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“We have a worst-case scenario, and you don’t even want to know,” warns Alessandro Vespignani, a researcher creating simulations of infectious disease outbreaks, but there could be as many as two dozen people in the U.S. infected with Ebola by the end of the month. The projections only run through October because it’s too difficult to model what will occur if the pace of the outbreak changes but, as Bloomberg reports, Vespignani warns if the outbreak becomes more widespread in other regions, it “would be like a bad science fiction movie.”

As Bloomberg reports,

Alessandro Vespignani, a Northeastern University professor who runs computer simulations of infectious disease outbreaks warns there could be as many as two dozen people in the U.S. infected with Ebola by the end of the month.

 

…

 

The projections only run through October because it’s too difficult to model what will occur if the pace of the outbreak changes in West Africa, where more than 8,900 people have been infected and 4,400 have died, he said. If the outbreak isn’t contained, the numbers could rise significantly.

 

“If by the end of the year the growth rate hasn’t changed, then the game will be different,” Vespignani said. “It will increase for many other countries.”

The model analyzes disease activity, flight patterns and other factors that can contribute to its spread.

“We have a worst-case scenario, and you don’t even want to know,” Vespignani said. “We could have widespread epidemics in other countries, maybe the Far East. That would be like a bad science fiction movie.”

The worst case would occur if Ebola acquires pandemic status and is no longer contained in West Africa, he said. It would be a catastrophic event, one Vespignani says he is confident won’t happen.

The CDC disagrees…

It’s unlikely that Ebola will ever exceed 20 cases in the U.S. or Europe because of their extensive health care infrastructures, said Ramanan Laxminarayan, director of the Center for Disease Dynamics, Economics & Policy, a non-profit think tank in Washington, D.C. The problem in the developed world will center more on the economic impact, he said.

“The damage is not as much in the number of deaths as much as in the panic it creates and all the disruption it creates in trade and travel,” he said. “It’s important for public health officials to strike a balance between being serious and certainly not creating panic.”

“It’s not going to be like the movie ‘Contagion,’” he said.

And Eli Perencevich, professor of epidemiology at the University of Iowa Carver College of Medicine, said average Americans shouldn’t see any risk from the virus outside of the medical community because patients aren’t terribly infectious until the disease peaks…

“There’s a high probability that there will be another person who comes in, no matter what we do, but the risk is in the hospital,” he said in a telephone interview. “As long as people who know they have been exposed to the virus get themselves quickly to the hospital, even after they have started a fever, it should be OK because they aren’t that infectious.”

*  *  *
Let’s hope he is right!

via Zero Hedge http://ift.tt/1wNhsq6 Tyler Durden

Submitted by Lance Roberts of STA Wealth Management,

Just recently one of the greatest fairytale movies ever made, “The Princess Bride” had its 27^th anniversary of its release. If you have never seen the movie, you are missing one of the greatest classic adventure tales ever made and something that you will enjoy watching with your children. 

What does this have to do with the financial markets? Just hold on a second and watch this clip first so you will have the right context for where I am headed.

This is the “frame of belief” that pervades in the financial markets currently.  A correction of magnitude is currently “inconceivable” as the U.S. is now “clearly” on a trajectory towards stronger economic growth.  As Russ Koesterich from Blackrock stated recently:

“But good news on the U.S. economic front should help temper worsening geopolitical tensions and slowing growth in Europe.

 

Of course, a strengthening U.S. economy may have a downside. If the Federal Reserve (Fed) increases interest rates too soon or by too much, markets could be rattled. Another trend to watch: diverging growth. Europe and Japan are still struggling while the U.S. continues to evidence signs of strength.

 

At the same time, stocks are on pace to finish the year with returns in the mid to upper single digits, and I still expect rates to rise, if only modestly, for the remainder of the year.”

First, the U.S. is hardly showing evidence of real economic strength outside of a “bounce” from the Q1 drawdown and the push from the Fed’s liquidity interventions. This is the same continuing pattern of the “start and stumble” recovery that we have witnessed since the end of the financial crisis as shown in the chart below.

Notice, that absent Central Bank interventions, the economic composite index has failed to show organic, self-sustaining, economic recovery.  Furthermore, even the recent “surge” in economic growth has failed to push the index neither to levels higher than the initial recovery bounce nor to levels more consistent with previous economic expansions since 1974.  With the Fed’s latest iteration of liquidity injections ending this month, the true test of whether the economy is “recovering” is yet to be seen.

Secondly, the recent decline in inflation expectations, commodity prices, and the rising dollar (which will impact exports and corporate profits), all suggest the economy is too weak to stand on its own.  

Those issues are already showing up in rapidly declining earnings momentum and expectations, as shown in the chart below from Societe Generale, does not “jive” with the near vertical ramp in recent manufacturing surveys. Very likely there will be a rapid deterioration in the “outlooks” by companies using “global weakness” as a reason to swiftly guide down future expectations. While it is currently believed to be “inconceivable” that the U.S. will be dragged down by global weakness, the markets face a potential re-pricing of “risk” as expectation collide with reality.

As I wrote in this past weekend’s newsletter, the markets are likely already recognizing these issues.

"Over the last several weeks there has been a very pervasive and steady deterioration in the technical underpinnings of the broader markets with small and mid-capitalization stocks, along with international and emerging markets breaking important supports.

For most investors, that damage, up to this point, has been masked by the rotation of money from "high-risk" momentum plays into the safety of large capitalization stocks found in the S&P 500. However, this past Friday, a critical level of support was violated, along with some other more worrisome signs, which need some attention.

 

The chart below shows the S&P 500 index from since 2007.

I have shown the relative buy/sell signals that have occurred since then. Only the sell signal in 2010 resulted in a "bad" trade due to the quick onset of the second round of quantitative easing in September of that year.

 

Importantly, the most severe corrections in the market since the end of the financial crisis have occurred ONLY when the Federal Reserve's "liquidity injections" were extracted from the financial markets."

I also outlined the "10-Risks" to the markets currently that will likely continue to weigh on the markets. (Subscribe for "free" email delivery)

Technically Important

These “risks” should not be underestimated. Never before in history has the amount of market participation been so heavily driven by computerized trading. Importantly, most of these computerized programs use some form of technical analysis for executing the buys and sells of entire baskets of securities instantly. The major risk to the markets is the break of widely watched support levels that triggers simultaneous selling across the markets driven by computerized algorithms.

Such an occurrence, as we got a taste of in the May, 2010 “flash crash,” creates a “vacuum” of buyers which causes extremely rapid declines in prices. Such a drop would break further supports potentially triggering “serial selling” as programs continue to generate sell-orders with no readily available buyers. The real danger of a swift sell-off is the potential escalation of margin calls as leverage is currently near all-time highs. The additional forced liquidations would create a negative spiral leading to a dramatic destruction of capital as “panic selling” eventually ensues.

That is what history suggests will happen. While this time is different due to the vast amount of computerized inputs into the markets, the result will likely be the same as it has always been.

The chart below shows the key support levels for the markets that are widely watched with the percentage decline from the recent market peak. While it is “inconceivable” that such a decline could occur, it certainly could not hurt to be aware of the levels that being closely watched.

Many of these levels are key psychological support levels such as 1800, 1750, 1700, etc.  As I stated above, like dominoes, once a key support level fails prices could quickly escalate tripping one support after the next.

As shown, a decline of 18.2% would wipe out all of the 2014 gains and 50% of those from 2013 without technically triggering a “bear market” in the S&P 500. The real problem is that no one knows where the “trigger” point is that escalates a market correction into a full-fledged bear market.  Furthermore, with the economy already growing so weakly, a decline of 18% could cause a contraction in economic growth further panicking the “bulls.”

The point is that there are many risks investors should not ignore. Making up losses is much harder than reinvesting stored capital once a clearer picture emerges. While the current belief that a correction of magnitude in the markets is "inconceivable," I am not sure that word means what they think it means.

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

The Dallas Morning News notes:

The political blame game over the deadly Ebola virus is in full swing just weeks before the November elections — with each side ignoring the facts.

In reality, both sides have dropped the ball.

Democrats

For example, Democrats are trying to blame Republicans for budget cuts to the Centers for Disease Control.  The CDC has had its budget slashed.

But Huffington Post notes that Obama also pushed for CDC cuts.  And McClatchy points out that both parties cut budgets for health.

Obama also largely ignored CDC’s recommendations for setting up Ebola centers around the world.

In addition, the health agencies have squandered money. For example, the Federalist notes:

A 2012 report on federal spending including the following nuggets about how NIH spends its supposedly tight funds:

• a $702,558 grant for the study of the impact of televisions and gas generators on villages in Vietnam.
• $175,587 to the University of Kentucky to study the impact of cocaine on the sex drive of Japanese quail.
• $55,382 to study hookah smoking in Jordan.
• $592,527 to study why chimpanzees throw objects.

Last year there were news reports about a $509,840 grant from NIH to pay for a study that will send text messages in “gay lingo” to meth-heads. There are many other shake-your-head examples of misguided spending that are easy to find.

The Daily Mail adds:

• The NIH budget included $2.4 million for a new condom design whose inventor is now being investigated for fraud [The article explains:  " 'Origami Condom' creator Daniel Resnic is accused of spending NIH grant dollars on cosmetic surgery, a Playboy Mansion party and exotic trips, and using his friends as informal research subjects instead of holding a controlled human trial"]
• Another $939,000 taught scientists that male fruit flies prefer younger females
• $257,000 went to create a companion website for first lady Michelle Obama’s White House garden
• It cost $592,000 to determine that chimpanzees with the best poop-flinging skills are also the best communicators, and another $117,000 to learn that most chimps are right-handed

Indeed, some worry that the head of the Centers for Disease Control is more focused on stopping soda than deadly diseases.

This is very similar to all of the wasted defense spending.

Republicans

Republicans blame the Democratic president and his Democratic CDC director for their failure to stop Ebola. And they have been doing an absolutely horrible job.

However, private healthcare – championed by Republicans – has been a train wreck in dealing with Ebola.

Moreover, health experts say that local governments have the ultimate authority to make decisions on handling Ebola and overseeing hospitals in their area.  The CDC can set protocols – which are widely followed.  But it is the local governments which have the power to actually issue orders.

Conservatives are against big government, and think that power should devolve to state and local governments.  But so far – at least in dealing with Ebola – local governments like Dallas have done a horrible job.

Updates: STUDY: 3-Week Quarantine Period Not Long Enough...

Nurse May Have Had Symptoms While Flying

via Zero Hedge http://ift.tt/1F5tvVF George Washington

And to think it was only yesterday when the WSJ unleashed this epic puff piece about HFT shop Hudson Trading with the following bullshit:

In their minds, they are making the markets more efficient through their trading… Critics of high-frequency trading are not likely to be easily won over, however. It’s going to take a lot of frank discussions between firms like Hudson River Trading and the market commentators who see them as parasites.

Sadly, what makes it complicated is that they are parasites, the only question if they are law-abiding parasites or criminal parasites. Enter the daily exhibit of yet another HFT firm busted for rigging everything it touches.

Today’culprit: Athena Capital, which did what every other algorithmic, HFT firm does – rig the market of course, but at least it had a sense of humor about it: Athena called the market-rigging algorithm that “manipulated the closing prices of tens of thousands of stocks during the final seconds of almost every trading day during the Relevant Period” by the very amusing name “Gravy.” But remember: HFTs are really your friend – they just provide liquidity and stuff.

From the filing:

Athena, an algorithmic, high-frequency trading firm based in New York City, used complex computer programs to carry out a familiar, manipulative scheme: marking the closing price of publicly-traded securities. Through a sophisticated algorithm, Athena manipulated the closing prices of thousands of NASDAQ-listed stocks over a six-month period.

 

Between at least June through December 2009 (the “Relevant Period”), Athena made large purchases or sales of the stocks in the last two seconds before NASDAQ’s 4:00 p.m. close in order to drive the stocks’ closing prices slightly higher or lower. The manipulated closing prices allowed Athena to reap more reliable profits from its otherwise risky strategies. Internally, Athena called the algorithms that traded in the last few seconds “Gravy.”

 

By using high-powered computers, complex algorithms, and rapid-fire trades, Athena manipulated the closing prices of tens of thousands of stocks during the final seconds of almost every trading day during the Relevant Period.

 

Although Athena was a relatively small firm, it dominated the market for these  stocks in the last few seconds. Its trades made up over 70% of the total NASDAQ trading volume of the affected stocks in the seconds before the close of almost every trading day.

 

Athena’s manipulative trading focused on trading in order imbalances in securities at the close of the trading day. Imbalances for the close of trading occur  when there are insufficient on-close orders to match buy and sell orders, i.e., when there are more on-close orders to buy shares than to sell shares (or vice versa), for any given stock.

 

Every day at the close of trading, NASDAQ runs a closing auction to fill all onclose orders at the best price, one that is not too distant from the price of the stock in the continuous book. Leading up to the close, NASDAQ begins releasing information, called Net Order Imbalance Indicator (“Imbalance Message”), concerning the closing auction to help facilitate filling all on-close orders at the best price. At 3:50:00 p.m., NASDAQ issues its first Imbalance Message.

 

Athena’s general strategy for trading based on Imbalance Messages worked as follows: Immediately after the first Imbalance Message, Athena would issue an Imbalance Only on Close order to fill the imbalance. These orders are only filled if there is an imbalance in a security at the close. Athena would then purchase or sell securities on the continuous book on the opposite side of its on-close order, until 3:59:59.99, with the goal of holding no positions (being “flat”) by the close. It called this process “accumulation,” and the algorithms that accumulated these positions were called “accumulators.”

 

Athena was acutely aware of the price impact of some its strategies, particularly its last second trading Gravy strategies. Athena used these strategies and its configurations to give its accumulation an extra push, to help generate profits.

 

For example, in April 2009, an Athena manager (“Manager 1”), after analyzing trading in which Gravy accumulated only approximately 25% of its accumulation, and, thus, had no price impact on the stock, emailed another Athena manager (“Manager 2”) and Athena’s Chief Technology Officer (“CTO”) suggesting that they: “make sure we always do our gravy with enough size.” (emphasis added). In fact, Athena traded nearly 60% of its accumulation in the final 2 seconds of the trading day.

 

With the helping hand of its Gravy strategy, Athena refined a method to manipulate the daily process, known as the “Closing Cross,” that NASDAQ uses to set the closing price of stocks listed on the exchange. Manipulating the closing process can increase market volatility (thereby frustrating the very purpose of the closing auction) and throw off critical metrics linked to the closing price of stocks. A stock’s closing price is the data point most closely scrutinized by investors, securities analysts, and the financial media, and is used to value, and assess management fees on mutual funds, hedge funds, and individual investor portfolios.

 

Athena, however, did not want to push the price of the stocks it traded too much because it created certain trading risks, but also because Athena was concerned about scrutiny from regulators as result of its last second trading. NASDAQ issued an automated Regulatory Alert for “Scrutiny on Expiration and Rebalance Days,” which provided that “Suspicious orders or quotes that are potentially intended to manipulate the opening or closing price will be reported immediately to FINRA.” Athena’s CTO forwarded this alert to Manager 1 and Manager 2 and wrote: “Let’s make sure we don’t kill the golden goose.”

Case in point:

Shockingly, market rigging is profitable:

Athena employees knew and expected that Gravy impacted the price of shares it traded, and at times Athena monitored the extent to which it did. For example, in August 2008, Athena employees compiled a spreadsheet containing information on the price movements caused by an early version of Gravy. They titled the spreadsheet “gravy [average] move by symbol[.]” (emphasis added).

 

That same month, an analyst at Athena emailed Manager 2 the day’s overall results and a breakdown of Athena’s profits from Gravy: “PM Gravy made 5.3k, trading on 33 symbols, biggest dollar move NTRS $.12 (.15%), percentage move PCBC $.06 (.41%).” Manager 2, who was out of the office on vacation, responded affirmatively: “Looks like we have some Mach chips….going to Vegas tonight….” (All emphasis added).

The people who bring you gravy: behold the Athena Criminal, pardon, Capital team:

Athena Capital Research is a team of individuals with backgrounds in a variety of fields such as computer science, statistics, mathematics, physics, economics, artificial intelligence, finance and engineering. We seek to combine self-motivated, talented individuals from various disciplines, state-of-the-art technology, and sophisticated trading strategies to produce an optimal work environment. Our people may come from diverse personal and professional backgrounds, but always maintain a “team first” approach when confronted with new market challenges. At Athena, our people are our biggest competitive advantage. We seek out thoughtful, team-oriented individuals who have shown a strong track record of achievement. Athena is always looking for bright, exceptional people who prefer to work in a collegial, yet challenging environment supporting our systematic trading efforts.

Translated: dear criminals, we are hiring!

End result: Athena made millions rigging the market. Which also means the traders on the other side lost millions.

So what is its punishment?

Respondent shall, within 10 days of the entry of this Order, pay a civil money penalty in the amount of $1,000,000 to the Securities and Exchange Commission. If timely payment is not made, additional interest shall accrue pursuant to 31 U.S.C. § 3717.

A $1 million penalty on $10s of million in profits? Where we come from, that’s called a Return On Criminal Investment. Which is also why the parasitic HFT industry will never die until the market finally crashes and the entire system is rebuilt from scratch.

Aside from that, remember: the market is, don’t laugh, unrigged.

via Zero Hedge http://ift.tt/1F5tq4e Tyler Durden