US markets closed lower in what is expected to be several more sessions of lower expectations. DOW down 85 points, SPY off -0.5% and gold stopped its waterfall decline (1270) for now. Good news is that indicators are only mildly bearish.
NEW YORK (Reuters) - Sterling slumped to a 31-year low versus the U.S. dollar on Tuesday as concerns over Britain's separation from the European Union were compounded by the renewed strength of the greenback on a recent string of better-than-expected economic data.
SAN FRANCISCO (Reuters) - Alphabet Inc's Google on Tuesday announced a new "Pixel" smartphone and a virtual reality headset, making a concerted move into home electronics and challenging Apple Inc's iPhone at the high end of the more than $400 billion global smartphone market.
CHARLESTON, W.V. (Reuters) - Richmond Federal Reserve President Jeffrey Lacker said he would have voted in favor of an interest rate hike at the Fed's September policy meeting had he been able to vote, reflecting the growing pressure on Fed Chair Janet Yellen to raise rates.
BRUSSELS (Reuters) - Amazon is talking to European Union antitrust regulators about settling a year-long investigation into its e-book deals with publishers without a fine, a person familiar with the matter said on Tuesday.
(Reuters) - Delta Air Lines Inc reported a smaller-than-expected drop in consolidated passenger unit revenue for September and maintained its operating margin forecast for the quarter despite suffering a system outage in August.
Detroit (Reuters) - Henrik Fisker, whose previous automotive venture collapsed in 2013 owing U.S. taxpayers $139 million, said on Tuesday he plans to launch a new electric car company next year to compete with Tesla.
CHICAGO (Reuters) - Aircraft maker Boeing Co is making progress on a deal to provide more than 100 commercial airplanes to Iran though none will be delivered in 2016, the company's top executive said on Tuesday.
From Charlie McElligott, head of cross-asset strategy of RBC
"You have to pick your poison -- more risky assets or a more balanced basket with high leverage...There's a philosophical
underpinning on why risk party has worked and why it should continue to work...Every time people talk about it as a leverage bond
portfolio, I just cry....It's not leveraged bonds. It's a leveraged portfolio. "
--Edward Qjan of PanAgora Asset, who "coined" the term "Risk-Parity"
Risk-parity 101: Leverage historically "low volatility" asset classes (e.g. fixed income) / subsectors (utilities) alongside historically "higher volatility" assets (stocks, EMFX, or the tech sector) to better "balance" your multi-asset portfolio's risk-allocation (which in a 60/40 equity/bond portfolio would see 90% of "risk" concentrated on the equities side). Net / net, the strategy uses leverage to allocate "risk" instead of allocating assets for diversification. Different parts of the economic cycle see different underlying asset class allocations (i.e. the current 'low growth, low inflation' backdrop), and now you're cooking with grease—an "all weather" portfolio, ahem.
Me, last month in "RBC Big Picture:"
"The issue is when the historical vol is based around a 35 yr bond bull mkt....bastardized by QE and NIRP....that when you get taper tantrums, crowded position unwinds or a rogue inflation print, that hyper-leveraged long in fixed income goes pear shaped as rates go 'wrong way.' The other dynamic with 'risk allocation' based on volatility modeling in this current environment is angle is that via CB policy, nearly all cross-asset vol ...
In mid-August, when the market was enjoying its low-volatility grind higher, we observed that one of the biggest bears in the hedge fund industry, Crispin Odey, was having a bad year, with his hedge fund sinking some 30% through the end of July. Since then, conditions have only gotten more precarious for the billionaire hedge fund manager, and as the FT writes, for Odey, who is betting it all "on a violent unwind of a QE bubble", the endgame may have arrived.
As Miles Johnson writes, "many financial commentators have warned that current monetary policy has inflated a bubble that will one day violently pop. Few of them have risked money betting on the precise manner in which a chaotic unwinding of quantitative easing will play out through financial markets. This makes the portfolio of Crispin Odey, a London-based hedge fund manager, an interesting outlier. Mr Odey is one of only a handful of investors who has backed up his dire prognosis for the global economy with a series of large, leveraged trades designed to pay off in the event of a crash."
To be sure, as we noted two months ago, Odey's bets are predicated on a collapse of Japanese bond prices, a surge in the price of gold and immolation of equities. Or as the FT puts, it, "If it works he may make hundreds of millions of dollars for his clients. If wrong his fund may not survive."
However, while for Odey the endgame of fighting the Fed (and other central banks) may have arrived, he may have a problem cashing out, even if correct. As FT observes, a closer examination of Mr Odey's individual positi ...
Now that the gloves have come off in the faux diplomacy between Russia and the US, which yesterday culminated with Putin halting a Plutonium cleanup effort with the US, shortly before the US State Department announced it would end negotiations with Russia over Syria, the next step may be one which John Kerry warned last week is "back on the table", namely the launch of military strikes on the Assad regime.
As WaPo reports, meetings have been going on within US national security agencies for weeks to consider new options to recommend to the president to address the ongoing crisis in Aleppo. A meeting of the Principals Committee, which includes Cabinet-level officials, is scheduled for Wednesday while a meeting of the National Security Council, which could include the president, could come as early as this weekend.
As Reuters hinted last week, at a Deputies Committee meeting at the White House, officials from the State Department, the CIA and the Joint Chiefs of Staff discussed limited military strikes against the regime as a "means of forcing Syrian dictator Bashar al-Assad to pay a cost for his violations of the cease-fire, disrupt his ability to continue committing war crimes against civilians in Aleppo, and raise the pressure on the regime to come back to the negotiating table in a serious ...
Google launched its biggest push yet to challenge tech rivals with new hardware offerings at an event Tuesday, showing off smartphones along with other goodies that may have overshadowed the company's iPhone rival.
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