"The global growth picture is, as per our long-term contention, weak and deteriorating, pretty much everywhere – in the US, in the eurozone and in the emerging markets/BRICs.... We in the Global Macro Strategy team still think the market consensus is far too optimistic on policy expectations both in terms of the likelihood of seeing more (timely) fiscal and/or monetary policy assistance (globally), and in terms of any meaningful and/or lasting success of any such policy moves. In particular, we think that the period August through to November (inclusive) represents a major global policy and political vacuum. Based on the reasons set out earlier and also covered in my two prior notes, over the August to November period I am looking for the S&P500 to trade off down from around 1400 to 1100/1000 – in other words, I expect over the next four months to see global equity markets fall by 20% to 25% from current levels and to trade at or below the lows of 2011! US equity markets, along with parts of the EM spectrum, will I think underperform eurozone equity markets, where already very little hope resides. For iTraxx crossover, this equates to a spread wide for 2012 of – in my view – 800/1000bp.... And of course I still see a very clear path to 800 on the S&P500 at some point in 2013/2014, driven by market revulsion against pump-priming money printing central bankers, but this discussion is also for nearer the time."
Gold has pushed back above $1600 this morning (and +2.6% year-to-date) as it appears the Hilsenrath-rumor is sinking in and the day of reckoning printing draws nearer. There was little new in the statement, as we have stated, but its timing and specificity is to be noted though we, like BofAML are more predisposed to expectations of a rate extension next week to mid-2015 followed by NEW QE in September (with a disappointed equity market slump in between that 'enables' NEW QE). The herald cry from every hypocritical CEO and retired banker this morning appears to be "but, but, but the central banks have to do something" - even if they 'know' the economic impact is nil - as pre-emptive omnipotence has always worked before.
It’s funny, I was worried about my Second Amendment rights just a moment ago, but now that the Council On Foreign Relations, a global governance think tank and inbred cesspool of despotic elitism, has explained the situation to me, I suddenly feel at ease… In preparation for the fast approaching UN summit on “international conventional arms trade” in New York, the CFR has published yet another disinformation piece skewing the facts and twisting reality to lull Americans into a state of apathy. Am I surprised that the CFR would rehash the talking points of the UN and declare uninhibited support for their worldwide gun grabbing bid? Of course not. The CFR and the UN are part and parcel of the same nefarious sea monster; each tentacle does its duty to rend sovereign ships asunder. However, such propaganda articles from establishment organizations do give us an opportunity to dissect and annihilate a host of lies and misdirections in one fell swoop. There may not be much sport in pulling apart the CFR’s poorly composed arguments, but, it has to be done…
In Defining Hypocrisy, Weill, Who Led Repeal Of Glass Steagall, Now Says Big Banks Should Be Broken UpSubmitted by Tyler Durden on 07/25/2012 - 08:18
Who is Sandy Weill? He is none other than a retired Citigroup Chairman, a former NY Fed Director, and a "philanthropist." He is also the man who lobbied for overturning of Glass Steagall in the last years of the 20th century, whose repeal permitted the merger of Travelers of Citibank, in the process creating Citigroup, the largest of the TBTF banks eventually bailed out by taxpayers. In his memoir Weill brags that he and Republican Senator Phil Gramm joked that it should have been called the Weill-Gramm-Leach-Bliley Act. Informally, some dubbed it “the Citigroup Authorization Act.” As The Nation explains, "Weill was instrumental in getting then-President Bill Clinton to sign off on the Republican-sponsored legislation that upended the sensible restraints on finance capital that had worked splendidly since the Great Depression." Of course, by overturning Glass Steagall the last hindrance to ushering in the TBTF juggernaut and the Greenspan Put, followed by the global Bernanke put, was removed, in the process making the terminal collapse of the US financial system inevitable. Why is Weill relevant? Because in a statement that simply redefines hypocrisy, the same individual had the temerity to appear on selloutvision, and tell his fawning CNBC hosts that it is "time to break up the big banks." That's right: the person who benefited the most of all from the repeal of Glass Steagall is now calling for its return.
Caterpillar Beats Estimates But Lowers Guidance, Blames Downbeat Outlook On China, Strong Dollar And Slow FedSubmitted by Tyler Durden on 07/25/2012 - 07:51
Caterpillar's stock has gotten pummeled recently, which explains why after posting results that were better than expected the stock has seen a big short squeeze, pushing it up 4% in thin pre-market trading. Of note, the company reported EPS of $2.54 on Expectations of $2.28, and revenues of $17.4 billion on estimates of $17.1 billion, yet it cut its full year revenue guidance from $68-72 billion to $68-70 billion on what it says is a weaker economy and a stronger dollar: "From the time the previous outlook was first established in January of 2012, the U.S. dollar has strengthened versus most currencies around the world. That has negatively impacted the full-year outlook by about $1 billion as sales in currencies other than the U.S. dollar are translating into fewer U.S. dollars. While the world's economic environment is weaker than we had expected, our sales have continued to grow." Yet what is most curious is that even CAT has become schizophrenic with respect to the Fed, in one bullet point saying the Fed's easing has done nothing to "benefit economic growth" yet in another claiming more easing will not come "soon enough to benefit growth in 2012." The Bernanke put is now so pervasive even non-financial companies have to rely on the Chairman getting out of bed at just the right angle and sitting down on the CTRL-P macro.
- ECB's Nowotny - ESM banking license could be advantageous (Reuters) - just keep regurgitating headlines until they generate a short squeeze
- IMF Says China Downside Risks Significant as Growth Slows (Bloomberg)
- Moody's cuts outlook on EU stability facility to negative (Reuters)
- Rome places spending controls on Sicily (FT)
- Big banks' glory days feared to be gone for good (Reuters)
- China's CNOOC scoped Nexen, partnered, then pounced (Reuters)
- Germany backs Spanish austerity plans (FT)
- Are 2012 Games one too many for London? (Reuters)
- Euro Crisis Spreading East Damps Growth, Development Bank Says (Bloomberg)
- Japan Flags Yen-Sales Impact as BOJ Eyes More Easing (Bloomberg)
Nowotny "Hilsenraths" EUR, Futures By Reviving Doomed "Red Herring" Discussion Of ESM Banking LicenseSubmitted by Tyler Durden on 07/25/2012 - 06:57
Europe is once again scrambling by clutching at broken straws and juggling dead ends. To wit: instead of actually proposing a realistic solution to its massive debt overhang, the ECB's Ewald Nowotny "said there are arguments in favor of giving Europe’s rescue fund a banking license, reviving the debate on bolstering its firepower as leaders face the prospect of a full-scale Spanish bailout." As a reminder, this is an absolute dead end that Germany and the ECB have both repeatedly rejected as implementation would confirm just how hollow the European gutted shadow banking market (you can't have shadow banking without credible collateral). Further slamming the Nowotny comment was Daiwa which called the Nowotny statetment a Red Herring and that "remarks that ECB council member sees arguments for giving bailout fund banking license "look to be just noise," Grant Lewis, head of research at Daiwa Capital Markets Europe, says in client note. Comments appear to have been off the cuff and purely personal opinion; such a move remains “highly improbable,” as Germany and ECB “implacably opposed” to this. Finally Daiwa adds that markets will soon focus again on fact that if ESM can’t be activated in early autumn, there’s no money available to bail out Spain, “let alone Italy."
If the UK was desperately hoping for a "terrible" economic print, it got it this morning after preliminary Q2 GDP printed 0.7% on expectations of a -0.2% decline, following a -0.3% drop in Q1, cementing the country's double dip collapse. Reuters explains: "The Office for National Statistics said Britain's gross domestic product fell 0.7 percent in the second quarter, the sharpest fall since early 2009 and a bigger drop than any of the economists surveyed in a Reuters poll last week had expected. The figures confirmed that Britain is mired in its second recession since the financial crisis, with the economy shrinking for a third consecutive quarter. It will add pressure on Osborne to get the economy growing again after a crisis that has left many Britons poorer as rising prices and higher taxes ate up meager wage increases. Sterling hit its lowest in nearly two weeks against the dollar after the data, and government bond prices rallied on speculation that the Bank of England may have to provide more economic stimulus than expected. Earlier this month the BoE has announced another 50 billion pound program of gilt purchases with newly created money to soften a grim economic outlook, but Wednesday's data is likely to add to market speculation that it may cut interest rates later this year. "This is terrible data. Frankly there's nothing good that comes out of these numbers at all," said Peter Dixon, an economist at Commerzbank. "The economy looks to be badly holed below the water line at this stage. It's a far worse period of activity than we'd expected."" Amusingly, according to Goldman "It is difficult to reconcile the weakness of today’s official GDP data with any other indicator of economic or labour market activity." We knew the peripherals were doing all they can to sabotage their economies and be eligible for more aid and bailouts. But the UK?
It is not often we double-dip in the Sausalitan's soliloquies but tonight's glorious truthiness from Charles Biderman, CEO of TrimTabs, is worth the price of admission. After explaining that the only way he could be any more bearish is to be double-levered - and that he believes that besides "believing in miracles" this market will see the March 2009 lows once the market-rigging is fully exposed, he makes probably the most clarifying statement we have heard regarding our central-planners-in-chief. With regards to Messrs. Bernanke, Geithner, and Obama: "The most damage is caused by those who are not as smart as they think they are." They continue to believe they are smart enough to fix all our financial problems (and Europe's - if they would just listen to Timmay) by building a bridge over the recession - thanks to asset-buying and ZIRP. "The only problem is we are running out of bridge and are nowhere near recovery" is how he sees it and reflecting on the massive gains that have been made on short-dated Treasuries as the Fed (who is the one buying them) extends the ZIRP horizon - it is clear that this is nothing but a huge Ponzi scheme.
"This market isn't real. The two percent on the ten-year, the ninety basis points on the five-year, thirty basis points on a one-year – those are medicated, pegged rates created by the Fed and which fast-money traders trade against as long as they are confident the Fed can keep the whole market rigged. Nobody in their right mind wants to own the ten-year bond at a two percent interest rate. But they're doing it because they can borrow overnight money for free, ten basis points, put it on repo, collect 190 basis points a spread, and laugh all the way to the bank. And they will keep laughing all the way to the bank on Wall Street until they lose confidence in the Fed's ability to keep the yield curve pegged where it is today. If the bond ever starts falling in price, they unwind the carry trade. Then you get a message, "Do not pass go." Sell your bonds, unwind your overnight debt, your repo positions. And the system then begins to contract... The Fed has destroyed the money market. It has destroyed the capital markets. They have something that you can see on the screen called an "interest rate." That isn't a market price of money or a market price of five-year debt capital. That is an administered price that the Fed has set and that every trader watches by the minute to make sure that he's still in a positive spread. And you can't have capitalism if the capital markets are dead, if the capital markets are simply a branch office – branch casino – of the central bank. That's essentially what we have today."
With the 302 events across 32 sports of the Olympics about to start (with early round soccer starting tomorrow), we conclude our five part (Part 1, Part 2, Part 3, and Part 4) series of posts bringing markets, economics, and sports together by looking at 10 exhibits that Goldman sees as describing how various aspects of the Olympics have evolved from the first modern Games in 1896 (where Greece won 46 medals compared to USA's 20) all the way to London 2012. From the monetary value of the distributed gold medals to the globalization of medal wins, the trends are analogous to the world's change but the full report attached provides some incredible interviews with many of the greatest Olympians ever with Michael Johnson reminding us that: "People are generally very fed up with political processes and the bickering that comes with it. You have some politicians with one particular set of ideas as to how to fix the problems and one with another set of ideas, and this continues to create a divide between people. The Olympic Games is the epitome of non-politicised activity. It’s about coming together... and having the opportunity to put differences aside and get behind their country and the athletes who are representing them."
Since (at least) 2005, Barclays has been manipulating LIBOR, and their traders have been allegedly pocketing $40MM a day betting on interest rate derivatives. If the LIBOR, one of the most fundamental metrics of our banking system can be rigged, can you imagine what other elements of our financial system are a fraud? This morning's comments from European regulators appears to confirm that this story has a long way to go as ECB's Almunia states: "The evidence we have collected is quite telling so I am pretty sure this investigation will not be closed without results."
UPDATE: AAPL -6.25% AH
Major misses everywhere, and this for the second quarter in a row - from the Q3 earnings report:
- APPLE 3Q REV. $35.02B, EST. $37.25B
- APPLE 3Q EPS $9.32, EXP. $10.37
- APPLE 3Q NET PROFIT $8.8B
- APPLE SEES 4Q REV. ABOUT $34B, EST. $38.01B
- AAPLE 3Q GROSS MARGIN 42.8%, EST. 43.8%
- APPLE SOLD 17.0 MILLION IPADS DURING QTR, UNIT EST. 15.4M
- APPLE 3Q IPOD UNITS SOLD 6.8MLN , DOWN 10%
- APPLE SOLD 4.0 MILLION MACS DURING QTR, UNIT EST. 4.3M
- APPLE SOLD 6.8 MILLION IPODS IN QTR, UNIT EST. 6.6M
Is the dream over?