Fleckenstein on missing the rally:

http://www.cnbc.com/id/102006263


http://thefelderreport.com/2014/09/25/the-hallmark-of-hubris/

The Hallmark Of Hubris

 

I can’t stop thinking about this interview with Bill Fleckenstein on CNBC the other day because it’s just the perfect example of the current stock market zeitgeist.
Fleck was brought on to talk about the new short fund he’s setting up for the first time since closing his last fund in 2009. As a longtime follower of Fleck’s writing I’m fairly certain that prior fund did very well during the financial crisis. Not only was he all over that mess BEFORE it happened, he had the balls to put his money where his mouth was and profit from it.
Today, he’s setting up a fund to once again profit from what he sees as another financial debacle in the making. And all she wants to do is give him shit for missing the upside over the past year or two! And I think, ‘why the hell would she even think of criticizing a short seller — who has effectively sidestepped the rally over the past five years — for not being long this market?!’ Since when are short sellers supposed to be long?
Oh, yeah. Since the market has gone straight up for five years. That’s the point when everyone and their mom decides that buying and holding an S&P 500 index fund forever and ever is the ONLY thing any sane person can do. Anything other than this strategy is something to be scorned.
Scorn the short seller. Scorn the market timer. Scorn the traders who haven’t captured every upside tick of the past five years. Scorn bond holders. Scorn anyone who hasn’t had at least an aggressive allocation to stocks. Scorn anyone who doesn’t just close their eyes, plug their nose and buy with both hands and then hold no matter what.
This kind of thinking is the hallmark of hubris: ‘Not only is my idea the right one. Any idea that is not exactly this idea is not only wrong it’s worthy of our worst scorn.’
And it’s not just this anchor. It’s also the most popular bloggers, pundits and publications you can find. It’s an ethos.
But do any of these folks remember when they were chanting, “buy and hold is dead,” just five years ago. It was the exact opposite of today’s ethos. Anyone who uttered the phrase, “buy and hold,” was ridiculed back then. Bears and short sellers were the ones heaping scorn on the hapless, hopeless suckers who bought the “buy and hold” line of BS.
It’s all just part of the sentiment wheel that keeps going round and round.

 

Central banks shift into shares as low rates hit revenues

http://www.ft.com/intl/cms/s/0/d9dfad02-f462-11e3-a143-00144feabdc0.html?siteedition=intl#axzz34ktExR6g

. http://www.ft.com/cms/s/0/d9dfad02-f462-11e3-a143-00144feabdc0.html#ixzz3CpqeoS2j

Central banks around the world, including China’s, have shifted decisively into investing in equities as low interest rates have hit their revenues, according to a global study of 400 public sector institutions.

“A cluster of central banking investors has become major players on world equity markets,” says a report to be published this week by the Official Monetary and Financial Institutions Forum (Omfif), a central bank research and advisory group. The trend “could potentially contribute to overheated asset prices”, it warns.

Central banks are traditionally conservative and secretive managers of official reserves. Although scant details are available of their holdings Omfif’s first “Global Public Investor” survey points out they have lost revenues in recent years as a result of low interest rates – which they slashed in response to the global financial crisis.
The report, seen by the Financial Times, identifies $29.1tn in market investments, including gold, held by 400 public sector institutions in 162 countries.

Central banks’ actions aimed at stimulating economies, including quantitative easing, have deliberately sought to push investors into riskier assets, and share prices have risen sharply since 2009 – leading to fears of stock market corrections if economic growth disappoints.

China’s State Administration of Foreign Exchange has become “the world’s largest public sector holder of equities”, according to officials quoted by Omfif. Safe, which manages $3.9tn, is part of the People’s Bank of China. “In a new development, it appears that PBoC itself has been directly buying minority equity stakes in important European companies,” Omfif adds.

A chapter in the report on Chinese foreign investment trends argues Safe’s interest in Europe is “partly strategic” because it “counters the monopoly power of the dollar” and reflects Beijing’s global financial ambitions.

In Europe, the Swiss and Danish central banks are among those investing in equities. The Swiss National Bank has an equity quota of about 15 per cent. Omfif quotes Thomas Jordan, SNB’s chairman, as saying: “We are now invested in large, mid- and small-cap stocks in developed markets worldwide.” The Danish central bank’s equity portfolio was worth about $500m at the end of last year.

Overall, the Omfif report says “global public investors” have increased investments in publicly quoted equities “by at least $1tn in recent years” – without saying from what level, or how the figure is split between central banks and other public sector investors such as sovereign wealth funds and pension funds.

Growth in countries’ official reserves has increased fears about potential risks to global financial stability. In a contribution to the Omfif report, Ted Truman, a senior fellow at the Peterson Institute for International Economics, writes: “Reforms are urgently needed to enhance the domestic and international transparency and accountability for this activity – in the interests of a better-functioning world economy.”

He adds: “Changes, real or rumoured, in the asset or currency composition of foreign exchange reserves have the potential to destabilise exchange rate and financial markets.”

Central banks around the world have foregone between $200bn and $250bn in interest income as a result of the fall in bond yields in recent years, Omfif calculates, without giving details. “This has been partly offset by reduced payments of interest on the liabilities side of the balance sheets,” it adds.

It's Settled: Central Banks Trade S&P500 Futures

http://www.zerohedge.com/news/2014-08-30/its-settled-central-banks-trade-sp500-futures

Based on the unprecedented collapse in trading volumes of cash products over the past 6 years, one thing has become clear: retail, and increasingly, institutional investors and traders are gone, probably for ever and certainly until the Fed's market-distorting central planning ends. However, one entity appears to have taken the place of conventional equity traders: central banks.
Courtesy of an observation by Nanex's Eric Hunsader, we now know, with certainty and beyond merely speculation by tinfoil fringe blogs, that central banks around the world trade (and by "trade" we mean buy) S&P 500 futures such as the E-mini, in both futures and option form, as well as full size, and micro versions, in addition to the well-known central bank trading in Interest Rates, TSY and FX products.

In fact, central banks are such active traders, that the CME Globex has its own "Central Bank Incentive Program", designed to "incentivize" central banks to provide market liquidity, i.e., limit orders, by paying them (!) tiny rebates on every trade. Because central banks can't just print whatever money they need, apparently they need the CME to pay them to trade.

BIS warning over euphoric markets doesn’t make sense

http://www.ft.com/cms/s/0/2be85a80-fe32-11e3-acf8-00144feab7de.html#axzz3CpDpG6nY