Saturday, August 27, 2016
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Former Head of Britain’s Civil Service Says the UK Might Remain in a Different Version of the EU


Lord O’Donnel, aka Baron Augustine Thomas O’Donnell, is taking media rounds, suggesting the UK could remain in a EU light version, stressing to not rush over getting out so soon, alluding to the great challenges and difficulties in achieving such a mammoth task. Moreover, he thinks England should wait for the people of Germany and France to choose their elected officials first, as that might have a profound effect on the negotiation process, before invoking article 50.

There isn’t a rush and leaving the EU would be arduous. Maybe public opinion will swing around, permitting the country to simply ignore the BREXIT vote and continue with the status quo?

Before his peerage, Sir Gus O’Donnell, as he was then known, was in charge of the Civil Service between 2005 and 2011 under three prime ministers – Tony Blair, Gordon Brown and David Cameron.

The crossbench peer said: “Lots of people will say, ‘We’ve had the referendum, we’ve decided to go out, so that’s it, it’s all over’.

“But it very much depends what happens to public opinion and whether the EU changes before then.”

“It might be that the broader, more loosely aligned group, is something that the UK is happy being a member of.”

Before the referendum, Lord O’Donnell had warned that leaving the EU would be complicated and take “a very long time”.

He told The Times that leaving would mean “a huge administrative and legislative change” because of the vast amount of EU law that had been implemented in the last 40 years.

As a result, he thinks the UK will keep the body of laws in place even if it does officially leave the bloc.

Lord O’Donnell also warned against rushing to trigger Article 50, which starts a two-year countdown to Brexit.

“The key for Government is to have a strategic plan to say ‘what kind of UK do we want? What is our place in the world? What are we trying to achieve in these negotiations’?”he told BBC Radio 4’s Today programme.

“Once you have got those strategic decisions sorted out, then you can go about thinking about ‘so when should we implement Article 50?’ I wouldn’t be in a rush.”

He added that elections in France and Germany next year meant “it is not even clear which leaders our Prime Minister will be negotiating with, so I don’t think there’s any great rush to do it”.

Lord O’Donnell said that it was going to be a “tough ask” for the civil service to take the UK out of the EU because Britain was “very short” of trade negotiators.

He said: “It is a big task, an enormous task that will take up a lot of the time both of the Government and Parliament over the rest of this Parliament.”

I’ve suspected this might happen. The new British PM, Theresa May, was campaigning for Britain to remain in the EU. The markets have shrugged off the BREXIT vote and the pro-BREXIT crowd have regaled in the glory of their paper victory, declaring ‘see, I told you nothing would happen.’ But, maybe, just maybe, the fix is in and markets have been pricing in BREMAIN the whole time, confident that the bureaucrats in the UK wouldn’t adhere to the will of the people.

Food for thought.

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Icahn Calls Ackman Out On His Herbalife Lies and Obsession


Explain to me how this episode of ‘Bill Ackman takes to CNBC to talk up his book’, via outright lies, wasn’t a pump and dump scheme? If a stock broker were to go on Twitter and publish to his 238 followers that Carl Icahn was selling $HLF, according to his block sale contact at Jefferies, he’s be investigated within 24 hours and tossed into a raping prison inside of 12 mos.

But Billy has clout.

So he went on CNBC this morning and told a tale about Carl Icahn selling HLF, which caused his billion dollar short position to plummet by 7%.

After the close of trade, C. Icahn issued the following press release, calling bullshit on Ackman’s lies and then went on to shit on Billy in a most hilarious manner, calling into question is mental stability and how wrong he’s been, for a very long time.

Over the years many investment bankers, including Jefferies, that specialize in block trades frequently make bids for our large positions. But completely contrary to what Bill Ackman stated on television today, I have never given Jefferies an order to sell any of our Herbalife shares. Last month we publicly disclosed that Herbalife granted us permission to go up to 35%. At the time of the disclosure, Ackman declared that I have no interest in increasing my position in Herbalife. This was obviously another misstatement of the facts by Ackman since today I bought another 2.3 million shares. I continue to believe in Herbalife: it’s a great model that creates a great number of jobs for people. Ackman may be a smart guy but he has clearly succumbed to the same dangerous (and sometimes fatal) malady that afflicts many investors – he’s developed a very bad case of “Herbalife obsession”. Obsessions concerning the value of stocks are the undoing of many investors because they often blind you to the facts, and it becomes impossible to see the forest for the trees. Watching Ackman on television today is a perfect example of this “obsession”. A month ago he declared that I’d never buy more Herbalife stock, which obviously turned out to be completely wrong. Today, he said I’m done with my Herbalife investment and that I’m a seller. Obviously wrong, again. It amazes me that a guy who hasn’t any knowledge of my internal investment thinking believes he is in a position to go on television to tell the world what I AM thinking! Amazing! He has no right to do so, and even worse, I’m sure his unsubstantiated, obsessive comments, especially about Herbalife, have cost investors a great deal of money over the last few years.

Apparently, desperate people do desperate things.

Throughout the trading day, investors sniffed out the bullshit, maybe Carl bought a few more share himself, knowing the rumors were false. In the after hours, the stock erased all losses, adding  4%.

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Markets Bore, as Piggish Investors Take the Day Off to Saunter

The Cognoscenti, in the North Gallery at Petworth House. Captain Walcott and Mr. Apthorpe (far left & right) are the only identifiable figures. Post-conservation. Photo: Matthew Hollow.

Image licenced to Timothy Don Lapham's Quarterly by Timothy Don
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© National Trust Photo Library / Art Resource


The stock market was off by 100 earlier today, which caused a great panic amongst the canaille trading in and out of solar stocks. Lo and behold, the 3:30 ramp came and rescued them from the frigid waters and placed them on a floating door, eerily reminiscent of the one that bitch in Titanic presided on, as she watched poor Jack suffer and then eventually drown to death in the arctic waters.

On the investment side of things, I have the least amount of cash in months. Between my FCX short, TLT long and new gold and gold miner positions, my cash position is less than 25%. Details are listed in the blog inside Exodus.

Today’s big news was that yields spiked, especially the 2yr. Now on the surface, unlearned men will take this as a plus for the banks. But it means NOTHING, if the actual curve is tightening. Right now the 2-10yr yield spread is just 77bps, down from 90bps just a short while ago.

Also, the dollar surged v the euro and yen. Stocks, despite the NASDAQ being up, were down, fuck-burger. Market breadth at 39% means 61% of stocks were lower.

Utilities bore the brunt of the sell off, rightly so. Valuations are out of whack and I’ve been saying this for some time now.

The remainder of my cash will be reserved for the next Exodus oversold signal, which is overdue. The last OS signal was on June the 27th, 2016, which turned out to be an exemplary display of harmonious mathematical precision–for the explicit purposes of winship.

Have a great weekend.

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Jackson’s Hole Has Produced Nothing But Shit


The feverish jerking off ahead of the Federal Reserve speech at Jackson’s Hole has resulted in a market brimming with shit. If I had no brain and simply looked at what the market was saying today, I’d surmise it was pricing in a Fed rate hike.

Look at the 2yr notes, through the roof!


These are the highest rates since May, when the Fed was last menacing markets with the specter of rate hikes.

Along this narrative, gold gave back all of their gains, currently flat. The dollar is surging v the euro, higher by 0.66% and up more than 1.1% v the Yen. A tight Fed is likely to lead to FOREX fuckery, a shortage of dollars throughout EM. I don’t really understand why the Fed keeps insisting on talking about raising rates, especially since all of Europe and all of Japan is under QE programs.

All indices are selling off, now down 80.

Over the past 2 weeks, the NASDAQ is down 1%, but up a whole 4.7% year to date. From my vantage point, this is a whole lot of nothing-burger. The real money continues to be made, without pause, in REITs, Utilities, Gold and Treasuries.

Year to date, gold miners are up 143%, water utilities are up 30%, healthcare REITs are up 26% and TLT is up 18%.

Today, we’re getting a push back against these sectors, however, because of the infantile belief in Federal Reserve rate hikes. The ark will be repurposed as a warship (DDG-Fly Class 12631) in the coming storms.

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Bipolar Market Plunges, Triple Digit Gains Vanished


You can’t read too much into this shit. It’s a sloppy Friday. Old sport, junior, is still at the trading turret. His fucking cocaine addled boss isn’t back from Nantucket yet and has given strict instructions to not fuck up. So, give the kids of Wall Street a little rope (extra hanging) when judging a post Yellen speech market reaction.

Earlier, the Dow was up more than a hundred, commodities were ripping higher, yields were crashing, and the dollar was getting donkey punched. All of that has reversed and we’re now seeing a tight environment, one that is construing the Jackson Hole speech as hawkish.

Perhaps by the end of the day, it’ll be viewed as dovish. But for now, profits are being taken and the dollar is crushing the euro to the upside, by 0.4%.

My gold position will not change, since I believe any narrative that paints the Fed as hawkish is delusional. The closer we get to the elections, the less likely they’re to hike, the more bullish it is for gold.

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U.S. Yield Curve Flattens; Spreads Hit New Lows


The 2yr yield isn’t dropping as fast as the 10. Typically, this is an indicator of a weakening economy, which could be construed by this morning’s revised GDP data. Also, it could mean the Fed might hike rates within the next 6 months. If the Fed hikes, it will affect shorter duration bonds much more than longer. As such, the yield curve is flattening.


I’ve been tracking the curve in Exodus for a while now and haven’t seen it this low ever. With just 74bps between the 2 and 10 year, someone, somewhere, is betting on a deleterious turn in economic activity.

Bear in mind, TLT is moving sharply higher today, +0.9% to $140.36. My entire thesis for TLT is that I will only sell it when the yield curve inverts. So, the tighter that spread gets, the more likely I am to take profits on treasuries. Also, because the Yellen speech was pretty much as expected, lacking any substance or teeth, I added the second tranche of my gold positions. It is now a full position, a little more than 25% of assets.

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Former Fed’s Mishkin Thinks Market is Underpricing November Hike


It’s worth noting, he dollar was down 0.5% v the euro and is now up. Gold has coiled back a bit, off the highs. And markets are down 30-40 points from the early morning pop. Nevertheless, it’s a strong day and the following Yellen statement might have something to do with it.

For example, future policymakers may wish to explore the possibility of purchasing a broader range of assets. Beyond that, some observers have suggested raising the FOMC’s 2 percent inflation objective or implementing policy through alternative monetary policy frameworks, such as price-level or nominal GDP targeting. I should stress, however, that the FOMC is not actively considering these additional tools and policy frameworks, although they are important subjects for research.

Bear in mind, the Fed isn’t planning to do any of this stuff, in the foreseeable future.  As former Fed’s Mishkin noted, a change in the Fed inflation target is a very long discussion, which would not be made on a whim.

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Stocks, Commodities Explode Higher, as Market Calls Bullshit on Yellen’s Remarks on Rates


Janet Yellen thought she’d sound tough today at the Jackson Hole. She prepared a speech designed to scare Wall Street into believing she was interested in hiking rates.

The Federal Open Market Committee “continues to anticipate that gradual increases in the federal funds rate will be appropriate over time to achieve and sustain employment and inflation near our statutory objectives,” Yellen said in prepared remarks.

More pointedly, she added, “Indeed, in light of the continued solid performance of the labor market and our outlook for economic activity and inflation, I believe the case for an increase in the federal funds rate has strengthened in recent months.”

The result was not as she intended. Stocks took off like a fucking bottled rocket and commodities–thru the roof. A hedonistic party broke out, with lit candelabras in the commodity pits–sending gold and oil higher.

Also, the dollar got its stuffing punched out and gobbled up by hungry Devils.

Look at my charts.




Inside the cavernous offices of Dr. B. Bernanke, at Citadel, he was overheard saying ‘bitch is soft, that’s why this shit happens to her all the time’, just before taking a puff on his marijuana filled blunt.

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