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Van Hoisington And The Fed's Bubble: "Overtrading" And "Discredit" Always End In "Revulsion"

Excerpted from Hoisington Investment Management's Quarterly Outlook,

via Van Hoisington and Lacy Hunt:

The U.S. economy continues to lose momentum despite the Federal Reserve’s use of conventional techniques and numerous experimental measures to spur growth. In the first half of the year, real GDP grew at only a 1.2% annual rate while real per capita GDP increased by a minimal 0.3% annual rate. Such increases are insufficient to raise the standard of living, which, as measured by real median household income, stands at the same level as it did seventeen years ago.


Asset Bubbles

Historically, in our judgment, the most important authority on the subject of asset bubbles was the late MIT professor Charles Kindleberger, author of 20 books including the one of the greatest books on capital markets Manias, Panics and Crashes (1978). He found that asset price bubbles depend on the growth of credit. Atif Mian (Princeton) and Amir Sufi (University of Chicago) provided confirmation for Kindleberger’s pioneering work and expanded on it in their 2014 book House of Debt. Chapter 8, entitled “Debt and Bubbles,” contains the heart of their insights. Mian and Sufi demonstrate that increasing the flow of credit is extremely counterproductive when the fundamental problem is too much debt, and excessive debt can fuel asset bubbles.

Based on our reading of these two books we would define an asset bubble as a rise in prices that is caused by excess central bank liquidity rather than economic fundamentals. As Kindleberger clearly stated, the process of excess liquidity fueling higher prices in the face of faltering fundamentals can run for a long time, a phase Kindleberger called “overtrading”. But eventually, this gives way to “discredit”, when the discerning few see the discrepancy between prices and fundamentals. Eventually, discredit yields to “revulsion”, when the crowd understands the imbalance, and markets correct.

Economists have commented on the high correlation between the S&P 500 and the Fed’s balance sheet since 2009. From 2009 to the latest available month, the monetary base (MB) surged from $1.7 trillion to $4.1 trillion. We ran the MB increase against the S&P 500 and found a very high correlation of 0.69. While correlation does not prove causality, the high correlation is certainly not inconsistent with the idea that the Fed liquidity played a major role in boosting stock prices. However, even as the MB has exploded since 2009 and stock prices have soared, the U.S. economy has experienced the worst economic expansion on record. In spite of a further large rise in the base this year, the GDP growth has subsided noticeably and corporate profits after taxes and adjusted for inventory gains/losses (IVA) and over/under depreciation (CCA) has declined 10% in the latest four quarters. Such discrepancy between the liquidity implied by the base and measures of economic performance could indicate the process of bubble formation. Kindleberger’s axiom that asset price bubbles depend on excess liquidity may yet face another test.

Still Bullish on Treasury Bonds

With the nominal growth trajectory extremely soft, U.S. Treasury bond yields are likely to continue working lower as similar circumstances have created declines in government bond yields in Europe and Japan. Viewing the yields overseas, it is evident that ample downside still exists for long U.S. Treasury bond yields, as the higher U.S. yields offer global investors an incentive to continue to move funds into the United States.

Another factor suggesting lower longterm U.S. Treasury yields is the strength of the U.S. dollar. In many industries, the price leader for certain goods in the U.S. is a foreign producer. A rising dollar leads to what economists sometimes call the “collapsing umbrella”. As the dollar lifts, the foreign producer cuts U.S. selling prices, forcing domestic producers to match the lower prices. This reinforces the prospect for lower inflation as nominal GDP wanes. This creates a favorable environment for falling U.S. Treasury bond yields.

Full letter below:

Van Hoisington Q3

Why Gold Is Undervalued

Submitted by Alisdair Mcleod via Peak Prosperity,

Gold has been in a bear market for three years. Technical analysts are asking themselves whether they should call an end to this slump on the basis of the "triple-bottom" recently made at $1180/oz, or if they should be wary of a coming downside break beneath that level. The purpose of this article is to look at the drivers of the gold price and explain why today's market value is badly reflective of gold's true worth.

First, I think a reminder would be timely. Those who seek to trade gold are at substantial disadvantage:

  • they line themselves up against too-big-to-fail banks which have the implicit backing of the taxpayer to bail them out of their trading positions;
  • furthermore markets have become so manipulated and dangerous that gold should be considered as insurance against systemic risk instead of a punt.

Because the majority of market investors don't fully grasp these risks, when the current global financial bubbles eventually burst, there will only be a tiny minority who end up possessing gold -- by which I mean physical gold held outside the fiat money system.

Technical Analysis & Gold

Using charts has the theoretical advantage of taking the emotion out of trading. So long as there is no significant change in the purchasing power of the currency against which it is traded, prices in the past have relevance to the future, because recent price experience sets an expectation in the human mind. The chart below shows the gold price since the peak in September 2011.

The chart shows a potential triple-bottom pattern formed over fifteen months, at just over $1180/oz. We know that the three bottoms were all at quarter-ends, strongly suggestive of price manipulation to enhance bullion bank profits and their traders’ bonuses. In each case, computer-driven traders had near-record short positions evident in this second chart, of Managed Money shorts on Comex:

This confirms that $1180/oz appears to be the point of maximum bearishness, in which case our triple-bottom pattern should hold.

However, this pattern is rare and should not be the first conclusion we jump to. The definitive work on Dow Theory (Technical Analysis of Stock Trends – Edwards & Magee) describes an unconfirmed triple bottom as “treacherous”. But the characteristics we're seeing in this current formation, with the third low on low volume and the subsequent rise on improving volume, are encouraging. Confirmation of the pattern according to Edwards & Magee requires the gold price to move above $1375, a level worth noting. Once confirmed, a triple-bottom “almost always produces an advance of distinctly worth-while proportions.”

The danger of course is non-confirmation. One can imagine a price rally to say, $1300, unwinding the shorts, at which point subsequent bears might then mount a successful challenge on $1180.

Additionally, since Edwards& Magee published their work, computers have allowed us to define trends by moving averages, and a commonly accepted indicator is the 200-day MA, which stands at about $1280. If that level is broken and the gold price stays above it long enough to cause the MA to rise, that should trigger computer-driven buying. So any price over $1300 will likely confirm the bullish case, yet it would be a mistake today to be unreservedly bullish on technical grounds alone until this price level is exceeded.

Valuing Gold

None of this reins in the truly subjective nature of tomorrow’s prices. Instead, we should turn to relative valuations to get a sense of whether gold should be bought today or not.

To do this, we need to compare the quantity of gold with the quantity of fiat currency. While we have reasonable estimates of the total amount of above-ground gold stocks over the last few centuries, we really don’t know how much the central banks actually hold, on the basis their figures are for “gold and gold receivables (i.e. leased, loaned or swapped and not in their physical ownership). Equally, the task of assessing the true total amount of the world’s fiat currency and how that has grown over time is too great to be a practical proposition.

Instead, I have devised a simple and practical approach, by comparing the increase in the world’s above-ground gold stocks with a measure of the increase in the quantity of USD fiat currency.

I've devised a metric called the "fiat money quantity" (FMQ) which reverses the process by which fiat money was originally created. Our forebears’ gold was taken in by commercial banks, which would issue currency notes and record deposits in gold substitutes (dollars payable in our forebears’ gold). When the Fed was created, the Fed took in the same gold from member banks and issued its notes and recorded reserves against that gold in its balance sheet. So FMQ is the total of cash, accessible deposits in the commercial banks and bank reserves held at the Fed, adjusted by temporary factors that affect those reserves such as Repos and Reverse Repos. More details on how FMQ is calculated can be found here.

The chart below shows how FMQ has grown since 1959. It shows a steady rate of exponential growth prior to the Lehman crisis, after which it has increased alarmingly:

One glance tells us that USD fiat currency is in monetary hyperinflation, which is not reflected in official price inflation statistics (but that's another story). Our objective is to try to get a feel for whether gold is cheap or dear, and the next chart shows how the gold price has progressed from the month before the Lehman crisis (nominal gold price in red, FMQ-adjusted price in yellow):

The message could not be made more clear: compared with fiat dollars, in real terms gold has fallen in price since the Lehman crisis despite the increase in its nominal price. With gold at $1200 recently, it has actually fallen by 41% in real terms from July 2008.

So to summarize, before the Lehman crisis, investors’ appreciation of systemic risk was relatively low. After the crisis, there were concerns that we faced a deflationary price contraction, so the nominal price of gold dropped (from $918 to $651). When it became clear the Fed would successfully inflate the financial system out of immediate trouble, gold rose to its high-point in September 2011 -- but on an FMQ-adjusted basis the high was considerably less, reflecting the sharp increase in the quantity of new fiat money being issued: gold only rose about 20% from July 2008 on this basis. While there was undoubtedly some froth in the gold price at this point that needed correcting, given the circumstances the price level was otherwise reasonable. The subsequent bear market in gold since has taken it to an extreme undervaluation today.

Gold is not alone in having a market value divorced from reality. A bankrupt government such as Greece has had no problem borrowing 10-year money recently at only 6.5%, though this anomaly is beginning to correct. Other insolvent nations, such as Spain and Italy were recently able to borrow 10-year money as low as 2% and 2.2% respectively, though their bond yields have also subsequently risen slightly.

Think about this for a moment: the US dollar is the reserve currency and its government bond yields are the benchmark for global fiat money risk-free return. Governments with a demonstrably (much) worse borrowing record have been able to issue bonds at what amounted to a yield backwardation -- significantly lower than the US 10-year Treasury bond. This has never happened before, so far as I’m aware.

Key market valuations are totally screwed up in a world of 0% interest rates and manipulated markets. If gold was alone in its extreme undervaluation, without a counterbalancing overvaluation in fiat-currency bond markets, something would probably be wrong with our analysis. The fact that this is not the case offers confirmation that gold is mis-priced and incorrectly valued in markets that have become divorced from reality.

Defining the Gold Market

It is common knowledge that dealings in paper gold are greater than that in physical bullion. Paper gold includes the following categories:

  • Unallocated gold accounts held with bullion banks.
  • Sight accounts held with central banks on behalf of other central banks.
  • Over-the-counter derivatives and options
  • Forwards on the London market (deferred settlement never intended to settle)
  • Regulated futures markets (Comex, Tocom etc.)
  • Gold ETFs not backed by physical gold.

The total of these markets, for which there is no estimate, is simply enormous (by contrast  GoldMoney estimates above-ground stocks of physical bullion total some 162,500 tonnes today, increasing at about 2,800 tonnes per annum.)

But we can get an idea of the overall interest in paper gold from numbers released by the Bank for International Settlements covering off-market derivatives, plus outstanding Comex interest. This is shown in the next chart:

The last data-point was end-2013, when gold coincidentally sank to $1180 for the second time. A significant portion of these derivatives can be expected to be hedges against bullion-bank liabilities such as unallocated accounts and perhaps positions in regulated futures, so they are a fair reflection of changes in outstanding paper interest. It is clear that over the course of the last thirteen years, in terms of tonnes equivalent, total gold derivatives have declined significantly. Some of this decline has been due to the increase in the gold price so the currency value of these derivatives would not have fallen so much; but from the peak in 2011 from which the gold price has fallen by nearly 40% in USD terms, outstanding paper gold has certainly accelerated gold’s decline.

This tells us that, given that their hedge positions are historically low, bullion banks have reduced their outstanding liabilities to customers with unallocated accounts, which would be consistent with the late stages of a bear market. Ironically, the unwinding of unallocated accounts has been hastened by the withdrawal of bullion from the London market redeployed to satisfy Asian demand, because ultimately physical bullion is the basis for the whole market. It is obvious that if the trend outlook for gold improves, given that the decline in outstanding derivatives has not led to reducing leverage on the physical market, liquidity could rapidly become a serious issue.

Meanwhile, physical gold goes from West to East.

Asian Demand

Physical gold features in the family pension fund for the average Asian. We are all familiar with this being the case for Indians, but it is also true for most other countries on the continent. The reason is simple: no Asian government has been able to suppress the ordinary citizen’s interest in gold as a store of wealth, and generally currency issuance has been badly abused by Asian governments. For example, in Turkey accumulating inflation from the 1980s led to six noughts being lopped of the lira in 2004. In India, since the 1960s the rupee price of gold has gone from INR160 to about INR76,000 per ounce today.

The history of Asian demand goes back to the oil crisis in the 1970s, when the Middle East suddenly became immensely wealthy from the rise in the price of oil. Naturally, they invested a portion of their new-found wealth in gold. The pace of gold acquisition by Arabs slowed in the early 1990s, because a new western-educated Arab generation began to manage the region’s financial resources, and these youngsters were doubtless discouraged by gold’s prolonged bear market. Instead they turned to equity markets and infrastructure investment. Then in 1990 India repealed the Gold Control Act.

This legislation banned Indians from owning gold in bar and coin form, which gave added impetus to smuggling and jewellery manufacturing. Its repeal was part of a process of economic liberation in the wake of a financial crisis which led to market-friendly economic reform. Since then, recorded private sector imports grew from a few hundred tonnes to as much as 1,000 tonnes annually before the Reserve Bank of India reintroduced import controls last year. Predictably the effect has been to restrict officially imported gold and increase smuggling.

Turkey is the gateway to Iran and the Moslem world to the east beyond the Caspian Sea. Gold has been actively used as money by this region since time immemorial. According to the Borsa Istanbul, Turkey has imported 3,060 tonnes of gold since 1995. Some of this has gone to Iran and to the east of Turkey, but equally the rest of the region will have had other sources over the decades. Lastly, South-East Asia is populated with a Chinese diaspora, and since its industrialization in the 1990s this region has also been stockpiling significant quantities of bullion. But the big story is China itself, which we investigate in detail in Part 2 of this report

Summary (Part 1)

When the gold price is being smashed in western capital markets, it's easy to forget that Asia is quietly buying up not only all or most of its own mine and scrap supply, but significant quantities of the above-ground stocks held in western vaults as well. It's a process that dates back to the birth of the petro-dollar in the 1970s and has continued ever since. The three big ownership centers are the Middle East, India and China -- the latter two having in recent years enjoyed high rates of economic expansion, with increasingly wealthy middle-classes with a high propensity to save.

We cannot know in truth how much of the world’s above-ground stocks of gold are in the hands of these three centers. But they are only part of the Asian story, with Turkey and its sphere of influence plus the whole of South-East Asia, whose people also regard gold as a prime savings medium. All we can say is that it is likely that significantly more than half the world’s gold is in Asian hands. Importantly, over the last ten years the pace of Asian accumulation has increased, draining the west of its physical liquidity. And in this respect perhaps the most important indicator is the decline in outstanding OTC derivatives shown in the last of the charts above.

So not only do we have evidence that the price is based on western paper markets with declining liquidity, but by comparing above-ground stocks with the Fiat Money Quantity of the world’s reserve fiat currency, we can see that gold is extremely undervalued at a time of high, possibly escalating systemic and currency risk.

In Part 2:The Case For Owning Physical Gold Now we delve more deeply into the flows of bullion to Asia which will soon create supply shortages in the West, as well as detail the growing systemic and currency risk factors that few asset besides physical gold can offer protection against. 

Click here to access Part 2 of this report (free executive summary; enrollment required for full access)


Everything You Need To Know About Blue Chip Earnings In One (Ugly) Table

With today's exuberance around earnings (notably forgetting the reality of various bellwether fails), we thought it appropriate to get some context on just what the "market stalwarts'" results look like in context.



A third of the companies in the Dow have posted shrinking or flat revenue over the past 12 months, as WSJ notes,

"steady has become stagnant as companies once considered among the market’s most reliable post poor growth, quarter after woeful quarter."

Source: WSJ

Google Vs The Entire Newspaper Industry: And The Winner Is...

As Brookings notes, "overall the economic devastation would be difficult to exaggerate," with regard the shift from print to online journalism - as the following chart sums up in all its devastating reality... it's a new world.

"...putting newspapers online has not remotely restored their profitability..."


"Now, however, in the first years of the 21st century, accelerating technological transformation has undermined the business models that kept American news media afloat, raising the possibility that the great institutions on which we have depended for news of the world around us may not survive."


Source: Brookings

A Furious Albert Edwards Lashes Out At Central Bankers: "Will These Morons Ever Learn?"

Albert Edwards is angry, and understandably so: almost exactly two weeks after warning readers to "sell everything and run for your lives" and the market was on the verge of its first correction in years, several powerful verbal interventions by central banks from the Fed, to the BOJ to the ECB have staged yet another massive rebound which has nearly wiped out all the October losses.

Central-planning aside (and ask how much the USSR would have wished for central planning to indeed have been "aside") we share his frustrations, almost to the point where we would reiterate word for word Edwards' furious outburst, as follows: "Simply put, the central banks for all their huffing and puffing cannot eliminate the business cycle. And they should have realised after the 2008 Great Recession that the longer they suppress volatility, both economic and market, the greater the subsequent crash. Will these morons ever learn?"

Obviously, they will never will because their very entire existence is based on the assumption that what they do can impact the business cycle when all it does is merely delay the inevitable. In this case, a recession whose arrival will be so violent, it will crush not only US stocks, but the overall economy, which has for the past 6 years existed purely on the Fed's CTRL-P fumes. Fumes, which by the looks of things, will evaporate at just the worst possible moment: just when half of the world's entire growth in 2015 is expected to come from the US (the other half from China).

So what is it that has peeved Edwards so much about the latest mispricing of, well, everything by the Mandarins of Marriner Eccles:

The bottom line is that there is far too much over-confidence in the US recovery. Fragile and vulnerable in itself, the US recovery now battles against the rest of the world, which like a horror movie is dragging it down into a hellish Ice Age underworld. The problem is that at, these stratospheric valuations, the market does not need to suffer an ACTUAL recession to see a crash. Like October 1987, just the fear of recession will be enough to trigger a massive market move.

Specifically, Edwards looks at implied inflation expectations - remember, this is critical for a recovery in a Keynesian context - and finds none.

The problem is that most risk assets, and especially equities and corporate bonds, are very expensive and priced for a long cycle. Meanwhile, this recovery has failed to generate any cyclical upward pressure to inflation - indeed quite the reverse. The global economy resembles a knackered old V8 engine which is now only firing on one cylinder (US). Hence, any data suggesting that the US economy is now also flagging were always likely to cause a meltdown as investors feared the imminent arrival of Japanese-style outright deflation. We note with interest that US 5-year inflation expectations in 5 years’ time have not fallen anything like as quickly as 5y expectations (see chart below). This suggests to me a continued misplaced market (over)-confidence about central banks’ ability to control events


Sure enough, the events from last week showed just how fast and how violent such a move would be, at least until the central bankers stepped in once again, and with chatter of QE4, made sure bad news if good news again, if only for a few weeks. However, with just one more POMO left, if only in theory, the fears of how the global economy will fare without the Fed's monetary tailwind propping up everything are going to resurface very fast.

And it is not just the US where the market is underpricing risk. Look at the chart at the top: that's right, the other place where Edwards is focusing on is China itself.

Two key items of Chinese data seem to have escaped close investor attention over the past week – maybe because of the flash crash. While I mentioned last Wednesday, what really surprised me that day was not the reaction in the wake of the US retail sales, but the fact that there was no reaction to the overnight news that China’s CPI inflation had slid to only 1.6% in September from 2% - I expected that to trigger a strong US Treasury rally in the European morning. Anyway, we have long warned that CPI inflation would gravitate downwards towards the GDP deflator, and that is indeed what is happening. Along with the 7.3% Q3 GDP data, the GDP deflator was also released showing economy-wide inflation is only around the 1% mark. Clearly, China too remains at a deflationary  precipice.


Source: Datastream

Finally, I was also surprised to see that the $100bn decline in China’s Q3 FX reserves, the largest quarterly fall ever, drew limited comment. As I have explained, this reflects deterioration in Chinese competitiveness from its excessively strong real exchange rate and a deteriorating of its balance of payments. If we have been warning that slower growth in FX reserves represents monetary tightening, then a decline of this order of magnitude is like a credit crunch! These data will ultimately prove to be more important than last Wednesday’s US retail sales. As I said two weeks ago “sell everything and run for your lives”.


So if Edwards is right, and the only two sources of growth in 2015 are taken out of the picture, watch how from 4% growth in 2014 the world grinds to an economic halt in the coming year. Which of course, would mean a global recession, if not worse, and this time not all the snows in Antarctica will save the narrative.

The only question is Edwards will be right this time, or if the "morons" will once again have the last laugh?

Smart People Listen To Radiohead, Dumb People Listen To Beyoncé, Study Finds

Now you can substantiate to today’s generation why that '60s and '70s era’s music was objectively "better," as JPMorgan's CIO Michael Cembalest has previously noted, and furthermore, researchers also found that popular music has gotten a lot louder (as SAT scores have plunged.. hhmm?) However, as Consequence of Sound notes, a software application writer by the name of Virgil Griffith has charted musical tastes based on the average SAT scores of various college institutions... and the results are.. interesting. Bob Dylan, The Shins, Radiohead, and Counting Crows are the favorite bands of smart people. Meanwhile, Lil Wayne, Beyoncé, The Used, and gospel music comes in at the lower end of the spectrum — or, as Griffith puts it, is music for dumb people.

Via Consequence of Sound blog,


Among other interesting revelations from the Griffith’s chart: Smart people prefer John Mayer over Pink Floyd; rock titans like Tool, System of a Down, and Pearl Jam fall right in the middle — so, music for average people?; and people still listen to Switchfoot.




*  *  *

Of course, correlation is not causation but...


As JPMorgan's Michael Cembalest has previously noted, there has been a “progressive homogenization of the musical discourse”, a process which has resulted in music becoming blander and louder.

Bring those classic rock and R&B playlists back


Now you can substantiate to today’s generation why that era’s music was objectively “better”.


The Million Song Dataset is a database of western popular music produced from 1955 to 2010. As described in Scientific Reports (affiliated with the publication Scientific American), researchers developed algorithms to see what has changed over time, focusing on three variables: timbre, pitch and loudness. Timbre is a proxy for texture and tone quality, terms which reflect the variety and richness of a given sound. Higher levels of timbre most often result from diverse instrumentation (more than one instrument playing the same note). Pitch refers to the tonal structure of a song: how the chords progress, and the diversity of transitions between chords. Since the 1960’s, timbral variety has been steadily declining, and chord transitions have become narrower and more predictable.

The researchers also found that popular music has gotten a lot louder. The median recorded loudness value of songs by year is shown in the second chart. One illustrative example: in 2008, Metallica fans complained that the Guitar Hero version of its recent album sounded better than it did on CD. As reported in Rolling Stone, the CD version was re-mastered at too high a decibel level, part of the Loudness Wars affecting popular music.


Overall, the researchers concluded that there has been a “progressive homogenization of the musical discourse”, a process which has resulted in music becoming blander and louder. This might seem like a reactionary point of view for an adult to write, but the data does seem to back me up on this. All of that being said, I do like that Method Man-Mary J. Blige duet.

*  *  *

So now you know...

It’s a green back for a reason!!

Short of China converting to a democracy tomorrow and the European Union becoming the giant that every backpacking teenager wished it could be, the US will remain the currency of choice for Oil, gold, and any other commodity, raw material, and energy available on this pseudo green earth.  Yes, aliens descending from MARS with technologies into the next millennium may make this a less compelling argument.  For the time being, the bet is on the USD.  

Take Japan for instance.  In the early nineties numerous economists and analysts were suggesting the Yen will become the currency of choice after the Japanese binge of US assets in the late eighties and early nineties.  The USD was on the “outs”.  History proved this notion wrong. Not only did Japan not become the currency of choice, but the Yen became the center of what was commonly referred to as the carry trade of choice.  The Japanese economy is only now hinting at an exit of the stagflation that took place during the 1990’s and 2000’s.   

We know what is happening in Europe.  Does the global economic power really want a currency that is mired in incongruous and possibly debilitating political strife, inefficient diplomacy, lack of sufficient job creation, to be the backing of all materials that contribute to global production and growth?  For the time being, NO.

On to China. Yes, the Chinese have grown by leaps and bounds in the last 15 years.  A little known fact, in the year 496 was China had 50% of global GDP.  The Chinese have already surpassed Japan to be the 2nd largest economy.  Even with “slower growth”, 7.3% growth per annum is nothing to gloss over. The problem with China, as every analyst, central banker, and hedge fund manager has commented is the reluctance of the Chinese government to reduce controls of the Yuan. 

The reason for the control of the currency is the fact that China is a communist regime with capitalist tendencies.  What is the probability that China will see the Western Light and convert to a capitalist democracy?  Clearly, quite low.  Does the G20 feel comfortable in readjusting the entire macro-economic mechanism to step away from the USD as a primary currency?  You know the answer to this answer as well as I do.

Given crisis and after crisis, through crashes and market exuberance, the USD and the US treasury market has been the bastion of “perceived” security and caution.  Grounded with the strength of an economy and a political system that by-in-large is able to sustain itself from little geo-political interventions.  What other country and currency is able to offer a bit of security and comfort in a world of contortion, confusion, and malfeasance? Yes.  That’s right. As I write this, we are getting word of a possible EBLOA case in NYC. So I am keeping my fingers crossed.  

I challenge the central banker, manager, trader, and investors to manufacture and financially engineer a safer and better alternative to the USD.

E Pluribus Unum


"It's Very Extreme" - Drought & Drug Cartels Drain California's Aquifers At Record Rate

"If there's no water for people to live, and you don’t have the basic necessities of life, your population is going to leave," warns the emergency services manager of one California town, warning that as the drought continues (and is not set to ease anytime soon), "you could see the economy of this area just decimated." But as farmers face the catastrophe with "water levels dropping at an incredibly rapid rate in some places - like 100 ft a year - 10 times expected," there is another drain on the dry state's water sources. As The FT reports, "Marijuana cultivation is the biggest drought-related crime we’re facing right now," with up to 80 million gallons of water per day stolen by heavily armed marijuana cartels.



As The FT reports,

Lieutenant John Nores Jr estimates that each of the state’s 2,000-odd cartel pot farms contains an average of 5,000 plants, and that each one sucks up between eight and 11 gallons of water a day, depending on the time of year. That means at least 80m gallons of water – enough for more than 120 Olympic-size swimming pools – is probably being stolen daily in a state that in some parts is running dry as a three-year-old drought shrinks reservoirs, leaves fields fallow and dries wells to the point that some 1,300 people have had no tap water in their homes for months.




“Marijuana cultivation is the biggest drought-related crime we’re facing right now,” says Lt Nores as he pokes at a heap of plastic piping the growers used to divert water from a dried-up creek near the plantation.


The theft of 80m gallons of water a day by heavily armed marijuana cartels is undoubtedly a serious concern, not least when the entire state is affected by drought and 58 per cent is categorised as being in “exceptional drought”, as defined by the government-funded US Drought Monitor.

However, this is a tiny fraction of the water used legally every day...

and towns across California plunge into chaos...

The crisis is more severe because a decline in snowfall has compounded problems caused by the lack of rain. The state’s mountain snowpack was just 18 per cent of its average earlier this year, a situation scientists say could be repeated as the climate warms.


As a result eight major reservoirs were last week holding less than half their average storage for this time of year.


Reservoir levels sank worryingly when a bad drought hit California in 1976-77, but there were fewer than 22m people in the state then, compared with 38.3m now.




In a normal year, aquifers supply about a third of the state’s water. In a drought, that can rise to as much as 60 per cent. But one of the most alarming aspects of this drought is that groundwater levels are plummeting.


“Water levels are dropping at an incredibly rapid rate in some places, like 100ft a year,” says Michelle Sneed, a hydrologist with the US Geological Survey who monitors groundwater in the Central Valley. “It is very extreme. Ordinarily, talking with hydrologists, if you would talk about a well dropping 10ft a year that would really get somebody’s attention, like wow! Really? Ten feet? And now we’re 10 times that.”


The depletion of this vital resource is not just a concern because it is so difficult to refill some aquifers when drought eventually subsides. It is also creating extraordinary rates of subsidence because as the groundwater disappears the land above it can sink. In one part of the valley, land has been subsiding by almost a foot a year, which Ms Sneed says is among the fastest rates anywhere in the world.




The town of East Porterville has more pressing groundwater worries. At least 1,300 people in the town rely for drinking and bathing water on wells that have gone dry as the drought has deepened.


“We ran out of water in June,” says Donna Johnson, a 72-year-old retired counsellor who delivers water to dozens of dry households from the back of her pick-up truck.




But the severity of this drought finally led to a package of measures signed into law in September requiring local agencies to monitor and manage wells, or face state intervention. Some critics say it is too little too late: many local agencies will have five to seven years to come up with plans, and until 2040 to implement them. Still, it is a lot better than nothing, say others.




That is small comfort when the latest outlook from the US Climate Prediction Center suggests the drought “will likely persist or intensify in large parts of the state” this winter.


“If there’s no water for people to live, and you don’t have the basic necessities of life, your population is going to leave,” says Andrew Lockman, the emergency services manager responsible for East Porterville. “Our primary economic driver is agriculture. If there’s no water to water crops, we’re not going to have any agriculture business, so you could see the economy of this area just decimated.”

*  *  *

Despite WHO's Confidence, Mali Becomes 6th West African Nation With Ebola

In yet another blow for the doctors fighting the spread of this deadly disease, AP reports, Mali's health minister says the West African country has confirmed its first case of Ebola. Despite every effort to close borders, quarantine areas, and now send US troops (to do... well we are not sure really), Mali becomes the sixth West African country to report an Ebola case.


Mauvaise Nouvelle EBOLA:
Le Mali vient d'enregistrer son premier cas positif. Il s'agit d'une fillette de 2 ans( Ministère de la santé)

— dr. etienne fakaba (@etiooo) October 23, 2014



As AP reports,

Mali's health minister says the West African country has confirmed its first case of Ebola.


The announcement made on Malian state television Thursday evening by Ousmane Kone said that the patient was a 2-year-old girl who had come from neighboring Guinea.


The child was brought to a hospital in the Malian town of Kayes on Wednesday, and her blood sample tested positive for the virus.


Mali becomes the sixth West African country to report an Ebola case — though nearly all the cases and deaths have occurred in Liberia, Sierra Leone and Guinea.


Senegal and Nigeria had imported cases though both have now been declared Ebola-free.


The World Health Organization says the disease has killed at least 4,877 people and infected 9,936.

*  *  *


*  *  *

Sadly this comes just hours after WHO said the following:

The World Health Organization said on Thursday it was still trying to slow the rate of new infections but had "reasonable confidence" that the Ebola virus plaguing three West African ountries had not spread into neighbouring states.


Asked whether countries such as Guinea Bissau, Mali and Ivory Coast might have cases of the disease crossing their borders without knowing about or reporting them, WHO assistant director general Keiji Fukuda said he considered that unlikely.

"I think that there is reasonable confidence right now that we are not seeing widespread transmission of Ebola into the neighbouring countries," Fukuda told a news briefing in Geneva. 

* * *

Nailed it!

3 Things Worth Thinking About

Submitted by Lance Roberts of STA Wealth Management,

Inflation Goal Elusive For A Decade

I have written previously about the Federal Reserve's real worry which is a rise in deflationary pressures:

"The biggest fear of the Federal Reserve has been the deflationary pressures that have continued to depress the domestic economy. Despite the trillions of dollars of interventions by the Fed, the only real accomplishment has been keeping the economy from slipping back into an outright recession.


Despite many claims to the contrary, the global economy is far from healed which explains the need for ongoing global central bank interventions. However, even these interventions seem to be having a diminished rate of return in spurring real economic activity despite the inflation of asset prices.


Despite the ongoing rhetoric of those fearing inflation due to the Fed's monetary interventions the reality is that such actions have, so far, failed to overcome the deflationary forces of weak global demand."

What is quickly being realized on a global basis is that injecting the system with liquidity that flows into asset prices, does not create organic economic demand. Both Japan and the Eurozone's interventions have failed to spark inflationary pressures as the massive debt burden's carried by these countries continues to sap the ability to stimulate real growth. The U.S. is facing the same pressures as continued stimulative measures have only succeeded in widening the wealth gap but failed to spark inflation or higher levels of economic prosperity for 90% of Americans.

When interest rates spiked in 2013, and many calls for the "death of the bond bull" were being made, I was one of the few screaming that this would not be the case. The reason for my steadfast belief was simply the lack of the three catalysts required to spark inflation: rising commodity prices, rising wages and increased monetary velocity.

(Read this for more on the construction of the index)

The reason I am dredging all of this history is to reiterate the point that Central Bank interventions have been proven NOT to be inflationary NOR effective in stimulating actual organic economic growth.

As stated by Bloomberg:

"Inflation expectations have plummeted in the past three months, with yields of Treasuries implying consumer prices will rise an average 1.5 percent annually through the third quarter of 2019. In the past decade, those predictions have come within 0.1 percentage point of the actual rate of price increases in the following five years, data compiled by Bloomberg show."

What Bloomberg is addressing is that both the drop in Treasury yields, along with the decline of "Breakeven Inflation Rates" (the spread between equivalent treasury and inflation-adjusted rates), are suggesting that inflationary pressures are nowhere on the horizon. It also suggests that expectations for 3% economic growth over the next several quarters is also likely to come up short.

  The Recent Rally May Not Last

That is the title to an article by Michael Kahn at Barron's which has extremely similar tone to a piece I wrote earlier this week entitled "Be Cautious: Correction May Not Be Over."

Michael makes a couple of good points that confirms much of my analysis, to wit:

"Since the steadiest part of the bull market began two-years ago, every pullback was very sharp and very quick. Some call them 'V' bottoms although that term is really reserved for the end of bear markets, not market dips. However, the meaning is similar as the market’s mood turned on a dime from fear to greed."

"There is something profoundly different about the rebound this week versus prior rebounds. This time, it occurred below the bull market trendline. When a major trendline such as this is broken to the downside, strict interpretation of the technicals says that the bull is over. Therefore, rebounds now take place in the context of a flat or even falling market, not a bull market."

The recent correction has inflicted a good bit of technical damage to the market that is unlikely to be cleared on an extremely short-term basis. While anything is certainly possible, the ability of the markets to make a run at new highs is much more suspect given the extraction of the Fed's liquidity driven support next week. This is a set-up we have seen previously as I pointed out in my analysis earlier this week.

"With the Fed's liquidity support now ending, the markets have once again plunged below the bullish trendline. The current rally, like every other time, is most likely a short-lived rebound from extremely oversold short-term conditions."

"Importantly, the deterioration in the internal dynamics of the market also suggest that the current rebound is not the resumption of the current bull market cycle, but rather a bounce that will likely be used to liquidate holdings. This will likely lead to a retest of lows, or even perhaps the setting of a new low, before a bullish trend can be re-established."

Michael sums the current situation very well stating:

"But for now, all we have is hints and possibilities. The rally from last weeks low does not have enough merits on its own to continue much higher so the bears may be resurrected from the depths of short-covering hell."

  Interesting Thought Of For The Day

My friend Michael Gayed recently penned a very interesting thought:

"I believe that the Last Great Bubble is bursting — faith in central banks to solve all problems."

I agree with Michael. The mantra has been over the last five years that you "do not fight the Fed." The problem, as discussed above, is that the Bank of Japan, the ECB and the Fed have all failed in accomplishing their objective of "reflating" the global economy.

The issue that has been consistently ignored is the massive, and expanding, debt burdens that act as a deflationary drag on economic growth and inflation. Despite statistical economic headlines, the underpinnings of the domestic economy remain far too weak to create the level of consumption needed to support stronger economic growth. The bond market has already recognized that inflation isn't coming, Japan and the Eurozone economies are slipping quickly back into recession, and even China's seeming inexhaustible growth has begun to drag. These aren't the drivers of a "secular" bull market.

As Michael concludes:

"A growing economy coincides with rising inflation expectations. A healthy bull market coincides with rising inflation expectations. Fight the Fed? You sure they are going to get that inflation target when the market itself is screaming they won't, at the same time quantitative easing is ending?"

Or, maybe this time really is different?

New York Department Of Health Issues Statement On Suspected Ebola Case

Statement On Suspect Ebola Case From Dr. Howard Zucker, Acting Commissioner, New York State Department of Health

The state Department of Health is closely monitoring this potential case and is working with the New York City Department of Health and Mental Hygiene and the Federal Centers for Disease Control and Prevention to ensure that all appropriate protocols are being followed to protect public health and safety.


This patient is undergoing testing at Bellevue Hospital, which is one of the eight hospitals statewide that Governor Cuomo designated earlier this month as part of his Ebola Preparedness Plan to handle potential cases.


That facility is prepared and equipped for the isolation, identification, and treatment of any such patients.


Preliminary test results are expected to be completed in the next 12 hours.


It is important to remember that the symptoms exhibited by this patient can be indicative of other illnesses and that there is no confirmed case at this time.

* * *

So go about your business, spend, consume, walk around, use Uber... and we'll lket u know in 12 hours if this chap that's been in NYC for 10 days is infected with a deadly disease that experts are still unclear on whether can be spread via sneezing.

Possible NY #Ebola patient is Dr. Craig Spencer who works w/ Doctors Without Borders

— CBSDFW (@CBSDFW) October 23, 2014

Why Amazon Is Crashing: Jeff Bezos' Nightmare Quarters In Charts

The only six charts you need to know why the Amazon dream is over and why AMZN stock is currently crashing after hours to fresh 52 week lows.

Total employees and global sales growth:


Quarterly Operating and Net Income


Operating Margin: whoosh


LTM Operating Margin: at 0.1% it is pretty much the lowest ever.


Q3 over time for profit and net income


And for operating margin


and the result so far...

Revisiting Truth's Moment

Way back on August 30, I did a post called Past Fear, Present Fear, which offered up an analog of the VIX (please read it if you don't remember; it's a pretty good post). I would daresay it was one of the best posts I did in 2014, and things certainly unfolded as I hoped they would (although today was no fun for me). I followed up on October 9th with my Moment of Truth post, which was just before the markets started really falling hard. Thus - so far, so good.

I've hacked together an update of the analog (although much more sloppily, and with different colors). Below we see, in yellow, the "throw-under" low, followed by the green burst, the cyan mega-burst, and - - what we're in right now - - the magenta decline. Historically, this was followed (in grey) by another push higher.

Below is the present VIX, which is panning out similarly, except in a sped-up fashion (e.g. fewer bars). The big question, of course, is how long we stay in "magenta mode" (where the markets get complacent again and grind slowly higher) before we return to another surge in the VIX. It goes without saying I'll be waiting for the grey rather impatiently.

Ebola Fears Take Shine Off Panic-Buying Surge In Stocks

Buyback-manipulated earnings produced the low-volume opening face-ripper everyone wanted and stocks took off, recovering yesterday's late losses and not looking back.Trannies were the big winners, led by a resurgence in Airlines (as Ebola in US is fixed) and, despite drastically lower than average volume, stocks kept lifting after EU close on a bed of AUDJPY and USDJPY... until 1450ET (when NYC Ebola headlines hit). Airlines were hit hard, S&P futures dumped back to VWAP, VIX was whacked back above 17, and the exuberant day transformed into merely a great day for stocks. Weakness in Treasuries and the HY bond ETF (despite notable compression in HY spreads) had the smell of a lot of HY issuance being hedged and unhedged but TSYs ended the day up 6-7bps (off their highs post-NYC-Ebola headlines). The USD rose for the 3rd day in a row taking gold lower. Copper (China) and Oil (Saudi) rose on the day (oil unch on the week).


Wake up call! Options exchanges broke because of overwhelming quote traffic. This is all from ONE ALGO over 38 seconds

— Eric Scott Hunsader (@nanexllc) October 23, 2014


Note the regularly spaced volume spikes that took the eMini down $ES_F

— Eric Scott Hunsader (@nanexllc) October 23, 2014


Tale of two headlines...


Airlines ripped and dipped...


As traders instantly reached for VIX...


and S&P naged back top VWAP (on heavy volume)


Credit and bond markets seemed very driven by rate-locks and hedge needs after Europe closed. After Ebola TSY yields and stocks/HY dropped


HYG had an ugkly fat finger early on but closed very weak...


Treassuries once again surged in yield during the European session but held those losses thru most of the NY session until Ebola hit...


The USD rose once again - 3rd day in a row, led by EUR weakness


And USD Strength took the shine off gold, silver ended flat but copper rose (China data) and Oil (Saudi supply cut)



Intrday historical volatility is surging...


Charts: Bloomberg

Bonus Chart: 7 Year Itch (well 30 quarters)...?

The Biggest Threat To America

Presented with no comment...

Q: "Who is going to defend the country without the Army?"

Zappa: "From what? The biggest threat to America is its own federal government... Will the Army protect anybody from the FBI? The IRS? The CIA? The Republican Party? The Democratic Party?... The biggest dangers we face today don't even need to sneak past our billion-dollar defense systems... they issue the contracts for them."


Source: The Burning Platform

40% Of Eurozone Banks Are In Bad Shape

Submitted by Raul Ilargi Meijer via The Automatic Earth blog,

David Myers Theatre on 9th Street. Washington, DC July 1939

Reuters has had a busy day today reporting on Europe’s banks and the stress tests the European Banking Authority is set to unveil on Sunday. And which put the EU and ECB on a see-saw like balancing act between credibility and panic.

The news bureau started off in the early morning citing a report by Spanish news agency Efe, which said 11 banks would fail the tests:

11 Banks To Fail European Stress Tests

At least 11 banks from six European countries are set to fail a region-wide financial health check this weekend, Spanish news agency Efe reported, citing several unidentified financial sources. The results of the stress tests on 130 banks by the European Central Bank are due to be unveiled on Sunday.


Four banks in Greece, three Italian lenders and two Austrian ones are among those that preliminary data showed had failed the tests, Efe said. It gave no details of how much capital the banks would have to raise and said this could yet change as numbers could be revised at the last minute. The euro fell on the report. Efe also identified a Cypriot bank and possibly one from Belgium and one from Portugal.

That’s right, the journalist lists 12 banks there, not 11. But anyway, that text is, miraculously, not available anymore, since at the same URL you now get the following article. Jean-Claude ‘When it gets serious, you lie’ Juncker’s first act in his first day in office as European Commission head may well have been to give Reuters a call. Make that a shout.

ECB Cools Speculation Over Bank Health Checks Ahead Of Results

The European Central Bank cautioned on Wednesday against speculation over the outcome of its stress tests after a media report said at least 11 banks had failed the landmark financial health checks, driving some banking shares lower. Austria’s Erste Group rejected the report from Spanish newswire Efe, which said that it along with banks from Italy, Belgium, Cyprus, Portugal and Greece, had failed the ECB review based on preliminary data, but it gave no details of the size of the capital holes at the banks.


The ECB, which will publish the test outcomes for 130 banks on Sunday, said final results had not yet been sent to the lenders involved, and it could not comment on individual institutions. “Any inferences drawn as to the final outcome of the exercise would be highly speculative until the results are final on 26 October,” said an ECB spokesman. The European Banking Authority, the EU watchdog coordinating the Europe-wide stress test, said the results would not be final until they are endorsed on Sunday just prior to publication. It had no comment on individual lenders.


Erste told Reuters it had no reason to believe it would fail the test. Banks have already had some feedback on the outcome of the tests through ‘supervisory dialogs’ with the ECB. They get the results on Thursday, three days ahead of the public announcement. The ECB becomes supervisor of the euro zone’s banks on Nov. 4. “Out of the supervisory dialogue we have no indication we won’t pass,” an Erste spokesman said. [..]“The bigger, more important question is not which banks have failed but which banks have achieved only a marginal pass,” said Jeremy Batstone-Carr at Charles Stanley.


Sources told Reuters that German public sector lender HSH Nordbank – which was not named in the Efe report – was set to pass the health checks. HSH was seen as the German lender most likely to fall short of requirements. Other than Erste, the banks listed by Efe were Italy’s Banco Popolare, Monte dei Paschi and Banca Popolare di Milano; Greece’s Alpha Bank, Piraeus Bank and Eurobank; Portugal’s Millennium BCP and Belgium’s Dexia. The agency also said a second, unnamed Austrian bank and a Cypriot bank were set to fail.

Looks like Brussels thinks it’s free of leaks to the media. Look, it’s Wednesday, and the banks will get results tomorrow. These are known, and can and will therefore be leaked. It’s 2014. Get with it.

Do note the words I bolded. Banks that only just slipped through the test are a major topic in this. If only because they’ve all had many months to shore up their capital by whatever means possible.

Those who still fail after that should probably have been long gone, while those who make it by a narrow margin are in bad shape. There are many ways to shore up your capital, including some that are temporary, just shy of being 100% legal and/or simply based on accounting tricks.

And of course many problems will remain hidden, for now, behind the veil of ultra cheap credit, either from central banks or corporate bond investors. Because that’s one of the damaging effects of ZIRP: it keeps zombies alive.

Then later in the day Reuters followed up with this interview with Pimco global banking specialist Philippe Bodereau, who says 18 banks will fail. Juncker must have thrown a hissy fit, and then lied about it.

Pimco’s Banking Expert Expects 18 Lenders To Fail ECB Stress Test

Fixed income investment firm Pimco’s global banking specialist, Philippe Bodereau, expects 18 banks will be seen to have failed the European Central Bank’s stress test of 130 regional lenders when results are published by the ECB on Sunday. Bodereau said in an interview on Wednesday the failures would likely include some German and Austrian cooperative and public sector banks, as well as weak regional lenders in the southern periphery.[..]


Describing the exercise as a milestone for cleaning up the banks, he said the test was “reasonably credible” when compared with previous tests and provided investors with a starting point to evaluate banks. “It’s pretty clear that not that many banks are going to fail it. A fair amount of balance sheet strengthening has taken place over the last six to nine months in anticipation of this exercise,” Bodereau told Reuters.


Big national champions across northern Europe and also in Southern Europe should pass quite easily, he said, although he expected almost a third of those tested to pass by a narrow margin. This group would likely include many medium-sized banks. “Probably the market will ask questions about their dividend policies, about their ability to grow balance sheet, etcetera. They will be under pressure to remain quite conservative on capital management and on deleveraging,” said Bodereau. [..]


Given recent market volatility, he said it was more likely there would be a positive than negative market shock after the results are released, and that share prices for the region’s biggest banks could be a market winner on Monday.

130 banks are being tested. 12-18 will fail. And on top of that, almost a third of 130, that’s over 40, will pass while still getting their feet wet. That means anywhere between 40% and 44% of Eurozone banks either fail or are in bad shape. And Bodereau suggests this will lead to a positive market shock on Monday morning. You might want to ask yourself what market position he has taken, how short he is exactly, and what book he’s talking.

If 40% of your banks are either dead in the water or barely floating, I’d say you have a major problem. ECB head Mario Draghi is undoubtedly still stuck in misplaced confidence on account of how well his ‘whatever it takes’ speech worked out, and ‘fresh’ EC head Juncker is as we speak emptying several bottles of champagne at once to celebrate his new job. He’s known to like his drinky.

And the ECB, under current conditions, seems almost entirely powerless to do anything about this, since, as Tyler Durden, using Barclay’s numbers, summarizes, it can only purchase $10 billion or so in ABC/Covered bond purchases per month, and another $5 billion per month in corporate bonds. There is simply not more eligible debt available for it to buy. Its mandate would have to be changed in drastic ways, and that doesn’t seem to be in the cards at all.

To keep markets afloat, however, as Bloomberg notes, $200 billion a quarter in QE from the central bankers is needed. The Fed is almost out, China has mostly withdrawn, Japan has too many domestic problems to look out the window, and the ECB can do just $15 billion a month. Confused? You won’t be .. after next week’s episode of .. the Eurosoap.

We all know our world, be it politics or economics, consists almost exclusively of spin these days, but in the face of these numbers I very much wonder how many people will be willing to bet their own money that Europe can get away with another round of moonsmoke and roses come Monday.

New York's First Ebola Case? Doctor Treating Ebola Patients In Guinea Rushed To Bellevue Hosptial

Just when you thought it was safe to assume that Ebola-in-America was fixed (one day into Ron Klain's tenure as Ebola Czar), NYPost reports some rather disquieting news. A New York City doctor - who returned from treating Ebola patients in Guinea 10 days ago - has been rushed under police escort to Bellevue Hospital... He is being tested for Ebola. Market liquidity has dried up instantly!


Update #2:



Possible NY #Ebola patient is Dr. Craig Spencer who works w/ Doctors Without Borders

— CBSDFW (@CBSDFW) October 23, 2014

As The Daily Mail reports,

Dr Craig Spencer, 33, who returned to the U.S. ten days ago from Guinea, was admitted to Bellevue Hospital in midtown Manhattan on Thursday and is being cared for in isolation.


The doctor flew to Africa on September 18 to treat patients in Guinea with non-profit organization, Medecins San Frontieres (MSF). 


The medic works at Columbia University Medical Center and originally comes from Detroit, Michigan.


Investigators were taking the case seriously because it is not believed that the doctor self-quarantined on his return from Guinea, CNN reported.


On September 18, Dr Spencer tweeted a picture of himself wearing a full yellow hazmat suit and face mask with the message: 'Off to Guinea with Doctors Without Borders (MSF). Please support organizations that are sending support or personnel to West Africa, and help combat one of the worst public health and humanitarian disasters in recent history.'



On October 16, he checked in at a hotel in Brussels, Belgium, presumably on his return journey from Guinea to the U.S.

*  *  *

Full Statement on Patient at Bellevue Hospital

Today, EMS HAZ TAC Units transferred to Bellevue Hospital a patient who presented a fever and gastrointestinal symptoms.


The patient is a health care worker who returned to the U.S. within the past 21 days from one of the three countries currently facing the outbreak of this virus.


The patient was transported by a specially trained HAZ TAC unit wearing Personal Protective Equipment (PPE).  After consulting with the hospital and the CDC, DOHMH has decided to conduct a test for the Ebola virus because of this patient’s recent travel history, pattern of symptoms, and past work. DOHMH and HHC are also evaluating the patient for other causes of illness, as these symptoms can also be consistent with salmonella, malaria, or the stomach flu.


Preliminary test results are expected in the next 12 hours.


Bellevue Hospital is designated for the isolation, identification and treatment of potential Ebola patients by the City and State.  New York City is taking all necessary precautions to ensure the health and safety of all New Yorkers.


As a further precaution, beginning today, the Health Department’s team of disease detectives immediately began to actively trace all of the patient’s contacts to identify anyone who may be at potential risk. The Health Department staff has established protocols to identify, notify, and, if necessary, quarantine any contacts of Ebola cases.


The Health Department is also working closely with HHC leadership, Bellevue’s clinical team and the New York State Department of Health to ensure that all staff caring for the patient do so while following the utmost safety guidelines and protocols.


Bellevue and the New York State Department of Health to ensure that all staff caring for the patient do so while following the utmost safety guidelines and protocols.


The chances of the average New Yorker contracting Ebola are extremely slim. Ebola is spread by directly touching the bodily fluids of an infected person. You cannot be infected simply by being near someone who has Ebola.

*  *  *


As NY Post reports,

A doctor who returned to New York City from Africa 10 days ago was rushed in an ambulance with a police escort from his Harlem home to Bellevue Hospital on Thursday, sources said.


He was suffering from Ebola-like symptoms — a 103-degree fever and nausea, sources said.


While he was in Africa, the doctor had been treating Ebola patients in Guinea, sources said.


He’s undergoing testing at Bellevue to see if he has the deadly virus, sources said.

*  *  *

NBC reports that...

He was transported from a building on 147th Street between Broadway and Amsterdam Avenue to Bellevue, law enforcement source said.


*  *  *

USDJPY was first to move then stocks...


and VIX was well bid...


...and S&P futures liquidty disappeared...

EMini liquidity fell off a cliff $ES_F $SPY

— Eric Scott Hunsader (@nanexllc) October 23, 2014

And then another exchange Breaks...