Market pundits scrambled to fill up air time by attributing the market movement to this data or that comment. The market rally catalyst was quite singular however. As rumors spread of a firmed up Greek rescue package, and the S&P suggested it was shifting Greece out of ICU, the Euro soared. It spiked 0.7% which is a significant move in the currency arena. The result was immediately evident and dramatic. Gold spiked $20 and oil shot up over $2. Those moves came long before the FOMC statement. Those moves were not influenced by some piece of economic data. Those moves were not the result of some shift on the outlook for the President’s health plan. Those moves were the direct result of the jump in the Euro and the correspondent weakening of the dollar. We believe that the Euro/Dollar move was also the primary catalyst in the stock market. Given the action in gold and oil, the stock market’s reaction was rather mute. With such a strong tailwind, you might have expected something like a 100/150 point move in the Dow. The real question on stocks was what was holding stocks back given the currency boost.
- China in Midst of ‘Greatest Bubble in History,’ ex-LTCM General Counsel Rickards Says (Bloomberg) (click here for recent extended interview with Rickards)
- Coal beats solar as analysts favor Peabody while subsidies drop (Bloomberg)
- Steve Forbes on Fannie and Freddie: Ugly beasts loom again (Forbes)
- Feldstein Sees Greece Euro-Exit Pressures as Deficit Plan Fails (Bloomberg)
- Evans-Pritchard: The proposed EU Greek bail-out cannot simply bypass German law (Telegraph)
- Deflation: Producer prices post biggest drop in 7 months (Reuters)
- Ex-Lehman boss sees vindication in Examiner's report (Post)
- Hussman: Ordinary outcomes in extraordinary recklessness (Hussman Funds)
- Asian stocks, commodity prices rise on Fed rate pledge, BOJ lending expansion.
- Bank of Japan doubles credit program to $222B, holds interest rate.
- BoJ loosens monetary policy, increasing low-interest loans available to the money market.
- India may create sovereign wealth fund to help state entities to acquire overseas energy assets.
- OPEC Ministers poised to keep output steady with Oil over $80/bbl.
- World Bank raised its forecast for China's growth this year to 9.5%.
RANsquawk 17th March Morning Briefing - Stocks, Bonds, FX etc.
Earlier today Tim Geithner was interviewed by Fox Business' Peter Barnes. The interview itself was not notable, with Timmy "Repo 105s are perfectly legal: I signed off on them myself" Geithner toeing the party line on issues such as a the Renminbi (It is a very important issue. It’s an important issue for China. I think China will decide it’s in their interest to move." - uh, right, just as soon as the US decides it is in its interest to tighten a couple of trillion in extra liquidity), trade wars (“No I’m not concerned about that.”) and other Houdini issues that just distract from the center piece of America's middle-to-klepto class wealth transfer.No, what was hilarious was Peter Barnes Freudian slip not once, but on two occasions: "Isn't the New York Fed Wall Street's representative?"... and even after an immediate and adamant refutation by tax challenged one, Barnes asks once again: "But [the Chairman of the FRBNY ] does represent Wall Street and its views." Leading to a response of "No....No...."
Hillarious Freudian slip or the absolute and unmitigated truth - you decide.
ECB's Juergen Stark Warns Of "Clear Risk Of Sovereign Debt Crisis," Cautions Recovery Largely Due To Massive Support By Governments...Submitted by Tyler Durden on 03/16/2010 - 22:00
The ECB's executive board member Juergen Stark had a rare admission (and even rarer for a central banker demonstration of rationality) that not only are most advanced economies about to enter a "third wave, a sovereign debt crisis in most advanced economies", not only is a "timely exit of extraordinary fiscal measures crucial in order to ensure a continued recovery", but that the mentioned recovery and economic improvements are largely as a result of "massive support measures taken by governments and central banks." In other words, the whole episode of the past year has been a one-time item which most analysts would exclude from "recurring operations" yet due to the magic of the Keynesian magic wand, the new normal is expected to persists as the magical "consumer" at some point takes over the recovery from the government effort. Alas, while the economy has indeed stabilized (effect), the cause continues to be purely based on governmental actions, as the consumer, and the private sector in general, continues retrenching. Too bad the US Federal Reserve has no aerobic critters than can formulate the same critical thoughts as Mr. Stark, or else they would realize that the path they are leading the US on is pure disaster, and furthermore, with the lessons from the last bubble fresh in everyone's mind, doing all they can to be branded mad, at least according to the Einsteinian definition of insanity: let's just keep flooding the system with money and keep hoping that something will change. In retrospect, pleading insanity in a decade when the entire western world is in ruins, before a tribunal of the people may not have quite the desired effect.
PIMCO Total Return Fund Hits $214 Billion, Gross Cuts Cash By $14 Billion, Buys Treasuries And Foreign Government HoldingsSubmitted by Tyler Durden on 03/16/2010 - 18:49
Pimco's Total Return Fund has released its February holdings, which is now a ridiculous 54% higher than a year earlier, at $214.3 billion. The fund reduced it cash holdings from $19 billion in January to just $4 billion in February, and used the proceeds to buy $10 billion of US Treasuries ($75 billion in total), $5 billion in Mortgages ($36 billion), and also expanded further internationally, buying $3 billion in Non-US Developed country bonds (total of $41 billion). Pimco also surpassed the $10 billion mark in Emerging Market holdings. The firm kept its holdings of High Yield bonds flat at $6.4 billion. While there were no major asset reallocations, Pimco did change its curve exposure materially, eliminating all of its sub-1 year paper, which in January amounted to $17 billion. The firm added the most exposure to the 5-10 year bucket, which increased by $12 billion to $72.9 billion. The greatest amount of holdings is still in the 1-3 year bucket. Holdings of 20 years or over were a moderate $15 billion. Is Pimco gradually shifting to a flattener position?
Forty years ago, it was a small town on the Persian Gulf, merely one of seven sheikdoms joined in federation in 1971 to create the United Arab Emirates. Basically, there was nothing there but sand. Yes, oil had been discovered under that sand, and the city/state was enjoying its first economic boomlet. From about 60,000 in 1968, population tripled by 1975, doubled in the next ten years, and nearly doubled again by 1995. Problem is, especially compared with many of its Gulf neighbors, it didn’t have all that much oil to begin with, and its reserves were falling fast. What it did have was Sheikh Mohammed bin Rashid Al Maktoum, the most influential member of the family that had ruled for more than a century and a half. And the sheikh had a vision. Sheikh Mohammed believed that the Muslim world needed a New Baghdad, a center of commerce and learning and culture that would shine like the hub of the old caliphate, which had dominated the civilized world a thousand years earlier. He was determined to erect a dazzling, ultra-modern new metropolis, starting from scratch.
In a recently declassified report by the CIA, the agency focuses on some of the core observations from the Iraq-Iran War. While still largely redacted and dated (the original memo came out in 1982), it does provide some incremental data that may be of significance should the recently disclosed bomb shipment, be put into use. Some key points: "Iran's most vulnerable choke point is the Kharg Island oil export terminal. The terminal, designed to export more than 6 million b/d, consists of an oil-loading jetty on one side of the island, a sea island off the other side, and a conventional buoy-mooring system. Approximately 25 million barrels of storage capacity are also located on the island... Other important petroleum facilities in Iran include three mainland booster stations that pump crude from the oilfields to Kharg Island. Iran has more than sufficient capacity to enable it to bypass damage to Gurreh and still maintain export levels."The CIA's views on imminent conflict driven market disruptions: "The oil market has reacted relatively calmly to the Iranian invasion because fighting has inflicted no major new damage to oil facilities or seriously threatened supply routes. The risk to the market is that the conflict will escalate to neighboring regions and disrupt the flow of oil. Surplus capacity, including inventories outside the Gulf, is insufficient to handle the potential loss of supplies if the conflict spreads. Excess oil production capacity outside the Gulf now amounts to about 3 million b/d."
UN Blasts American Push To Force Chinese Currency Flotation, Warns That Current Markets Have The "Makings Of Highly Correlated Big New Bubbles...Submitted by Tyler Durden on 03/16/2010 - 16:36
"Amidst continued financial crisis, the question of the global trade imbalances is back high on the international agenda. A procession of prominent economists, editorialists and politicians have taken it upon themselves to “remind” the surplus countries, and in particular the country with the biggest surplus, China, of their responsibility for a sound and balanced global recovery. The generally shared view is that this means permitting the value of the renminbi to be set freely by the “markets”, so that the country will export less and import and consume more, hence allowing the rest of the world to do the opposite. But is it reasonable to put the burden of rebalancing the global economy on a single country and its currency? This policy brief contends that the decision to leave currencies to the vagaries of the market will not help rebalance the global economy. It argues that the problem lies in systemic failures, and as such, requires comprehensive and inclusive multilateral action." - United Nations Conference On Trade And Development
We present a detailed analysis of international capital flows as disclosed by yesterday's most recent TIC data. Among the key observations we note that while foreign buying of Long Term Treasuries came at a healthy $61.4 billion in total net long-term treasuries, this was coupled by record selling of corporate debt, to the tune of ($24.6) billion. January also saw a net sale of over $5 billion in agency securities, offset by $4.3 billion in stock purchases.
Fed Announcement: No Change, "Exceptional" And "Extended" Language Remains, Vote 9-1, Hoenig Did Not Want "Extended Period...Submitted by Tyler Durden on 03/16/2010 - 14:17
The Committee will maintain the target range for the federal funds rate at 0 to 1/4 percent and continues to anticipate that economic conditions, including low rates of resource utilization, subdued inflation trends, and stable inflation expectations, are likely to warrant exceptionally low levels of the federal funds rate for an extended period. Voting against the policy action was Thomas M. Hoenig, who believed that continuing to express the expectation of exceptionally low levels of the federal funds rate for an extended period was no longer warranted because it could lead to the buildup of financial imbalances and increase risks to longer-run macroeconomic and financial stability.
As the attached chart demonstrates, Bloomberg interpolates that there is not even a 1% probability of Fed hike today. The earliest possible hike date is April 28, and even then the probability of a raise to 0.5% is 4.8%. The subsequent date, June 23, has a 14.8% probability of a 14.8% increase, and 0.7% to 0.75%. And even as all is quiet on the Fund Futures side, something is stirring in the Libor market, where 1 week LIBOR has moved to October 2009 levels overnight (in absolute terms, the move from 0.2% to 0.221% is of course a joke; massively leveraged, however, is a different story).
William Cohan: "The Chance Of Seeing Dick Fuld On A Stand At This Point Is An Eight On A Scale Of One To Ten"Submitted by Tyler Durden on 03/16/2010 - 14:03
House of Cards author William Cohan is buying Fuld 2015 correctional facility calls with (with a a 5 year strike). In an interview given earlier to Bloomberg TV, Cohan notes that the "chance of seeing Dick Fuld on a Stand at this point is an eight on a scale of one to ten." The reason: quite simply, as we pointed out first - blatant contradictions between facts and Fuld's version of reality: "Bart McDade, the former president of Lehman, says he told Dick Fuld about [Repo 105] and Dick Fuld was aware of it. By the way Dick Fuld was the biggest cheerleader for this kind of off balance sheet activity. And now Fuld is coming out saying he didn't know anything about it. Seems very hard for me to believe that. The interview also brings up the very pertinent question of how on earth it is possible that not only Bart McDade is currently working as a financial advisor (to Altman's Evercore of all places), but also Dick Fuld is running a comparable gig. "These guys keep moving forward like sharks until they stop. I think they just keep going until someone says 'no more'." Yesterday, Ted Kaufman was the first and so far only person to do that. Will anybody else in this ridiculously corrupt country refuse the bribes, grow a conscience, and follow in Kaufman's example? SEC? FRBNY? District Attorneys? FBI? If you are out there... if anyone is out there... You are alone.
Paulson's Bazooka Reemerges: Greek Finance Minister Wants EU To Put "Loaded Gun" On Table To Protect Him From SpeculatorsSubmitted by Tyler Durden on 03/16/2010 - 13:14
This is getting plain moronic. First, in July 2008 we were hearing all sorts of idiocy, spewed by Paulson about some loaded bazooka that the Treasury had but would never use. Well, the Treasury not only ended up having to use it but it turned out to be the biggest dud in the history of capitalism, Paulson' tendentious blatherings in his publicistic memoir notwithstanding. And now we have the Greeks using precisely the same line. Today in an interview before CNBC, Greek Finance Minister G-Pap II (not to be confused with G-Pap JR, the Prime Minister, or G-Pap 0, the guy who started it all) said he was looking to the EU to put a "loaded gun on the table to defend Greece's financial markets." We were expecting a laugh, a cackle, a snicker, or some indication the man was joking. We all recall that the system started collapsing about a month after the famous Paulson loaded weapon reference. We expect the same this time.