Wednesday, October 16, 2013

some evening news

Here's some stuff I happened across today:

Reformed Borker (Bork Bork Bork!) - the most uber-bullish thing you'll read today. Seriously, Ritholtz has gotten cautious, but Josh sounds like a frickin' cokehead anticipating his next hit. Here, let me quote the whole damn thing:
Let me set the scene for you:

* There is a Debt Deal in the works that removes the ceiling and related draconian cuts from the discussion til at least February. Out of sight, out of mind.

* There is no election this fall.

* There is no war with Syria and high level talks are happening with Iran for the first time in decades.

* The incoming Fed Chairperson is the most dovish in the institution's 100 year history. There will be no taper talk whatsoever so long as employment data remains muted. At least not this quarter and probably not until the spring barring a huge tsunami of good economic news.

* Stock markets around the world are selling at fair to absurdly cheap valuations.

* The banks are as highly capitalized as they have ever been.

* Home prices are back to long-term trend and appreciation continues despite recent mortgage slowdown - normalization being the operative word.

* US households reclaimed the 2007 peak in total net worth and have now surpassed it.

* Small and mid cap stocks are at all-time highs and yet still under-owned by the largest pools of capital in the US - pensions, endowments and insurance companies.

* Going back 110 years, when the Dow has been up in the first half, it's finished the year strong with gains in the back half 70% of the time.

* Hedge funds are at their highest net short positions since January and have massively trailed every equity benchmark you can think of.

Thats the set-up going into year-end.

What happens from here?  My guess would be that we have all the rocket fuel we need for an explosion.
I forwarded this to Jojo in an attempt to make his head assplode. No reply from him suggests that it was a success. It must feel terribly lonely when even Gary Tanashian has gone full-bore bullish the US stock market.

Bonddad - live-blogging the debt default. You've already lived through it, so the post is meaningless, except this section:
From Bonddad: A note on why the short-term treasury spike is so important: there is a market between companies called the repo market. It's essentially a short-term collateralized loan market where one party will essentially give a second market a specific amount of treasury bills in exchange for a short-term loan.  For example, company A needs $10 million because of an unexpected cash short-fall.  They're a large company who just happened to run into a short-term cash crunch.  But while they may be short on cash, they do have Treasury Bills as part of their cash management strategy.  So they give $10 million of T-Bills to a second party who essentially makes a collateralized $10 million dollar loan to the first party.  30 days later, Company A has sufficient cash on hand to repay the loan, so they do so and get their $10 million in T-Bills back.

Here's the rub: this transaction which is incredibly common and a bedrock of modern treasury management requires a "riskless" security to perform.  Enter the T-Bill which is backed by the full faith and credit of the US government.  The T-Bill makes this a routine and standard transaction.  But remove the riskless nature of the T-Bill and you've got big problems in the financial world as this market grinds to a halt, making short-term lending impossible.  That completely cripples trade and commerce, and that is why this situation is so deadly.

NPR - what if we paid off the debt? All of it? As noted before, Greenspan himself was the architect of the Bush tax cuts; he said world finance would be thrown into disarray if there was no more US debt for banks to leverage off of. Read it. The modern finance system runs on debt: it's not a "dishonest system coming apart at the seams".

FT beyond brics - Indian reforms and the electoral cycle. I still think Avantika Chilkoti is useless as a writer, but at least this article will give you a slight bit of useful background if this is the first time you've ever heard of India.

Mineweb - Molycorp sucks. Mountain Pass has only achieved half expected throughput, and the only rare earth they're mining in any quantity is the one that nobody in the world even wants. And you thought gold miners were pathetic losers? - Gartman says gold looks awful on the charts. Quote:
With the political mess in Washington, gold should be going up but it's "just not going what it should be doing," Gartman said.

"A market that won't go up on news that should send it up is not going up."

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