Abigail Doolittle of Peaks Theories submits: "While I fully expect Treasurys to decline further this year, I think it will come in a volatile and range bound manner and at this moment there are some technical reasons to believe that we may see Treasurys rally in the coming weeks." Here's why...
That total consumer credit increased modestly and in line with expectations in November, exclusively on the back of non-revolving credit, used for such purchases as cars financed and sold by recently IPOed makers of shitty cars, and student loans, the most recent entrant in the $1 trillion + never to be repaid market, is not surprising: after all, GM had to finance its dealers to hoard its channel stuffed inventory of 500k+ cars as discussed previously. What is even less surprising, is that the credit that does matter, the revolving variety, used for credit card purchases of everyday items which are increasing in price every single day courtesy of the Fed's monetary policy, declined once again, more specifically the 27th consecutive time. In other words, in November revolving credit decreased by $4.2 billion, which non-revolving credit increased by $1.3, a drop of $5.7 billion from October's revised $7 billion which surged on the back of $12.4 billion in non-revolving credit.
The Power Elite which has been raised to occupy the privileged seats of political and financial power in America has a skillset limited to navigating the world of privilege... No wonder the U.S. is imploding--its State and financial Elites believe their mediocre groupthink is actually brilliant. That self-serving self-deception and hubris has cost us dearly, and will continue to do so.
Bruce Berkowitz, recently notorious for taking the other side of David Einhorn's St Joe short position, but also with long positions in such governmental recovery cases of bankrupt basket case firms such as AIG and MBIA, released his thank you letter, after generating a 25.5% return. His two top receipients of gratitude: the government and Goldman Sachs. Pretty much explains everything about whom to thank when you want to outperform the market. It should also explain which particular centrally planned regime and fixed income monopoly one must never raise their voice against, if one doesn't want to be 'GM senior bondholdered.'
Reuters reports that Portugal is in the process of making a private placement of bonds, without announcing details on size or the buyer. Our guess: buyer is China, and size is about €1 billion (recall that recently China told Spain it would buy about €6 billion from the three PIIGieS each). We will keep you updated, but this is a revolutionary change in the way bonds are sold to investors as it bypasses the traditional dutch approach entirely. As such, we would not be at all surprised if Goldman is the underwriter. After all this is basically a 144A transaction (although unlike in facebook there is no need for an SPV), and since there is no noise associated with a public offering, the buyer and seller can both pretend things are great until everything collapses in the inevitable post house of cards rubble.
Ever wonder where all the money for equity inflows came from? Here's the answer: with all the money saved from participating in the Supplemental Nutrition Assistance Program, better known as foodstamps, which in October hit a brand new record, 43.2 million Americans decided to join in on this "wealth effect" they had been hearing so much about and buy Apple stock. After all 190 hedge funds are doing it: and there is no way that 190 hedge funds can possibly be wrong. As a result, the chart below shows our nation's pending wealth effect in its full glory. Just think: 43.2 millionaire in waiting. Just consider the guaranteed explosion to money velocity...
First it was birds, then fish. Not it's crabs. For those with a keen eye for patterns, this apocalypse "thing" appears to be crawling along the signs of the zodiac. Next up: thousands of dead lions and soon after, virgins. Ergo New York is safe. Joking aside, the reason for this latest mass death is hypothermia. So good of BP to do its best to "adjust" the global climate. Luckily, $10 billion will be more than sufficient to recreate entire ecosystems by the time the full impact of the oil spill is uncovered.
For all those with a penchant for crunching manipulated numbers and wish to make a change by taking on the Fed (ironically, making some fiat in the process), this may be your chance: Ron Paul, chairman of the Domestic Monetary Policy subcommittee, and his chief of staff Jeff Diest are seeking to hire a young economist, “thoroughly Austrian, and preferably with an advanced degree. The candidate needs strong knowledge of the Fed and monetary policy generally, and must be an effective writer. He or she will be responsible for organizing hearings; summarizing data and Fed actions for Dr. Paul; writing statements; dealing with Financial Services committee staff; and various other tasks.” Sorry Joe LaVorgna, despite your ubercreative "weather worker" adjustment, you are on the exclusion list.
A few days ago some were very surprised by the previously announced decision from the SNB that it the bank would cease accepting Irish bonds as collateral. Considering that the Swiss National Bank is now the only responsible institution left in Europe, now that floundering Jean Claude Trichet is willing to accept even used condoms at a 120% LTV as long as they have a sterling CCC- rating by S&P, we fail to see how this is surprising. That said, those same people may be even more surprised that the SNB has just added Portugal to its "restricted" list. The FT reports: "The Swiss National Bank confirmed on Friday that it had stopped accepting Portuguese government securities as collateral for repurchase (repo) agreements, adding Lisbon to Dublin among the eurozone governments on its ineligible list. The decision to exclude both countries follows steep downgrades of Portuguese and Irish debt and was based on the Swiss central bank’s strict, but highly transparent, acceptance criteria." What this means is that on Monday JCT will be very busy BTFD in Portuguese bonds. He will have many opportunities to do so, as everyone holding the paper will be bailing in droves. Furthermore, this disclosure could not have come at a worse time: with Portugal slated to hold another major bond auction next week (following last week's abysmal 6 Month Bill auction), there is actual risk the entire affair could be a failure and set the European sovereign market ablaze, kicking off the 2011 round of "bail out Europe."
Primary Dealers know all about fight or flight. And boy are the flighting. After yesterday more than half of the POMO consisted of one single CUSIP, with the bond auctioned off just a week earlier accounting for well over 50% of the entire operation, today the New York Fed, following our ridicule that Brian Sack allows such bond flipping it is virtually borderline criminal churning decided to add the most recently auctioned off CUSIP, the PLP8s of 12/15/2013 on the exclusion list, meaning PDs were stuck with their holdings in the name. The Fed, however, did not prevent any of of the previously auctioned off securities from being monetized. And what a selling frenzy those were: of today's $7.2 billion POMO, 75% of the operation consisted of the monetization of the two most recently permitted securities: the 3 Years auctioned off in November (PU8), $3.4 billion worth, and October (PB0), for $2 billion. This is a stunning rush to get the hell out of dodge, and confirms that Primary Dealers can not wait to sell every single piece of paper purchased recently via the PD auction take down. What this also means, is that any pretense the Fed had that it was not monetizing debt directly is now gone. Brian Sack should just expand the SOMA allocation per auction, and add the Fed as a legitimate 4th bidder party: after all nobody is fooled by the Treasury->Primary Dealer-> Fed charade any more. And at least that way, the PDs will stop collecting commissions on arbitrary bid/ask spreads.
This is not quite the end of Bank of America (and Wells.. suck it up Munger), but it very could be the start, unless Brian Moynihan's bank now spends hundreds of millions if not much more more bribing judges across the country... The only winners out of this? The plaintiff's bar as usual. Luckily, at this stage burying fraudclosure will be far more difficult for the kleptocratic banker mafia syndicate...
Whitney Tilson, the consummate "value investor" is the latest confirmation of what we have been claiming since the beginning of 2010: namely that with the Fed's intervention in capital markets, those who plan on making money using a gold old fashioned long-short, 130/30 portfolio distribution, value trading are in the bullseye of central planning. What has happened over the past year, when courtesy of the Chairman's endless market manipulation, is that the worst of the worst stocks, those traditionally shorted by all, the 5x beta crapshoots, were the ones the screamed higher, with State Street and BoNY making it impossible to hold shorts in anything, not to mention repo desks calling in borrow on a daily basis, and killed traditional fundamental analysis, where good companies are purchased, and bad ones are shorted. Congratulations Bernanke: with your reckless destruction of prudent capital allocation decisions, you will put every single "value investors" out of business. Which is why we feel for Whitney, who despite his seemingly constant appearance on CNBC at one point talking his book, returned just 10% net for his fund, compared to the S&P which did about 50% better. Hopefully the redemption requests leave something in their wake. On the other hand, like every single self-respecting asset manager, Tilson blamed the bulk of his underperformance on Netflix. Of course, he is absolutely right: the company is worth exactly nothing, but it will likely take a few years for the momo crew to figure it out. By then, all shorts in the name will be but a memory.
*BANKS LOSE PIVOTAL FORECLOSURE CASE IN MASSACHUSETTS HIGH COURT
*MASSACHUSETTS TOP COURT DECIDES CLOSELY WATCHED IBANEZ CASE
*MASSACHUSETTS DECISION MAY AFFECT FORECLOSURE-CRISIS CASES
This is the last chart we will dedicate to today's B(L)S non-farm payroll data. It shows nothing less than than just how much of a factor the "seasonal adjustment" has become in every December data series, and is the definitive evidence of why only the most gullible but any credibility in the BLS seasonal adjustment mechanics. Unfortunately far from indicating a one time seasonal adjustment, it is no yet another secular trend policy tool, whose goal is to offset the actual drop in jobs. Indicatively while the number is now well over 2x greater than it was in 2000, the US population has hardly tripled over the past decade, requiring such a dramatic increase in fudge factors.
We have been claiming for almost half a year now that with the policy tool known as stocks now completely irrelevant, the places where traders can still find some Fed-free volatility (for the time being) is in the FX and bond markets. We are confident that in 2011 the MOVE bond vol index will be far more relevant that then the VIX, and that 200 pip daily moves in key FX pairs such as the EURUSD will be a normal occurrence. As validation of the first, just after the NFP number was announced, it was not US stocks, but the massive German treasury market that was halted due to a surge in volatility. This bears repeating: the massive, presumably liquid, and critical sovereign debt market of Europe's biggest economy was halted! We look forward to many more such examples of connected vessels, as computer, robots and the few remaining homo sapiens traders, pursue only modestly manipulated markets in which to trade volatility.