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99 Market Wisdoms

Forget 'red balloons', StreetTalkLive's Lance Roberts expands from his recent visualization of Bob Farrell's investment rules to six more market mavens with insights into money management and being a successful investor. What you will find interesting is that not one of them promote "buy and hold" investing for the long term - probably because in reality it doesn't work.



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Franco-German Divide Nears Record High

Yesterday we mentioned the chasm between European union nations' minimum wages from the core to the periphery, but when even the so-called 'core' nations are diverging aggressively in their macro-conditions, we ask - rhetorically once again - how can they expect to hold this together with a single monetary policy. The difference is exhibited in many ways: manufacturing (yesterday's PMIs) differentials are the highest since Feb 2011, and as Bloomberg notes, the third highest on record; France's weakness relative to its German neighbor is also evident in GDP where Germany has recovered its post-2008 losses but France remains lower; Unemployment levels are stunningly wide with Germany at a mere 5.3% relative to France's 10.6%. All of this is summed up perfectly in the 'Taylor Rule' suggesting main policy rates that are 4 percentage points apart - a record since the Euro began - stoking inflationary concerns in Germany (relative to France). The market, as repressed as it ever was, is starting to wake up to this divergence with France 10Y yields at their widest relative to Germany in 2013 today.



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Bernanke: "There Is No Bubble"

It was only two weeks ago that Fed governor Jerremy Stein delivered a speech titled "Overheating in Credit Markets" in which he observed the obvious and warned that a new credit bubble was forming (not to mention housing, tech, student loan, GM channel stuffing and much more). And it was only yesterday that we learned that Bernanke, after a 6 year hiatus, just had his latest "everything is contained" moment.  And just as when Maria Bartiromo asked him in July 2005 "what is the worst case scenario if prices come down substantially", so now his response, as then, is "I guess I don't buy your premise, it's a pretty unlikely possibility. We have never had a decline of house prices on nationwide basis." Of course, three years later the Fed had to do everything it legally could, and also much more, to prevent the modern financial system from terminally imploding.



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Guest Post: ObamaCare: The Neutron Bomb That Will Decimate Employment

Sickcare is unsustainable for a number of interlocking reasons: defensive medicine in response to a broken malpractice system; opaque pricing; quasi-monopolies/cartels; systemic disconnect of health from food, diet and fitness; fraud and paperwork consume at least 40% of all sickcare funds; fee-for-service in a cartel system; employers being responsible for healthcare, and a fundamental absence of competition and transparency. If you set out to design a corrupt, inefficient, wasteful, unfair, deranged and unreformable system, you would arrive at U.S. healthcare. The neutron bomb has gone off, unseen by politicos and the Elites who wrote the bill.



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Obama Dispatches 100 US Troops To Niger To "Support Predator Drone Base"

As we speculated from the very beginning, and as was reaffirmed in "Is Nigeria, And Its Light Sweet Crude, About To Be Drawn Into The Mali "Liberation" Campaign?", the "French" (with complete and fully-comped US support) Mali campaign is slowly but surely migrating to its intended target: Nigeria, and rather its holdings of light sweet crude. And while the US presence in this latest resource land grab, this time in Africa, was so far rather stealthy, it appears the time for foreplay is over and moments ago Obama told congress has has dispatched 40 more American troops to Niger this week, bringing the total U.S. military presence in the west African country to 100. Let's hear it for the full retroactive transparency demanded by the War Powers Resolution.



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The Gold, Silver Morning Smackdown Is Back

Having had yesterday off, it appears the ubiquitous morning dump in precious metals is back in all its glory... but didn't Jim Bullard just tell us 'Fed policy will stay very easy for a long time'?



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JPM's Tom Lee Goes... Bearish!?

This coming from the guy who a month ago called for "Dow 20,000", all we can say is... #Ref!



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Friday Humor: Extra Cruel Parents Edition

Surely this is sufficient to boost ES by 10 points...



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Nationalized Bankia To Post Largest Corporate Loss In Spanish History

Just in case anyone is confused about how fixed Europe is, insolvent Spanish TBTF megabank, which F'ed last year and had to be bailed out by the government, will post earnings (and in this case we use the term very loosely) next week at which time it will report the biggest corporate loss in Spanish history. From Telegraph: "On Thursday Bankia will report full-year earnings, including a €12.6bn provision taken at the end of last year. The writedown is a result of the lender moving assets into Spain’s “bad bank” at heavy discounts. Bankia, which is seen as a symbol of Spain’s financial woes, was created through the merger of seven smaller savings banks before being listed on Madrid’s stock exchange. When the company failed, hundreds of thousands of people who had been sold shares saw their savings wiped out. The collapse forced Spain to ask Europe for a bailout for its banking sector, which has meant the lender is subject to tight controls.  Bankia is trying to sell its 12pc stake in International Consolidated Airlines Group, the parent company of British Airways, which is valued at about £510m, and 5.3pc of the power company Iberdrola, which is worth about €1.24bn."



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Sequester: Front-Loaded Pain, No Gain

The sequester was supposed to be such a bad outcome that it would force a compromise. The across-the-board cuts were so rigid and hurt so many favored programs, BAML notes, the “Super Committee” was almost certain to come up with a more flexible alternative. And yet, not only did the Super Committee fail to even make a proposal, the negotiations have now devolved into a blame game – the two parties are trying to pin the blame, and the political cost, onto the other party. As we have expected for some time, the sequester will very likely hit on March 1. This well likely add further downward pressure to the economy in the second quarter, with job growth averaging less than 100,000 per month and GDP growth slowing to 1%.



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Spain's "Inverse Austerity" Leads To Multi-Year High Budget Deficit

For a country that laments the imposition of draconian "austerity" measures, now allegedly in their third year, which have so far seen government revenues slide, while spending rises, Spain sure has a problem with figuring out how it is supposed to work. Yet while the world was shocked back in December 2011 when Spain quietly announced its budget deficit would jump from 6% to 8.5%, before finally settling on 8.9% of GDP, today's announcement that the 2012 Spanish deficit was a whopping 10.2% of 2012 GDP hardly caused any commotion. Apologists will quickly say that this budget gap was boosted by the 3.2% increase due to setting up the bad bank, and rolling bank bailouts, and of course they will be right: just as all those economists were right to say that when one excludes all the negatives, US Q4 GDP was in fact positive. Or, indeed, as Goldman said to ignore this week's negative initial claims and new housing starts data: after all they too were negative. In fact, when one excludes all the negative trading days in 2013, the stock market has not had a down day yet. As for Spain, too bad the country can't have its broke bank cake and eat the budget surplus that would result "if only" things were different.



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Frontrunning: February 22

  • Spain’s Deficit Widened to 10.2% on Bank-Rescue Cost (BBG) - or as Rajoy would say, when one excludes all negatives, it was a surplus
  • Monti Austerity Pushes Italians Toward Parliament Upheaval (BBG)
  • Russia accuses U.S. of double standards over Syria (Reuters)
  • Euro Area to Shrink in 2013 as Unemployment Rises (BBG)
  • UK, China central banks to discuss currency swap line (Reuters)
  • Italy Court Rejects Challenge to Bailout of Monte Paschi (BBG)
  • Japan's Abe to showcase alliance, get Obama to back Abenomics (Reuters)
  • Russia’s missing billions revealed (FT)
  • China Home-Price Gains May Presage Policy Tightening (BBG)
  • Fed unlikely to curtail stimulus despite rising doubts (Reuters)
  • Banks face fines up to 30 per cent of revenues (FT) - just as soon as Basel III is passed (i.e., never)
  • J.C. Penney Can Raise Billions Under Revised Credit Line (BBG)
  • Cost of Dropping Citizenship Keeps U.S. Earners From Exit (BBG)


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Overnight Sentiment: Dull Levitation Returns

A listless overnight session with just the previously noted first disappointing LTRO-2 repayment and the now traditional big beat out of the "other" German confidence indicator, IFO, which beat expectations of 104.9, rising to a 10 month high of 107.4 to attempt to push the economy out of the recessionary slump (just don't mention yesterday's PMI), and nothing on today's US calendar is a fitting way to end the week, and further shows that markets are once more completely oblivious to the risks of the Hung Parliament outcome that this weekend may bring in Italy should the Berlusconi juggernaut maintain its momentum. The EURUSD and the US futures have disconnected once more, with almost all of yesterday's market weakness filled in the overnight session as the good old low-volume levitation returns. Here are the few news items worth reporting.



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Euro Slides As First LTRO-2 Repayment Less Than Half Expected

A month ago, on January 25 when the window to commence LTRO repayments was opened, European banks, with much pomp and circumstance, announced that 278 banks repaid a greater than expected €137.16 billion of the €1+ trillion in LTRO funding disbursed in early 2012. This was taken as a sign of European bank stress dissipation and financial stability, and furthermore served to push the EUR much higher on expectations that the ECB balance sheet would rapidly contract even as every other central bank balance sheet was expanding. It also ignored the fact that ongoing broad economic weakness in Europe required and still requires a weaker currency, not a stronger one (however too weak, and you get "redenomination risk", etc, etc). As it turns out, like everything out of Europe, the "strength" indicated by the first LTRO2 repayment was merely a sham, and moments ago when the ECB announced the results of the second 3 year LTRO repayment option, the news was a big dud: instead of the €122.5 billion expected to be paid back, European banks repaid just under half of this amount or €61.1 billion, spread among 356 banks - an average of just €0.17 billion per bank.



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