Presenting Today's Blatant Bond Market Manipulation

Today is the second time in three months that someone, or something, either leaked the Non-farm payroll data just ahead of its official release, or if not leaked then a trading algorithm manipulated the bond market ahead of the official data release by launching a "momentum ignition" (see here [12], here [13]and here [14]for much more on how HFT uses this strategy over and over to set trading bands) launch higher just ahead of the official data release at 8:30:00:0000 am that desperately needed to push 10 Year yields, already on the verge of a 2 year breakout, lower.

The chart below shows how 3 seconds ahead of the official release someone started a buying spree before the actual reported BLS miss. This was followed by a trading halt in the bond complex as the machines reacted to the new "baseline" price in the 10 and 30 Year Treasury future, and proceeded to trade using the new momentum-ignited reference price as the reference level.

 [15]

Was this a leak, or was it simply a programmed momentum ignition event designed to provide a higher high in the 10Y futures, and drag the bond complex higher - after all we live in a world in which algos are buying just because other algos are buying - which ahead of the BLS print was threatening to surge above the 2.7535% 2 year high in yield, and finally wake up stocks that soaring yields are here.

As a reminder, this is precisely what happened June 7 when a BLS released resulted in yet another bond market ignition and subsequent halt as described in "Here Is Today's 482 Millisecond NFP Leak, The Subsequent Gold Slam And Trading Halts In Treasurys And ES [16]", although back then it was not nearly as blatant: the "momentum ignition" hit just 482 before the official release back then.

Here Is Today's 482 Millisecond NFP Leak, The Subsequent Gold Slam And Trading Halts In Treasurys And ES

What was more amusing was the action after the NFP release in both the eMini and the T-Bond futures, all of which had to be halted for a whopping 5 seconds until the algos, selling everything at first, got the memo out that good news today was in fact good news, and promptly ramped risk to the moon. Either that, or someone called in a code Red, made it so all selling was literally prohibited, and with the only path of no resistance up, resulted in today's epic melt up on what was initially a very bearish kneejerk response to the NFP print.

First: September 2013 T-Bond Futures trades and quote spread. The deluge of selling hits 482 milliseconds before the NFP release, leading to a 5 second circuit breaker and halting the OTR future contract of the world's largest bond market. Abe would be proud.



Meanwhile in equities, all liquidity disappeared. All of it.

 [17]

Fear not though: the CFTC is on top of it. You see, when bond trading is halted two times in three months alongside of the most important monthly economic release, someone has a fit, and they scream at the CFTC. The Goldman-alumnus headed CFTC. So what does the CFTC do? They "review" it. From Reuters [18]:

CFTC probing Treasury futures trading that led to halt at CME

U.S. futures regulators are reviewing trades that triggered a brief halt in trading at CME Group's markets for Treasury futures just as the U.S. government was poised to release key data on the jobs market.

"We are aware of it and will be doing a review of the trades, which is standard operating procedure for something like this," Commodity Futures Trading Commission commissioner Bart Chilton said in response to a query from Reuters.

CME Group halted trading in some Treasury futures for five seconds, beginning just before the 8:30 am ET (1230 GMT) release of the monthly jobs report.

Large trades in 10-year and 30-year Treasury futures were made just prior to the release of the report. Such trades and large market moves can trigger automatic stops in CME markets.

Of course, once the CFTC and CME both discover the ignition originated either at Liberty 33, at its proxy Citadel, or Goldman/JPM, the "review" will promptly fade into obscurity, or at best, the CFTC will "discover" that nothing actually happened contrary to irrefutable evidence to the contrary.

Just like in its investigation of silver manipulation. But at least Bart Chilton will sell more poetry books.

http://www.zerohedge.com/print/477159

US Escalates: Issues Worldwide Travel Alert Following Embassy Closures

With US leaks about Israeli air strike on Syria, John Kerry stirring the civil war pot in Egypt, and the closure of US embassies across the Muslim world (Iraq, Afghanistan, Qatar, Bahrain, Oman, Kuwait, Bangladesh, Saudi Arabia, Libya, Yemen, UAE, Algeria, Mauritania, Sudan, Israel (Tel Aviv) and Jordan), it appears something is afoot. To add to the intrigue, the US State Department just issued a worldwide travel alert for US citizens.

• *STATE DEPARTMENT WORLDWIDE TRAVEL ALERT EXPIRES AUGUST 31, 2013
• *STATE DEPT ISSUES WORLDWIDE TRAVEL ALERT FOR U.S. CITIZENS

An Al-Qaeda threat has been posited but with no follow-up but we can't help but fear what we wondered about previously - the need for deficits to re-awaken (via some external event that no-one can 'un-patriotically' demur) providing more room for Bernanke to avoid his need for Taper.

Via The State Department,

The Department of State has instructed certain U.S. Embassies and Consulates to remain closed or to suspend operations on Sunday, August 4.  The Department has been apprised of information that, out of an abundance of caution and care for our employees and others who may be visiting our installations, indicates we should institute these precautionary steps.

On Egypt,

Demonstrators calling for the reinstatement of ousted former president Mohammed Morsi (2012-13) remained defiant on 1 August, a day after the interim cabinet authorised the police to dismantle their protest camps. The authorities in recent days have filed additional charges for incitement to violence against senior members of Morsi's Muslim Brotherhood and other Islamist parties.

...

Accordingly, Embassy Cairo will be closed on Sunday, August 4.  U.S. citizens requiring emergency assistance should contact the Embassy switchboard which is manned 24/7 at 02-2797-3300.

Various media sources are reporting possible marches or demonstrations for Friday, August 2 and possibly throughout the weekend.  In addition, several media sources are reporting that the police have been given the authority to clear protestors from permanent gathering locations.  Should police move to clear these various locations, it may escalate into violent confrontations.  U.S. citizens should maintain a low profile and limit movements within their immediate residential neighborhoods.

On Saudi Arabia,

Department of State urges U.S. citizens to carefully consider the risks of traveling to Saudi Arabia. As the August 26, 2012, arrest of two terrorist cells by Saudi security authorities indicates, there remains an ongoing security threat due to the continued presence of terrorist groups, some affiliated with al-Qaida, who may target Western interests...

And as we noted, our concern before:

Why is Ben unhappy? Simple - as a reminder, the only reason Ben is even contemplating tapering has nothing to do with the economy. After all the Fed chairman (and/or his successor) is willing to send the stock market into stratospheric overdrive and would be very happy to add not subtract from the monthly QE $85 billion notional since it means more "wealth effect" and thus brings the US closer to the "Keynesian successful endgame" (that the logic here is completely inverted is well known to all but the most die-hard Keynesian fanboys and is not in the scope of this article).

However, the fact that the gross US debt issuance is declining (if only until the demographic and healthcare crunch hits in 2015 and deficits explode once more) means Bernanke has less primary issuance to monetize. Were Bernanke to maintain his monetization run rate into a lower deficit regime, the Chairman would destabilize the liquidity in the already increasingly illiquid Treasury market in which the Fed now holds over 30%of all 10 Year equivalents and its holdings increase by 0.3% every week. This illiquidity is manifesting itself most directly in the "special" repo rates that have become a norm in the past few months especially in the 10 Year, and which indicate an ongoing shortage of TSY collateral.

Of course, there is a very simple and elegant solution to declining defense spending, one which has been used time and again in US history when the US government needed to provide the Fed with more securities (i.e. deficit) to monetize: war.

Because, if in dire need to boost deficit spending, the chart below shows the most usual suspect:

http://www.zerohedge.com/news/2013-08-02/what-do-they-know-us-issues-worldwide-travel-alert

The Snowden Time-Bomb

Authored by Harold James, originally posted at Project Syndicate,

In the aftermath of the global financial crisis, world leaders repeated a soothing mantra. There could be no repeat of the Great Depression, not only because monetary policy was much better (it was), but also because international cooperation was better institutionalized. And yet one man, the American former intelligence contractor Edward Snowden, has shown how far removed from reality that claim remains.

Prolonged periods of strain tend to weaken the fabric of institutional cooperation. The two institutions that seemed most dynamic and effective in 2008-2009 were the International Monetary Fund and the G-20; the credibility of both has been steadily eroded over the long course of the crisis.

Because the major industrial economies seem to be on the path to recovery – albeit a feeble one – no one seems to care very much that the mechanisms of cooperation are worn out. They should. There are likely to be many more financial fires in various locations, and the world needs a fire brigade to put them out.

The IMF’s resources were extended in 2009, and the organization was supposed to be reformed in order to give emerging markets more voice. But little progress has been made.

The Fund was the centerpiece of the post-1945 global economic system. It subsequently played a central role in the management of the 1980’s debt crisis and in the post-communist economic transition after 1989. But every major international crisis since then has chipped away at its authority. The 1997-1998 Asian financial crisis undermined its legitimacy in Asia, as many governments in the region believed that the crisis was being exploited by the United States and US financial institutions.

The post-2007 Great Recession discredited the IMF further for three reasons. First, the initial phase of the crisis looked like an American phenomenon. Second, the IMF’s heavy involvement in the prolonged euro crisis looked like preferential treatment of Europe and Europeans. In particular, the demand that, because the world was focused on Europe, another European (and another French national) should succeed the IMF’s then-managing director, Dominique Strauss-Kahn, was incomprehensible to the large emerging-market countries. Eventually, as in the Asian crisis, European governments and the European Commission fell out with the Fund and began to blame its analysis for having confused and unsettled markets.

On the big issues underlying the global financial crisis – the problem of current-account imbalances and deciding which countries should adjust, and reconciling financial reform with a pro-growth agenda – the IMF cannot say much more, or say it more effectively, than it could before the crisis.

The G-20 was the great winner of the financial crisis. The older summits (the G-7 or, with the addition of Russia, the G-8), as well as the G-7 finance ministers’ meetings, were no longer legitimate. They consisted of countries that had actually caused the problems; they were dominated by the US; and they suffered from heavy over-representation of mid-sized European countries.

The G-20, by contrast, brought in the big emerging markets, and its initial promise was to provide a way to control and direct the IMF. The new mood of global economic regime change was captured in the official photograph that was widely used in coverage of the most successful of the G-20 summits, held in London in April 2009.

In the short term, the London summit mitigated financial contagion emanating from southern Europe; gave the World Bank additional resources to deal with the problem of trade finance for emerging-market exports; appeared to give the IMF more firepower and legitimacy; and seemed to catalyze coordinated fiscal stimulus to restore confidence.

But only the more technical of these four achievements – the first two – stood the test of time. Everything else that was agreed at the London summit turned sour. The follow-up summits were lame. The idea of coordinated fiscal stimulus became problematic when it became obvious that many European governments could not take on more debt without unsettling markets and pushing themselves into an unsustainable cycle of increasingly expensive borrowing.

And yet, however limited the London summit’s achievements proved to be, the summit process itself was not fully discredited until Snowden’s intelligence revelations. It may be that leaders and their staffs were naive in believing that their communications were really secure. But Snowden’s revelations that the London summit’s British hosts allegedly monitored the participants’ communications make it difficult to imagine that the genuine intimacy of earlier summits can ever be recreated. And, with the espionage apparently directed mostly at representatives of emerging economies, the gulf between the advanced countries and those on the rise has widened further.

World leaders appear partly ignorant and partly deceptive in responding to the allegations. They are probably right to emphasize how little they really know about surveillance. It is in the nature of complex data-gathering programs that no one really has an overview.

But the lack of transparency surrounding data surveillance and mining means that, when a whistleblower leaks information, everyone can subsequently use it to build their own version of how and why policy is made. The revelations thus encourage wild conspiracy theories.

The substantive aftermath of the London summit has already caused widespread disenchantment with the G-20 process.The Snowden affair has blown up any illusion about trust between leaders – and also about leaders’ competence.By granting Snowden asylum for one year, Russian President Vladimir Putin, will have the bomber in his midst when he hosts this year’s summit in Saint Petersburg.

44 facts about the death of middle class that every American should know

What is America going to look like when the middle class is dead? Once upon a time, the United States has the largest and most vibrant middle class in the history of the world. When I was growing up, it seemed like almost everyone was "middle class" and it was very rare to hear of someone that was out of work. Of course life wasn't perfect, but most families owned a home, most families had more than one vehicle, and most families could afford nice vacations and save for retirement at the same time. Sadly, things have dramatically changed in America since that time. There just aren't as many "middle class jobs" as there used to be. In fact, just six years ago there were about six million more full-time jobs in our economy than there are right now. Those jobs are being replaced by part-time jobs and temp jobs. The number one employer in America today is Wal-Mart and the number two employer in America today is a temp agency (Kelly Services). But you can't support a family on those kinds of jobs. We live at a time when incomes are going down but the cost of living just keeps going up. As a result, the middle class in America is being absolutely shredded and the ranks of the poor are steadily growing. The following are 44 facts about the death of the middle class that every American should know: 

1. According to one recent survey, "four out of five U.S. adults struggle with joblessness, near poverty or reliance on welfare for at least parts of their lives". 

2. The growth rate of real disposable personal income is the lowest that it has been in decades. 

3. Median household income (adjusted for inflation) has fallen by 7.8 percent since the year 2000. 

4. According to the U.S. Census Bureau, the middle class is taking home a smaller share of the overall income pie than has ever been recorded before. 

5. The home ownership rate in the United States is the lowest that it has been in 18 years. 

6. It is more expensive to rent a home in America than ever before. In fact, median asking rent for vacant rental units just hit a brand new all-time record high. 

7. According to one recent survey, 76 percent of all Americans are living paycheck to paycheck. 

8. The U.S. economy actually lost 240,000 full-time jobs last month, and the number of full-time workers in the United States is now about 6 million below the old record that was set back in 2007. 

9. The largest employer in the United States right now is Wal-Mart. The second largest employer in the United States right now is a temp agency(Kelly Services). 

10. One out of every ten jobs in the United States is now filled through a temp agency. 

11. According to the Social Security Administration, 40 percent of all workers in the United States make less than $20,000 a year. 

12. The ratio of wages and salaries to GDP is near an all-time record low. 

13. The U.S. economy continues to trade good paying jobs for low paying jobs. 60 percent of the jobs lost during the last recession were mid-wage jobs, but 58 percent of the jobs created since then have been low wage jobs. 

14. Back in 1980, less than 30% of all jobs in the United States were low income jobs. Today, more than 40% of all jobs in the United States are low income jobs. 

15. At this point, one out of every four American workers has a job that pays $10 an hour or less. 

16. According to one study, between 1969 and 2009 the median wages earned by American men between the ages of 30 and 50 declined by 27 percent after you account for inflation. 

17. In the year 2000, about 17 million Americans were employed in manufacturing. Today, only about 12 million Americans are employed in manufacturing. 

18. The United States has lost more than 56,000 manufacturing facilities since 2001. 

19. The average number of hours worked per employed person per year has fallen by about 100 since the year 2000. 

20. Back in the year 2000, more than 64 percent of all working age Americans had a job. Today, only 58.7 percent of all working age Americans have a job. 

21. When you total up all working age Americans that do not have a job, it comes to more than 100 million. 

22. The average duration of unemployment in the United States isnearly three times as long as it was back in the year 2000. 

23. The percentage of Americans that are self-employed has steadily declined over the past decade and is now at an all-time low. 

24. Right now there are 20.2 million Americans that spend more than half of their incomes on housing. That represents a 46 percent increase from 2001. 

25. In 1989, the debt to income ratio of the average American family was about 58 percent. Today it is up to 154 percent. 

26. Total U.S. household debt grew from just 1.4 trillion dollars in 1980 to a whopping 13.7 trillion dollars in 2007. This played a huge role in the financial crisis of 2008, and the problem still has not been solved. 

27. The total amount of student loan debt in the United States recently surpassed the one trillion dollar mark. 

28. Total home mortgage debt in the United States is now about 5 times larger than it was just 20 years ago. 

29. Back in the year 2000, the mortgage delinquency rate was about 2 percent. Today, it is nearly 10 percent. 

30. Consumer debt in the United States has risen by a whopping 1700% since 1971, and 46% of all Americans carry a credit card balance from month to month. 

31. In 1999, 64.1 percent of all Americans were covered by employment-based health insurance. Today, only 55.1 percent are covered by employment-based health insurance. 

32. One study discovered that approximately 41 percent of all working age Americans either have medical bill problems or are currently paying off medical debt, and according to a report published in The American Journal of Medicine medical bills are a major factor in more than 60 percent of all personal bankruptcies in the United States. 

33. Each year, the average American must work 107 days just to make enough money to pay local, state and federal taxes. 

34. Today, approximately 46.2 million Americans are living in poverty. 

35. The number of Americans living in poverty has increased by more than 15 million since the year 2000. 

36. Families that have a head of household under the age of 30 have a poverty rate of 37 percent. 

37. At this point, approximately 25 million American adults are living with their parents. 

38. In the year 2000, there were only 17 million Americans on food stamps. Today, there are more than 47 million Americans on food stamps. 

39. Back in the 1970s, about one out of every 50 Americans was on food stamps. Today, about one out of every 6.5 Americans is on food stamps. 

40. Right now, the number of Americans on food stamps exceeds the entire population of the nation of Spain. 

41. According to one calculation, the number of Americans on food stamps now exceeds the combined populations of "Alaska, Arkansas, Connecticut, Delaware, District of Columbia, Hawaii, Idaho, Iowa, Kansas, Maine, Mississippi, Montana, Nebraska, Nevada, New Hampshire, New Mexico, North Dakota, Oklahoma, Oregon, Rhode Island, South Dakota, Utah, Vermont, West Virginia, and Wyoming." 

42. At this point, more than a million public school students in the United States are homeless. This is the first time that has ever happened in our history. That number has risen by 57 percent since the 2006-2007 school year. 

43. According to U.S. Census data, 57 percent of all American children live in a home that is either considered to be "poor" or "low income". 

44. In the year 2000, the ratio of social welfare benefits to salaries and wages was approximately 21 percent. Today, the ratio of social welfare benefits to salaries and wages is approximately 35 percent. 

And not only is the middle class being systematically destroyed right now, we are also destroying the bright economic future that our children and our grandchildren were supposed to have by accumulating gigantic mountains of debt in their names. The following is from a recent articleby Bill Bonner:

Today, the U.S. lumbers into the future with total debt equal to about 350% of GDP. In Britain and Japan, the total is over 500%. Debt, remember, is the homage that the future pays to the past. It has to be carried, serviced... and paid. It has to be reckoned with... one way or another.

And the cost of carrying debt is going up! Over the last few weeks, interest rates have moved up by about 15% - an astounding increase for the sluggish debt market. How long will it be before long-term borrowing rates are back to "normal"?

At 5% interest, a debt that measures 3.5 times your revenue will cost about one-sixth of your income. Before taxes. After tax, you will have to work about one day a week to keep up with it (to say nothing of paying it off!).

That's a heavy burden. It is especially disagreeable when someone else ran up the debt. Then you are a debt slave. That is the situation of young people today. They must face their parents' debt. Even serfs in the Dark Ages had it better. They had to work only one day out of 10 for their lords and masters.

We were handed the keys to the greatest economic machine in the history of the planet and we wrecked it. 

As young people realize that their futures have been destroyed, many of them are going to totally lose hope and give in to despair. 

And desperate people do desperate things. As our economy continues to crumble, we are going to see crime greatly increase as people do what they feel they need to do in order to survive. In fact, we are already starting to see this happen. Just this week, CNBC reported on the raging epidemic of copper theft that we are seeing all over the nation right now:

Copper is such a hot commodity that thieves are going after the metal anywhere they can find it: an electrical power station in Wichita, Kan., or half a dozen middle-class homes in Morris Township, N.J.Even on a Utah highway construction site, crooks managed to abscond with six miles of copper wire.

Those are just a handful of recent targets across the U.S. in the $1 billion business of copper theft.

"There's no question the theft has gotten much, much worse," said Mike Adelizzi, president of theAmerican Supply Association, a nonprofit group representing distributors and suppliers in the plumbing, heating, cooling and industrial pipe industries.

The United States once had the greatest middle class in the history of the world, but now it is dying. 

This is causing a tremendous amount of anger and frustration to build in this nation, and when the next major wave of the economic collapse strikes, a lot of that anger and frustration will likely be unleashed. 

The American people don't understand that these problems have taken decades to develop. They just want someone to fix things. They just want things to go back to the way that they used to be. 

Unfortunately, the great economic storm that is coming is not going to be averted. 

Get ready while you still can. Time is running out.

http://www.sott.net/article/264559-44-facts-about-the-death-of-middle-class-that-every-American-should-know