One of the key catalysts (aside from the retarded rumor that JPM would buy Bank of America) that prevented BAC's stock from dropping to a 5 handle yesterday, was JPM's credit upgrade of Bank of America (report here). Sure enough, the reacharound from BAC is as usual missing, with the response from the bank's banking analyst Guy Moszkowski, being to... downgrade JPM. And he did not stop there: he also cut, GS, MS, and C: in other words the entire TBTF brigade. Someone should probably explain to Guy that any sell off in BAC's peers will be doubly acute in the stock of BAC itself, which has now become the whipping boy for the shorts, and the proxy of all that is wrong in the US and European banking system. Then again, with the palpable sheer panic in the corridors of 1 Bryant Park, we doubt anyone at that bank has any idea what they are doing at all.
I could largely take yesterday's piece and insert it here. Credit weaker across the board. Stocks doing okay. Yesterday's almost 40 point rise in the SPX was only able to get IG16 to tighten by just over 1 basis point. It is wider, but tentative today as so many got hurt yesterday when stocks kept going higher. The major change since yesterday is that European Sovereign debt has joined the sell-off party in credit. Nothing major as of yet, but they are finally pushing higher in yield terms as even the ECB might be running out of powder? Gold moved down yesterday, which was a bit inexplicable as the hope of Jackson Hole and more printing was part of the reason for the stock market to rally.
Strong Durable Goods Headline Number, Very Weak Between The Lines: "Weak Start To 3Q" Bloomberg's YamaroneSubmitted by Tyler Durden on 08/24/2011 - 07:41
Once again we get a strong durable goods numbers report at the headline level, but far weaker when one actually reads it instead of just scanning it: with the July Durable goods printing well above expectations, at 4.0%, double expectations of 2.0%, and up from an upwardly revised -1.3%. Ex-transportation, the number was up 0.7%, beating the estimate of -0.5%, virtually unchanged with the previous upwardly revised 0.6%. What is, however, not good is that cap goods non-defense ex aircraft dropped by -1.5%, in line expectations, and a plunge from an upward revised 0.6%: this shows that actual CapEx is plunging. The bulk of the beat comes due to stronger than expected automotive-related production. Futures surge on the news because a continent wide liquidity squeeze is less important than the future channel stuffing of more unsellable cars.
Germany May Want PIIGS Gold as Security for ‘Bailouts’ – Merkel’s Officials in Damage Limitation ModeSubmitted by Tyler Durden on 08/24/2011 - 07:21
Germany is likely to push for European gold reserves to be used as collateral. The Deputy Chairwoman of the Christian Democrats is an astute woman and politician and knew exactly what she was saying. Indeed, she echoed other senior lawmakers who in May called for Portugal to consider selling their gold. Two leading governing party members - Norbert Barthle, Germany’s governing coalition budget speaker and his counterpart Carsten Schneider from the Social Democrats, the biggest opposition party, urged Portugal to consider selling some of its gold reserves to ease its debt problems. They called for a review of Portugal’s request for financial aid to include gold and other potential asset sales. The German people and lawmakers realize that the euro is being debased and lawmakers realize that gold may offer protection from the debasement of the euro but also from sovereign default and systemic contagion. Some of the PIIGS (to use the unfortunate and unfair acronym) have very sizeable gold reserves – especially Italy which alone has some 2,452 tonnes of gold. Portugal has 421.6 tonnes, Spain 281.6 tonnes, Greece 111.7 tonnes and Ireland has just 6 tonnes. The ‘German PIIGS gold collateral’ story is a very important one that is unlikely to go away. Indeed, it may be the story that helps educate those not familiar with economic and monetary history and with monetary economics and who do not understand gold and why gold remains valuable and remains a safe haven asset and currency today.
- Moody's downgraded Japan's long-term sovereign rating by one notch to Aa3, with a stable outlook
- Financials came under pressure during the early European session after figures from the ECB revealed a sharp jump in lending to banks, re-igniting funding concerns
- The Greek/German spread widened partly on news that Troika has warned Greece on public payroll and public mergers
- The German IFO report was not as bad as some analysts expected, which provided appetite for risk
Durable goods orders for July and FHFA house prices. Also another $35 billion in 5 Year bonds to be auctioned off.
Counterparty Risk Soars To Highest In Over A Year, European CDS Sliding, LIBOR-OIS Spikes, High Yield Spreads Blowing Out, Overnight ECB Lending SoarsSubmitted by Tyler Durden on 08/24/2011 - 06:50
We wish we had some good news to report this morning.... But we don't.
Euro Bank CDS Surge To All Time Record After Collapse In German IFO Business Survey, Discord Over Eurobonds, Greek 2 Years Over 40%Submitted by Tyler Durden on 08/24/2011 - 06:29
Following yesterday's plunge in the German ZEW investor confidence reading, today we got yet another confirmation that Germany's economic in freefall, after the IFO Business Climate survey printed at 108.7, the lowest in more than a year, down from 112.9, and a big miss to consensus of 111.0. The 4.2 drop was the highest since November 2008, when it plunged by 4.2. In summary, today’s disappointing Ifo data, if repeated in coming months, points “at least to sharp deterioration of growth, perhaps even recession,” Ralph Solveen, head of economic research at Commerzbank says." And unlike America, where hope is the only thing pushing investors forward, in Germany it is the inverse with the expectations component dropping belopw the 10 year average of 100.5, for the first time since July 2009, while the current assessment component is still above the 102.7 long-term average. Should this collapse in hopium consumption jump across the Atlantic, watch out America. Furthermore, while as was noted before, Merkel's continuing refusal to adopt Eurobonds is nothing new, today we got a new kink after German president Wulff questioned the legality of ECB bond purchases during a conference at Lindau, claiming that bond buying damages the ECB's independence. Wulff cited an article in the European Union's fundamental treaty, which prohibits the ECB from buying bonds directly from governments. "This ban only makes sense if those responsible don't circumvent it with comprehensive purchases on the secondary market," he added. "What independence?" might add anyone who has seen the global printing cartel in action over the past 3 years. Yet the recent expansion in the SMP, which has bought about €40 billion in Spanish and Italian bonds, is the only thing keeping Europe afloat now: if this were taken away, it is the beginning of the end. Another complication to any sustained EUR rally, is that the Finnish government announced overnight it is sticking to its collateral side deal with Greece, a move that apparetly has Germany fuming. Expect headlines as Finland’s govt will meet this afternoon to discuss Germany’s rejection of collateral agreement the cabinet struck with Greece on Aug. 16, newspaper Helsingin Sanomat reported on its website without saying where it got the information. This may well be worth 200 pips in the EURUSD... to the downside. And lastly, the cherry on top is that Greek 2 Year bonds, just soared above 40% for the first time ever! So much for bailout #2. Time to star pricing in the 4th iteration as the 3rd one is now a certainty. All this means that iTraxx Fins Senior is now at an all time high of 255, +4 bps, while the Sub Index is also at a record of 453, +9bps. Look for a resumption in the serial close of trade of all Italian banks before Europe shuts down at 4:30 pm local.
A snapshot of the European Morning Briefing covering Stocks, Bonds, FX, etc.
Market Recaps to help improve your Trading and Global knowledge
A (Hopefully Fake) Paul Krugman Laments The Lack Of Death And Destruction Following Today's EarthquakeSubmitted by Tyler Durden on 08/24/2011 - 00:28
We truly can only hope that this Google Plus account of Paul Krugman is merely a well-orchestrated parody, because if it is indeed that of the self-styled uber-Keynesian, the time for the public outrage, his economic beliefs aside, has arrived. In a blast post on Google's imitation of twitter and facebook, which should immediately result in the termination of the Nobel prize winning economist if it was indeed penned by him, this particular account of "Paul Krugman" writes: "People on twitter might be joking, but in all seriousness, we would see a bigger boost in spending and hence economic growth if the earthquake had done more damage." Translation...well it's pretty obvious, but for those laboring under the aftermath of a full frontal lobotomy, the person who tweeted this essentially yearns for his voodoo economic religion to be validated following countless failures of Keynesianism (no, really, after this latest injection of Xx *illion dollars into the economy things will really be well), at the expense of death and destruction. Even more poignant translation: "Krugman" would like nothing more than to put an equal sign between the death of a human being and its proportional GDP replacement value. What next: Krugman lamenting that only certain races end up getting killed in conflict, those whose replacement potential is too low, demanding more death? Or that X number of deaths would have been more stimulative if it was really XXX? This is about as close as we will get to a Keynesian admitting that reparations for death and destruction are the only two special clauses under which fiscal stimulus does work. Which of course means that with idiots such as the poster of the above who actually thinks this, be it Krugman or some of his countless voodoo brethren, and with their proximity to the president, the only logical explanation is that a war is coming, and is being welcomed by all these s[h|c]am "economists", for whom human death and suffering is a fair tradeoff in preserving their tenure or modestly-paid, liberal publication blogging jobs. If this indeed Krugman's account, it is imperative that the NYT immediately terminate this pathologically deranged and homicidal psychopath. Institutionalization in a mentally insane ward may be a proper subsequent action.
When some evil fund,
Is out there shorting you
Who you gonna call?
Minutes ago we saw the following headlines flash, describing Japan's latest attempt to kill the Yen, following the earlier already failed attempt by Moody's which while probably being paid well for its downgrade of Japan, did not achieve its true purpose - to weaken the Yen:
- MOF: Will Require Banks To Report FX Trading Positions - a nice little appetized to FX capital controls...
- Fin Min Noda: Will Set Up Maximum $100B Facility To Deal With Yen Rise - yet another attempt at central planning of FX crosses
- MOF: Will Strengthen Monitoring Of Currency Markets - Noda will be watching... even more
What is highly entertaining, is that as Bloomberg's Michael McDonough, going forward we will need to measure the halflife of Japanese intervention not in days, not in hours, not even in minutes, but in actual ticks.
The number of insured banks declined from 7,574 to 7,513. So the number of banks covered by the report declined. And that makes sense since 22 failed and 39 were absorbed via mergers. So the number of problem banks declined by 23, and 22 banks failed. I assume once a bank fails it goes of the "problem" list since it is not covered by this report? So at best, 1 bank moved off?
Two and a half years after consistently and methodically exposing one conspiracy after another (and by the way, once it is proven to be a fact, it is no longer a conspiracy), we were stunned to find that the biggest conspiracy theory is none other than... Zero Hedge. "Zero Hedge, for example, is one that lots of hedge funds look at, lots of money managers look at, and the guy that runs it has their ear. Now I'm not saying that he is not doing his own proprietary work, but, people like to plant stories in there. [cue ominous silence]." TA DUN DUN. Gee - one does learn something new every day. Also, to anyone who still doesn't get it, please send your dodecatuple secret "plant" stories to plant@zerohedge[.]com along with your non-refundable payment made in physical gold Zimbabwean dollars, to be delivered to our paper street headquarters. We certainly would prefer it if the drop man is Bank of America's James Mahoney.
What was that word Freud used when you are a weak, pathetic, corrupt, powerless, piece of anacrhonistic filth and instead of doing the right thing (for fear of losing your job or worse), you lash out at a weaker and irrelevant substitute? Oh yes, projection.