The Market Ticker
Commentary on The Capital Markets

Central banks have made uneconomic decisions look wise -- for a while.  There are those who call this "mis-allocation of capital", but that's a false statement in its premise as what central banks (and all banks, really) do is not allocate "capital" at all.  They instead sell debt, a thing that is at its heart destructive to capital.  Debt cannot be other than destructive to capital because debt always comes with interest; a parasitic leech upon the capital at its base (if there is any at all.)

Emerging market borrowers have been issuing dollar bonds at an average real rate of just 1pc. The great worry is what will happen as increasingly large blocs of bonds or loans - typically on five-year maturities - come due for refinancing in a far less friendly world. The dollar has almost doubled against the Brazilian real and the Russian rouble since mid-2012.

Got it yet folks?  An increase in real rates of just a couple of percent is enough to destroy the cash flow of these economies and markets.

This is the 2006 housing market on a global scale.  Remember that what set off the firestorm in the United States housing market was not an increase in rates but rather the disappearance of "covenant non-existent" loans otherwise known as "liar loans" and similar.  That in turn was triggered by a cessation of the mathematically-impossible claim that houses will always go up in price; when this revealed to be a bald lie those who had bought paper predicated on these uneconomic "loans" discovered they were holding worthless "securities."

There was fraud in the inducement across the board but there was also plenty of pie-in-the-sky dreaming by the buyers too.  Arithmetic makes indefinite exponential series of any sort impossible.

Blowing a bigger bubble to try to rescue the prior one is the legacy of the last 30 years.  Trying to spread it thinner and further so as to make it "better" is also part of that legacy.  The problem is that it may be spread further, but it is never thinner; as such the destruction when the subsequent bubble bursts is always larger!

In this case the spreading is global and the damage will be cataclysmic.

The only debate we have left is exactly when it hits, and whether you will have achieved minimum safe distance before it does -- and whether that's possible.

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Fortune has an interesting article out on Facebook today that bears reading:

Even as Facebook tries to convince news publishers like the New York Times to publish directly on its platform—instead of just posting excerpts with links to their websites—the company continues to demonstrate why that is such a Faustian bargain. On Tuesday, for example, the social-networking behemothannounced some new tweaks to its news-feed algorithm, and warned that publishers might see a decline in “post reach and referral traffic” as a result.

Facebook wants publishers to actually post articles on the service instead of the more-common excerpt-and-link.  The reason for this is to capture the entire revenue stream from advertising on that particular story.

This, of course, is diametrically opposed to the interest of the publisher, who is not being paid by Facebook to post the material!  I'd be happy to post my articles on Facebook if and only if they paid me more than I earned from advertising on my own site.

Absent that why would you take Facebook's deal?  Nobody in their right mind would, if they understood it this way which is why Facebook, of course, doesn't explain it this way.  

They instead couch their changes in the form of "optimization" for the userbase.

Uh huh.

This will, in my opinion, eventually destroy all of the monetary value in the platform as what will ultimately be left are pictures of your neighbor's cat.

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Oh c'mon guys.  You're on your high horse on "proper regulation" with regard to the accused "flash crasher"?

Where the F have you been?  I reported on this behavior in the futures markets in 2010, and nobody cared.  CNBC didn't care and neither did anyone else in the regulatory structure -- yet it was instantly apparent to anyone who watched, as it was going on right under everyone's nose and clearly visible over the 4th of July holiday.

It didn't take any sort of special access or view into the market; my retail trading platform showed quite-clearly a pattern of repeatedly placing bids and offers off the market and then immediately canceling them.  The counts were in the thousand contract area, which meant that with a $5,000/contact margin requirement you needed several million dollars on deposit to place these orders for initial margin.

Well, was that money on deposit?  Let's ask that question first because if it wasn't the order should have never been able to be placed at all.

Second, why wasn't this crap stopped instantly when it was noted to be happening?  It required no special power to observe, you only had to give a crap because all orders are tagged with their originating FCM and thus can be traced.  Quite clearly the so-called regulators clearly did not give a damn.

Third, I don't believe for one second that there was only one guy doing this -- not then and not now.

So-called high frequency trading, to the extent it is abusive rather than legitimate, has a simple solution as I have propounded upon for the last five years: Require every order that is placed to be valid for at least two seconds and require that every outstanding order be margined before it is accepted.

In other words an order can only be removed from the open order books by either (1) execution or (2) a cancel which is not effective until two full seconds have elapsed after the order was placed.

Further, all outstanding orders must be margined.  That is, you must be able to clear every order, individually and without offset, that you have open at any given instant in time.

This would instantly stop these abusive order patterns as if you tried it you'd be subject to having them hit and you couldn't issue more of them than you had margin in deposit to clear at any instant in time.

But no, we can't do that -- because if we did then manipulating the market upward wouldn't happen either -- and it's only the downward moves that get the regulator's attention!

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Things that make me roll on the floor with laughter....

At San Francisco's RSA conference, an even more terrifying exploit has been revealed that has the power to send your iPhone or iPad into a perpetual restart loop. Mobile security firm Skycure has discovered that iOS 8 has an innate vulnerability to SSL certificates that, when combined with another WiFi exploit, gives malicious types the ability to create "no iOS zones" that can render your smartphones and tablets unusable. Before you read on, grab a roll of tinfoil and start making a new case for your iPhone.

An "exploit"?  Well, no, not really an exploit....

Basically what happens here is that the iPhone "trusts" certain WiFi networks innately (like attwifi named ones), which is rather stupid on its face.  Then you just have to feed a bogus SSL certificate to it, which the phone will solicit on its own when it sees that "trusted" Wifi SSID and bingo -- crash city.

It's one thing to crash an app but it's another when the operating system goes out and solicits this sort of connection on its own.  The latter leads to the ability to create a "No IOS devices zone" where anyone who wanders within range has their IOS devices all reboot continually on their own!

Clever, that.  Stupid Apple, that -- not just the flaw with certificate processing, but the "default" trusting of an open WiFi network in the first place.

'Ya gotta be fruity to carry that crap around in your pocket...... smiley

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I have to chuckle at what passes for "reporting" among these buttclowns:

Apple Watch is already having a ripple effect.

A lot of employees who already use mobile devices for work plan to buy an Apple Watch or similar device, according to a global survey by mobile device management company MobileIron.

And what did said people say they were going to do with said device?

Taking phone calls 58%
Reading email 56%
Writing email 45%
Getting alerts, such as meeting reminders 44%
Accessing calendar 40%
Reading documents 37%
Surfing company intranet 30%

You can't possibly be serious?

I can make a possible argument for two of those listed items, but not the rest.  Taking a phone call?  How?  You're going to hold your watch up to your ear?  Shirley you jest!

Reading an email?  On a 1.5" (roughly) screen?  Writing an email?  With what, may I ask?

Surfing a corporate intranet or reading documents?!

This much I'll say right up front -- MobileIron is the "source" of this alleged "survey", and their CEO along with the firm (that issued the "press release" to cite these claims) just outed themselves as buttclowns and unworthy of serious consideration by anyone in the corporate space.

And since their entire reason to exist comes from said consideration, well.....

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