ignore the rhetoric, pay attention to the mega trends
 

Greece and France are showing major upheaval on the political front as Sarkozy is pushed aside for a socialist leader and Greece elects neo nazis in significant numbers for the first time in 40 years. The clamor that is coming in is all about rejecting the debts and changing the direction the Eurozone is going. I hate to say this, but some of the things they want to do would actually be helpful in the long term, but the rest of it is pure fantasy.

The major trends to follow are increasing economic instability, separation of the haves (Germany) from the have nots (Greece, Spain, etc.), and unsustainable debt levels. This is in many ways like a group of out of balance gyros, the spinning kind, not the Greek food.

DarJones

[QUOTE=ewmayer;298481]I realize that making fun of people's names (especially if the amusement is based on a name common in a given ethnic group-different-than-one's own) is a bit lame[/QUOTE]
It's especially lame when it's based on not knowing how the name in question is pronounced. "Qin" is pronounced like "chin", not "kin" as you seem to think.

[QUOTE=Random Poster;298672]It's especially lame when it's based on not knowing how the name in question is pronounced. "Qin" is pronounced like "chin", not "kin" as you seem to think.[/QUOTE]

Oh I realize full well than it's really pronounced "Ch", but that doesn't lend itself to jokemeistery - and I've never been one to let ugly 'facts' stand in the way of a quip, lame or otherwise.

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Speaking of e-quippage, it finally occurred to me what word suits a transplanted Californian like myself, who has learnt most of his Spanish from watching Telenovelas and Deportes Mundiales on the local Spanish-language TV stations:

[I]Telespangelist[/I]

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[URL="http://www.reuters.com/article/2012/05/07/us-usa-fed-nominees-idUSBRE8460KD20120507?feedType=RSS&feedName=domesticNews"]Old feud appears to sink Obama's Fed nominees[/URL]: [I]
WASHINGTON (Reuters) - President Barack Obama's two nominees to the Federal Reserve appear likely to fall victim to a long-running political feud, which would leave the central bank short-handed as it struggles with tough regulatory and monetary policy questions.[/I]
[quote]Republican Senator David Vitter has demanded that the Senate hold a debate before any vote on the nominees, which would require Democratic leaders to muster a super majority to move forward - a hurdle that may be too high to clear.

As a result, the Senate may end up abandoning the nominees, Harvard economist Jeremy Stein and investment banker Jerome Powell, and leave a decision on filling out the normally seven-member Fed board until after this year's presidential election.

"I refuse to provide Chairman Bernanke with two more rubber stamps who approve of the Fed's activist policies," Vitter said when asked if he planned to lift his hold on the nominations.

Leaving the central bank short-staffed deprives it of top-notch monetary policy and financial market expertise that could prove valuable given the stop-and-go nature of the U.S. recovery and economic threats coming from Europe.[/quote]Honestly - how much "monetary policy and financial market expertise" does it require to keep hitting Ctrl-P on the Fed money-printing terminal until the problems (which the Fed itself is largely responsible for creating) either magically disappear, are buried in a tsunami of inflation, or something breaks? (In the the latter event one then has a ready-made excuse to cry "we need more resources and unlimited authority to fix it!"


[B]Happy 2nd Birthday, Flash Crash[/B]

ON the 2nd anniversary of the May 6, 2010 "flash crash", it is a good timr to ask "what has changed as a result"? Unsurpsinngly the answer on the fixing -the-structural-problems-with-markets side is "little or nothing of substance." The real change is the ongoing retail investor reaction to this, namely to pull money out the rigged farce the "capital markets" have become. As described in detail by a pair of expert TBP guest posters:

[URL="http://www.ritholtz.com/blog/2012/05/the-flash-crash-of-2010-happy-2nd-anniversary/"]Happy 2nd Anniversary, Flash Crash of 2010 ![/URL]
[quote][I]Joseph Saluzzi and Sal L. Arnuk are co-heads of the equity trading desk at Themis Trading LLC, an independent, no conflict agency brokerage firm specializing in trading listed and OTC equities for institutions. Prior to founding Themis, Sal and Joe worked for more than 10 years at Instinet Corporation, pioneers in the field of electronic trading, and at Morgan Stanley.[/I]

Listening to NYSE Euronext’s 1st quarter conference call yesterday, we shook our heads in dismay as management described a trading environment where volumes fell to a four and one half year low – the lowest levels since Reg NMS was implemented in late 2007, in fact.

NYSE’s Duncan Niederauer explained his 44% profit decline was due largely to a 25% decline in revenues from transactions from a year earlier. The culprit: An unfriendly environment for high frequency trading firms. From his point of view, regulators and folks in the media hyped the HFT bogey man too much, creating uncertainty, causing an HFT migration into other asset classes and geographies.

Niederauer doesn’t get it. He is mistaking the symptoms for the underlying problem. HFT volumes are down because investor volumes are down. Investor volumes are down because traditional retail and institutional buyers and sellers of stock have been steadily waking up to the dangers of drinking at the increasingly dangerous ”stock market watering hole.”

Like the animals on the Serengeti, who for years were accustomed to sipping long and heartily at their favorite spot, retail and institutional investors now see what’s beneath the surface. And they are deciding that the drink they crave is just not worth the risk.

More than $250 billion in long term equity funds has retreated from the markets since May 6th, 2010 – despite a slow but steady improvement in the economy and a stock market that has nearly doubled since the 2009 lows. It isn’t that these investors don’t have confidence in the economy. They don’t have confidence in our markets.

It isn’t hard to blame them. They have witnessed a radical transformation of the best capital allocation market system in the world, into one where:

- 13 stock exchanges cater to hyper traders who game the system, chasing exchange rebates, and leveraging speed for the purpose of a nanosecond scalping dance.
- More than 40 dark pools together trade more than 1/3rd of all shares.
- Conflicts of interest abound as exchanges own stakes in dark pools, and HFT firms own stakes in exchanges.
- Brokerage firm internalization of trades feeds the HFT financial modeling of investor orders.
- Exchange data feeds act as a veritable DVR of investor orders and behavior, the recording of which is then sold to HFTs.
- Rogue exchange traded products break down, trap unsophisticated investors, and only enrich the issuers, exchanges, and HFT firms that make markets in them.
- HFT firms in the last decade have achieved wondrous profitability (double-digit Sharpe ratios) while investors at best have clawed back to even.
- More than $1 billion in customer-segregated monies goes missing from MF Global, with not a single prosecution, nor a hope of redress.

As they witness all of the above, traditional retail and institutional investors see that our regulators must be having a challenging time acting as effective policemen in the marketplace:

- Flash orders, which give HFTs a quick peak at retail and institutional orders, are still alive and well, under many different names, despite a proposed banning of them in 2009.
- Dark pool regulation, also proposed years back, has not materialized.
- Internalizing brokerage/HFT firms, which clearly played a huge role in the market melt-down on May 6th (perhaps as well in the financial crisis in late 2008 and 2009) still practice the same way, with additional help from dark pools and exchanges who have all embraced “liquidity provider” programs.
- And finally, payment for order flow (PFOF) is alive and well on numerous levels throughout the system – from retail, to maker/taker exchange pricing, to free dark pool executions.

Investors know that the markets are broken. And they desperately want it fixed.

Our outrage over the transformation of the best capital markets in the world to this conflicted and fragmented web of chaos led us to write our book, Broken Markets: How High Frequency Trading and Predatory Practices on Wall Street are Destroying Investor Confidence and Your Portfolio, which is being published by Financial Times Press.

When the book comes out June 3rd, it will find no shortage of critics from within our industry. However, we needed to write it. For years we have spoken about all of these issues in trade magazines and the financial media, and at industry conferences and panels, as well as with our regulators.

We wrote Broken Markets so that Main Street could understand what happened to our markets, to inspire change, so we can once again have the best capital markets in the world.

So, Happy Anniversary to everybody who made the Flash Crash happen. We hope you are enjoying yourself.

Because we, and millions and millions of other retail and institutional investors around the world, are not.[/quote]

So is the world in another recessionary economic dip? The EU appears to show that it is. The U.S. appears to be in a downswing. China appears to be down. India appears to be flat. The great depression of 2008 appears to be following the pattern from the 1929-1936 time frame.

One of those funny numbers that sometimes shows up is from a local lawnmower dealer. He has sold more mowers so far this year, nearly twice as many, than for the same time interval in the past 4 years. This makes him happy because it is the first profitable year he has had since he bought the business. It makes me ask questions though because lawnmowers that run from $2,000 to $10,000 are considered durable goods. Did buyers postpone purchases in previous years? Are older mowers finally so "long in the tooth" that they have to be replaced? Regardless of cause, it is a sign that the economy is not as distressed as it was for the past few years.

DarJones

That's a sign of crisis: ppl lost the jobs and stay home, nothing to do, "haircutting" the grass? :razz:

[edit: this is the only thread I would NEVER read on this forum, the posts are too long, their truth is at least arguable, not like in the math where 2+2 is always 4, well, with few exceptions, etc, and as a currency trader I would not want that some opinions in this thread to influence my trading decisions, so I stay away, but your short post was worthing a reply :D. Now I see someone brought here the arguing about gold which I started in the science-news thread, grrr, I don't want to open that subject again, but my fingers are heavy tickling..]

[url=http://www.reuters.com/article/2012/05/10/us-foreclosure-suit-idUSBRE8491GW20120510?feedType=RSS&feedName=domesticNews]Florida Supreme Court hears landmark foreclosure suit[/url]: [i](Reuters) - The Florida Supreme Court heard arguments on Thursday in a landmark lawsuit that could undo hundreds of thousands of foreclosures and open up banks to severe financial penalties in the state where they face the bulk of their foreclosure-fraud litigation.[/i]
[quote]Legal experts say the lawsuit is one of the most important foreclosure fraud cases in the country and could help resolve an issue that has vexed Florida's foreclosure courts for the past five years: Can banks that file fraudulent documents in foreclosure proceedings voluntarily dismiss the cases only to refile them later with different paperwork?[/quote]
I have a different question: Given that the original paperwork in question was indisputably fraudulent and thus represents a fraud-upon-the-court (a felony) which was in many cases perpetrated on a massive scale, why has no one been indicted for this?

Imagine a similar 'logic' involving individuals rather than banks - "If a mugger is about to get arrested by the police and decides to return your wallet 'voluntarily', did he commit a crime?". But apparently "banks are people" (as affirmed last year by the US supreme court) only applies to their right to buy politicians, not when there would be any downside to such "peoplehood", like some of the people benefiting from it actually being held to account for their crimes.

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Mish has an [url=http://globaleconomicanalysis.blogspot.com/2012/05/trimtabs-on-debt-and-disability-claims.html]interesting answer[/url] to the question "what is happening to all those millions of folks exhausting their extended unemployment benefits after 99 weeks out of work?"

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Any bets on how many more "completely solvent, going concerns" banks Spain will nationalize next week? Oh wait, forgot we were only supposed to talk about the upcoming Facebook IPO: "$100 Bln for a FadCorp based on 1999-style dotcom metrics like 'eyeballs' is *cheap*, folks - don;t worry about how they're gonna monetize that huge user base, that was the same kind of misplaced skepticism people applied to Skype, and look how much money Skype has made since then - oh wait..."

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[b]Friday Funnies[/b]

The funny folks at XKCD take on the college cost bubble and channel Gilbert and Sullivan in this hilarious installment:

[url=http://xkcd.com/1052/]Every Major`s Terrible[/url]

JP Morgan appears to [url=http://globaleconomicanalysis.blogspot.com/2012/05/whale-of-story-jpmorgan-loses-2-billion.html]have invested too heavily[/url] into the Facepalm's IPO.

More on that MyFace (or was it TwitSpace?) IPO:

[url=www.bloomberg.com/news/2012-05-10/facebook-ipo-said-to-meet-weaker-than-expected-investor-demand.html]Facebook IPO Said to Get Weaker-Than-Forecast Demand[/url]
[quote]Facebook Inc. (FB)’s initial public offering has so far generated lower-than-expected demand from institutional investors who are concerned about the company’s growth prospects, people with knowledge of the matter said.

Some investors expressed reluctance after Facebook said on May 9 that advertising growth hasn’t kept pace with the increase in users, said the people, who asked not to be identified because the process is private. Facebook is also telling analysts that sales may not meet their most optimistic projections, two people said.

Facebook executives have another week to market the IPO, set to price May 17, and underwriters are stepping up efforts to drum up interest from large shareholders, one person said. The top end of the price range values the world’s most popular social network at $96 billion, or more than Standard & Poor’s 500 Index members including Walt Disney Co. and Visa Inc. [/quote]

A better title for the piece would have been "Faceplant IPO?" :)

[quote]The top end of the price range values the world’s most popular social network at $96 billion, or more than Standard & Poor’s 500 Index members including Walt Disney Co. and Visa Inc.[/quote]And the bottom end of the price range ... ?

[QUOTE=ewmayer;299183]
[B]Friday Funnies[/B]

The funny folks at XKCD take on the college cost bubble and channel Gilbert and Sullivan in this hilarious installment:

[URL="http://xkcd.com/1052/"]Every Major`s Terrible[/URL][/QUOTE]Trivia: The inspiration for the face in the first box on line seven ("Astronomers all cringe ...") was Phil Plait ([URL]http://blogs.discovermagazine.com/badastronomy/[/URL]). Yes, it was: [URL]http://blogs.discovermagazine.com/badastronomy/2012/05/07/xkcd-is-the-very-model-of-a-modern-major-science-grad/[/URL]

[QUOTE=ewmayer;299183]
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Mish has an [URL="http://globaleconomicanalysis.blogspot.com/2012/05/trimtabs-on-debt-and-disability-claims.html"]interesting answer[/URL] to the question "what is happening to all those millions of folks exhausting their extended unemployment benefits after 99 weeks out of work?"

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[/QUOTE]Note how the featured chart [URL="http://3.bp.blogspot.com/--5SpBK1I3Fk/T6ynx2uVWuI/AAAAAAAAPJU/5y_luR2_tuk/s1600/trimtabs%2Bdebt%2Bto%2Bgdp.png"]http://3.bp.blogspot.com/--5SpBK1I3Fk/T6ynx2uVWuI/AAAAAAAAPJU/5y_luR2_tuk/s1600/trimtabs%2Bdebt%2Bto%2Bgdp.png[/URL] shows that:

(1) the minimum debt-per-growth ratio in the Reagan/Bush[sub]1[/sub] budget era (1982-1993) exceeded the maximum debt-per-growth ratio in every year of the Ford/Carter budget era that is shown (1975-1981), and

(2) the minimum debt-per-growth ratio in seven of the eight years of the Bush[sub]2[/sub] budget era (2002-2009, except 2008 having negative GDP growth) exceeded the maximum debt-per-growth ratio in seven of the eight years of the Clinton budget era (1994-2001).

Conservative propaganda has been very effective in distracting attention from the otherwise-obvious conclusion about the correlation between the party of the presidency and the debt-per-growth ratio that one would draw from the "Annual Growth in U.S. Debt to Generate ..." chart for the 35 years prior to the Obama administration.

How many leading Republicans have recently taken public responsibility for their party's having introduced the modern era of massive federal deficits during Reagan's presidency, through a fundamental change in conservative fiscal policy?

This change (inducing large deficits through tax-cutting) from previous conservative fiscal strategy (minimizing deficits) was very deliberate. It was devised in the billionaire-funded conservative think tanks of the latter 1970s in order to concentrate wealth in the wealthiest 1%, among other purposes. It has been very successful, but conservatives seem quite shy of publicly taking credit for it.