While everyone's strategic focal point still continues to be planted firmly on the black swan even horizon, in essence making the "unexpected" negative event virtually impossible as while nobody knows what will cause the crash, everyone is certain a crash will arrive in some form or another, today John Taylor takes an inverse approach and instead of chasing Black Swans he looks at the possibility of a "White Crow" - or the opposite: a positive outlier event with outsized implications on risk assets. The two main White Crows evaluated by Taylor are i) a conversion of the stock market melt up into a rout up, and ii) a bullish outlook on the EURUSD. The latter is particularly notable as the FX titan has long been known for his extremely bearish outlook on the European currency. Is he throwing in the towel and joining Goldman in the long EURUSD trade? Overall a surprisingly optimistic short-term outlook on the market: "Although our cycles argue there is a reasonable probability of a risk peak in the first half of March, followed by a sharp decline, the cyclical picture before that time is positive for risk. The future outlook might be dark, but the models are positive now. Being open to risky assets is the only way to go." And with $200 billion in additional liquidity in February and March, he just may be right.
Q4 GDP comes below consensus at 3.2%, on expectations of 3.5%. Goldman once again hits in on the nail with their below consensus estimate of 3.0%. Inventories take out 3.7% from Q4 economy (annualized) which is strange considering all diffusion indices in Q4 saw inventory accumulation. Furthermore we are supposed to believe that the government actually subtracted 0.11% from economic "growth." Exports and Imports combined to add another 3.44% gross of the total annualized growth. This is the first time Imports "grew" the economy since Q2 2009. Overall, more or less in line with expectations, with a weaker tone.
- Baltic Dry Index falls 4.1% to 1137 points
- Moody's Says Time Running Out for U.S. as S&P Cuts Japan (Bloomberg)
- Governments Stockpile Food Staples (FT)
- Consumer spending seen helping quarterly growth (Reuters)
- Internet in Egypt offline (BGPMon)
- IMF's Zhu Warns Global Imbalances May Worsen on Chinese Exports (Bloomberg)
- Chinese Firms Set Sights on U.S. Investments (WSJ)
- Ratings Agency Cites Political Chaos (WSJ)
- ECB’s Tumpel-Gugerell Says Governments Must Do More for Euro (Bloomberg)
- Sarkozy Tells G20 ‘Dare to Dream.’ (FT)
- BofA may pay higher share of bonus in cash: report (Reuters)
- Facebook Overvalued at $50 Billion in Global Poll of Investors (Bloomberg)
Markets mostly positive this AM ahead of significant 4Q10 economic releases. GDP is widely believed to be very expansionary, but considering the disappointing numbers yesterday, a more muted number would not be a surprise. Jobless claims printed on a (sadly) more normal run rate yesterday and the Fed’s dovish stance revealed in Wednesday’s release seems to be well founded if one chooses to ignore commodity price inflation. Moody’s commentary on US ratings, states that the timeframe for review is shortening as the balance sheet expands.
Forget the irrelevant inventory accumulation... pardon... GDP number. The real news today is coming from Egypt, where history is currently being made and a regime is in the process of being overthrown despite the unprecedented country-wide internet shutdown. The fallout from today's riots will be momentous. Follow all the news in real time from Al Jazeera.
Even as the conference board reported that US consumer confidence recently surged to fresh multi-year highs, on who knows what: presumably the fact that ever more Americans are happy that Ben Bernanke can manipulate the stock market higher, it has continued to plunge in the UK, a country which is identical to ours, except for all the pervasive data manipulation. As Bloomberg reports, "Polling firm GfK NOP Friday said its headline measure of consumer confidence fell to -29 in January from -21 in December to reach its lowest level in 22 months." And more: "According to GfK's survey, consumers became significantly more pessimistic about the outlook for the economy in the coming 12 months, much more downbeat about their personal financial prospects, and much more reluctant to make major purchases. "January's eight point drop represents an astonishing collapse in consumer confidence," said Nick Moon, managing director of GfK NOP Social Research. "In the 35 years since the index began, confidence has only slumped this much on six occasions, the last being in the midst of the 1992 recession." And all this happened even before snow caused the UK economy to enter official stagflation. This is simply an advance indication of what will happen in the US once the Fed stops monetizing in June (which it won't), and when the last remnants of the latest bout of fiscal stimulus finally disappear. Unfortunately the government's recent attempt to break the oil price surge, which is the biggest black eye in its attempt to reflate, will fail spectacularly once Egypt formally revolts at some point over the next 6-12 hours.
The preliminary take on fourth-quarter growth, employment costs, and consumer confidence….And just in case greater inventory accumulation for the GDP report is not sufficient to get stocks higher, there will be a $7-9 billion monetization of 02/15/2018 – 11/15/2020 bonds.
RANsquawk European Morning Briefing - Stocks, Bonds, FX etc. – 28/01/11
Optimism is so important that Merrill Lynch, one of the oldest firms on Wall Street adopted a “bull” as their logo and the phrase “be bullish” as their mantra. [Editors note: despite Merrill Lynch’s best attempts of providing uplifting advice to America and the World, they’ll remain as one of the poster children for the 2008 market collapse. I guess being eternally bullish didn’t exactly workout for the mighty Merrill Lynch]. Ok, Merrill Lynch was obviously married to positive thinking. But should everyone on Wall Street be painted with the same brush? We’ll let the numbers speak for themselves as we examine the success of the professional World of economists.
Per assorted tweets from the country that is only second (but certainly not last) in experiencing first hand the Genocidal one's monetary policies, the Egyptian government has now effectively shut down the internet, text messaging and possibly land lines -link. This includes Facebook and Twitter. Ironically this act of desperation in Egypt which seeks to prevent the ongoing televising of the revolution, would be precisely the match that would set off America on a certain path to revolution: not ongoing banker rape, not Primary Dealers stealing from babies, not Greek president G-Pap robbing your wallet... merely a shutdown of Facebook and Twitter (and possibly cable) and 300 million well-armed American will promptly go apeshit.
And so Chicago politics continues in the good old fashion way. From the Illinois Supreme Court: "Given the record before us, it is simply not possible to find clearly erroneous the Board’s determination that the objectors failed to prove that the candidate had abandoned his Chicago residence. We therefore reverse the decision of the appellate court and affirm the decision of the circuit court, which confirmed the Board’s decision. So there will be no mistake, let us be entirely clear. This court’s decision is based on the following and only on the following: (1) what it means to be a resident for election purposes was clearly established long ago, and Illinois law has been consistent on the matter since at least the 19th Century; (2) the novel standard adopted by the appellate court majority is without any foundation in Illinois law; (3) the Board’s factual findings were not against the manifest weight of the evidence; and (4) the Board’s decision was not clearly erroneous."
Desperation kitchen sink anyone? The M2, which up until now was merely diagonal, is about to go parabolic. In the week ending 1/17/2011, Seasonally Adjusted M2 surged by $46.6 billion, the biggest weekly increase in the broadest tracked monetary aggregate (ever since the cost-cutting associated with discontinuing the M3) since 2008. One look at the chart below indicates precisely what is fueling the endless market ramp. Furthermore, for those who realize there is a 93% correlation between M2 and gold, we would certainly recommend putting on the M2/Gold convergence trade on.
And there you have it: blame that shocker of a non-recurring event known as snow in December. Someone should explain to Jeff Bezos that Amazon benefits from record snowfalls. It sure would inspire some confidence in shareholders if the CEO actually knew that he was running an online retailer. Did someone dissolve crazy pills and forget to tell us about it? When will someone finally blame fiscal and monetary policy (all QE1, Lite and 2 of it), for one-time, non-recurring $4.5 trillion in stimulus? We dread to imagine what Stay Puft marshmallow man will materialize if it ever snows on the Abominable Chairman's printers...
"The world has paid with tens of millions of unemployed, who
were in no way to blame and who paid for everything. It caused a lot of anger. Too much is too much. The world was stupefied to see one of five biggest U.S. banks collapse like a house of cards. We saw that for the last 10 years, major institutions in which we thought we could trust had done things which had nothing to do with simple common sense. That's what happened... There is an ocean between flexibility and the scandal we saw. So if people present me as obsessed with regulation,
it's because there is a need for regulation. I don't contest the principle of securitisation, but when
one offshore country guaranteed 700 times its GDP, are we in the
market economy or in a madhouse? Bonuses don't bother me, provided there are also ...
draw-downs when there are losses. When things don't work, you
can never find anyone responsible. Those who got bumper bonuses
for seven years should have made losses in 2008 when things
collapsed." - Nicolas Sarkozy
Chris Martenson Interview With Jim Rogers: Why Inflation Is Raging Worldwide And He's Shorting US Treasury BondsSubmitted by Tyler Durden on 01/27/2011 - 17:44
"I see more inflation and more currency turmoil as we go forward. There are huge debt imbalances in the world. U.S. is the largest debtor nation in the world and all the assets are in Asia. The largest creditors in the world are China, Korea, Japan, Taiwan, Hong Kong, Singapore – this is where the assets are and the debts are in the West. Those imbalances have to be resolved. They frequently lead to more currency turmoil. We’ll see more inflation, we’ll see more governments fall. We just saw Tunisia fall – more are coming because the world is going to continue to have these problems, and especially inflation that is going to cause more social unrest."