Economic Blogs

Mike Pollaro – Central Bank Credibility, the Equity Markets and Gold

Krassimir Petrov - Thu, 16/10/2014 - 22:27
Here is a great idea abotu central banking and gold from my good “Austrian” friend Mike Pollaro:
Categories: Economic Blogs

Washington D.C. Is Now The Most Expensive Place To Live In The US

Zero Hedge - Thu, 16/10/2014 - 22:15

Submitted by Mike Krieger of Liberty Blitzkrieg blog,

There is no greater signpost of the decay in America’s cultural, economic and spiritual life than Washington D.C.’s ascendancy into the most expensive spot to live in within these United States.

Yes, according to a recent government study, the nation’s capital is even more expensive than New York City, ground zero for America’s most unscrupulous banking criminals, as well as San Francisco, the epicenter of the latest tech venture capital binge. This is extraordinarily disturbing, considering the primary products created in the D.C. area consist of death, destruction, criminality, propaganda and lies. In a nation in which the primary driver of GDP growth has become fraud, I suppose this shouldn’t be that surprising.

The Washington Post noted the following:

The Washington region ranks as the most expensive place to live in the country, ahead of the pricey markets of New York and San Francisco, according to a government study.


The surprising statistic comes from a Bureau of Labor Statistics report that shows that — on average — Washingtonians spend more on housing and related expenses (utilities, furnishings and equipment) than New Yorkers and San Franciscans.


Naturally, this trend has been in the works for a long time. Last year, I posted an article titled, How Washington D.C. is Sucking the Life Out of America. Here are a few excerpts:

At the same time, big companies realized that a few million spent shaping legislation could produce windfall profits. They nearly doubled the cash they poured into the capital.


During the past decade, the region added 21,000 households in the nation’s top 1 percent. No other metro area came close.


At the peak in 2010, companies based in Rep. James Moran’s congressional district in Northern Virginia reaped $43 billion in federal contracts — roughly as much as the state of Texas.


The number of lawyers in the D.C. metro area increased by a third from 2000 to 2012, nearly twice as fast as the growth rate nationwide.

We have become a nation that rewards and celebrates thieving parasites. It needs to end, or we will destroy ourselves completely.

You may also be interested in this post from 2012: 70% of the Wealthiest Counties in America are in the Washington D.C. Area.

Categories: Economic Blogs

The Idiotic Explanation Why The "Idiot With The Clipboard" Was Unprotected

Zero Hedge - Thu, 16/10/2014 - 22:11

Phoenix Air has released a statement explaining why the now infamous non-HazMat-wearing 'clipboard man' seen in close proximity to Dallas Ebola patient Amber Vinson (while the rest of the members of staff are fully protected) was unprotected... and it will blow your mind.

Why is "Clipboard Man" not wearing protective gear?


Phoenix Air responds (via ABC News)...

The airline confirmed to ABC News that the man was their medical protocol supervisor who was purposefully not wearing protective gear.


"Our medical professionals in the biohazard suits have limited vision and mobility and it is the protocol supervisor’s job to watch each person carefully and give them verbal directions to insure no close contact protocols are violated," a spokesperson from Phoenix Air told ABC News said.


"There is absolutely no problem with this and in fact insures an even higher level of safety for all involved," the spokesperson said.

*  *  *

So - in summary - due to the restrictive vision when wearing an Ebola-protective suit, one member of staff must be sacrificed/exposed to ensure no one trips?

And these are who we are supposed to trust?

Here is the full sequence of events involving "clipboard guy" via the Mail:


Is he with the CDC? Both the ambulance company and Emory University Hospital said the unprotected man with the clipboard (center) is not one of their employees - meaning he is likely a CDC employee

A man in plain clothes was seen on the tarmac Wednesday afternoon, as the second Ebola patient (in yellow hazmat suit) boarded a flight to Atlanta, Georgia

The man is seen boarding the flight, after exchanging several objects with the hazmat crew

Clipboard man appears to have flown on the same flight as infected Miss Vinson, as he is seen in footage of her getting into an ambulance at an airport in Atlanta

Categories: Economic Blogs

The Ebola Effect Arrives: Half Of Americans Will Avoid International Air Travel Out Of Ebola Fears

Zero Hedge - Thu, 16/10/2014 - 21:34

Remember when Obama said "Putin was isolated", despite the Russian having the explicit support of the BRIC nations, and thus at least half of the world's population? Well, as irony would always have it with this particular US president, the tables have promptly turned, and paradoxically where ISIS failed to "terrorize" Americans into a state of paralyzed daze, the West African virus has succeeded in isolating none other than America, and as a brand new Reuters poll reveals, nearly half of Americans are so concerned about the Ebola outbreak that they are avoiding international air travel!

In other words, global trade, commerce and simply transit, already declining thanks to the global depression rematerializing now that the Fed's latest placebo round has worn off, are about to slam into a brick wall.

The poll results come as health officials said the second nurse infected at Texas Health Presbyterian Hospital in Dallas had flown from Ohio to Texas with a slight fever the day before she was diagnosed.


The Reuters/Ipsos poll, which surveyed 1,577 Americans 18 or older online, found nearly 80 percent were concerned about the Ebola outbreak, with 41 percent saying they were "very concerned" and 36 percent "somewhat concerned."

And while the one thing that is certain to provoke an even greater popular panic at the invisible terror, is at least one more Ebola case developing on US soil, the whistleblowing admission by another nurse at Texas Health Presbyterian will hardly boost America's confidence in the way the Ebola crisis is being handled.

NBC Chicago reports that a Dallas nurse who cared for a co-worker who contracted the Ebola virus at Texas Health Presbyterian Hospital said the facility was unprepared to fight the disease and she would “do anything” to avoid being treated there if she were ever to fall ill with the potentially deadly virus.

“I can no longer defend my hospital,” Briana Aguirre said Thursday on NBC's “Today" show.

Aguirre claims that before Thomas Eric Duncan arrived at Texas Health Presbyterian nursing staff had not been trained in how to treat an Ebola patient beyond being offered an “optional seminar.”

Aguirre did not treat Duncan, who died on Oct. 8. But she said that co-workers told her that he was put in an area with up to seven other patients and it took three hours before the hospital first contacted the Centers for Disease Control and Prevention. She called the situation a "chaotic scene."


"Our infectious disease department was contacted to ask, what is our protocol. And their answer was, we don’t know. We’re going to have to call you back,” she said.


“We never talked about Ebola and we probably should have,” Aguirre said, adding that staff was “never told what to look for.”

Well, at least Obama will be kind enough to tell the thousands of reservists he just announced he will be mobiziling by executive order and sending to west Africa precisely what it is they should look for: a virus. One which they should preferably shoot on site.

Categories: Economic Blogs

The Real Reason the Global Economy is Such a Mess – and How to Fix It

The Daily Reckoning - Thu, 16/10/2014 - 21:32

The global economy is a mess today because most economists, bankers and political leaders don’t understand that most basic of subjects: money. When it comes to monetary policy, they have it backwards, thanks to the misbegotten ideas of John Maynard Keynes.

Before Keynes and like-minded peers, economists understood that the real economy was the creation of products and services. Money was the symbol economy. It represented what people had produced. It was a facilitator of commerce.

Money reflects what we do in the marketplace. But… Keynes posited the exact opposite.

The ability of people to trade with one another is how we achieve a higher standard of living. Money measures wealth; it is not wealth itself. It is a claim on products and services that people have created. That’s why counterfeiting is illegal; it’s thievery. But when government does this, it’s called quantitative easing, or stimulus.

Money reflects what we do in the marketplace. But instead of recognizing that basic truth, Keynes posited the exact opposite. To his way of thinking, money controls the economy.

Change the supply and you can change economic output, just as a thermostat controls a room’s temperature. Government, not the marketplace, is the real driver of commerce.

Other “economic actors,” such as investors, venture capitalists, entrepreneurs and business executives, are secondary; they merely respond to the prompts of government officials and central bankers. (While monetarists focus exclusively on the money supply, Keynes thought it useful to employ fiscal tools, such as spending and taxes, to help steer the economy. He and his acolytes, however, had virtually no concept of taxes being a barrier or hindrance to commercial activity; they simply saw them as a way of controlling an economy’s total purchasing power, or “aggregate demand.”)

Keynes did share one crucial view with the classical economists: They both saw the economy as a machine that should run smoothly. So-called business cycles — booms and busts — were phenomena to be studied with an eye toward eliminating them. Classicists thought more “perfect competition” among businesses, minimal government regulation, prudent levels of government spending, a gold standard and low taxes, along with combating unsound banking practices, would do the trick.

The cult of Keynes thought that free markets were inherently unstable, capitalists were their own worst enemies, and wise government officials, like Keynes, were necessary to save business people from themselves. Get the government controls right — primarily monetary — and the economy would purr smoothly forever after.

Joseph Schumpeter thought both the classicists and the Keynesians were utterly wrong in looking at the economy as if it were a clock. To him “equilibrium” didn’t exist. The marketplace was always changing; the pace would vary, but things never stayed still. New methods, inventions and the constant rate of improvement of existing things meant that government officials could never run an economy the way one drives a car.

The only single economy is the global economy. Yet Keynes assumed the British economy could be treated as if it were an isolated entity. Too many countries today formulate policies under a similar assumption.

The Forbes 400 list of the richest Americans and our list of global billionaires demonstrate that Schumpeter had it right. “Economic actors” are the drivers. Government can either impede their activities or create an environment in which they can rise and flourish.

This would seem self-evident. Yet economies all over the world are in trouble. Government leaders and economists galore talk about monetary policy as if it could rev up economies that are staggering under excessive taxation, suffocating regulation and massive government spending.

The only single economy is the global economy.

(Remember, government doesn’t create resources. It gets them through taxation, borrowing or inflation, which is — Keynes got this right — another form of taxation.)

Most governments loathe the truth that the people on our lists are essential to prosperity and a higher standard of living. Government wants the benefits of what such people create, but it doesn’t want anyone to get rich from the creating.


Steve Forbes
for The Daily Reckoning

Ed. Note: The truth can be difficult to stomach. Which is why governments tend to shy away from it… especially regarding matters of money. The Daily Reckoning seeks to do the opposite… bringing you an honest and unfiltered view of the world of money from the experts who know it best. As an example… Managing Editor, Peter Coyne recently traveled to New York to interview Steve Forbes at his 5th Ave. office. The resulting discussion provided a unique perspective on the financial markets that could very well shape your own investment approach. Take a look at it for yourself, right here:

Categories: Economic Blogs

The Pompous Prognostications Of "Permanently High Plateau" Prophets

Zero Hedge - Thu, 16/10/2014 - 21:04

Submitted by Jim Quinn via The Burning Platform blog,

The talking heads will be rolled out on CNBC to assure the masses that all is well. The economy is strong. Corporate profits are awesome. The stock market will go higher. Op-eds will be written by Wall Street CEOs telling you it’s the best time to invest. Federal Reserve presidents will give speeches saying there are clear skies ahead. Obama will hold a press conference to tell you how many jobs he’s added and how low the budget deficit has gone.

We couldn’t possibly be entering phase two of our Greater Depression after a temporary lull provided by the $8 trillion pumped into the veins of Wall Street by the Fed and Obama. Could we?

1927-1933 Chart of Pompous Prognosticators
Colin J. Seymour



Chart locations are an approximate indication only

1. “We will not have any more crashes in our time.”
- John Maynard Keynes in 1927

2. “I cannot help but raise a dissenting voice to statements that we are living in a fool’s paradise, and that prosperity in this country must necessarily diminish and recede in the near future.”
- E. H. H. Simmons, President, New York Stock Exchange, January 12, 1928

“There will be no interruption of our permanent prosperity.”
- Myron E. Forbes, President, Pierce Arrow Motor Car Co., January 12, 1928

3. “No Congress of the United States ever assembled, on surveying the state of the Union, has met with a more pleasing prospect than that which appears at the present time. In the domestic field there is tranquility and contentment…and the highest record of years of prosperity. In the foreign field there is peace, the goodwill which comes from mutual understanding.”
- Calvin Coolidge December 4, 1928

4. “There may be a recession in stock prices, but not anything in the nature of a crash.”
- Irving Fisher, leading U.S. economist , New York Times, Sept. 5, 1929

5. “Stock prices have reached what looks like a permanently high plateau. I do not feel there will be soon if ever a 50 or 60 point break from present levels, such as (bears) have predicted. I expect to see the stock market a good deal higher within a few months.”
- Irving Fisher, Ph.D. in economics, Oct. 17, 1929

“This crash is not going to have much effect on business.”
- Arthur Reynolds, Chairman of Continental Illinois Bank of Chicago, October 24, 1929

“There will be no repetition of the break of yesterday… I have no fear of another comparable decline.”
- Arthur W. Loasby (President of the Equitable Trust Company), quoted in NYT, Friday, October 25, 1929

“We feel that fundamentally Wall Street is sound, and that for people who can afford to pay for them outright, good stocks are cheap at these prices.”
- Goodbody and Company market-letter quoted in The New York Times, Friday, October 25, 1929

6. “This is the time to buy stocks. This is the time to recall the words of the late J. P. Morgan… that any man who is bearish on America will go broke. Within a few days there is likely to be a bear panic rather than a bull panic. Many of the low prices as a result of this hysterical selling are not likely to be reached again in many years.”
- R. W. McNeel, market analyst, as quoted in the New York Herald Tribune, October 30, 1929

“Buying of sound, seasoned issues now will not be regretted”
- E. A. Pearce market letter quoted in the New York Herald Tribune, October 30, 1929

“Some pretty intelligent people are now buying stocks… Unless we are to have a panic — which no one seriously believes, stocks have hit bottom.”
- R. W. McNeal, financial analyst in October 1929

7. “The decline is in paper values, not in tangible goods and services…America is now in the eighth year of prosperity as commercially defined. The former great periods of prosperity in America averaged eleven years. On this basis we now have three more years to go before the tailspin.”
- Stuart Chase (American economist and author), NY Herald Tribune, November 1, 1929

“Hysteria has now disappeared from Wall Street.”
- The Times of London, November 2, 1929

“The Wall Street crash doesn’t mean that there will be any general or serious business depression… For six years American business has been diverting a substantial part of its attention, its energies and its resources on the speculative game… Now that irrelevant, alien and hazardous adventure is over. Business has come home again, back to its job, providentially unscathed, sound in wind and limb, financially stronger than ever before.”
- Business Week, November 2, 1929

“…despite its severity, we believe that the slump in stock prices will prove an intermediate movement and not the precursor of a business depression such as would entail prolonged further liquidation…”
- Harvard Economic Society (HES), November 2, 1929

8. “… a serious depression seems improbable; [we expect] recovery of business next spring, with further improvement in the fall.”
- HES, November 10, 1929

“The end of the decline of the Stock Market will probably not be long, only a few more days at most.”
- Irving Fisher, Professor of Economics at Yale University, November 14, 1929

“In most of the cities and towns of this country, this Wall Street panic will have no effect.”
- Paul Block (President of the Block newspaper chain), editorial, November 15, 1929

“Financial storm definitely passed.”
- Bernard Baruch, cablegram to Winston Churchill, November 15, 1929

9. “I see nothing in the present situation that is either menacing or warrants pessimism… I have every confidence that there will be a revival of activity in the spring, and that during this coming year the country will make steady progress.”
- Andrew W. Mellon, U.S. Secretary of the Treasury December 31, 1929

“I am convinced that through these measures we have reestablished confidence.”
- Herbert Hoover, December 1929

“[1930 will be] a splendid employment year.”
- U.S. Dept. of Labor, New Year’s Forecast, December 1929

10. “For the immediate future, at least, the outlook (stocks) is bright.”
- Irving Fisher, Ph.D. in Economics, in early 1930

11. “…there are indications that the severest phase of the recession is over…”
- Harvard Economic Society (HES) Jan 18, 1930

12. “There is nothing in the situation to be disturbed about.”
- Secretary of the Treasury Andrew Mellon, Feb 1930

13. “The spring of 1930 marks the end of a period of grave concern… American business is steadily coming back to a normal level of prosperity.”
- Julius Barnes, head of Hoover’s National Business Survey Conference, Mar 16, 1930

“… the outlook continues favorable…”
- HES Mar 29, 1930

14. “… the outlook is favorable…”
- HES Apr 19, 1930

15. “While the crash only took place six months ago, I am convinced we have now passed through the worst — and with continued unity of effort we shall rapidly recover. There has been no significant bank or industrial failure. That danger, too, is safely behind us.”
- Herbert Hoover, President of the United States, May 1, 1930

“…by May or June the spring recovery forecast in our letters of last December and November should clearly be apparent…”
- HES May 17, 1930

“Gentleman, you have come sixty days too late. The depression is over.”
- Herbert Hoover, responding to a delegation requesting a public works program to help speed the recovery, June 1930

16. “… irregular and conflicting movements of business should soon give way to a sustained recovery…”
- HES June 28, 1930

17. “… the present depression has about spent its force…”
- HES, Aug 30, 1930

18. “We are now near the end of the declining phase of the depression.”
- HES Nov 15, 1930

19. “Stabilization at [present] levels is clearly possible.”
- HES Oct 31, 1931

20. “All safe deposit boxes in banks or financial institutions have been sealed… and may only be opened in the presence of an agent of the I.R.S.”
- President F.D. Roosevelt, 1933

Categories: Economic Blogs

Obama Mobilizes National Guard, Army Reserves To Fight Ebola

Zero Hedge - Thu, 16/10/2014 - 20:30

With numerous counties and states having declared "States of Disaster" or "States of Emergency", the looming civil rights destruction of martial law domestically draws ever closer.

However, President Obama has decided that, by Executive order:



What is The Individual Ready Reserve? (via Wikipedia)

The Individual Ready Reserve (IRR)is a category of the Ready Reserve of the Reserve Component of the Armed Forces of the United States composed of former active duty or reserve military personnel and is authorized under 10 U.S.C. ch. 1005.



For soldiers in the National Guard of the United States, its counterpart is the Inactive National Guard (ING). As of 22 June 2004, the IRR had approximately 112,000 members (does not include all service IRR populations) composed of enlisted personnel and officers, with more than 200 Military Occupational Specialties are represented, including combat arms, combat support, and combat service support.

*  *  *

#BREAKING Obama issues executive order calling up reserve troops to combat Ebola in Africa

— USA TODAY (@USATODAY) October 16, 2014

WASHINGTON (AP) - Obama authorizes call-up of National Guard, reserves if needed to address Ebola.

— Charlie Kaye (@CharlieKayeCBS) October 16, 2014

In other words, we are sending Vets and reservists to Africa... where they are expected to do what? Shoot at viruses?

*  *  *

BUT they will come into contact with Ebola:

Via Bloomberg Transcript,


KIRBY: Afternoon, everybody. I'm proud to welcome into the briefing room General David Rodriguez, commander of Africa Command. He's here to give you an update on U.S. contributions to the effort against Ebola -- U.S. military contributions to the effort against Ebola in West Africa. And with that, sir, I'll turn it over to you.


QUESTION: Just a clarification on that, please. Will they be in contact with individuals or just specimens?


GENERAL DAVID M. RODRIGUEZ (USA), COMMANDER, U.S. AFRICA COMMAND: They come in contact with the individuals and they do that. And they're -- like I said, it's a -- it's a very, very high standard that these people have operated in all their lives, and this is their primary skill. This is not a -- you know, just medical guys trained to do this. This is what they do for a living.

*  *  *

As USA Today reports,

President Obama has issued an executive order calling up ready reserve troops to combat the Ebola crisis in Africa.


Obama notified Congress of his order Thursday. It reads: "I hereby determine that it is necessary to augment the active Armed Forces of the United States for the effective conduct of Operation United Assistance, which is providing support to civilian-led humanitarian assistance and consequence management support related to the Ebola virus disease outbreak in West Africa."


The Pentagon said it had no immediate plans to send reservists to Africa, saying that the order simply allows the military to begin utilizing reserve/guard forces in our overall response in Northern Africa.


It "doesn't mean that we are deploying these forces, but it gives us the option to do so if we need to," said Air FOrcer Lt. Col. Thomas Crosson, a Pentagon spokesman.


The White House said it didn't know exactly how many reserve troops would eventually be required.

*  *  *

Categories: Economic Blogs

Crash 2014?

Zero Hedge - Thu, 16/10/2014 - 20:29

Is It Fair to compare this sell off to the Great Recession of 2008 and 2009?

Sort of, Kind of, and not really.    No Baby, No bathwater, not yet.    

Let’s check the tape.  SP500 at the peak of the “unrest” in the crisis was at 666.79, March 2009. Dollar index (DXY) during the same week was 89.522.  

Conversely, March 2008 DXY was at 70.698.  SP500 was 1325.61 during the same time period.  The high for the SPX before the crisis was 1578.11. From the high to the low of the crisis the SPX index fell 57.74%. (1578.11-666.79/1578.11)

Crisis SPX volatility


The DXY increased 26.63%.  (89.522-70.698/70.698)

DXY crisis volatility

Let look at the current situation, numerically.  High of the SPX before this sell-off was 2019.26.  Let’s suppose we close near the 1850 levels.  From this recent high to current levels, we have a sell-off of 8.38%. Apples to Apples, we have about 1/6 of the move from 2008. 

Recent SPX volatility

Recent DXY volatility

Let’s bring the dollar back into the picture.  We can infer that the DXY was at 78.906 (May 8, 2014) October 3, 2014 the DXY hit a high of 86.732. The increase in the DXY was 9.91%.  The recent increase is 37.21% of the move during the crisis of 2008.

Equating the DXY increase with the SP500 decrease (26.63/57.74) we get a factor of .4612. Equating the current situation (9.91/8.38) we get a factor of 1.1826.  In order this market to react in a similar way as in  2008/2009 we would need the SPX to move 21.49% lower from the high of 2019.26.  This would mean the SPX would need close at 1585.32 to make the equation work. And yes, this would put the index in a bear market.  

Economically and philosophically speaking, the two situations are difficult to equate.  The Great Recession, The Crisis of 2008, The 2008 Depression, whatever you want to call it, the impedance for the event was on several fronts. Over bloated lending mechanisms,  consumer mortgage based debt, Asset Bases Securities (ABS) euphoria, popularity of Collateralized Debt Obligations (CDO), rampant involvement in Credit Default Swaps (CDS) by institutional and Hedge Funds.  At the peak of this euphoric period, the notional value of ABS, CDS, CDO held by investors was 14-16 times global GDP. To complicate matters, the internals of CDO’s held highly suspect securities and reaped the benefit of high ratings from trusted analysts. These CDOs found their way into balance sheets of banks, funds, and government entities. 

The crisis was not only a perfect storm of complication and insolence but involved multiple industries and worked perfectly into the disruptive nature of events. Since then we witnessed a deleveraging by investors across the globe. The perception of risk and ratings on securities has changed. BASEL III has now entered the picture and financial institutions have revamped their Tier 1 ratios to comply with the new regulations.  As a side comment, perhaps this is why we have a bid in the 10 year US notes.  But that is a topic for our next article.

Let’s return back to the present.  Do we have a market addicted to QE? Yes.  Commodities, Energy, and Raw Materials have dropped significantly in recent weeks.  What is this reason behind this drop?  Potential recession in Europe, Chinese economic slowdown, OPEC countries jockeying for position to gain market share? Are these inter-industry, potentially disruptive events? Not sure, yet.

Putting things into perspective: Here is a slight philosophical and macroeconomic opinion on developed G8 category economies.  No matter where the leading economic are pointing to, a developed economy has a set amount of implicit activity to sustain some level of growth.  Short of a cataclysmic or debilitating event; i.e. a full pandemic EBOLA outbreak that has infiltrated a New York, London, Paris, etc; economic activity will churn to some degree to sustain some semblance of an isolated GDP. 

Let’s recap: We do not have a banking crisis on our hands.  We do not have a systemic financial crisis.  We do have a softening of global macro-economic growth. Certainly, the recent memory of the crisis conjures up unpleasant and extremely volatile conditions.

A check of oil: Although we did not provide analysis of oil in this article, suffice it to say that oil’s low during the crisis of 2008/2009 was $33.2.  The high was $147.27.  This current oil swoon took us from $107.21 to current levels of $81.66.  Certainly, this has been a tighter range of momentum.

The dovetail risk: EBOLA.  This is the only non-quantified aspect of most trader’s models and algos.  This would be a very difficult scenario to quantify with respect to markets, domestic and global economies.  Since we live in an interconnected world, the fact that EBOLA has reached industrialized countries should not be a huge surprise.   The objective is to quantify the potential disruptive nature of EBOLA on society and the functionality of economies. Could this be the proverbial Black Swan? Maybe.  From a social and humanitarian perspective, this is the last thing we need.  This is the possible inter-industry, inter-global economic disruptive event. 

If we continue to receive news that EU countries are at the ready for possible QE-like actions and “dovish” sentiment from the US FED, we will most likely avoid a major relapse of the macro markets.  The proverbial “bid” in the market.  

We will certainly continue with the volatility but instinct and a bit of history dictates that rational thought should supersede “fear”, just don’t forget about EBOLA. 

Categories: Economic Blogs

Dow Drops 6th Day - Longest Losing Streak In 14 Months

Zero Hedge - Thu, 16/10/2014 - 20:08

An ugly dump in stocks early on sent all the major indices to yesterday's lows (and bond yields to yesterday's lows) but for a smorgasbord of reasons (pick from: Bullard "QE4", jobless claims, industrial production, oil rising, lack of Ebola panic, oh and POMO) stock performed the ubiquitous bounce and extended gains quite handsomely before fading back in the afternoon. Volume was considerably lower than yesterday but solid (driven mostly by the dump). All major asset classes ticked together all day with USDJPY, Treasury yields, stocks, and oil all rising with one another. The USD was flat (despite some intraday kneejerks) as were gold and silver. Copper slid lower as oil jerked dramatically higher intraday before falling back (holding above $82). VIX fell modestly to around 25.5. Once again early manic-selling led to late buying panic (but the volume buying was dramatically lower). The Dow closed red for the 6th day in a row - longest losing streak since Aug 2013.


Russell & Trannies were the best performers on the day as the major indices all closed around unchanged despite the best effortsof JPY...


The weakness in stocks (during the European session) is evident from futures...


Ramp volume (which lifted S&P Futs back to VWAP) was weak relative to selling volume


Sectors saw the worst first today as Energy rebounded...


Everything was nicely coupled today...


A very big swing in HY CDX today (looks like hedges being unwound and managers reducing risk into the rally)


VIX decoupled again at the close (same as the last 2 days)...


The USD kneejerked higher and back down around EU and US data to close very marginally higher (-0.9% on the week)


Treasury yields rose 3-4bps on the day - across the curve


Oil surged (but faded back), gold and silver flat, copper lower...


Charts: Bloomberg

Bonus Chart: GOOG....

Categories: Economic Blogs

What Americans Are Thinking (And Asking) About The Fed

Zero Hedge - Thu, 16/10/2014 - 19:56

Via ConvergEx's Nick Colas,

When will the Fed... Raise rates? Stop buying bonds? End quantitative easing? Common questions, those, from Wall Street to Main Street. And – apparently – the online world as well, because they also reflect (literally) what Google autofills when individuals pose inquiries about future monetary policy action in the famously simple Google search box.

Since Google’s autofill algorithm constantly updates commonly entered completions for the most typically searched phrases, it provides telling insight into what Americans are thinking and asking about the Fed. And because Fed related inputs are broader than the more geographically sensitive such as “Movie theater in…” or “Shopping mall in…”, completions offered by the search engine are based on larger populations. Don’t worry - we checked. Here are some of the top autofills that followed our unfinished queries:

“The Fed Will...” Three out of the top four autofills reads “Never taper”, “Not taper”, and “Never stop QE”. The Fed is on track to close out its bond buying program this month, but after almost six years with three shades of QE, it seems the public is reluctant to believe it.


“The Fed is...” Second on the list shows Americans classifying our central bank as “behind the curve”. Autofills may highlight the perception of the Fed as dovish, but not rightly so for those typing the phrase into Google’s search box. In fact, an input of “I want the Fed to” elicits “decrease money supply”.


“Interest rates will...” This phrase conjured mixed responses of “rise” and “go up”, and “fall in 2014” and “never rise”. The third wager is highly unlikely based on fed funds futures, which signal a rise in mid-2015; the question isn’t a matter of direction, but when the grind higher begins.


“Low interest rates are...” “Here to stay” autofilled first, yet “bad for the economy” and “bad” trail behind. Even still, “economic growth” and “economic recovery” appear next to “low interest rates help”. Near-zero rates may have helped stimulate the economy during the early years of the sluggish recovery, but Americans also understand that maintaining these low levels for too long could act as an impediment. “Higher interest rates will help” produce “economy” and “the economy”.


“The economy is...” Besides the doomsayers autofill of “going to implode”, “getting better” and “improving” appear. On the labor market front, “Jobs are…” produce “not enough”, “hiring”, and “hard to find”. An entry of “Wages have” paints the gloomy picture of wage inflation: “not kept up with inflation”, “not increased”, “not stagnated”, “remained stagnant”, and “stagnated”. These tensions underscore the Fed’s patience when it comes to normalizing rates.

Just as Google autofills offers a unique view on how Americans negotiate monetary policy, the Beige Book captures the economic sentiment of each regional Fed District. This information proves particularly useful in gauging the Fed’s decisions since it colors each district’s respective Fed President. Given his or her spot on the Federal Open Market Committee, we provide customary analysis of the report after it is released eight times a year. Please continue reading for our takeaways of the Federal Reserve’s “Current Economic Conditions”.

Although the Fed continued to describe economic growth as “modest” and “moderate”, the pace of growth remained largely unchanged across districts. With that said, many districts experienced “slight” to “moderate” growth in consumer spending, cited strong tourism activity, and noted retailers’ positive outlook for the balance of the year. Nonfinancial services, transportation services, and manufacturing activity also fared better in most districts. Additionally, commercial construction, real estate activity, and banking conditions—particularly commercial loan volumes—improved across most regions.


These steady trends carry over into the two components we watch most closely—inflation and the labor market—which also showed slight improvement or little change. According to the Fed, the state of employment generally stayed the same from the prior Beige Book. Finding skilled workers continued to prove most challenging for many districts, but once again helped the other half of the Fed’s “Dual Mandate”, at least in terms of increased wage pressure for some industries and professions. However, price levels were mostly reported as “unchanged” or “up slightly”.


Given the cautious tenor of the Federal Open Market Committee minutes from last week, central bank monetary policy will likely echo this report in remaining mostly unchanged. Despite the strength of the most recent jobs report, FOMC minutes showed the Fed’s concern about the impact of slow global growth on the U.S. economic recovery. This worry has riled financial markets for over the past week, and recent U.S. economic data, such as today’s weak retail sales number and negative reading for producer prices, will encourage the Fed to stay patient with respect to raising near-term interest rates.

Beige Book Summary: Overall national economic activity continued to expand in September and October, according to the Federal Reserve’s most recent Beige Book released today. Six of the twelve Federal Reserve Districts experienced “moderate” economic growth during the reporting period, while five Districts noted “modest” expansion and Boston’s economic conditions were described as “mixed”. In terms of labor market conditions, growth in employment, wages, and prices remained mostly unchanged. Employers continued to struggle finding skilled workers, which put some upward pressure on wages in certain industries and professions. What does this mean for monetary policy going forward?

While Beige Book findings suggest the U.S. economy continues to improve, this report clearly does not portend a rise in short-term rates over the near future. Given widespread global growth concerns, a large contributor to today’s market sell-off, the Fed will likely wait to see how the slowdown in Europe and China impact the U.S. economic recovery, as touched upon in the latest FOMC minutes.

Categories: Economic Blogs

Caption Contest: America's Independent, Unbiased Media

Zero Hedge - Thu, 16/10/2014 - 19:38

Because every banana republic democracy deserves its fair, impartial, independent and objective media.

  • On the left: Arthur Ochs Sulzburger, Jr, owner of the New York Times
  • On the right: Tom Glocer, CEO of Reuters from 2001 to 2011, director of Morgan Stanley, Merck, the CFR; founder of Angelic Ventures, LP
  • In the midle: Lloyd Blankfein, CEO of the NY Fed Goldman Sachs

h/t @RudyHavenstein

Categories: Economic Blogs

Researchers Expect Over 20 US Ebola Cases In Weeks, "You Don't Want To Know Worst Case"

Zero Hedge - Thu, 16/10/2014 - 19:01

"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!

Categories: Economic Blogs

Your Chance to Profit Alongside America’s Wealthiest Investors

The Daily Reckoning - Thu, 16/10/2014 - 18:44

They say good things come to those who wait…

Do we get a bonus for waiting 82 years?

For the first time since 1933, all U.S. citizens will be able to invest in the most profitable market in history.

It doesn’t matter who you are.

It doesn’t matter who you know.

And it doesn’t matter what your net worth or income is.

The market I’m talking about is the market for early-stage investments…

…early-stage investors earn 27% annual returns — in good years and bad.

The private stock market.

And today we’re going to tell you when the private market will finally open its doors.

As long-time readers of my Crowdability website know, early-stage investors have been earning staggering returns for decades.

The 5 most profitable investments in history were all made in the private markets.

Folks that got in early on companies like Coke, Microsoft, and Google turned small investments into fortunes.

But even forgetting about “homeruns” for a minute, on average, early-stage investors earn 27% annual returns — in good years and bad.

And for the first time in your life, you’ll now have the chance to do the same thing.

Let’s take a quick look at some of the critical events from Congress and the SEC that have gotten us where we are today — and then look at the timeline for the future.

So let’s go back in time a bit…

1. September 23, 2013, last fall, was a big day.

That’s when Title II of the JOBS Act went live.

Title II allows private companies to advertise that they’re accepting new angel investors. A company can now put a billboard up in Times Square if it wants to.

2. A month later, on October 23, 2013, the SEC issued their proposal on Title III.

Title III is the long-awaited “crowdfunding” component to the JOBS Act.

This is what allows ALL citizens, regardless of their income or net worth, to invest small amounts of capital into private companies and receive equity in exchange.

A 90-day commenting period followed — this is where outside experts and regulators add their two cents.

Then the SEC started its deep review of all these comments.

3. This past summer, on August 8, 2014, members of a bi-partisan house committee called the “Committee on Innovation and Technology” sent a letter to the SEC Chair, Mary Jo White.

In the letter, the committee gave the green light on Title III…

They told Mary Jo White in no uncertain terms that they were ready for immediate finalization of Title III Rules.

And that leads to where we are now…

After several recent meetings we’ve had with our industry contacts, we believe we’re finally in the home stretch — the private stock market is on the verge of opening its doors.

Recently, we spoke with Ron Miller, the founder of StartEngine and one of the most vocal and influential advocates of Title III crowdfunding.

Ron’s started and “exited” from four different companies, including taking one of them public on the Nasdaq — so he knows start-ups, and he’s well-known by the decision-makers at the SEC.

According to Ron, there’s a 90% chance that Title III will go into effect in Q1 2015…

And there’s even a possibility it will go into effect this year…

If you actually want to become WEALTHY, you need to invest your money like the wealthy do…

Remember: that’s the date that all citizens will be able to invest in the private market — regardless of their income or net worth.

Evidently, Chair White wants Title III done “in the near term.”

Bottom Line: We don’t know if we’re in the 8th inning, the 9th, or if we’re going to end up going into extra innings.

But one thing is clear: we’re in the home stretch of this game.

And that means that it’s time for you to get ready.

If you put your money into stocks and bonds like the rest of middle-class America, you’re going to crawl along and make middle-class returns…

You’ll be lucky to make 8% a year.

If you actually want to become WEALTHY, you need to invest your money like the wealthy do — and now you’ll be able to.

If you have any questions about the JOBS Act, Title III or the Private Stock Market, feel free to drop us a line at:

Happy Investing.

Best Regards,

Wayne Mulligan
for The Daily Reckoning

Ed. Note: When Title III eventually becomes a reality, there are going to be so many stories of new millionaires popping up, you’ll probably get sick of hearing about them. That is… unless you’re one of them. That might sound like hyperbole now, but just wait… This untapped market has an almost limitless amount profit potential. Can you really afford to miss out on it? Click here now to sign up for the FREE Tomorrow in Review e-letter — a free service designed to put you in the right position to make huge gains when Title III finally passes. Once inside, you’ll receive daily opportunities to discover what to do and how to profit. So don’t wait. Sign up for FREE, right here, to get started.

Categories: Economic Blogs


Zero Hedge - Thu, 16/10/2014 - 18:33

Submitted by Lance Roberts of STA Wealth Management,

Just recently one of the greatest fairytale movies ever made, “The Princess Bride” had its 27th 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)

1) Eurozone 2) Earnings 3) Deflation 4) Commodities 5) US Dollar 6) Interest Rates 7) Economic growth 8) Technical underpinnings 9) Volatility 10) Complacency 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.

Categories: Economic Blogs

Politicians Try to Make Ebola a Partisan Issue for the Upcoming Election … But BOTH Parties Dropped the Ball

Zero Hedge - Thu, 16/10/2014 - 18:25

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.


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 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 an absolute train wreck in dealing with Ebola.

Additionally, managers of the private hospitals are gagging the nurses, so they can't say what's really going wrong.  For example:

In a Washington Post story on October 12, about how many US hospitals seem not well prepared for Ebola infected patients, appeared this from Bonnie Castillo, director of Registered Nurse Response Network, part of the union, National Nurses United,


Castillo said the union has been trying to contact nurses at Texas Health Presbyterian Hospital, where Thomas Eric Duncan, the Liberian man diagnosed with Ebola, died Wednesday.


‘That hospital has issued a directive to all hospital staff not to speak to press,’ Castillo said. ‘That is a grave concern because we need to hear from those front-line workers. We need to hear what happened there. … They have them on real lockdown. There is great fear. This hospital is not represented by a union. Our sense is they are afraid to speak out.’

The Los Angeles Times story included,

The Dallas nurses asked the union to read their statement so they could air complaints anonymously and without fear of losing their jobs, National Nurses United Executive Director RoseAnn DeMoro said from Oakland.



The AP story of October 15 stated,

The Presbyterian nurses are not represented by Nurses United or any other union. DeMoro and Burger said the nurses claimed they had been warned by the hospital not to speak to reporters or they would be fired. ***

Covering up information vitally needed by health care professionals, other institutions, the government, etc to better manage a potentially fatal disease that is already epidemic in other countries appears completely unethical.  Doing so to preserve the reputation of managers seems reprehensible.  But the implication of the recent stories is that is what happened.

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

Categories: Economic Blogs

HFT Firm Athena Engaged In Massive Closing Price Manipulation, Called It "Gravy"

Zero Hedge - Thu, 16/10/2014 - 18:12

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.

Categories: Economic Blogs

Falling Oil Prices Could Push Venezuela Over The Edge

Zero Hedge - Thu, 16/10/2014 - 18:00

"There is nothing good to say about the state of Venezuela’s economy, and this isn’t helping," warns Danske's Lars Christensen as tumbling prices for Venezuela’s oil are threatening to choke off funds (oil is 95% of exports) needed to pay debt.. and that is clear from the collapse of bond prices. The Maduro government desperately needs a rise in oil prices, but Saudi Arabia has so far rebuffed calls for an emergency meeting as it pursues a strategy of waiting out higher cost competitors. OPEC does not plan on meeting until Nov. 27. That is an eternity for a country that is beginning to unravel.



Submitted by Nick Cunningham via,

Oil prices continue to slide, putting enormous pressure on oil producers around the world.

Saudi Arabia has insisted it is willing to live with lower prices for quite a while as it seeks to maintain a grip on its market share. Kuwait also indicated its willingness to slash prices in order to keep output level. That sent oil prices lower on Oct. 14, as the markets reacted with a bit of surprise to the unwavering stance by OPEC’s leading members: WTI dropped 4.5 percent.

Lower oil prices are putting a strain on all producers, including Saudi Arabia, but Riyadh is hoping that the economic pain will be much greater for some of its competitors. That includes U.S. shale producers, which have higher average production costs.

In fact, an estimated 2.8 percent of total worldwide oil production could become unprofitable if oil prices drop below $80 per barrel, according to a new report from the IEA. Canadian oil sands projects topped the list, but U.S. shale might not be far behind.

But while Saudi Arabia tests the mettle of North American producers, it could be Venezuela that is the most vulnerable. As a fellow OPEC member, Venezuela has been the most vocal about the need to cut oil production and has called for an emergency meeting of the 12-member oil cartel. That is because Venezuela is in a much weaker position than many of the other member countries, and the recent drop in prices has raised alarm in Caracas.

Using state-owned oil company PDVSA as a piggy bank has allowed the Venezuelan government to increase social spending over the last decade, a key political objective of the late President Hugo Chavez and his successor, Nicolas Maduro. However, using oil revenues for a wide array of spending priorities has also starved PDVSA of money needed for investment in order to boost oil production, let alone keeping output level. Since 2000, Venezuela has seen its oil output drop from 3.5 million barrels per day (bpd) down to 2.5 million bpd.

The bad news for President Maduro is that there was major unrest earlier this year even when oil prices were above $100 per barrel. That is because oil makes up 97 percent of Venezuela’s foreign earnings, and the country needs oil prices of around $120 per barrel for its bloated budget to break even.

Venezuela is in an economic crisis. Annual inflation is estimated to be in excess of 60 percent. The country’s economy actually shrank at a rate of 5 percent in the first six months of 2014. Shortages of food, medicine, shampoo, diapers, and other basics are so common that the government rolled out a plan this past summer to fingerprint people at grocery stores.

Crime is so rampant in the capital that people are afraid to go out at night. For those who can afford it, leaving the country has become the best option.

The government is heavily indebted, and Venezuela’s bonds are now competing with Ukraine’s for the mantle of the world’s riskiest. With bond yields surpassing 16 percent, Venezuela cannot keep up. There is a 50-50 chance of default within the next two years, according to credit rating agency Standard & Poor’s.

The sudden 20 percent decline in oil prices since June is compounding the problem and has the potential to throw the country into crisis. “Venezuela’s oil prices have been high for several years now, and the country is still struggling to pay its debt at those prices,” Russ Dallen of Caracas Capital Markets told The Wall Street Journal. Lower oil prices could bring things to a head.

The Maduro government desperately needs a rise in oil prices, but Saudi Arabia has so far rebuffed calls for an emergency meeting as it pursues a strategy of waiting out higher cost competitors. OPEC does not plan on meeting until Nov. 27. That is an eternity for a country that is beginning to unravel.

Categories: Economic Blogs

3 Examples of How the U.S. Is Totally Unprepared for an Ebola Outbreak

The Daily Reckoning - Thu, 16/10/2014 - 17:31

Dammit. We really tried not to bring up Ebola today…

We wanted to lighten the mood. We had two hilarious bits lined up. One about China’s weird security measures and another on how to make money twerking (both had to be cut for lack of space. Tomorrow.)…

Get a few chuckles today. Release some tension. That was the plan.

Alas, duty calls. Some pretty heavy developments have surfaced in the past 24 hours.

And we couldn’t let them go unreported.

As you probably know by now, another Texas nurse has been infected.

Her name is Amber Vinson. She helped treat Thomas Eric Duncan, the Liberian who fled to America after coming into contact with the virus.

Come to find out…

Even after coming into close contact with Duncan, the CDC told her that it was OK to fly on a commercial airplane to Cleveland.

Then when it came time for her to fly back, they gave her the thumbs-up again…

This time after she told them she had symptoms.

Yep. Contrary to what the CDC initially reported, they told her to fly after she called them to tell them she was experiencing Ebola-like symptoms.

Seriously. She was on the plane in full transmission mode.

We learned this from CBS News’ Medical Correspondent Dr. John LaPook.

According to his report, Vinson called the CDC several times before boarding a plane back to Dallas from Cleveland.

She called to tell them she was showing symptoms true to Ebola and see what steps she should take.

CDC’s response? It’s fiiine. Get on the plane!

While at first, the CDC denied it, they later came out and said it did happen.

“This nurse, Nurse Vinson,” Dr. LaPook said, “did in fact call the CDC several times before taking that flight and she said she has a temperature, a fever of 99.5, and the person at the CDC looked at a chart and because her temperature wasn’t 100.4 or higher she didn’t officially fall into the category of risk.”

Caption: Obligatory facepalm

“Frontier Airlines is working closely with the CDC to identify and notify all passengers on the flight,” CBS News reports.

[Is that supposed to be comforting?]

“The airline also says the plane has been thoroughly cleaned and was removed from service following CDC notification early Wednesday morning.”

[You hear that big “BUT” stomping toward you?]


[Yep. There it is...]

“…according to Flighttracker, the plane was used for five additional flights on Tuesday before it was removed from service. Those flights include a return flight to Cleveland, Cleveland to Fort Lauderdale–Hollywood International Airport (FLL), FLL to Cleveland, Cleveland to Hartsfield–Jackson Atlanta International Airport (ATL), and ATL to Cleveland.”

One more time…

From a different angle

Let’s back up. How do not one — but two — Dallas nurses get infected?

Maybe because they haven’t been properly trained… or maybe it’s something much more harrowing.

The former is a possibility:

National Nurses United (NNU), during a conference call with reporters this week, announced that most Dallas nurses had no clue what to do when Duncan Thomas was brought to the hospital.

And that’s not all they revealed. Far from it. See below.

(We’ve been following their Twitter feed. Highly recommend it. Extremely telling. Visit it here for the latest.)

Here are some highlights…

“There was no advance preparedness on what to do with the patient, there was no protocol, there was no system,” one NNU spokeswoman said.

Officials, on the other hand, claimed that the first health care worker, Nina Pham, must’ve breached protocol.

On the contrary: NNU reported that the only Ebola training Texas Presbyterian (the hospital Duncan was quarantined at) offered was optional for the staff. And the guidelines were constantly changing.

“When it came time to deal with it,” alt-media blog Bustle reported, “workers were allegedly allowed to choose whichever protocol they wanted.”

Pick what you like. Sounds super effective.

Oh. Here’s another gem that just popped up on our newsfeed…

As you might’ve seen in the Vice video we shared last week, there’s no room at all for error when dealing with the infected.

None. Zilch. Nada.

Especially considering the bombshell the Center for Infectious Disease Research and Policy (CIDRAP) dropped back in September…

According to Breitbart, CIDRAP warned the CDC and WHO as far back as September 17 that the risk of airborne aerosol infection is real.

“Being at first skeptical that Ebola virus could be an aerosol-transmissible disease,” reads the article written by two national experts on respiratory protection and infectious disease transmission, Dr. Brosseau and Dr. Jones, “we are now persuaded by a review of experimental and epidemiological data that this might be an important feature of disease transmission, particularly in healthcare settings.”

Also, they wrote that “We believe there is scientific and epidemiologic evidence that Ebola virus has the potential to be transmitted via infectious aerosol particles,” including exhaled breath.

They’re warning that surgical facemasks won’t cut it. Healthcare workers must outfit themselves with “full-hooded protective gear and powered air-purifying respirators,” Breitbart reported.

Not just any respirator. The go-to respirator was the N95. Unfortunately, says the report, “N95 filtering facepiece respirators seem inadequate against microorganisms.”

But the most disturbing part of the story is this:

“Guidance from the CDC and WHO recommends the use of facemasks for healthcare workers providing routine care to patients with Ebola virus disease and respirators when aerosol-generating procedures are performed.”

[This is where it gets real dumbfounding.]

“(Interestingly, the 1998 WHO and CDC infection-control guidance for viral hemorrhagic fevers in Africa, still available on the CDC website, recommends the use of respirators.)”

Three facepalms in one day? Too excessive.

“Facemasks,” the article goes on, “do not offer protection against inhalation of small infectious aerosols, because they lack adequate filters and do not fit tightly against the face.

“Therefore, a higher level of protection is necessary.”

Most body fluids are capable of creating short-living aerosol.

Vomit, diarrhea, blood and saliva: All of them are capable of creating inhalable particles in the immediate vicinity. Though they are said to evaporate quickly, anyone within reach could be in danger.

The CDC had to have considered this information when CIDRAP informed them of it. And it shouldn’t have come as a shock: they recommended it over a decade and a half ago!

Yet they still let her on the plane.

As a side note, if anyone cares, wanna know what Obama’s up to?

According to the Golf Channel, he just swatted his 200th round of golf as President.

Good for him.

Oh, what the hell…

The absurdity is so overwhelming, even the bird looks worried…

We recently received the screening protocols for Johns Hopkins Hospital from a friend on the inside.

Not only are the Ebola protocols vague, they don’t emphasize how to keep from getting infected while screening a potential Ebola patient.

“Has the patient traveled to Sierra Leone, Guinea, Liberia, Nigeria or the Democratic Republic of Congo within the past 21 days?” the protocol reads in big red words.

“If YES, give a mask to the patient to wear, escort patient to a private room and shut the door and immediately notify a clinician (designated nurse or MD). Immediately place the patient on Contact and Droplet Precautions and the designated clinician will complete the screening form below.”

Contact precautions means nobody touch the patient.

Droplet precautions?

Unfortunately, warding off an Ebola infection is a little more complex…

First, the mask pictured is definitely not going to cut it. Officials have already admitted that Ebola could be spreading through aerosols. The possibility is no longer controversial.

Even if the possibility is minute, we should upgrade. A simple mask isn’t enough.

Also, healthcare workers have to be extremely careful when taking off the gear.

The safest way to take off the gear is to spray it down with bleach beforehand.

If they can’t do that, there’s a specific way to take off just the contaminated gloves so their hands don’t get the virus on them.

Not perfect. But we hope they’re at least being told this.

Apparently not.

OK. That’s what we gathered today.

We have a feeling after the latest news this is going to be a bumpy ride. Hold onto your hat.


Chris Campbell
for The Daily Reckoning

Ed. Note: Ebola is real. It’s serious. And the world could be on the brink of a global epidemic. It would be wise to do these three things: stay calm, prepare, and stay informed. The latter is where Laissez Faire Today can help… Chris Campbell has been on the case since Duncan Thomas touched down, and he won’t stop reporting the unvarnished truth until Ebola is no longer a threat. Click here to sign up today for Laissez Faire Today, for FREE, right now. You can also secure yourself a copy of Laissez Faire’s Ebola Pandemic Survival Guide — available on Amazon right now for only 99 cents — by clicking right here.

Categories: Economic Blogs
Syndicate content