Skew (S&P 500 Crash Risk) Rises To Highest Level Ever!

The CBOE Skew index, a measure of tail risk for the S&P 500 index, just exploded.


It is now at the highest level on record.


It looks like an S&P 500 index downturn follows the SKEW breaching the 140 level.


This is not surprising given how much air has been pumped into asset markets like the S&P 500 index.


Like the mayor in the film Jaws, Fed Chair Janet Yellen and her compadre Stanley Fischer will tell everyone that it is safe to go swimming in the stock market.


Surprise! Economic Surprises Negative As M2 Money Velocity Continues To Tank

The US Surprise Index remains in negative territory indicating that economic news releases are negative compared with economist’s expectations.


But is it any surprise when The Federal Reserve is battling against declining labor force participation?


M2 money velocity (aka, GDP/Money Supply) is falling along with labor force participation despite the enormous monetary stimulus provided by The Fed in terms of a near zero Fed Funds Target Rate and a massive balance sheet.

Here is a video of The Fed’s theory of economic recovery.

Draghi Says ECB’s Bond-Buying Plan Working Better Than Expected (Really Mario?)

(Bloomberg) — Mario Draghi said the European Central Bank’s quantitative-easing program is working better than expected, even though the institution will take longer than intended to reach its inflation goal.

“We are satisfied with QE, as it has met and even surpassed our initial expectations,” the ECB president said in an interview with Greece’s Kathimerini published on Saturday. While “it presently appears that it will take somewhat longer than previously anticipated for inflation to come back to, and stabilize around, levels that we consider sufficiently close to 2 percent,” that is largely because of a drop in oil prices, he said.

Draghi cited lower borrowing costs, rising credit volumes and better access to loans for small businesses as signs that QE is having a positive effect. Even so, with the inflation rate below zero for the first time since March, and an emerging-market slowdown posing risks, he has said the ECB is ready to expand its asset-purchase program if needed.

So, is the ECB bond-buying part deux really working better than expected?


Yes Mario, Eurozone inflation is negative.


And the rate of growth in household lending is also negative.


And the poor French. Their unemployment level (aka, jobseekers) keeps exploding since 2007.


When Greek GDP growth is better than Germany and France’s GDP growth, you know you’ve got trouble!


So Mario, HOW is the ECB’s QE working better than expected? Unless you expected it to fail in the first place?


Warning! Margin Debt in Freefall Is Another Reason to Worry About S&P 500

According to Bloomberg, NYSE margin debt surged from $182 billion to $505 billion in the six years ended in June 2015, roughly tracing the trajectory of the S&P 500, which tripled over the period. The biggest gains came in 2013, with credit rising 35 percent as U.S. stocks climbed 30 percent for the best returns in 16 years.

Since June, it’s been the other way around, with margin debt falling 6.3 percent to $473 billion at the NYSE’s last update, which covered August. The S&P 500 slid 4.4 percent at the end of that period as stocks entered a correction.


Margin debt, compiled monthly by the NYSE, represents credit extended by brokerages for clients to buy stock. It hews closely to benchmark indexes such as the S&P 500, primarily because equity is used to back the loans and as its value rises, so does the capacity to lend.

Could The Fed’s asset bubble tactic be running out of juice?


Don’t worry Stanet (Janet Yellen and Stan Fischer)! House prices are plenty frothy!


Warning Janet Yellen!


Minneapolis Fed’s Kocherlakota Suggests EXTRAORDINARY PATIENCE In Reducing Monetary Accomodation

The Minneapolis Fed’s Kocherlakota just gave a speech hinting at negative interest rates!

The FOMC can achieve its congressionally mandated price and employment goals only by being extraordinarily patient in reducing the level of monetary accommodation. Indeed, to best fulfill its congressional mandates, the Committee should be considering reducing the target range for the fed funds rate, not increasing it.

Reducing the target range for the Fed Funds rate from 0.00% – 0.25%? That implies a negative Fed Funds target rate.

The effective Fed Funds rate is already 0.13%, the lowest in the Americas. Only Japan is Asia/Pacific is lower than the US. However, in EMEA, the Eurozone, Switzerland, Sweden, Denmark and the Czech Republic all have central bank policy rates lower than the US.


And former Fed Chair Ben Bernanke appeared on The Show withj Stephen Colbert claiming that The Fed was responsible for the labor market. Bernanke is responsible for deadly slow wage growth??


Like the slogan at pre-DVD movie rental shops, Kocherlakota is suggesting “Be kind, DON’T unwind! And go to negative interest rates.


China Dumping U.S. Government Debt (Deflation Alert!)

According to the Wall Street Journal, Central banks around the world are selling U.S. government bonds at the fastest pace on record, the most dramatic shift in the $12.8 trillion Treasury market since the financial crisis.


Sales by China, Russia, Brazil and Taiwan are the latest sign of an emerging-markets slowdown that is threatening to spill over into the U.S. economy. Previously, all four were large purchasers of U.S. debt.

Few analysts expect much higher yields in the Treasury market as a result. Foreign private purchases of U.S. debt have increased amid pessimism about the world economic outlook. U.S. firms and financial institutions continue to buy Treasurys, as do some foreign central banks.

Zero yield on shorter maturity Treasury bills are not a great sales point either.


As the US continues to see declining prices, except for home prices and the stock market.


To which both Janet Yellen and Stanley Fischer said “Say what??????????”


October Surprise! Mortgage Purchase Applications Jump 27.4 Percent In First Week Of October

Usually, mortgage purchase applications have begun their steady decline by October culminating in low December applications. But not this year!

Mortgage applications increased 25.5 percent from one week earlier, according to data from the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending October 2, 2015.

The seasonally unadjusted Purchase Index increased 27 percent compared with the previous week and was 49 percent higher than the same week one year ago.


The seasonally adjusted Purchase Index increased 27 percent from one week earlier and may be close to breaking out of the trough that purchase applications have been in since 2010.


The Refinance Index increased 24 percent from the previous week, thanks to declining mortgage rates.


“The number of applications for purchase and refinance mortgages soared last week due both to renewed rate volatility and as many applications were filed prior to the TILA-RESPA regulatory change. It may take longer to apply for a mortgage under TILA-RESPA or TRID.

That is, “Get your applications in before the mountain of paperwork and regulations (known as TILA-RESPA) hits the loan originator’s desk.”