Business

The efficient market theory is long dead, according to Bloomberg's Richard Breslow.

It was a brilliant academic construct. It fit the needs of those who wanted to explain markets to freshmen, make econometric models or make money from the knowledge that it wasn’t reality. An unfortunate problem arose, however, from how the counter-argument was framed. If markets weren’t efficient they must be irrational or biased. The truth is something very much in-between.

When it comes to following China's capital outflows, the traditional place to keep track has been China's official reserve data released monthly, which however as we showed previously can and often is manipulated to give the impression of generally smalle numbers. We noted one example in October when China disclosed an official outflow of $43 billion, yet this number was largely incomplete, and short of the total, due to the PBOC's recent adoption of using currency forwards to manipulate the Yuan, something not tracked by the official reserve number.

The Cleveland Fed Financial Stress Index has been rising all year and just broke out to what The Fed describes as a "significant stress" period. The last two times this level of financial instability was breaking out across US markets Bernanke unleashed QE1 (Q1 2009) and Operation Twist (Q1 2012). 

"Significant Stress" has been reached...

Submitted by David Stockman via Contra Corner blog,

That didn’t take long. We’ve just had another short-covering rip from the 1820 Bullard Bottom on the S&P 500 and it’s already petered out. Not even another one of the St. Louis Fed President’s bouncing billiard balls could keep the machines slamming the buy key.

"Get back to work, Mr.Draghi..."

Not only are stock markets (and bank bonds) collapsing, so is European consumer confidence...

Eurozone consumer confidence fell more than expected in February, the first estimate by the European Commission showed Friday. Consumer confidence in the euro area fell to -8.8 in February from -6.3 in January, the Commission said. The decline was much sharper than the fall to -6.8 forecast by economists surveyed by MNI.

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