If it was the Treasury's intent to make auctioning of Treasury paper increasingly more fraught with risk, it has succeeded. Moments ago, in the second auction of the week and month, another $24 billion were added to the gross US debt, when the Treasury sold 10 year paper at a yield of 2.620%, pricing through the When Issued yield of 2.623% So far so good. However, as was shown last week, the trouble is in the internals. Recall that as Zero hedge first demonstrated in January and as the TBAC reconfirmed in their refunding presentation, the Bid to Covers have been declining across the curve. It should perhaps come as no surprise then that the just completed 10 Year auction was completed at the lowest Bid To Cover, or 2.44, going all the way back to March 2009.
Following yesterday's soundbite-generating speech, President Obama will continue his 'victory lap' over housing. In a social-media event (#AskObamaHousing), Obama will join the CEO of Zillow to answer all your housing questions. From "which market do I buy/invest in to make the most money in the next 3 months flipping dat house?" to "how will my new rent-backed-securities hold their value if you cap rates?", and from "Isn't Eminent Domain just another wealth transfer plan from a large diversified group of investors to a small of group of people?" to "have you got naked pictures of Larry Summers to ensure that he instantly un-Tapers upon appointment and smashes rates back down?", we cant wait to hear the public's questions... especially as homeownership plunges to 18 year lows and rent costs surge, the 'recovery' is stalling as hedgies flee, and affordability retreats dramatically. With Zillow's dismal earnings it seems they need Obama as much as he needs housing hope...
There was a time when wealthy foreigners would frequently travel all the way to these United States in order to receive top notch medical attention. Fast forward a decade or two, and all we hear about now is how it is us Americans being forced abroad in order to receive affordable care. From a hip and knee implant cartel of five companies, kickbacks to surgeons, salespeople in the operating room, massive bureaucratic red tape and rampant price gouging, in complete contrast to the Hippocratic Oath; it is perhaps no surprise that "the list price of a total hip implant increased nearly 300 percent from 1998 to 2011."
"Financial institutions have intentionally made a mockery of market logic, forcing end-users to keep paying more despite rising global aluminum supplies. As the Times points out, each time you “open a can of soda, beer or juice,” GOLDMAN SACHS gets a cut.... By inserting itself into a healthy industry producing widely needed commodities, severely degrading functionality, and widely distributing costs while itself benefiting, GOLDMAN SACHS and JP MORGAN couldn’t fit a more archetypal description of a parasite on the markets. Hoarding in aluminum, however, is just one in a bevy of ever-multiplying non-innovations, demonstrating how the leeching of productive society has emerged as finance’s guiding light, and leeching that antitrust laws are designed to prohibit and make the economic sanctions and repayment to consumers for entering such destructive enterprises too high to pursue."
President Obama said yesterday that he wouldn't support restoring FNMA and Freddie Mac to the status they enjoyed before the credit crisis, which let Fannie and Freddie make profits during good times, "knowing that if their bets went bad, taxpayers would be left holding the bag." The implications loom large not just for property owners but for investors if there will not be any "implicitly guaranteed" Agencies. For home owners it is likely to mean that their cost of mortgage products will rise and perhaps significantly if this task is left totally to the private sector. We suspect that in times of trouble then no one will lend and the volatility in the housing sector will increase dramatically.
One of these charts represents the equity market of an over-levered, recovery-hoping, money-printing nation that shows no signs of removing its training-wheels-efforts to devalue its currency and reflate its economy... the other is Japan.
Ripped from the pages of Marvel Comics, Japanese Anime, or Game of Thrones; the latest cunning solution to what the Japanese admit is an ongoing emergency in Fukushima is, well, creative... Now that TEPCO has been shown to be inept, Abe and his government have sanctioned the funding of a 1.4km wall of ice to surround the building that holds Reactors 1 to 4. No this is not Pacific Rim; as Kyodo reports, chemical refrigerants will keep the underground wall frozen to stop the 400 tons of ground water being pumped into the reactors to cool them from leaking further into the sea water surrounding the catastrophe. This must be a positive for GDP, if 'broken windows' can help the Keynesians (and digging and refilling holes) then why not build a giant ice wall that will require unending energy to refrigerate what is a constantly melting-down core of nuclear awfulness. We wish them luck.
The country which over the past decade is most synonymous with "financial innovation" of the less than desirable kind, such as hyperinflation, complete currency and economic collapse and wholesale property confiscation, has just taken financial central-planning brilliance to the next level and following dictator Robert Mugabe's "reelection" has announced plans to open a new and "racially exclusive" stock exchange, allowing blacks alone to trade. And not trade just anything, but shares of recently nationalized foreign companies, most of which are South African-owned miners. Or rather were, because following the most recent nationalization round, Zimbabwe would take a 51% stake in all major foreign-owned companies valued at over $7 billion. No compensation will be paid.
Obama cancels meeting with Putin in Moscow amid tensions over NSA leaker Edward Snowden. http://t.co/Wdy2SYXvSt
— WSJ Breaking News (@WSJbreakingnews) August 7, 2013
Two weeks ago, Larry Summers was a long-shot 4/1 odds of becoming the next Fed Chair while Janet Yellen (at 1/3) was a 75% probable shoe-in. What a difference an onslaught of PR makes... According to PaddyPower's now re-started odds for the next chair(wo)man, the 'smart' money has piled into Larry Summers shifting his odds to a remarkable 7/4 (or triple the probability of 2 weeks ago at 60%). Yellen has dropped to a 36% probability (halving her likelihood) and Roger Ferguson has dropped off the front-runners sheet. Is the market jittery as the 'conscientious objecter to QE' rises in certainty.
This 4 year Bull market has been registering new all-time highs on a nearly daily basis. Days like today’s 57 basis point drop in the S&P 500 are being mocked as a correction or large sell off for the current environment. It appears that after so many years of the “Great Rotation” being hyped, the public has (to an extent) been trained to take their Bond fund proceeds and roll them into equity ETFs. While it is unlikely that baby boomer money will come back to equities and sustain the rotation, there is money flowing in. While we are no fans of the bond market, we are still stunned that there are people selling “safe” assets and rolling the proceeds into “risky” assets at all-time highs. There are three cornerstones to our current view that risk far outweighs opportunity...
If destruction is nothing but a boost to the economy as the global Keynesian brotherhood of voodoo priests believes, than Kenyan (not to be confused with Keynesian of course) GDP is about to go vertical.
- Libor Settlements Said to Ease CFTC’s Path in Rate-Swaps Probe (BBG)
- Manhattan Homes Under $3 Million Never Harder to Buy (BBG)
- Just two years late: Abe Pledges Government Help to Stem Fukushima Water Leaks (BBG)
- Chesapeake drops energy leases in fracking-shy New York (Reuters)
- Hedge Fund Magnetar Won't Face Charges Tied to Mortgages (WSJ)
- U.S. envoy leaves Cairo after talks declared over (Reuters)
- Credit-Crisis Oracle Rajan to Head India’s Central Bank (BBG)
- Bank of England Changes Policy Tack (WSJ)