the payment schedule for existing debt.

 

The source said this concerned a personal ban on leaving the country for Naftogaz's CEO Yevgeny Bakulin.

As we noted yesterday,

What is certain, is that the struggling population, most of whom never wanted the recent political overhaul and were quite happy with life as it was, will suddenly demand a return to the living standards under the old, if "horrible" regime, and demand an even quicker overhaul of the current administration.

 

Something Putin knows all too well.

 

Why does he know it? Because current events are a carbon copy of what happened in 2007 that led to the infamous 2008 Ukrainian political crisis.


    



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Illinois Lawmakers to Millionaires: Get Out!

Burning cashIn what appears to be part of a

full-fledged class warfare strategy that includes comparing
Republican gubernatorial candidate Bruce Rauner to C. Montgomery
Burns of The Simpsons, Illinois Democrats propose a
referendum on imposing a “millionaires tax” targeted at high-income
state residents. In a state that has already enjoyed
government credit downgrades with
little expectation of improvement for poor habits, including
putting off paying its bills into the murky future and not funding
public pensions, the move could raise fears that politicians plan
to resolve their own failures by mugging anybody with assets to
speak of (not that it’s
easy to accumulate assets in Illinois). It just could send the
targets of the millionaires tax heading for the exits, as they’ve
already done in New Jersey.

Earlier this year, financial firm RegentAtlantic
reported that New Jersey is suffering a net loss of taxpayers and
adjusted gross income to lower-tax states, and that “the
average income coming into New Jersey is approximately 50 percent
less than the income that is leaving.” Overall, the company found
that the state lost taxable income of $5.5 billion in 2010 as
residents moved to relative tax havens.

Note that New Jersey ranks at 44 out of 51 jurisdictions in
WalletHub’s
recent ratings of tax burdens (1 is the least burdensome).
Illinois comes in at 47.

By contrast with New Jersey, Stanford University reports that
high tax rates
don’t drive the highest earners to flee California.
But Illinois doesn’t quite have California’s natural attractions,
for which wealthy people may be willing to pay a premium.

And California is still
hemorrhaging money and people as many seek tax relief and

opportunity, even if millionaires are willing to stick around
for the nice views. If Illinois can’t find itself some redwoods and
pretty coastline, and quick, look for a line at the exits.

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Senator Dan Coats’ Top 10 Reasons Why Russian Sanctions Suck

Having noted the ridicule with which the Russians view the sanctions barrage between the EU and US, we thought it worth reflecting, courtesy of Senator Dan Coats, on the absurd political farce that is the entirely useless (and purely public-relations-based) war of words (and not actions) that is under-way as the West realizes the Russian “boomerang” is coming any minute…

 


    



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Steven Greenhut Says Anti-Pot Rhetoric Out of Step With California Voters

As the state Republican Party searched for new
ways to reach California’s young and independent-oriented
electorate during its weekend convention outside of San
Francisco, its main lieutenant governor candidate has chosen to run
on an increasingly unpopular issue: opposing the decriminalization
of marijuana. This is going to be an uphill and counterproductive
battle given public support for pot and the state’s fiscal reality,
writes Steven Greenhut.

View this article.

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When Even Goldman Complains About HFT

For the past five years we have been complaining about the two-tiered, and broken, market resulting from the near-ubiquitous presence of HFT trading strategies, where fundamentals have been tossed into the trash, and where quote churning, packet stuffing and not to mention, momentum ignition, put on candid display just before market open today when the Emini was ramped in a vertical line straight up taking the S&P to new all time highs, have become the only trading strategies that matter. Why? Because algos were in a panic buying mode as other algos were in a panic buying mode, and so reflexively on. The SEC long ignored our complaints, even after the HFT-precipitated flash crash, which we had warned apriori would happen, in a market as broken and manipulated as the one the Fed and the algos have unleashed. This changed recently when NY AG Schneiderman finally decided to “look into things” following the release of Virtu’s ridiculous prop trading profits when the firm, in its IPO prospectus, announced it had made money on 1327 of 1328 trading days. However, when even Goldman Sachs begins complaining about HFT, it may be time to fire all those 20-some year old math PhDs who program your “trading algorithms.”

In an Op-Ed overnight, Goldman COO Gary Cohn reminds those who may have forgotten, that:

In the past year alone, multiple technology failures have occurred in the equities markets, with a severe impact on the markets’ ability to operate. Even though industry groups have met after the market disruptions to discuss responses, there has not been enough progress. Execution venues are decentralized and unable to agree on common rules. While an industry-based solution is preferable, some issues cannot be addressed by market forces alone and require a regulatory response. Innovation is critical to a healthy and competitive market structure, but not at the cost of introducing substantial risk.

Odd – we have been saying this since April 2009.

Anyway, what does Cohn suggest? Here, via the WSJ, are his four proposal for eliminating the fragmented, broken markets that have resulted from the relentless incursion of vacuum tubes, which have also driven the vast majority of carbon-based traders out.

Regulators and industry participants, including asset managers, broker-dealers, exchanges and trading firms, have all put forth ideas and reforms. We agree with a number of their concerns and propose the following four principles:

 

First, the equity market needs a stronger safety net of controls to reduce the magnitude and frequency of disruptions. A fragmented trading landscape, increasingly sophisticated routing algorithms, constant software updates and an explosion in electronic-order instructions have made markets more susceptible to technology failures and their consequences.

 

We propose that all exchanges adopt a stringent set of uniform, SEC-mandated execution controls to reduce errors. In addition to limit-up, limit-down rules that prevent trades from occurring outside a specified price band, pre-trade price and volume limits should be implemented to block problematic orders from entering the market. Mechanisms should also be introduced to halt a firm’s, market maker’s or other entity’s trading when an established threshold is breached, thus minimizing the uncontrolled accumulation of trades.

 

Second: Create incentives to reduce excessive market instability. The economic model of the exchanges, as shaped by regulation, is oriented around market volume. Volume generates price discovery and liquidity, which are clearly beneficial. But the industry must recognize how certain activities related to volume can place stress on a market infrastructure ill-equipped to deal with it.

 

Electronic-order instructions connect the objectives of buyers and sellers to actions on exchanges. These transaction messages direct the placement, cancellation and correction of orders, and in recent years they have skyrocketed. In the 2010 “flash crash,” a spike in the volume of these messages exacerbated volatility, overwhelming the market’s infrastructure.

 

According to industry analysis, since 2005 the flow of these order instructions sent through U.S. stock exchanges has increased more than 1000%, yet trade volume has increased by only 50%. One consequence of the enormous growth in order-message traffic is that increasingly the quote that an investor sees isn’t the price he or she can transact, as orders often get canceled at lightning-quick speeds.

 

Currently there is no cost to market participants who generate excessive order-message traffic. One idea would be to consider if regulatory fees applied on the basis of extreme message traffic—rather than executions alone—are appropriate and would enhance the underlying strength and resiliency of the system. Regulators in Canada and Australia have adopted this approach.

 

Third: Public market data should be disseminated to all market participants simultaneously. Exchanges currently disseminate prices and transaction data to the SEC-sanctioned distributor for all investors, but exchanges may also send this information directly to private subscribers. While the data leave the exchange simultaneously, the public data are delayed because they go through the intermediary’s processing infrastructure. The public aggregator should release information to all market participants at the same time.

 

Removing the possibility of differentiated channels for market data also reduces incentives that favor investment in the speed of one channel over the stability and resiliency of another. Instability creates and compounds market disruptions. Stable and accurate market data is one of the most important elements of market safety; it is the backbone of the market that must weather the most extreme periods.

 

Fourth: Give clearing members more tools to limit risk. A central clearing house with strong operational and financial integrity can reduce credit risk, increase liquidity and enhance transparency through enforced margin requirements and verified and recorded trades. But because clearing members extend credit, the associated risks must be recognized. Tools like pre-trade credit checks and being able to monitor positions and credit on an intraday basis are essential. Clearing firms use various tools like margin and capital adequacy to manage their risk, but exchanges should also provide uniform mechanisms for clearers to set credit limits and to revoke a client’s ability to trade immediately upon request, when necessary.

Once again, all suggestions we have banged the table on for the past five years to the point where we simply don’t care.

Why? Because we realize that the HFT-parasite system is so embedded in the market structure and “New Normal” levitation topology that serves the failed status quo system, that there is no hope of ever extricating the algos from the market without crashing the market outright. And the regulators know this all too well.

 Which is the definite paradox, because the only thing that will revert the market back to some semblance of normalcy, is precisely a crash that wipes out the false sentiment that things are stable, which as everyone who traded securities in the old normal, knows they are anything but.

In other words, the best thing one can do is to cheer on the increasing incursion of idiocy in stock trading, which inevitably will self-cannibalize itself. As, incidentally, will the Fed’s final attempt to centrally plan the “wealth effect” to all time highs.

So do your worst, Mr. Chairmanwoman and Virtu, we, for one, are rooting for you!


    



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The Federal Reserve: Masters Of The Universe Or Trapped Incompetents?

Submitted by Charles Hugh-Smith of OfTwoMinds blog,

Suppose the Fed was actually little more than a collection of incompetents trapped in a broken system that is beyond repair.

For a variety of reasons, the Federal Reserve is viewed by many as the financial Master of the Universe. Given how the media hangs on every pronouncement and the visible power of the Fed's policies to move markets, this view is understandable.

But suppose rather than being masters of all things financial, the Fed was actually little more than a collection of incompetents trapped in a broken system that is beyond repair. Many reasons have been proposed to explain the Fed's policies,and most (including my own expressed here) focus on the Fed's need to protect the banking sector and the Status Quo, lest the whole rotten contraption collapses in a heap of worthless derivatives and various Ponzi schemes.

An alternative view is that the members of the Fed have been selected for incompetence by a system that fosters incompetence by its very nature, i.e. a centralized power center.

Longtime correspondent Harun I. recently offered this explanation of the incompetence of those atop the heap:

Regarding the competence of the Deep State and Federal Reserve:When one merges the Peter Principle and Pareto Principle one realizes that, not only are they incompetent, it is inevitable. Complexity does not equal competence. And because complexity is a form of leverage it does not require a majority of systems inoperable to fail.

Modern developed civilizations rest upon several inverted pyramids. How many people out of any random sampling know how to produce their own food, make their own clothing, build their shelter, or tap into their own water source? As complexity increases and the division in labor grows increasingly in areas that have nothing to do with core survival the civilization becomes increasingly incompetent.

Since a civilization is a hierarchal system, its leaders (the vital few) will eventually be incompetent. Inverted pyramids and inept leadership are a toxic mix. As history would indicate this situation eventually disintegrates then reorganizes… to be repeated.

Another key characteristic of such centralized systems is the way they trap participants, even those at the top. Analyst Catherine Austin Fitts has discussed this attribute, for example, in this interview: Catherine Austin Fitts on Wall Street's Corruption, the Austrian School and Who's 'Really' in Charge.

One way to think about this is to ask: let's say the voting members of the Fed knew that the best way to re-start sustainable growth was to normalize interest rates by ending the Fed's zero-interest rate policy (ZIRP) and quantitative easing.
Even if they knew these changes would ultimately profit the banking sector and the economy as a whole, could they withstand the pressure that would be exerted by everyone benefiting from the Status Quo?

I have long maintained that the Fed's vaunted independence is actually contingent, i.e. the Fed is a political entity and as a result it responds to political pressure like any other political entity. And like any hierarchy, it is prone to group-think and the urge to conform to norms.

This raises another question: even if the voting members of the Fed wanted to fix the nation's broken financial system, do they have the ability to do so?

I have posited that whatever consensus/group-think dominated the various factions that comprise the Deep State has eroded, and the cracks of profound disunity are opening between powerful factions in the Deep State.

Rather than Masters of the Universe, the Fed's governors are increasingly looking more like deer caught in the headlights of a transformation they cannot understand, much less control.

Is the Deep State Fracturing into Disunity? (March 14, 2014)

Why Is Our Government (and Deep State) So Incompetent? (March 6, 2014)

The Fed Has Failed (and Will Continue to Fail), Part 1 (March 11, 2014)

How The Fed Has Failed America, Part 2 (March 12, 2014)


    



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Delaware Supreme Court Upholds Gun Rights for Public-Housing Tenants

In a decision issued Tuesday, the Delaware Supreme Court ruled
that a Wilmington public-housing authority violated the state
constitution’s right to keep and bear arms by forbidding
public-housing tenants from carrying otherwise lawful firearms in
common areas, such as in the laundry rooms of their buildings.
“With the Common Area Provision in force under penalty of
eviction,” the opinion in Boone v. Wilmington Housing
Authority declared, “reasonable, law-abiding adults become
disarmed and unable to repel an intruder by force in any common
living areas when the intervention of society on their behalf may
be too late to prevent an injury.”

The opinion rests in part on the U.S. Supreme Court’s rationale
in District
of Columbia v. Heller (2008), which recognized a “core”
Second Amendment right to possess a handgun in the home for
purposes of self-defense. The Wilmington restriction, the Delaware
Supreme Court argued, similarly undermined gun rights “by
functionally disallowing armed self-defense in areas that
Residents, their families, and guests may occupy as part of their
living space.”

The opinion in Boone v. Wilmington Housing Authority is
available here.

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Is The Biotech Bubble Bursting?

Having been among the best performing sectors of the stock market for so long (up around 70% alone last year), the moves of the last few days – and especially today – are extremely worrying for the ‘trend-is-your-friend’ momo-following fickle investing public. The Nasdaq Biotech index is getting monkey-hammered this morning and is now 10% off its late-Feb highs. Crucially, this sector has been a major pillar of strength for the overall Nasdaq and that means the Nasdaq is also getting crushed – now down 0.9% from the FOMC and dramatically underperforming.

 

The Nasdaq Biotech index is plunging today and down 10% from Feb highs…

Here are the biggest losers…

 

Which has smashed the Nasdaq lower and dramatically underperforming… (the Dow is rallying on the back of Visa’s surge as news that the Fed upheld debit card swipe fee caps)

 

And across sectors since the FOMC there is only one winner – financials – (and 2 clear losers)… with Healthcare dominated by the Biotechs… one question – if builders are dumping on higher rates (which we presume means pressure on housing) then why are financials rallying (especially given the collapse in the curve and thus lower NIMs and lower expected loan creation)


    



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