The past and present bailouts of each and every bank (and 'important' industry) will, one day, be seen as a generational offense is how MEP Daniel Hannan begins this thoroughly British demolition of the three critical myths surrounding the crisis, that despite market optics, we are still living through. From the idea that capitalism has failed (it has not in his view, it has been ravaged by political pandering), to the crisis being caused by lack of regulation, and that greed is the single-driver of the mess that we remain in; Hannan suggests in a brief but extremely eloquent debate that there is a world of difference between being pro business and pro market as he destroys any semblance of credibility that the political (and elite) class has echoing a young Ron Paul in his thoroughly libertarian free-market sensibilities.
How many European Union officials does it take to change a light bulb?
None. There is nothing wrong with the light bulb; its condition is improving every day. Any reports of its lack of incandescence are an illusional spin from the American media. Illuminating European rooms is hard work. That light bulb has served honorably, and any commentary not approved by the EU undermines the lighting effort. From the 'obvious 'encouragement' given to Europe's banks to pay back exceptionally cheap LTRO loans early to the world's addiction for freshly printed money and propaganda.The world seems devoid of politicians that sensibly lead though they have been quite adept at spending past what can be afforded. The worlds’ central banks have been left to pick up the bills.
James Turk: "My guess is that 2013 and 2014 are going to be big up year for the precious metals, but we still have to contend with the central planners and the various government policies, which have been actively trying to keep the gold and silver prices from reaching fair value. The central planners are losing the war. They may win an occasional battle or two, but they’re losing the war, and eventually gold and silver are going to go higher.... I can’t say that trust between central banks is waning, but you have to recognize that there are two categories of central banks: There are central banks that are in the U.S. circle of control and dominance, and then there are central banks outside the circle of U.S. control and dominance. The ones that are outside of the U.S. control and dominance are accumulating physical gold. The ones within the U.S. control tend not to do that, although it’s interesting that Germany, Netherlands, and now Austria, too, are talking about bringing their gold back."
This past week, America's premier financial comedy channel, which lately specializes in such "epic financial journalism" as the real billionaire hedge husbands of New York (because sagging Nielsen ratings are always a direct corollary of central market planning) wasted no time in advising its few remaining viewers that the market, which soared past 1,500, has now regained levels last seen before the start of the recession in December 2007. Sadly, this is the only thing that has been regained. Below we present some things that have not been regained since the last time the S&P 500 was at 1500.
Geithner's Legacy: The "0.2%" Hold $7.8 Trillion, Or 69% Of All Assets; And $212 Trillion Of Derivative LiabilitiesSubmitted by Tyler Durden on 01/26/2013 - 14:51
As of this morning Tim Geithner is no longer Treasury Secretary. And while Tim Geithner's reign of clueless pandering to the banks has left the US will absolutely disastrous consequences, an outcome that will become clear in time, the most ruinous of his policies is making the banks which were too big to fail to begin with, so big they can neither fail nor be sued, as the recent fiasco surrounding the exit of Assistant attorney general Lanny Breuer showed. Just how big are these banks? Dallas Fed's Disk Fisher explains: 'As the most recent weekly H.8 statement shows, there was $11.25 trillion in total assets at domestically chartered commercial banks. Which means that just 12 banks now control some $7.76 trillion."
Italian Scandal Widens As Italy's Third Largest Bank Set To Get Third Bailout In 3 Years; Draghi, Monti ImplicatedSubmitted by Tyler Durden on 01/26/2013 - 13:09
While little has been said in the mainstream western press about the ongoing fiasco surrounding Siena's Banca Monte dei Pasci, Italy's third largest bank and the world's oldest which may get its third bailout in three years - or even be nationalized - as soon as today, for fears that it may break the thin veneer of "recovery" in the European financial system, the situation on the ground in Italy is getting more serious by the minute, and will have implications on both next month's general election, on Mario Monti, on Silvio Berlusconi, on frontrunner for the Prime Minister post Pier Luigi Bersani, and reach as far up as the head of the ECB - Mario Draghi.
The purpose of asset purchases by the Fed might no longer be improvements in the real economy, but rather a more subtle financing of U.S. government deficits. However, in the long run, expanding the money supply inevitably leads to inflationary pressures. Luckily for the Fed and the U.S. government, there is so much slack in the labour market that inflation might be years away. And, if we are right about the long run unemployment rate being structurally higher, then the Fed has all the room it needs to continue Quantitative Easing (QE) to infinity. This might allow them to continue to hide the true financial position of the government for many years to come. Nonetheless, the rising GAAP deficit and the sheer size of the U.S. Federal Government’s liabilities to its citizens makes it clear that one day or another, services (health care, social security) will have to be cut. Financial alchemy can hide reality, but it does not provide any tangible services. Europe’s (unresolved) experience with its debt crisis provides an insightful window into the future. Austerity measures in Ireland, Portugal, Spain and Greece have caused tremendous pain to their citizens (25% unemployment rates) and wreaked havoc in their economies (double digit retail sales declines). Are we going to ignore the obvious?
Today's reminder of the importance of taking physical delivery of gold at the best price possible comes from Singapore.
Nassim Taleb sits down for a quite extensive interview based around his new book Anti-Fragile. Whether the Black Swan best-seller is philosopher or trader is up to you but the discussion is worth the time as Taleb wonders rigorously from the basic tenets of capitalism - "being more about disincentives that incentives" as failure (he believes) is critical to its success (and is clearly not allowed in our current environment) - to his intellectual influences (and total disdain for the likes of Krugman, Stiglitz, and Friedman - who all espouse grandiose and verbose work with no accountability whatsoever). His fears of large centralized states (such as the US is becoming and Europe is become) being prone to fail along with his libertarianism make for good viewing. However, his fundamental premise that TBTF banks should be nationalized and the critical importance of 'skin in the game' for a functioning financial system are all so crucial for the current 'do no harm' regime in which we live. Grab a beer (or glass of wine, it is Taleb) and watch...
"Regardless of what the markets do near-term, a correction is overdue," Marc Faber tells Bloomberg TV's Betty Liu. From discussing Europe's 'apparent' stabilization - "anything can go up when you print money"; to US equity exuberance - "a correction is overdue and February is a seasonally weak month"; Faber sees no change from Geithner's handover to Lew as he opines: "The only thing I know is one day the markets will punish the interventionists, the Keynesians and the monetary policy that the Federal Reserve and ECB has enforced because the markets will be more powerful one day. How will this look like? Will the bond market collapse or equity markets become a bubble, which would be embarrassing for the Fed's sake if the U.S. market became a gigantic bubble and at the same time the economy does not recover."
Drip...drip...drip... day by day, stocks leak higher, gradually inching up to record nominal highs; credit yields compress to record lows (and spreads near record pre-crisis tights); and volatility compresses (realized and implied) to near all-time-record lows. We have discussed the positioning of the market (S&P 500 futures at their net longest since 2007), crowded nature (JPY Shorts and NKY Longs), and sentiment (AAII Bulls near record highs). But, it is Credit Suisse indicator of risk appetite that should be worrisome for most investors. With Credit Risk Appetite well beyond any previous record high and Global Risk Appetite at its highest since 2006, perhaps it is time to consider the hedging discussion we had yesterday? With the euphoria dramatically dislocated from fundamentals and empirical world wealth trough-to-peak moves indicating a turning point, the lack of bearish arguments is deafening.
This objective report concisely summarizes important macro events over the past week. It is not geared to push an agenda. Impartiality is necessary to avoid costly psychological traps, which all investors are prone to, such as confirmation, conservatism, and endowment biases.
In a week dominated by prognosticators pointing reflexively to a nominal price index flashing green on their TV as indication that all is well in the world, Bob Shiller provides some much-needed healthy skepticism on not just the state of the housing market but the broad economy itself. While Bloomberg TV's Tom Keene presses his short-term anchoring-biased view of a world heading for much better growth and a US housing recovery that will seemingly save us all; Shiller warns we have seen this before (in 2009's housing market) and that the housing decline could go on. When Keene tries to translate the market's performance into economic performance expectations, Shiller responds "you are talking to wrong man." From the fact that we should be growing super-normally now to return to 'normal' market conditions to his view of many more years to go in this stagnation, four minutes of Shiller's historical prescience is the perfect foil to the tick-watching talking-heads exuberance (especially in light of today's dismal new home sales).
Sure, the retail "investors" are coming back into the "markets"... They are coming back in shifts. And just so they know what to expect, here is what happened to Apple stock in the last second of regular trading today, courtesy of Nanex. Unlike traditional flash crashes where the trade is an HFT error, or a few shares traded through the entire bid or offer stack, in this case it looks like a very premeditated unloading of some 800K shares (some $350 million worth) of AAPL in the last second, with the full knowledge it was shake the market. Why anyone would want (or wait until the very last second) to do that, while covering the offsetting ES short in the pair trade, to ramp the market into the close, is anyone's guess.
A close above 1500, and the last time the S&P 500 managed 8 close-to-close gains in a row was November 2004 (with the 9th higher close marking the end of the run that time). The rise of the Dow Industrials is the best January since 1994 - which saw a rather painful 10% decline in Febuary. Today saw bonds monkey-hammered to catch up (yields) to equity's strength on the week. FX markets saw more JPY weakness (-1% on the week) as EUR strength from this morning's LTRO news followed on - dragging the USD down 0.3% on the week. Commodities were mixed with Oil unch on the week, Copper down (but global growth?), and Gold and Silver slammed on what looks like AAPL collateral calls. AAPL spent the day wiggling up to VWAP and getting dumped to new 52-week lows unable to get any bid and once again we saw VIX totally ignoring the equity exuberance. Builders outperformed (+3.2%), Tech underperformed (-0.4%), as trade-size and volume were relatively low. The close with AAPL smashing lower on huge volume and ES ripping to new highs confirms the pairs-trade unwind we have been banging on about.