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13May2015 Market Close: Markets Off Morning Highs, Large Caps Close Red And Flat, Oils Declining, Two EU Countries In Recession

Written by Gary

Little changed in afternoon trading today as investors stood on the sidelines waiting for the next round of economic data at the tail end of earnings season.

All of the markets slipped off their morning highs leaving the large caps flat and in the red on low volume at the close. The oils have also melted down but remain well within their respective sideways trading channels.

Todays S&P 500 Chart

Many money managers believe that the recent selloff isn't sustainable, pointing to two key differences with the events of 2013's "taper tantrum": tempered economic expectations and more-balanced positioning by investors.

The gross domestic product of the 19 nations that form the euro currency bloc grew 0.4 percent in the period, but two countries slid into recession, again worrying investors about creeping bears finding their way into the markets.

Short term indicators have turned bearish for the first time in 3 sessions.

The Market in Perspective

Here are the headlines moving the markets.

Wall St. little changed in earnings, data lull

(Reuters) - Wall Street was little changed in afternoon trading on Wednesday as investors stood on the sidelines waiting for the next round of economic data at the tail end of earnings season.

Consequences? Barclays Exec Involved In LIBOR Fixing Becomes Bank's Head Of Asia-Pac

Although it now appears that the logos of several large US banks are set to plead guilty to rigging FX markets, we're still fairly certain that the post-crisis policy of never sending any actual people to jail for their role in rigging every single market and fixing every single fix on the face of the planet will persist.

As unfortunate as that is, what's worse is the fact that many of the traders involved in the egregious manipulation of the world's benchmark rates not only escaped without prison time and with their accumulated fortunes largely intact, but in fact found lucrative employment opportunities at places like BlueCrest Capital Management, where LIBORgate participant Christian Bittar ended up following his dismissal from Deutsche Bank.

Of course rate-rigging derivatives traders need not necessarily flee to the buyside should they find themselves in the unfortunate position of having to take one for the team and admit their complicity in seeking to game the market, because as Bloomberg reported earlier today, not only can you remain employed at the firm from which you operated when you were engaged in illegal collusion, you can in fact get promoted.

Via Bloomberg:

Mark Dearlove, a Barclays Plc executive who was involved in the manipulation of the London interbank offered rate, was named as the U.K. lender's head of markets for Asia-Pacific.

The banker will relocate to Tokyo from London, replacing Conor Brown, who's taking a sabbatical, ...

Many Investors Still Bullish on Treasury Bonds

Many money managers believe that the recent selloff isn't sustainable, pointing to two key differences with the events of 2013's "taper tantrum": tempered economic expectations and more-balanced positioning by investors.

U.S. appeals court appears receptive to bond trader's fraud appeal

NEW YORK (Reuters) - A federal appeals court on Wednesday signaled a willingness to overturn part or all of the conviction of a former Jefferies Group Inc trader accused of defrauding investors after the financial crisis by lying about mortgage bond prices.

Stupid Or Satire? Bond Manager Suggests "Make Cash Illegal" To End Boom & Bust

How to end boom and bust: make cash illegal

Forcing everyone to spend only by electronic means from an account held at a government-run bank would give the authorities far better tools to deal with recessions and economic booms.

Authored by Jim Leaviss, originally posted at The Telegraph,

A proposed new law in Denmark could be the first step towards an economic revolution that sees physical currencies and normal bank accounts abolished and gives governments futuristic new tools to fight the cycle of "boom and bust".

The Danish proposal sounds innocuous enough on the surface â€" it would simply allow shops to refuse payments in cash and insist that customers use contactless debit cards or some other means of electronic payment.

Officially, the aim is to ease "administrative and financial burdens", such as the cost of hiring a security service to send cash to the bank, and is part of a programme of reforms aimed at boosting growth â€" there is evidence that high cash usage in an economy acts as a drag.

But the move could be a key moment in the advent of "cashless societies". And once all money exists only in bank accounts â€" monitored, or even directly controlled by the government â€" the authorities will be able to encourage us to spend more when the economy slows, or spend less when it is overheating.

This may all sound far-fetched, but the idea has been developed in some detail by a Norwegian ...

Canada Finance Minister Says Volcker Rule Violates Nafta

A U.S. rule that prohibits banks from taking risky bets with their own money violates the North American Free-Trade Agreement because it bans U.S. banks from trading triple-A-rated Canadian government debt, Canada's finance minister said.

Vertex Could Give Investors Vertigo

Vertex shares are soaring ahead of Orkambi's likely approval, but high drug prices and valuations pose risks to investors.

Eurozone Economy Improves, but Finland and Greece Lag

The gross domestic product of the 19 nations that form the euro currency bloc grew 0.4 percent in the period, but the two countries slid into recession.

30Y Treasury Yield Retraces 50% Of 2014 Plunge

As 30Y yields push up to the highs of the day, steepning the yield curve across the entire complex, it has now retraced 50% of the yield collapse from the start of 2014 to early Feb 2015...

30Y Yields have retraced half the collapse of 2014...

and curves across the board have steepened dramatically...

Charts: Bloomberg

ETF Issuers Quietly Prepare For "Market Meltdown" With Billions In Emergency Liquidity

Between the dramatic sell-off in German Bunds that unfolded over the course of three weeks beginning on April 21 and the erratic trading that ensued on Tuesday following the weakest JGB auction since 2009, the chickens, as they say, have come home to roost in government bond markets where thanks the ECB, the Fed, and the BoJ's efforts to monetize anything that isn't tied down, the market has become hopelessly thin.

As we've documented exhaustively, and as every pundit and Wall Street CEO is now suddenly screaming about, the secondary market for corporate credit faces a similar dearth of liquidity and at just the wrong time. Issuance is at record levels and money is pouring into IG and HY thanks to CB-induced herding (i.e. quest for yield) and record low borrowing costs (again courtesy of central planners), but thanks to the new regulatory regime which ostensibly aims to curtail systemic risk by cutting out prop trading, banks are no longer willing to warehouse corporate bonds (i.e. dealer inventories have collapsed), meaning that in a rout, investors will be selling into a thin market. The result will be a firesale.

So while policymakers are still willfully ignorant when it comes to honestly assessing the effect their actions are having on government bond markets, the entire financial universe seems to have recently become acutely aware of the potentially catastrophic conditions prevailing in corporate credit. These concerns have now officially moved beyond the realm of lip service and into the realm of disaster preparedness because as Reuters

Forget Mattresses, Greeks Are Stashing Their Cash In Cars

As Greek empty their bank accounts at a record pace, waiting for the capital-controlling, bank-holiday-based 'other shoe' to drop on Grexit, devaluation, and drachmatization; they are not stashing their cash in the proverbial mattress. Instead, as The Telegraph reports, there is a slightly surprising sign that Greece is in the classic throes of a bank run (as we saw in Russia last year): car sales jumped by 47% in April.

As we noted when Russia was in the middle of its currency collapse (something that is 'hidden' from view in Greece since there is no way - aside from implications from Sovereign CDS and bond yields - to see the devaluation)...

The dramatic collapse in the rouble in recent days has not triggered outright panic, but it has prompted a rush to change currency and to stock up on durable goods such as furniture, cars and jewellery before they become even more expensive.

And so it is that, as The Telegraph reports, for the last 20 months, car registrations of new and used vehicles has risen...

Retailers Can't Gas Up on Oil Savings

U.S. consumers are hanging on to the money they have saved on gasoline, creating a tough environment for retailers.

Mark Hanson Is In "Full-Blown, Black-Swan Lookout Mode" For Housing Bubble 2.0

Submitted by Mark Hanson via mhanson.com,

Speechless: The Kardashian's are now house flippers

"No more neighbors, friends whose past Real Estate experience is renting an apartment or buying a starter house, or stay-at-home moms flipping houses locally; young, flamboyant Realtors on reality, cable TV shows selling multi-million dollar trophy properties to those from abroad with briefcases of cash that until this year bought a lot relative to the 'weak' US dollar; 20-something Silicon-kids paying $2,000/sq ft for a house they could buy 20 miles away for $500; large, institutional private equity firms buying 10s of thousands of single-family houses for rental purposes — sight unseens using computer programs — thinking a 3% yield is acceptable long-term and somehow, someday economies of scale will emerge; or individual / "family-style" speculators committing lending fraud at a pace that rivals 2006 chasing their share of the "easy money" in Real Estate, are needed to prove to me that Bubble 2.0 is not just a monster, greater in intensity and energy than Bubble 1.0, but will end the very same way..."

This week on the Kardashians, Scott Disick, the baby daddy of the oldest sister, revealed he was a new entrant to the house flipping scene with the purchase of a $3.7 million Beverly Hills "fixer-upper".

When his interior designer flaked out on the job, he asked his Kardashian sister for help. He said he wants to "buy as many houses as he can".

To his credit, he showed genuine concern when she started suggesting uber-high-end remodel ideas saying (loosely translated) "I am a concerned. The object is to make money" ...

Air Gets Thin in Luxury Condo Market

It's getting crowded at the top of Manhattan's apartment market. Builders are plowing ahead with scores of condominiums priced above $20 million in skinny glass towers throughout Manhattan, sparking fears of a supply glut.

Facebook Begins Testing Instant Articles From News Publishers

The social network will host articles directly on its site instead of linking to them, potentially undermining news sites and apps.

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To contact me with questions, comments or constructive criticism is always encouraged and appreciated:

gary@econintersect.com

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