Why The Troika's Forecasts Are A Total Joke In One Easy Chart


The remarkable forecasting skills of the Troika and the immense decisions being taken on the back of these ‘sacrosanct’ projections need to be put into context. We are more than happy to do that (as we did here – with hilarity ensuing), but the chart below shows even more clearly, so far so bad as the Troika has pretty much nailed it on the ‘most optimistic mean-reverting model’ ever. Not wanting to steal the jam from Europe’s donut but the forecasts are – quite evidently – a complete and utter joke. Going forward though, we are sure it’s different this time…

 

 

(h/t Follow The Money)

Deer Emerges As Stocks Slump Half Way To Reality


The crowded liquidity-fueled pump-fest of the last few months is beginning to unwind. Look around at where the damage occurred. Equities and Credit were smashed; the USD is practically unchanged; Treasuries very marginally bid; commodities sideways (aside from Oil’s oscillations).

But, But, But I’m Hedged…

 

The close did see some of the other asset classes start to catch down to equity and credit but based on our models, we see the S&P 500 having retraced about half its short-term mispricing relative to Treasuries. All the over-pumped sectors were the biggest laggards – Financials, Industrials, Materials, and Tech – but from the 11/25/11 beginning of the global coordinated central bank pump, there is still plenty of downside for stocks. Our greatest concern now is if high-yield bond ETFs are unwound (where so much liquidity is concentrated) and forces cash bond liquidations – there is simply no depth to soak up that move and the entire secondary market will reprice (and shut the primary market – which has lived on flows for so long).

 

So what happened…and why – well maybe this chart will help…


Gold is now almost 3% ahead of stocks on the year as the long-bond is catching up fast on the S&P 500…

 

but stocks have plenty of froeth from the beginning of the globally coordinated liquidity flush from 11/25/11…

 

the S&P 500 has now retraced around half of its pre-QE3 dislocation…

 

and equities are also catching down to high-yield credit’s warning signs…but the reflexivity will begin in this pair shorly…

 

and for a sense of the relative calmness in non-equity/credit markets today… with ETFs all moving as one big liquidity block (left) but FX, Treasuries, and commodities were unimpressed having already made their moves… (right)

 

HYG crossed below its 200DMA and equalled its largest drop in over six weeks (with serious volume)…

 

and the last few days shows that when the selling begins, it will squeeze the cash market (the lower pane) just as the wash of liquidity drives the cash market via the ETF on the way up in HYG… Critically, we saw a big bond dump at the open today to catch down to HYG’s ‘price’ and then HYG kept going lower all day to leave yet another big gap…

 

Evidently, as we have said again and again, the surplus of liquidity has been soaked up in the synthetic instruments (ETFs for instance). It’s all fun and games on the way up – just ask Bruno Iksil – but when the unwinds begin and the ‘real’ market can’t soak up that risk (consider dealer inventories!!) then price adjustments are rapid and gappy – everywhere…

 

Finally, the long-term CONTEXT view of where we stand…

 

We would imagine that every repo desk margin call is currently going directly to voicemail…

 

Charts: Bloomberg and Capital Context

 

Bonus Chart: AAPL’s last week…VWAP finally snapped

 

AAPL Shareholder’s perspective…

 

Facebook’s 12% rise (coincidentally on record daily volume and perfectly ending at the big gap-down day’s VWAP close…not sure this one holds up here) and for one more crazy coincidence (which by now we hope you do not believe in) – today’s closing VWAP of $21.62 is EXACTLY the same as the aggregate VWAP from the 10/24 high volume ramp til today

and Facebook putholders…

Tilson Releases September 30 13-F: Top Positions Are AIG And AAPL


Just when we thought blowing up one fund in one year is enough for Whitney Tilson (recall from July: It’s Official: T1 Is Not T2; Tilson Liquidates To Buy More Of The Same), we got a glimpse of his just released 13F and are rather confident the man, the myth, the stuff of Anti-Tilson ETFs will shock and awe us all one more time. The reason? As of September 30, Tilson’s inaccurately named T2 Partners – it should be T1 now that Glenn Tongue is long gone – had a total of $175 million in AUM. That’s not the punchline: as part of this $175 million, Tilson had $63 million in put/call stock equivalents. In other words the much vaunted “asset manager” who for some absolutely inexplicable reason continues to get CNBC airtime, managed a grand total of $110 million in real (mostly family and friends) money. That’s not the punchline either. The punchline is that Tilson’s top 3 positions were AIG and AAPL, with AIG in both stock and Call format. In fact, more than 10% of the firm’s virtual AUM, or $18.6 million was in stock equivalent calls for AIG and AAPL, stocks which since September 30 have gone in a literally, not virtually, straight line lower, and have as a result likely wiped out the entire intrinsic call value. The only silver lining: Tilson owned $5.5 mm in NFLX calls and a grand total of $3.6 million in NFLX stock. We hope it carries him far, because once the Icahn grand jig is up, in which the raider is exposed as having absolutely no intentions of buying the company, or even putting it in play, but merely squeezing the shorts courtesy of a costless collar and a sternly worded 13D, that will be the final straw for Tilson’s second coming, and most likely, his career.

Source: Sexually Explicit and Corrupt

THE LIST HAS GROWN: SWITZERLAND, THE NETHERLANDS, AND ECUADOR JOIN GERMANY IN CALLS FOR AUDITS OF THEIR GOLD

THE LIST HAS GROWN: SWITZERLAND, THE NETHERLANDS, AND ECUADOR JOIN GERMANY IN CALLS FOR AUDITS OF THEIR GOLD

Read more: THE LIST HAS GROWN: SWITZERLAND, THE NETHERLANDS, AND ECUADOR JOIN GERMANY IN CALLS FOR AUDITS OF THEIR GOLD
– Giza Death Star Community

The calls for full audits, and in some cases, repatriation, of foreign gold reserves being held by the New York Federal Reserve are growing, as now Switzerland, the Netherlands, and Ecuador have joined Germany in those calls and in Ecuador’s case, repatriation, of its gold:

German Calls for Gold Repatriation Intensify As Fed Refuses to Allow Inspection

Obviously, the Fed’s refusal to comply “in the interest of security” is a complete fabrication and obfuscation, what what is Germany going to do? Rush out and tell the world the processes by which the Fed “operates”? Doubtful. As the article correctly observes, the real underlying concern is whether the gold is even there, or, to put it in different terms, has been stolen or re-hypothecated so many times that recovery – even if it is there – would be virtually impossible.

The real concern is expressed accurately and aptly in the final paragraph of the article:

“While Bundesbank officials likely understand the reality (much better than German politicians do) that a German repatriation of it’s entire 1,536 tons of gold reserves held at the NY Fed would likely cause a complete Western financial collapse if/when the Fed failed to promptly deliver said gold (tungsten free), confidence in the Fed and the BOE has clearly been shattered, and it is now only a matter of time for an absolute mad run on every last gram of physical metal underneath the NY Fed ensues.”(Emphasis in the original)

This view essentially confirms what I have previously maintained, namely, that Germany’s concerns are a signal of serious factional infighting and pressures within the Western financial oligarchy, and there is no denying that Germany is as fundamental an economy to that oligarchy as is the United Kingdom, Japan, or the USA.

The real question we must ask is what is the big secret that this oligarchy is hiding? The clue, I suggest, is contained in the Federal Reserve’s own words: “in the interests of security”. If one merely adds the adjective “national” to that phrase, “in the interests of national security”, we see the potential implications, which spill out into a reconsideration of the entire post-World War Two system of finance and the vast military-industrial-intelligence complex that was erected. We are, the phrase suggests, also dealing with threads that, if pulled, will reveal secrets from the Cold War period and even deeper secrets.

In short, for once, the Fed may not be lying, but in its own subtle, obfuscatory way, hinting at the truth.

See you on the flip side.

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