The Source Of The Next Crisis

Authored by Kevin Muir via The Macro Tourist blog,
In 1992, the CBOE hired Robert Whaley to develop a tradeable volatility product on equity index option prices. A year later, in 1993, the VIX was born when the CBOE started publishing real-time quotes on the implied volatility of the calculated S&P 500 index options. In those early days, I very much doubt Robert ever imagined his volatility index would someday be the cornerstone of some of the world’s most actively traded ETFs. In fact, for the next decade, no VIX instruments traded at all, and it wasn’t until 2004 that the VIX future was listed. And then, it took another five years before the first ETF based on those futures hit the exchanges. But what a ride it’s been.
Nowadays, everyone knows the VIX index. It’s no longer some arcane index reserved for derivative traders, but instead a highly liquid, easily traded way to bet on future implied volatility. And I doubt most participants realize that last part. They are not betting on current volatility. They are not betting on future volatility. They are betting on future implied volatility. Remember that point. It’s important. We’ll come back to it later.

This post was published at Zero Hedge on Nov 23, 2017.

NFL Ratings Slump Worsens As ESPN Forced To Slash $80 Million In Salary Costs

As the NFL continues to try to address the ongoing civil war between Dallas Cowboys owner Jerry Jones and Commissioner Roger Goodell, not to mention the intermittent hostile fire from the White House, viewers are increasingly deciding they’ve had enough and are abandoning professional football viewership altogether. As the NY Post points out today, the embattled league saw ratings dip 6.3% in Week 11 meaning 1 million fewer people tuned in to see players take a knee during the national anthem versus last year.

The TV audience for NFL games steepened its slide in Week 11, losing 1 million viewers versus last year’s season-to-date average.
The 6.3 percent slump – worsening from comparable declines of 5.6 to 5.7 percent during the previous three weeks – plagued a week whose off-the-field drama made gridiron tackling seem almost tame by comparison.
After starting 11.8 percent behind last year’s TV audience for NFL games in Week 1, league viewership had either held its own or narrowed the gap through Week 8.

This post was published at Zero Hedge on Nov 23, 2017.

Michigan Township Blocks Nestle From Bottling, Reselling Its Groundwater

A small Michigan township is making a stand against Nestle, temporarily blocking the company from pumping millions of gallons of groundwater for bottled water. Citizens near Evart, Michigan became outraged when Nestl proposed to build even larger pipelines to increase the flow of water to its plant in Standwood. Global News CA details the local resistance to Nestl’s proposed expansion to collect even more ground water:
The added capacity provided by the proposed booster pump would make it possible for Nestl to extract an estimated 1,500 litres of groundwater per minute, representing more than 4.2 million bottles of water in a 24-hour period. That’s equal to 794 million litres of water annually.
As explained by Global News CA, ‘the company is currently limited to pumping 945 litres per minute, up significantly from its pre-2015 cap of 565 litres per minute.’
Nelson Switzer, Nestl Waters’ chief sustainability officer told the Stamford Advocate, ‘just because we’re putting in the application for 400 [gallons] doesn’t mean it’s going to run at 400 gallons per minute most of the time. Switzer added, ‘the fact is we want to make sure t

This post was published at Zero Hedge on Nov 23, 2017.

Europe Rebounds From Chinese Rout After Stellar PMIs; US Closed For Holiday

#Eurozone output #PMI hits 79-month high (57.5) in November. Employment rises to greatest extent in 17 years. pic.twitter.com/hCY1Dx9uzh
— Markit Economics (@MarkitEconomics) November 23, 2017

Nothing can keep the BTFD spirit at bay in Europe this Thanksgiving morning.
Having started the session on the back-foot after the biggest Chinese stock market tumble in 17 months (the SHCOMP dropped -2.3%, most since June 2016) amid tighter liquidity conditions as a result of today’s Thanksgiving holiday in the US and attempts by regulators to rein in asset management firms and the micro-loan market, the negative sentiment was short-lived however, a slew of blockbuster November Eurozone PMIs, among which the highest output print in 79 months, with the highest employment number in 17 years, helped revive sentiment in Europe – and brought the Eurostoxx back to green on the session. Among the notable composite PMI prints:
France 60.1 vs est. 57.2 Germany 57.6 vs ext. 56.7 Euro zone 57.5 vs est. 56.0 Markit noted this was a multi-year highs seen for all main indicators of output, demand, employment and

This post was published at Zero Hedge on Nov 23, 2017.

Thanksgiving Day 2017

‘Do not indulge in dreams of having what you have not, but reckon up the greatest of the blessings you do possess, and then thankfully remember how you would crave for them if they were not yours.’
Marcus Aurelius, Meditations
“We pray for the big things, and forget to give thanks for the ordinary, small, and yet really not so small, blessings.’
Dietrich Bonhoeffer
“Rejoice in the Lord always; and again I will say, rejoice; let your gentleness and consideration to be known all, for the Lord is always near. Do not be anxious about anything, but with prayer, and by supplication, and with thanksgiving, let your needs be made known unto God. And the peace of the Lord, which surpasses all understanding, will guard your hearts and your minds, in Christ Jesus.”
Philippians 4:4-7

This post was published at Jesses Crossroads Cafe on 23 NOVEMBER 2017.

Blain: “The High-Yield Market Is Where The Bond Supernova Will Erupt”

It’s a US holiday and markets will be thin through today. To show my solidarity with our American cousins, I’m off for a proper lunch with clients in the West End and Malbec rules* will probably apply.
What happened in China this morning? Stocks down sharply (the steepest decline this year), on the back of rising inflation worries. Dong! – that strikes a chord. It seems yesterday’s Porridge – dealing with the threat of an inflation shock – was perfectly timed. Suddenly everyone is waking up to the I-threat.
China is in sharp focus – bond yields keep climbing despite the PBOC injecting liquidity. My colleague Ara Levonian downstairs on the BGC floor points out we’ve got over $1 trillion of Chinese corporate debt coming up for refinancing next year. Put all the clues together: an inflationary environment, supply-side policies driving up wages and inflation, rising rates, and a large number of highly geared companies facing rate risk?
Do you think it might end up messy? (Messy? Yes, but terminal probably not.. the Chinese can press the money spigot again and again.)
And how different is the US? That’s why I’m watching the high-yield market – that’s where the bond supernova is going to erupt. Just like the next Icelandic volcano we can feel the high-yield market spluttering beneath our feet as an ominous cloud of steam rises above the glacier….

This post was published at Zero Hedge on Nov 23, 2017.

The Best-Laid Plans…

It happened on November 20, 2017. After 25 years, it was time to say goodbye to the Georgia Dome in Atlanta.
It cost Georgia taxpayers $214 million to build, 1989-1992. In today’s dollars, that is $385 million.
The new Mercedes-Benz Stadium is going to replace it, right next door. Total public funding: $600 million.


This post was published at Gary North on November 22, 2017.

Chinese Stocks Plummet: Shanghai Tumbles Most In 17 Months As Bond Rout Spreads

The euphoria from the year-end melt up in Europe and the US failed to inspire Chinese traders, and overnight China markets suffered sharp losses, with the Shanghai Composite plunging 2.3%, its biggest one day drop since June 2016, over growing fears that the local bond rout is getting out of control. Both the tech-heavy Chinext and the blue chip CSI 300 Index dropped over 3%, as the sharp selloff accelerated in the last hour, as Beijing’s “national team” plunge protection buyers failing to make an appearance. There were sixteen decliners for every one advancing share.
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In addition to tech, consumer non-cyclical and health-care sectors, the hardest hit names were banks such as ICBC, Ping An Insurance and Kweichow Moutai. Over in Hong Kong, the Hang Seng Index slid 1 percent from a decade-high, one day after closing above 30,000.

This post was published at Zero Hedge on Nov 23, 2017.

Thanksgiving: A Celebration of Domestic Life

If recent years are any indication, this year we’ll be treated, yet again, to a smattering of articles about the supposed politics behind Thanksgiving, and how the bad guys (whether on the left or right) are opposing all things decent by refusing to celebrate the holiday in a way that promotes the correct political agenda. On one side are the leftists who feel compelled to use Thanksgiving as an extension of Columbus Day, in which we’re all reminded that it’s a bad thing to steal from indigenous tribes. One the other side are the conservatives who insist on making Thanksgiving into a day celebrating a national origin story. July 4, it seems, isn’t enough for them.
Unfortunately, both of these efforts at hijacking the holiday for political battles refuse to go away. Fortunately, it appears that the vast majority of Americans don’t care, and most plan to enjoy the holiday in the way it has been enjoyed for about 150 years: as a celebration on domestic life and economic prosperity.
The Evolution of Thanksgiving As a holiday, Thanksgiving has gone through several different forms. As described in James Baker’s study of the holiday, Thanksgiving: The Biography of An American Holiday, there had been a variety of Thanksgiving traditions practiced throughout the US, but few of them closely resembled the Thanksgiving we now know today.

This post was published at Ludwig von Mises Institute on November 23, 2017.

UK Trader Fined 60,000 Pounds For Outsmarting Algos

Yet another UK trader is being punished by overzealous regulators for an accomplishment that should instead have earned him accolades: Outsmarting the machines.
In a case that echoes some of the circumstances surrounding the scapegoating of former UK-based trader Nav Sarao, former Bank of America Merrill Lynch bond trader Paul Walter has been fined 60,000 pounds by the FCA for a practice that regulators call ‘algo baiting’.
Algorithm baiting is similar to spoofing – a practice that has been banned by stock-market regulators as those markets have embraced high-frequency trading practices that have broken markets and made them more vulnerable to this type of manipulation. But fixed income markets, like the Dutch loan market Walter is accused of manipulating, have been slower to embrace HFT-type trading. Because of this delay, Walter is a pioneer. Using BrokerTec, a popular fixed-income trading platform, Walter would place a bunch of bids for a given bond, triggering trend-following algos to follow suit. Then he would quickly cancel the bids. Here’s a more complete explanation per the Financial Times.
Mr Walter entered bids for Dutch state loans that pushed up their price. Then, when other algorithmic trades followed him in response and raised their bids, Mr Walter sold to them and cancelled his quote. This happened 11 times between July and August 2014 while he was working for the bank, the FCA said, while on one occasion he did the opposite. He netted a total of 22,000 profit from this ‘algo baiting’.

This post was published at Zero Hedge on Nov 23, 2017.

The Debt Bubble Is Beginning To Leak Air

‘The current state of credit card delinquency flows can be an early indicator of future
trends and we will closely monitor the degree to which this uptick is predictive of
further consumer distress.’ – New York Fed official in reference to rising delinquency rate of credit cards.
The recent sell-off in junk bonds likely reflects a growing uneasiness in the market with credit risk, where ‘credit risk’ is defined as the probability that a borrower will be able to make debt payments. This past week SocGen’s macro strategist, Albert Edwards, issued a warning that the falling prices of junk bonds might be ‘the key area of vulnerability that could bring down the inflated pyramid scheme that the Central Banks have created.’
The New York Fed released its quarterly report on household debt and credit for Q3 last week. The report showed a troubling rise in the delinquency rates for auto debt and mortgages. The graph to the right shows 90-day auto loan delinquencies by credit score. As you can see, the rate of delinquency for subprime borrowers (620 and below) is just under 10%. This rate is nearly as high the peak delinquency rate for subprime auto debt at the peak of the great financial crisis. In fact, you can see in the chart that the rate of delinquency is rising for every credit profile. I find this fact quite troubling considering that we’re being told by the Fed and the White House that economic conditions continue to improve.

This post was published at Investment Research Dynamics on November 22, 2017.

Brexit Budget – Grim Outlook As UK Economy Downgraded

– Brexit budget – Grim outlook as UK economic forecasts downgrade
– UK Chancellor uses housing market policy as smoke-screen for deteriorating economy
– UK budget matters more than ever due to BREXIT risks
– Policy on stamp duty will fail to aid worsening housing market
– Real GDP expected to grow by just 1.5%, 40% less than projections 2 years ago
– Households now face an unprecedented 17 years of stagnation in earnings
– Critics claim Budget failed to calm Brexit uncertainty
– UK and especially London property market at ‘breaking point’
Editor: Mark O’Byrne
Yesterday UK Chancellor Philip Hammond’s long-awaited Autumn Budget was delivered to the Houses of Parliament. He was praised for a ‘good budget in political terms’ and for talking up the UK economy, telling his contemporaries that that it is ‘confounding those who talk it down’ and that ‘those who underestimated the UK, do so at their peril’.

This post was published at Gold Core on November 23, 2017.

Need A Jumbo Jet? China’s E-bay Can Help You With That…

In a first for not just China, but the entire world, Alibaba’s online auction website, Taobao, has successfully auctioned off two Boeing 747-400 jumbo jets for a combined $49 million. The jets were bought by Chinese cargo airline SF Airlines after they were seized by courts during Jade Cargo’s bankruptcy proceedings in 2013. According to the South China Morning Post, the successful online auction was conducted after six failed private auctions.
Two Boeing 747-400 Freighters were sold on Tuesday on Taobao, the online shopping platform owned by Alibaba, for a combined 322.8 million yuan (US$49 million), reflecting the first time such jets were sold via online auction in China, and possibly the first-ever globally at online auction.
The sale was concluded after six failed attempts at offline private auctions organised by the seller – a state court – in the past few years.
SF Express, China’s largest private courier, bought the jets from the Intermediate People’s Court in the southern city of Shenzhen, which seized them after Jade Cargo International filed for bankruptcy in 2013.
Three Boeing 747-400s had been put up for sale on Taobao’s judicial auction arm from Monday to Tuesday. One of the jets parked at the Shenzhen Bao’an International Airport went unsold, with a starting bid of 122.6 million yuan.

This post was published at Zero Hedge on Nov 22, 2017.

Monaco Has To Build Into Mediterranean Sea To House Super-Rich

The principality of Monaco is about the same size as New York’s Central Park and slightly bigger than London’s Regent’s Park. Besides hosting the Monaco Grand Prix it is home to thousands of multi-millionaires, including tennis player Novak Djokovic and F1 driver Lewis Hamilton, who enjoy the fact that Monaco does not levy income tax or capital gains tax. As the Financial Times notes.
Monaco’s enduring popularity for tax exiles also rests on its year-round climate, unrivalled security and its wealthy, multicultural society…
It has an opera house, a philharmonic orchestra and concerts throughout the year. It has good transport links: Nice International Airport is just six minutes away by helicopter.
The problem for Monaco is that more and more millionaires want to live there – even though property is the second most expensive in the world after Hong Kong – and there simply isn’t the space. Furthermore, the average Monegasque home only changes hands once every 37 years.

This post was published at Zero Hedge on Nov 23, 2017.

Whose Private-Sector Debt Will Implode Next: US, Canada, China, Eurozone, Japan?

Canadians, fasten your seat-belt. Here are the charts. The Financial Crisis in the US was a consequence of too much debt and too much risk, among numerous other factors, and the whole house of cards came down. Now, after eight years of experimental monetary policies and huge amounts of deficit spending by governments around the globe, public debt has ballooned. Gross national debt in the US just hit $20.5 trillion, or 105% of GDP. But that can’t hold a candle to Japan’s national debt, now at 250% of GDP.
And private-sector debt, which includes household and business debts – how has it fared in the era of easy money?
In the US, total debt to the private non-financial sector has ballooned to $28.5 trillion. That’s up 14% from the $25 trillion at the crazy peak of the Financial Crisis and up 63% from 2004.
In relationship to the economy, private sector debt soared from 147% of GDP in 2004 to 170% of GDP in the first quarter of 2008. Then it all fell apart. Some of this debt blew up and was written off. For a little while consumers and businesses deleveraged just a tiny little bit, before starting to borrow once again.

This post was published at Wolf Street on Nov 22, 2017.

ThanksFRAUD Day

I often write on the plethora of US-based frauds and scams, both political and business-oriented.
Fraud is the most-profitable business model today, and has been for close to two decades. It is why I’m out of the business world and will not re-enter it. It is why despite having what I believe is a ground-breaking home automation, security and control application that runs on $35 computers (which means there’s a hell of an opportunity to bundle the software with those and sell ’em hella-cheap, undercutting all the other guys plus having a nice installation business to go with it) I am only willing to do so on a “buy it all and you do it” basis.
Companies like Amazon exist with the sort of “valuation” they have only because of these schemes and scams. Cost-shifting (otherwise known as cross-subsidization) for the purpose of destroying competitors is a felony and has been for over 100 years (15 USC Chapter 1) whether you succeed or not. That is, the very attempt is a criminal act. Yet despite continual evidence in the form of quarterly filings that document the company does not make money (on an all-cost-in basis) on their product sales along with near-daily professions of the “next” company being “Amazoned” (that is, put out of business or severely harmed by this practice) in the major business media on television and in print, along with open cheering on of such conduct by same not one single indictment has ever issued.
Facebook, it appears from my work, to be deliberately detecting the use of ad blockers and then gaming their software so as to just meet the so-called “deliverable” standard for ads to people who have blocked them. That is, since I have a blocker on my desktop I would not normally generate any revenue for Facebook from advertisers. But I have observed, in a 100% repeatable manner, that a “display” ad will remain visible until the minimum pixel count and time is met (1 second, etc) and then disappear and a video ad will do so for 2 seconds with 100% pixels — and then likewise disappear. In other words the company is billing the advertisers for content they know damn well I blocked and never see. What do you call billing someone for something they don’t get on purpose, because that’s what it looks like to me. Oh, and how many billions have been taken from advertisers this way? Nobody but Zuckerpig knows but I bet it’s not a small number.

This post was published at Market-Ticker on 2017-11-22.

How to Beam Factories to Mars

In a recent blog post, Paul Krugman tried to illustrate a point about the GOP tax cut plan by imagining interplanetary trade with Martians. (At least he’s now entertaining voluntary transactions, rather than an alien invasion.) Yet in his zeal to downplay the potential benefits to workers from a corporate tax cut, Krugman ends up shortchanging the versatility of markets. As a teaching exercise, I’ll walk through the full implications of Krugman’s story about Martians, to show the elegance of capitalism.
Krugman’s Martian Scenario The context for Krugman’s fanciful thought experiment is the GOP plan to cut the corporate income tax rate from 35 to 20 percent. In order to sell this plan as pro-worker, the GOP defenders are arguing that capital is very mobile on the international market. Therefore, global investors can be picky, and must earn the same after-tax rate of return (due account being made for risk), wherever they invest. This means – so the GOP argument continues – that a large cut in the US corporate tax rate will simply invite a flood of foreign capital into the US, pushing down the pre-tax rate of return to reestablish equilibrium across all countries. Yet this process helps American workers, who are now mixing their labor with a larger capital stock. Because labor productivity is higher with more tools and equipment, wage rates end up rising. Thus, so the argument concludes, the primary beneficiaries of the GOP tax cut won’t be international capitalists, but instead will be American workers.
As you can imagine, Krugman has been doing his best to throw cold water on this chain of reasoning. One line of attack has been the casual assumption that a flood of new foreign investment could come into the United States and quickly increase the capital stock, in order to push down the earnings of capital (while raising the earnings of workers). Krugman argues that because global markets are not fully integrated, that the adjustment process could take decades, meaning that workers would have to wait a long time to see the alleged benefits from the big tax cut on corporations.

This post was published at Ludwig von Mises Institute on 11/22/2017.

Labor Market Conundrum: Number Of Millennials Living At Home With Mom Continues To Surge

Nary a day goes by that President Trump and/or the talking heads on CNBC fail to mention the following unemployment chart as evidence that “everything is awesome” with the U. S. economy…
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…which might be true unless you’re among the 95 million-ish Americans who have been looking for a job for so long that you no longer even count as a human being to the Bureau of Labor Statistics…

This post was published at Zero Hedge on Nov 22, 2017.