Yesterday, when we commented on the bloodbath going on in the hedge fund space, someone asked if a hedge fund mauling is an indication of a market bottom. We replied no, and clarified as follows: “The bottom tick sign, if any, is that Gartman just went mega bearish…“

Yup: the infamous, and infallible, Gartman contrarian indicator had just struck again.

Ironically it was merely days earlier on April 1, when Gartman collected his daily $200 CNBC appearance fee, saying that “experience tells him to stay bullish on stocks”, and that it’s foolhardy to fret about the fundamentals of the economy adding that “Here, write this down: The stock market will stop when it stops, and not a moment before. It’s moving from the lower left to the upper right,” Gartman said. “Enjoy the ride!”

Fast forward to Monday when we got the following pearl:

In a reversal of his more bullish take on U.S. equities in recent weeks, Dennis Gartman said Monday that he’s getting out of equities and sticking with cash and gold to ride out the recent pullback, which he called a “long-awaited and much-needed correction.”

 

On CNBC’s “Fast Money” on Monday, the editor of the Gartman Letter said simply, “I got scared.”

 

Gartman said that Friday’s action made it seem as though a switch was flipped in the minds of investors. “The whole world switched at that period of time,” he said.

 

That same switch evidently dimmed Gartman’s view of stocks as well; he pared down his exposure to equities from an average of 100 percent, to close to zero.

 

…

 

“You don’t need to be short, but you don’t need to be long at this point. I think cash is the right place to be,” he said.

 

…

 

In Monday’s issue of “The Gartman Letter,” Gartman said he couldn’t recall “a time in our history of trading when we’ve seen such unanimity of trend reversals” as was observed on Friday. “Indeed, the changes were material enough and important enough to mandate that action be taken to reduce our exposure to everything we have on, save for positions in gold,” he said.

Ah, to have Gartman’s magical VWAP algo that allows him to get out of all stocks into all cash in the span of hours. But then again one doesn’t need VWAP or any other WAP when one “transacts” in monopoly money. Further, here was his commentary from his April 8 “Gartman letter”:

STOCKS: The Trend’s Still Up But the Sidelines Seem the Better Place To Be: We’ve gone to the sidelines as the market “reversed” to the downside last Friday and seems intent upon tracing out a monthly reversal too, although it is far, far too early in the month to make that statement now and to give it great credence. But with the 100 and 200 day moving averages so far below us and with the market’s propensity to put the 100 day moving average to test we’ve taken to the sidelines… and we’re rather comfortable there… at least for now.

For those curious, here is the entire clip:

 

So what happened next? This:

 

Then again, none of this should be a surprise. Recall:

• Gartman Does It Again… Again
• Gartman Does It Again: “The Game Changed Utterly In The Capital Markets Yesterday”
• Gartman Comedy Hour
• Forbes Pulls Down China Hoax Story; Even As Dennis Gartman Is Completely Fooled
• Dennis Gartman Compare And Contrast

And so on.

We were wondering what we would do in the absence of Tom Stolper’s impeccable genius of picking FX inflection points, we are, however, lucky to still have Dennis.

So this Bud’s for you, real man of contrarian genius – we hope you remain as long of CNBC appearances (in $200 appearance fee terms) as is possible, sharing market inflection points with laserlike precision.

Luckily if Gartman is ever barred from appearing on CNBC, there is always a backup plan:

Further damage is being done as many support levels are being broken. Don’t be complacent – this market has much more downside.

— Ralph Acampora CMT (@Ralph_Acampora) April 7, 2014

via Zero Hedge http://ift.tt/1sBMyR9 Tyler Durden

Investors, or perhaps algos, it appears are shocked that the Fed is just as dovish as it has always been (despite endless speeches since Yellen's six month comment) and today's minutes sparked a short-squeeze loaded VIX-slamming jerk higher to get the Dow back to unchanged from the FOMC statement (S&P back to unch on the month and Nasdaq back to unch on the year). Bond yields ripped lower (the best FOMC minutes day since the Fed announced QE3 expectations) with the short-end outperforming (unwinding only 50% of the flattening post-FOMC) and long-end selling off. Gold and silve rhad been fading early but rallied on the FOMC minutes (back above $1310). Oil pushed on to $103.50 and copper rallied back to unch (supported by PBOC buying rumors). Credit markets were diverging notably before the FOMC jerk but remain wider on the week. Just as the initial squeeze euphoria ("most shorted" stocks had their best day in 2 months) was fading, the 330 Ramp in JPY occurred and lifted stocks to the highs of the day.

 

• Biotechs +4% – best day in 12 months
• VIX -8% – biggest drop a month (2 day -12%)
• "Most Shorted" +2.1% – stocks best day in 2 months
• FB +7% (but rest of momos only smaller gains)
• Nasdaq +1.7% (best in 4 weeks) and back above its 100DMA

Right on time – 330RAMP CAPITAL showed up to try and keep the momentum…

 

As AUDJPY ruled the market once again…

 

The S&P did not make it back to unch from the FOMC (but the Dow and Trannies did)…

 

Nasdaq is back in the green for 2014…(and Russell very close)

 

 

Momo high growth high multiple names bounced but remains down between 10 and 18% from the FOMC…

 

As "most shorted" names rallied the most…

 

VIX cracked 0.5 vols instantly and broke below 14 – but was notably less exuberant about the late day surge…

 

Today was the "most shorted" names best day in 2 months

 

The short-end of the bond curve rallied the most today as the entire complex jerked lower in yields.

 

 This steepened the curve but only retraces half the major flattening that occurred…

 

Credit markets were widening notably this morning but were snapped tighter on the FOMC minutes. It looks like the 330 ramp squeezed the last of the credit shorts back to unch on the week…

 

Commodities all rallied post FOMC…

 

We leave it to Bill Miller (yes that Bill Miller) to end today's market update…

"the conditions for a bad market don't exist"

Trade accordingly…

Charts: Bloomberg

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

Submitted by Simon Black via Sovereign Man blog,

Imagine that your country and banking system are so broke that you have to receive approval from a special committee just to send your own money to your kids who are away at university…

Crazy, right?

But that’s exactly what’s going on in Cyprus. And it all happened overnight.

Just over a year ago, people across Cyprus went to bed thinking everything was just fine. They woke up the next morning to a brand new reality: their government AND their banking system were flat broke.

In collusion with other European powers, the Cypriot government FROZE bank accounts across the country. Suddenly an entire nation had no access to their savings.

The government spent weeks bickering about whose funds they were going to confiscate in order to bail out the banks… all the while maintaining the freeze.

Finally they made a decision: wealthy people would have their funds seized.

But this wasn’t a victory for everyone else… because simultaneously the government announced a flurry of severe financial restrictions.

Sure, people could log on to a bank website and see an account balance.

But it was nothing more than a number on a screen. It didn’t mean the banks actually had the money. Nor did it mean they were free to access their own funds.

Cash withdrawal limits were imposed. Funds transfers were curtailed. Cypriots were even forbidden from doing something as simple as cashing a check.

Peoples’ savings were essentially trapped inside of a highly insolvent financial system.

These destructive tactics are called capital controls. And one year later they’re still in place. Some are being relaxed. Others are being maintained.

But by its own admission, the Ministry of Finance still believes there is a “lack of substantial liquidity and risk of deposits outflow. . . that could lead to instability of the financial system and have destabilizing consequences on the economy and society of the country as a whole.”

Naturally, since this is an “emergency situation” in their view, they have to impose these “restrictive measures” in order to safeguard “public order and public security”.

In other words, capital controls are for your own good.

This is exactly the sort of thing that happens when governments and banking systems go bankrupt.

And every shred of objective evidence suggests that many of the ‘rich’ nations of the West are in a similar position.

Some of the largest banks in the US (like Citigroup) have failed their stress tests; this means they are inadequately capitalized to withstand any major financial shock.

Then there’s the FDIC, which is supposed to insure deposits in the Land of the Free. But the FDIC itself is inadequately capitalized, failing to meet the legal minimum for its insurance fund.

All of this is backed up by the US government, whose net worth is negative $17 trillion.

The Federal Reserve is supposed to be able to bail out the banks. But at this point, with $50+ billion in unrealized losses and a net equity of just 1.35% of its record $4+ trillion in assets, the Fed itself is practically insolvent.

This is the reality: inadequately capitalized banks are backed by an inadequately capitalized insurance fund backed by an insolvent government and nearly insolvent central bank.

Hardly a beacon of stability. Yet this is the system in which literally hundreds of millions of people have misplaced their trust and confidence.

It doesn’t take a financial guru to figure out that this is not a consequence-free environment.

All that’s required is the independence of mind to look at the facts rationally and understand that, like Cyprus, this could all change overnight.

It’s worth considering that at least a portion of your savings may be much safer elsewhere– in a stronger, well-capitalized foreign bank located in a stable country with minimal debt.

It may be wise to consider those options while you still have the ability to do so.

++++++++++++++

But don't worry because Greece is issuing 5Y bonds into the "public" markets so everything must be fixed in Europe…

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

While quick to explain how next year will be better (even though he keeps his year-end 1900 target for the S&P 500), Goldman’s chief US equity strategist David Kostin warns there is a good chance of a 10% drop sometime in the next 12 months. The recent 6% pullback (sparked by EM concerns) is only one-third of typical historical corrections and as Kostin notes, the market has gone way too long without a so-called correction (10% from peak to trough). It’s been 22 months (and 50% gains) since the last 10% drop and, based on Kostin’s quant work, there is a 67% probability that we’ll see that correction – which would take the S&P to around 1700.

 

 

Source: Goldman Sachs

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

Submitted by Mike Krieger of Liberty Blitzkrieg blog,

I’ve covered the militarization of the domestic police force on several occasions on this website. For those of you who need a refresher, I suggest reading the following:

There are Over 50,000 SWAT Team Raids Annually in America

Retired Marine Colonel to New Hampshire City Council: “We’re Building a Domestic Army”

Video of the Day – Thuggish Militarized Police Terrorize and SWAT Team Iowa Family.

Moving along to the subject of today’s absurdity, the tiny city of Washington, Iowa with a population of 7,000 and 11 police officers, will be receiving a Mine Resistant Ambush Protected (MRAP) vehicle. Yes, they will be employing one of these in the field:

These things normally cosy $500,000, but will be given to Washington, Iowa for free under a Defense Department program that gives surplus military equipment to domestic law enforcement.

Matthew Byrd writes in the Daily Iowan that:

Sometimes the news is just so drearily awful that you have to sit back and almost appreciate the pure comedy induced by it.

 

Take this item from Washington, Iowa, where the local police have recently acquired an MRAP vehicle (short for Mine Resistance Ambush Protected) through a Defense Department program that donates excess vehicles originally produced for the wars in Iraq and Afghanistan to local police departments across the United States, including other Iowa towns such as Mason City and Storm Lake.

 

The MRAP weighs an impressive 49,000 pounds, stands 10-feet tall, and possesses a whopping six-wheel drive. Originally designed to resist landmines and IEDs, it sure seems like the MRAP will come in handy for the notorious war zone otherwise known as Washington County, Iowa.

 

If you’re having a bad day, I highly recommend watching a video produced by the Des Moines Register in which Washington police officials try to justify the possession of a vehicle it clearly has no use for. The excuses range from school shootings (which are an actual concern but an MRAP seems like overkill) to a terrorist attack happening in central Iowa (because if there’s any place that seems ripe for a high-profile terrorist attack it’s Washington, Iowa, population 7,000).

 

As Radley Balko, the author of the book The Rise of the Warrior Cop, an expose of the police militarization of the last decade, found, in 2006 alone the Pentagon, “distributed vehicles worth $15.4 million, aircraft worth $8.9 million, boats worth $6.7 million, weapons worth $1 million and “other” items worth $110.6 million to local police agencies.”

 

The effects of cops moving from handguns to assault rifles and being equipped with tanks, bazookas, and Kevlar has been twofold. First, civil liberties have absolutely been eroded, with police-brutality rates skyrocketing in last decade according to the Justice Department. Not only that, but, with the influx of military gear into local police forces, cops begin to view themselves as soldiers whose main job is combat rather than keeping the peace. How else can you explain the rise in police shootings since 9/11?

USA! USA! USA!

Keep chanting like idiots until one of these rolls up to your doorstep.

Full article here.

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

Here is what we said in our latest comment on hedge fund positioning from this weekend.

“As Goldman adds:  “Short holdings created problems by rising 130 bp more than S&P 500 YTD.” Gee, where have we seen this before, not to mention predicted this would happen? Why here: “Presenting The Best Trading Strategy Over The Past Year: Why Buying The Most Hated Names Continues To Generate “Alpha.”

 

Thank you Chairman Bernanke and Chairmanwoman Yellen, not to mention HFT vacuum tubes, for making the market so broken, a tinfoil blog can outperform the smartest money in the street.”

What else can we add but…. “alpha”.

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

We wondered earlier whether Kevin Henry would achieve his goal.. and he did. VIX is now sub-14 once again and thanks to a lift-off in EURJPY, stocks are surging. The Dow Industrials (and almost the Transports) have recovered all their post-FOMC losses in this reaction to the apparently more dovish minutes. Gold is maintaining gains. Bond markets ripped lower in yield and the USD is tumbling. The ammo, of course, for all this, is “most shorted” stocks which are spiking post-FOMC.

 

Will K-Hen send VIX under 14 today? Find out shortly

— zerohedge (@zerohedge) April 9, 2014

EURJPY ignited it but is fading now…

 

As VIX was banged below 14…

 

Squeeze….

 

which has bounced the Dow back up to unch from the FOMC…

 

Buy bonds, buy stocks, buy gold, sell USD…

via Zero Hedge http://ift.tt/1g8SP1B Tyler Durden

With all eyes fixed on any mention of the length of time post-taper before rate hikes, stocks and bonds slid gently in the last few minutes before the minutes release – and sure enough…

• *SEVERAL FED OFFICIALS SAID FORECASTS OVERSTATED RATE RISE PACE

In other words, we are way more dovish than you thought we were… Weather was blamed for any slowdown and the pace of tapering appears set. Bear in mind these minutes reflect a discussion that took place – at least from a chronological standpoint – before Janet Yellen’s “six months” statement.

Pre-FOMC: S&P Futs 1852.75, 10Y 2.717%, Gold $1304

Here is the key fragment:

A few participants suggested that new language along these lines could instead be introduced when the first increase in the federal funds rate had drawn closer or after the Committee had further discussed the reasons for anticipating a relatively low federal funds rate during the period of policy firming. A number of participants noted the overall upward shift since December in participants’ projections of the federal funds rate included in the March SEP, with some expressing concern that this component of the SEP could be misconstrued as indicating a move by the Committee to a less accommodative reaction function. However, several participants noted that the increase in the median projection overstated the shift in the projections. In addition, a number of participants observed that an upward shift was arguably warranted by the  improvement in participants’ outlooks for the labor market since December and therefore need not be viewed as signifying a less accommodative reaction function. Most participants favored providing an explicit indication in the statement that the new forward guidance, taken as a whole, did not imply a change in the Committee’s policy intentions, on the grounds that such an indication could help forestall misinterpretation of the new forward guidance.

So is “several” less than or more than 6 months? Of course, these are Fed forecasts. Which are always wrong anyway. Either way, stocks love it as the Fed has just given the go ahead to reflate the bubble some more.

Full minutes:

 

 

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

With today’s 10 Year auction just an hour ahead of the traditionally negative for rates FOMC Minutes, it was no surprise that the just completed issuance of $21 billion in 10 Year paper was nothing to write home about. Sure enough, with a high yield of 2.72% tailing the When Issued by 0.8 bps or the biggest tail for a 10Y auction in 2014, the reception was hardly impressive. That said, the yield was still 1 bp lower than the March auction when bonds sold for 2.73%, which in the aftermath of yesterday’s wider 3Y, confirmed that flattening is still on everyone’s mind.The Bid To Cover was also hardly notable and while it was below March’s 2.92, it was well above the TTM average of 2.66 at 2.76.

Internals were hardly anything to write home about either, as Dealers took down just over 40%, the most in 2014, even as Indirects were allotted 44.7% meaning Directs had only 15.2% of the allotment, the least since January.

Bottom line: unlike equities which are back into euphoria mode, the 10 Year promptly sold off on the auction news, which kneejerk momentum we assume will continue after the FOMC minutes due out shortly.

via Zero Hedge http://ift.tt/1mY4Tqj Tyler Durden

Of all the Fed’s communication tools, BofA notes that the minutes seem to be the most confusing to the markets. They should be “old news," Ethan Harris comments, and yet, investors look to the minutes for nuggets of insight. The result, in our view, is a steady stream of “head fakes” and a regular pattern of weakness in the bond market. The results are striking and more consistent than we had expected: the bond market sold off on 18 out of 20 days. Of course, this time could be different but the last 2 years of FOMC Minutes releases have seen bond yields rise on average 3.5bps (bonds are already 3bps higher in yield) and effective Fed watching these days appears mainly a matter of avoiding misleading messages and fading "misinterpretation" of their communications.

Via BofAML's Ethan Harris,

What we seem to have here is failure to communicate

Of all the Fed’s communication tools, the minutes seem to be the most confusing to the markets. They should be “old news.” They are released three weeks after the meeting, and they are predated by both the directive and, often, the Chairman’s press conference and other speeches. The FOMC tries to be as clear as possible about its intentions, using the directive and press conference to explain the views of the majority of voters. By contrast, the minutes present a confusing comingling of the views from the majority voters, dissenters and the nonvoters. Hence, before each release, we warn that the “minutes provide a platform for the hawks to protest against the current policy.”

The bond market regularly sells off on the minutes

And yet, investors look to the minutes for nuggets of insight. The result, in our view, is a steady stream of “head fakes” and a regular pattern of weakness in the bond market.

 

Table 1 shows the change in the 10 year yield on the days when the minutes were released over the last two years. The results are striking and more consistent than we had expected: the bond market sold off on 18 out of 20 days and the cumulative change on these 20 days was 63 bps. There is only one notable exception—August 22, 20121. On that day, the minutes signaled a strong likelihood of QE3: “Many members judged that additional monetary accommodation would likely be warranted fairly soon unless incoming information pointed to a substantial and sustainable strengthening in the pace of economic recovery.”

Of course, the market movements on these days are not purely due to a misreading of the minutes. At times, there is new substantive information. Moreover, on some of these days, other news may have also impacted the markets. Nonetheless, in our view the scale and frequency of the adverse movements seems hard to ignore.

The minutes are now one of our least favorite releases because of the scramble to find the market moving sentence. Often, it is in the main text. Thus, the biggest selloff was on November 20, 2013 when the minutes suggested that “the central bank could cut back on its bond buying program even if the job market does not improve dramatically” (CNN Money). However, sometimes, the zinger is buried in the appendix: on July 10, 2013, bond yields rose 5 bps when investors noticed an obscure sentence in the forecast discussion: “about half” of members had assumed that QE would be over by the end of 2013 in making their growth and inflation forecasts. At the time, we argued that the Fed would not put such an important signal in the appendix and that the assumption was a “place holder” used to develop forecasts for growth and inflation and not a serious policy prediction. Sure enough, the Fed did not even start to taper QE until December 2013.

Will history repeat itself?

It is very hard to anticipate the potential misinterpretation of the minutes this time around. Perhaps the bond market has adjusted to what appears to be inefficient pricing. However, we would not be surprised to see the market sell off on Wednesday afternoon. More broadly, in our view, effective Fed watching these days is mainly a matter of avoiding misleading messages. These include not just the minutes, but also the “certainty” of tapering last September, the 6.5% and 7.0% unemployment rate “rules”, and most recently the six-month “rule” for the first rate hike.

via Zero Hedge http://ift.tt/1erq4ce Tyler Durden