13Aug2015 Market Update: Averages Solidly In The Green, WTI Oil Pausing Its Decent, Short Term Indicators Bearish With A Chance Of Rain

Here is the current market situation from CNN Money

North and South American markets are mixed today. The S&P 500 is up 0.32% while the IPC gains 0.31%. The Bovespa is off 1.59%.

40.41%

FTC offers first-ever guidance on ‘unfair competition’

NEW YORK (Reuters) – The U.S. Federal Trade Commission on Thursday released unprecedented guidance on a section of business antitrust law that bars “unfair competition,” but stopped well short of offering the level of detail long sought by businesses.

One Trader Warns “Market Realities Were Starkly Exposed This Week”

Certain market realities were starkly exposed this week as a result of the China currency moves, Bloomberg’s Richard Breslow writes.

Carry positioners have/had enormous positions leaning on central banks despite obviously changing circumstances, equity investors remain long for the same reason and bond investors remain short their duration targets. What it implies is that the need to be fully invested continues to trump prudence, that the market thinks it will deal with rate hikes when they actually happen, and every curve ball will be seen and described as a black swan event.

As Keynes is supposed to have said, “When the facts change, I change my opinion. What do you do, Sir?” Yet markets have been lulled into relying on the belief that this is no longer the case, and even if it is, any change will be stage managed for the comfort of institutional money managers. Gone are the days when you had to guess at the Fed’s policy by interpreting weekly money-market operations. But that can’t be done in any practical sense.

Keynes also argued that the world was an inherently unstable place and no central banker has perfect insight into the future. Saying the Fed is “data dependent” really means we have little faith in our forecasts and will move if and when it is a no brainer. It also says, as we have been so reminded of this week, that it is wrong to define “data” narrowly as only meaning economic reports. To the Fed, wrongly or rightly, data means all inputs from all comers.

Yet again, just yesterday, the NY Fed’s Bill Dudley wouldn’t give a specific date for liftoff and said he doesn’t know when himself, even if the time is “certainly getting nearer.” He then spent quite a bit of time talking about China. But he does acknowledge that being able to raise rate …

Even The Fed Admits Recession Looms: Q3 GDP Forecast Slashed To Just 0.7%

Just as we warned earlier – and Goldman subsequently confirmed – the Q2 “stack’em-high” surge in inventories (which has juiced hype hope that America is back, baby!) has consequences. The Atlanta Fed just released its latest forecast for Q3 GDP growth, lowering it to just 0.7%, citing an inventory drag of -2.2 percentage points. The Fed estimate is now 75% below the street’s consensus!!

As The Atlanta Fed explains…

The GDPNow model forecast for real GDP growth (seasonally adjusted annual rate) in the third quarter of 2015 was 0.7 percent on August 13, down from 0.9 percent on August 6.

The previously reported nowcast of 1.0 percent for August 6 was revised down due to a minor adjustment in the method for nowcasting investment in computers and peripherals. Since a week ago, the nowcast for the contribution of inventory investment to third-quarter real GDP growth has declined from -1.8 percentage points to -2.2 percentage points.

This decline more than offset an increase in the nowcast of the third-quarter growth rate in real consumer spending from 2.9 percent to 3.1 …

Wall Street flat as investors focus on economic growth

(Reuters) – Wall Street was little changed in late morning trading on Thursday as investors focus on the latest batch of strong U.S. economic data and digest China’s reassurance that there was no basis for further depreciation of the yuan.

“Project Omega” – Why HFTs Never Lose Money: The Criminal Fraud Explained

Two weeks ago, without knowing the details of the most recent market-rigging and frontrunning scandal involving “alternative” market veteran ITG’s dark pool POSIT, which issued a vague 8-K it would settle with the SEC for “irregularities”, we explained what we thought had happened:

ITG had an in house prop trading group, or “pilot”, which operated for nearly two years, whose only signal was client order flow, which it would frontrun, and make millions in profits. In other words, once again precisely what we have claimed since 2009. But oh yes, not everyone is guilty of such manipulation. Only Liquidnet… and Pipeline… and ITG… and countless other ATS and HFT firms for whom clients are better known as either “easy money” or muppets.

And yes, we get the “trading experiment” narrative: calling it “criminal market manipulation and order frontrunning scheme” just does not sound like something the Modern Markets Initiative would spend millions of dollars to get Congressmen to agree on.

It turns out we were spot on, the only thing we missed was the name of this market manipulation exercise. Now, thanks to the SEC, we know: “Project Omega” (or as it was also correctly dubbed here the “criminal frontrunning scheme”) is how ITG dubbed its secretive prop-trading desk whose only purpose was to frontrun clients.

Here are the details for all you suckers who still read the HFT apologists and believe the bullshit that all these algos do is provide liquidity, when in reality all the really do is frontrun your orders, assuring them of 6 years of trading without a single day’s loss (or in the case of Virt …

Solid U.S. retail sales bolster Fed rate hike expectations

WASHINGTON (Reuters) – U.S. retail sales rebounded in July as households boosted purchases of automobiles and a range of other goods, suggesting solid momentum in the economy early in the third quarter.

Bits Blog: Samsung Introduces New Phones and Mobile Payment System

Samsung, trying to stay ahead of the competition, announced two big-screen Galaxy phones and a mobile-payments system.

Coca-Cola names Quincey COO, raising succession question

(Reuters) – Coca-Cola Co named James Quincey president and chief operating officer, a management shake-up that prompted questions of whether Quincey is now positioned to one day take the helm of the world’s largest soda maker.

Turning Humans Into Algos: The Trend Of Employees Wearing “Biosensing Wearable Devices” At Work

Submitted by Mike Krieger via Liberty Blitzkrieg blog,

The future is here.

Just yesterday, I published an article titled, “Minority Report”-esque Big Brother Billboards are Coming to England. Here’s an excerpt in case you missed it:

Much of the shift is being driven by today’s enhanced data-collection and analysis power. Ocean’s three new billboards in Birmingham, shaped like large human eyes, will broadcast ads like regular digital billboards, but have the ability to change based on how many of a certain group are within “eyesight” of the camera.

But software will analyze the feeds to pick up facial features and how long a person looked at an advertisement, according to Olivier Duizabo, chief executive of Quividi, the company that made the software.

Today, I came across a Bloomberg article that highlighted how some companies, particularly hedge funds looking for an edge, are having employees wear “biosensing wearable devices,” in order to collect detailed analytics about them and hopefully improve performance.

We learn that: . . .

Musk to invest $20 million in Tesla’s $500 million share sale

(Reuters) – Tesla Motors Inc CEO Elon Musk will invest $20 million as part of the company’s $500 million stock offering in a show of confidence at a time when the electric car maker is burning through cash.

‘Sesame Street’ to Air First on HBO for Next 5 Seasons

Under the deal, production will increase to 35 episodes a year from the current 18, and a spinoff show and another new educational series for children will be created.

Bank C&I Nonperforming Loans Increasing

After 5+ years of moving lower, the past two quarters have seen a marked increase in Commercial & Industrial Nonperforming Loans. Based upon numbers sourced from BankRegData, it is my opinion that Commercial & Industrial Loan performance has reversed and NPLs are heading much higher.

First, we’re going to look at the startling increase in Commercial & Industrial NPLs the past two quarters.

Aggregate U.S. Banking Commercial & Industrial NPLs:

From a low of $8.515 Billion at the end of 2014 C&I NPLs have increased $2.381 Billion for a 27.97% increase in 6 months. The NPL % to total C&I loans has grown from 0.50% in 2014 Q4 to 0.61% in 2015 Q2. We’ll come back to this ratio shortly.

Looking at C&I NPLs at the individual bank level reveals that the $2.381 Billion NPL $ increase is widespread and is not due to a small handful of institutions having issues.

Commercial & Industrial NPLs: Capital One

Capital One has seen C&I NPLs increase $233 Million (109.72%) over the prior quarter. Their NPL % has risen from 0.95% in 2015 Q1 to 1.99% in Q2. This appears to be a deterioration in their portfolio rather than an acquisition related increase. We also see an increase in their Early …

Google has until August 31 to reply to EU antitrust charges

BRUSSELS (Reuters) – Google Inc has been given an extra two weeks to respond to European Union charges of abusing its market power in a dozen EU countries and stave off a possible billion-euro fine.

Germans borrow more as Merkel urges Europe to spend carefully

BERLIN (Reuters) – While Chancellor Angela Merkel’s focus on careful spending as a cure for the euro zone’s debt problems has made her popular at home, German consumers are borrowing more to finance everything from furniture to cars.

Which States Will Suffer The Most From China’s Devaluation?

Submitted by Jim Quinn via The Burning Platform blog,

In case you missed it, China has devalued their currency for three consecutive days. The devaluation has been just under 5% and it has caused markets around the world to implode. This is just the beginning. They plan on devaluing their currency by 10% in a desperate attempt to revive their floundering economy. What they are really doing is crushing the economies of the US, Europe and Japan as their companies have a harder time competing in world markets.

Those who don’t think the US is heavily dependent on China as a market are delusional. Check out this chart.

Without these tremendous increases in exports to China, these states would be in far worse shape than they already are. When this devaluation is complete, the companies in these states will be 10% less competitive. Their exports will decline. When exports decline, companies fire workers.

Get ready. The fireworks are just beginning. Fourth Turnings sure are entertaining.