IBM weighed on the Dow - much to the chagrin of the mainstream media - but if they'd replaced IBM with AAPL things would have been just as ugly (if not worse). The tech-darling dumped after trying to ramp in the last hour and once again failing at VWAP on heavy volume as the big boys exited. S&P futures auctioned up to QEtc. spike levels and were unable to get through but still had a solid day. Interestingly, while today was an 'uncorrelated' day across risk assets, the rise in Treasury yields, rise in stocks, drop in Gold, and drop in USD has brought them all back together in sync post-QEtc. - from here who knows? Credit markets tracked equities generally - but HYG and LQD saw major volume spikes early on this morning (looked like HYG sells and LQD buys). VIX limped sideways most of the day - falling 0.14vols to 15.08% (though for the year remains on average at a high premium to realized). The USD is down 0.85% for the week with EUR back above 1.31 and only JPY weaker vs USD among the majors.
Update: we now have the suspect's name: Quazi Mohammad Rezwanul Ahsan Nafis, who in addition to Plan A had Plan B: "If Nafis felt his attack was about to be thwarted by cops, he would invoke the back-up plan, which involved a suicide bombing operation"
NBC 4 New York has learned that federal authorities have arrested a man they say was plotting to attack the Federal Reserve in New York City. The man is in custody in New York. Sources tell NBC 4 New York that he lives on Long Island. Law enforcement officials stress that the plot was a sting operation monitored by the FBI and NYPD and the public was never at risk. "According to the report, the suspect drove a van he believed to be loaded with explosives from Long Island to Lower Manhattan. He then placed the van near the Federal Reserve and was then arrested by the FBI and NYPD. The suspect, whom sources said is from the Jamaica Queens section of New York City, is currently in custody in New York. Sources say he was acting alone." And "New York terror suspect is a 21-year-old Bangladeshi citizen who traveled to the U.S. in January to carry out terror attack." At least all that tungsten gold lying on the Manhattan bedrock is safe and sound and John McClane will not be called out of retirement just yet.
Ten days ago, when we last tracked the progress of the third US aircraft carrier, CVN-74 Stennis, with destination Arabian Gulf, aka Iran, we reported that it was "within a week of reaching" its destination. Sure enough, as the latest Stratfor naval update confirms, CVN-74 has now reached its destination for which it was commissioned several months prematurely. But before you get your war hats out, note that that other aircraft carrier which is conducting its final voyage, the CVN-65 Enterprise, has decided to take a bit of a break and left the Arabian Gulf area for a scehduled R&R port visit in Naples, Italy. In a week or so, shore leave will be over and CVN will be back to join everyone else, at which point the US will finally have three aircraft carriers just off the Iranian coastline ready to rumble.
There is little doubt that asset prices have responded to Central Bank promises and actions. Even as bottom-up fundamentals are fading, top-down index 'nominal prices' rise on the back of magical multiple expansion - which is defended from on high by sell-side strategists the world over on the back of 'recovery' is just around the corner. The trouble is there's a limit and it seems - from QE2 and LTRO - that we are rapidly approaching that limit; and with earnings outlooks being revised lower, perhaps we are at peak P/E for this cycle of QE?
As incredible as it may seem, there is more than just November 6th to worry about for the next three months. We present UBS's summary and relative importance of the main economic events and political dates through the end of the year. Of course, it is dominated by the politics in Europe, US, and China, but key economic data points that are required to maintain multiple expansion hopes are also included.
Even though we have presented comparable scenarios looking at the coverage of the US money base in gold terms previously, aka "gold coverage" ratio, including once from Dylan Grice, and once from David Rosenberg, now that we have drifted into a new, previously unchartered and very much open-ended liquidity tsunami, it is time to revisit the topic. Luckily, Guggenheim's Scott Minerd has done just that. Not only that, but he presents three distinct gold pricing scenario, attempting to forecast a low, medium and high price range for the yellow metal. To wit: "The U.S. gold coverage ratio, which measures the amount of gold on deposit at the Federal Reserve against the total money supply, is currently at an all-time low of 17%. This ratio tends to move dramatically and falls during periods of disinflation or relative price stability. The historical average for the gold coverage ratio is roughly 40%, meaning that the current price of gold would have to more than double to reach the average. The gold coverage ratio has risen above 100% twice during the twentieth century. Were this to happen today, the value of an ounce of gold would exceed $12,000.”
While we have largely resumed ignoring the non-newsflow out of Europe, as it has reverted back to one made up on the fly lie after another, or just simple rumor and political talking point innuendo in the most recent attempt to get hedge funds starved for yield (and chasing year end performance) to pursue every and any piece of Italian and Spanish debt (at least the until euphoria ends and the selling on fundamentals resumes) the latest development from the FT bears noting as it has major implications for Europe's make it up as you go along "recovery." According to the FT: "A plan to create a single eurozone banking supervisor is illegal, according to a secret legal opinion for EU finance ministers that deals a further blow to a reform deemed vital to solving the bloc’s debt crisis. A paper from the EU Council’s top legal adviser, obtained by the Financial Times, argues the plan goes “beyond the powers” permitted under law to change governance rules at the European Central Bank." The punchline: "The legal service concludes that without altering EU treaties it would be impossible to give a bank supervision board within the ECB any formal decision-making powers as suggested in the blueprint drawn up by the European Commission."
It will come as no surprise to some but the bankruptcy court hearing for Solyndra just threw up all over any hopes that our taxpayer-funded loans to this solar sinkhole will be recovered:
- *SOLYNDRA HAS ABOUT $71 MILLION IN NET DISTRIBUTABLE ASSETS
- *SOLYNDRA LENDERS AHEAD OF GOVERNMENT OWED ABOUT $77 MILLION
So it looks like a $0 recovery for us - US Government: Picking Losers One Sector At A Time.
With bellwhether, large- and small-cap firms missing earnings, missing revenues, and lowering outlooks, it is no surprise that the market is near record highs once again - oh wait... IBM anchor-like on an otherwise glorious day in the stock markets...
With 20 days left to the big day and the candidates seemingly in a tighter race than many expected it seems appropriate to look at how the equity market is and will be positioned for a potential changing of the guard if Mitt Romney wins or if incumbent Barack Obama remains in charge. Credit Suisse has created a comprehensive 'cheat-sheet' outlining key issues for the election for each candidate, the sector impact of an Obama or Romney victory, and the extent to which that impact is already factored into current market prices. Everything you wanted to know about gaming the outcome of the election but were afraid to ask.
We can summarize the breeding ground of new-type depression: very demanding work that is beyond the capacity of people with poor social and communication skills and those who fear being left behind or failing. Fearing failure, they wilt under criticism that seems unfair and irresponsible given that they're doing their best. Facing an apparently no-win situation at work, they quit or take an extended leave of absence. This doesn't solve the depression or its causes, unfortunately. What seems to help is counseling that raises the emotional maturity of the person with NTD so they can better handle criticism, and counseling the senior supervisors to become better communicators with younger workers. Placing workers with low communication skills in jobs where they can work independently and productively also helps. The demands on enterprises and employees alike are rising as the "New Economy" of pervasive insecurity and constant adaptation become the norm. The take-away from Japan's new-style depression is that we need to understand not all workers are cut out for the high-social-skill "New Economy," though in the right positions they are admirably productive. That will take a new level of management skills in Corporate Japan, America and Europe as definancialization and deleveraging unravel the global economy.
We are currently experiencing a pre-election surge in all economic metrics; and then comes the hangover as can be confirmed by looking at hiring plans. Morgan Stanley's Business Conditions Index (a multi-factor real-time bottom-up economy tracker) has tumbled this month, giving back most of the very recent gains but it is the 'outlook for hiring' that is the most worrisome. Despite the stronger than expected employment report for October, both hiring indices fell to multi-year lows. The hiring index dropped 10 points to 44%, its lowest since December 2009, and the hiring plans index sunk 13 points to 44%, lowest since August 2009. Due to its leading indicator nature, this means that imminent payrolls may not stop rising; but in a few short months will post the first sequential decline since 2010. What this means for the unemployment rate is self-explanatory - but by then the election will be decided.
Once "Jollying The Markets" With "Faith, Hope And Charity" Fails, What Comes Next: A Primer On Europe's Next StepsSubmitted by Tyler Durden on 10/17/2012 - 09:06
Back in January, Zero Hedge proposed a pair trade, which to date has returned well over 100% on a blended basis, namely the shorting of local law peripheral European bonds, while going long English law (or strong covenant) bonds (a relationship best arbed in Greece, when various foreign-law issues were tendered for at par to avoid a bankruptcy, even as the local law bond population saw a massive cram down a few months later as part of the second Greek "bailout"). In big part, this proposal stemmed from the work of Cleary Gottlieb's Lee Buccheit, who has been the quiet brain behind the real time restructuring of Europe's insolvent states. In fact, one can say that what is happening in Europe was predicted to a large extent in his "How to Restructure Greek Debt" and "Greek Debt; The Endgame Scenarios." Which is why we read his latest white paper: "The Eurozone Debt Crisis - The Options Now", because it presents, in clear, practical terms, just what the flowchart for Europe looks like, unimpeded by the ceaseless chatter and noise of clueless politicians and career bureaucrats who have never heard the term pro forma or fresh start. In brief, Buccheit, unlike all European politicians, is hardly optimistic.
As all eyes and ears (and trigger fingers) are glued to the flashing red headlines from Europe's conditional unconditional OMT/credit-line/backstop/ESM malarkey and Spain's insistence that it doesn't need help yet just wonders what the rules are, Merkel stated - for absolute clarity once again - her views yesterday. As much as no-one wants to hear what the money-lady has to say - preferring instead to live in a world where promises work, FinMin Schaeuble clarified the need for a 'currency commissioner' with sweeping powers to strike down national budgets. This bombshell, as The Telegraph calls it, is really nothing of the sort; as Merkel has already made it clear that there's no money without sacrificing sovereignty. The directness of this statement though does raise questions over just what the ECB is for? Critically, dismissing Van Rompuy's spin that this is a step towards debt-pooling and euro-bills, Schaeuble made it clear that fiscal union meant "more power to police the affairs of debtor states." While the possibility remains of a precautionary line of credit, the Germans stated: "one thing is clear: whatever is requested, it won't be without conditions," and as Citi's Steve Englander noted "It's all down to haggling over the price now."