Following the money - taxpayers give money to BofA to keep it alive, BofA pays SEC/shareholders in revised wrist slap. Sure seems like one way to keep keep the velocity of money above 1. One hopes that Cuomo won't follow next and throw in the towel in his civil suit against Ken Lewis. A seemingly unhappy with this outcome Rakoff had this to say: "So should the court approve the proposed settlement as being fair, reasonable, adequate and in the public interest? If the court were deciding that question sole on the merits - de novo, as the lawyers say - the court would reject the settlement as inadequate and misguided. But as both parties never hesitate to remind the court, the law requires the court to give substantial deference to the SEC as a regulatory body having primary responsibility for policing the securities markets, especially with respect to matter of transparency." We have gotten to the point where the SEC's cronyism is even impairing the judicial system.
Dax futures have bounce to our 5,740/5,725 target zone. This corresponds to the 100dma, formerly key support and now resistance, the highs of Jan 22 and Feb 3 and the 50% retracement of the sell-off from the tops. If the Jan 11 highs are indeed a major intermediate top, the market should hold resistance here and trade down to test 5,626/5,600, which if broken will confirm further downside towards 5,300, 5,040, and finally 4,570/4,590 which is next major support. On the upside we would use a daily close above 5,780 as a stop. Major focus will be on 5,626/5,600 in the short-term. - Nic Lenoir
As we noted in Friday’s Comments, some traders thought the surprise Discount Rate hike by the Fed may have been a pre-emptive strike at inflation expectations and the bond vigilantes. The Fed has said over and over again that inflation “expectations” are a primary concern of theirs. By the time actual inflation breaks out, the Fed would be behind the curve, so it is expectations they monitor. Thursday morning the PPI spiked sharply. That, some thought, may have inspired the surprising Discount Rate hike in the late afternoon. If so, the Fed might have fired too soon. Friday morning, the CPI was downright deflationary. The core CPI fell 0.1%. The last time we had a negative reading in the core CPI was way back in 1982. That’s 28 years ago. And, that was when Paul Volcker had interest rates at double digits trying to drive inflation out of the system. Traders speculated that the jump in PPI and the dip in CPI might be a function of management. Companies could be absorbing the higher prices in raw materials (global demand); to keep finished products lower for their clients. It’s an interesting hypothesis. - Art Cashin
The following chart from Stateline will be quite critical to evaluate going forward as states increasingly ponder just how to tweak their revenue formulas in order to not only get away from the precipice of insolvency, but to pay back the tens of billions borrowed from the Federal government to fund unemployment pay.
Thank goodness the SEC doesn't care about pursuing, well, anything, as its 1-man enforcement team would be horribly torn in trying to find just who the leaks, and the various benefactors, in the ongoing barrage of Greek realted, totally unjustified rumor mongering are. Earlier today European Commission spokesperson for economic and monetary affairs
Amadeu Altafaj Tardio stated "there is no Eurozone plan to bail out Greece" refuting a story that appeared over the weekend in Der Spiegel, claiming a €25 billion fund to bailout Greece was in the making. Furthermore, he noted that Eurostat, which has requested details on all swap agreements done by Greece over the past decade or so, has not gotten all the needed information, due to, wait for it, a 4 day strike at the Greek finance ministry.
- The deflationist: a profile of Paul Krugman (New Yorker)
- China new village makes Chanos see Dubai times 1,000 (Bloomberg)
- Goldman cranks up p.r. engine to turn sinner into saint (Post)
- Hey recovery.gov, The "stimulus" actually raised unemployment (IBD)
- Another one jumps on the bandwagon - Nathaniel Rotschild calls for ban on sovereign CDS (Les Echos (in french), via DealBook)
- Euro worst to come as Greece hammerlocks ECB on rates (Bloomberg)
- Asian stocks, oil advance as US interest rate concern eases; Yen weakens.
- China mustn't "bow before external pressures" on trade policy: Chinese Trade Ministry.
- China received $8.13B in foreign direct investment in January, up about 7.8%.
- Crude oil rises above $80 on speculation economic recovery to spur demand.
- U.S. consumer prices rose 0.2% in January, less than economists forecast
- World markets recover from drop following Fed move
- Yuan strengthened the most in 11 months on speculation govt will allow more flexibility.
- Aramco and Total said to hire bankers to sell Sukuk for Saudi Jubail refinery
RANsquawk 22nd February Morning Briefing - Stocks, Bonds, FX etc.
"If The US Can Do It, So Can We": Japan To Keep Pumping Cash And Monetizing Debt Until Deflation Goes AwaySubmitted by Tyler Durden on 02/22/2010 - 01:17
And with that Japan joins the competitive devaluation currency race, in which both the SNB and Federal Reserve have a substantial head start (the euro and the fat Brussels bureaucrats are in a ouzo daze, with no clue what the hell is going on). Speaking before lawmakers BOJ governor Masaaki Shirakawa, who recently said Japan was powerless to fight deflation on its own, has changed his tune, and today said that Japan will print the kitchen sink if it has to to beat "stubborn deflation." In a speech before the Lower House Budget Committee Shirakawa said that not only will Japan continue monetizing its debt (at least unlike Bernanke, he admits it), but that they will happily accelerate this action if it means killing the Yen and creating a glimmer of hope for inflation. Carry traders everywhere rejoice.
It's good that the rest of the economy is humming along, and the whole record unemployment thing is under control, cause we were wondering when the president would refocus his efforts on such mission critical things as having the government determine health insurance rates. Apparently the answer to the last question is tomorrow. According to the NYT, "Obama will propose on Monday giving the federal government new power to block excessive rate increases by health insurance companies, as he rolls out comprehensive legislation to revamp the nation’s health care system, White House officials said."
In this interview with the BBC's Andrew Marr, Greek Prime Minister George Papandreou makes it clear that Greece has enough cash to get it through another 30 days (and likely less), or to last it thought "Mid-March." While this statement was likely supposed to remove pressure from expectations that Greece will auction off another €5 billion this week, which as we disclosed previously will most likely not happen, this revelation will likely not achieve the required goal. It has been well known for a long-time that Greek bond maturities culminate with €16.7 billion over April and May. Specifically, there is €8.22 billion maturing on April 20. The fact that there is a lag time of at least a month between when Greece should be rolling maturities and actually in need of funding, will likely be taken as a sign of additional weakness, as spending apparently has not moderated by one bit. This means that Greece will now have to raise double the amount as it approaches the funding deadline when taking into account the natural deficit generated between mid-March and April 20. How happy the EU, and Germany in particular, will be with this disclosure will be seen in tomorrow's Greek CDS market.
Ambrose Evans-Pritchard is outstanding in his expose on Europe's increasingly more evident deflationist cul-de-sac, and the ever more obvious L-shaped "recovery" facing Europe. While it has taken fans of the euro currency a mere two short months to not just diametrically change their exposure vis-a-vis the "long" currency of choice, but to allow speculators to build record euro short positions, the question of how America (and China by virtue of its dollar peg) will deal with euro currency that has no choice but to go lower, becomes an increasingly thorny issue. And to further confound deficit worries, recent overtures by the Fed in the form a discount rate hike make it all too obvious that the bond market will likely soon demand a much more substantial "pound of flesh" to fund America's burgeoning deficit. In this context, the threat of increasing rates, coupled with a euro that could reach $1.25 according to Morgan Stanley, and hit a low of $1.10 according to Albert Edwards, makes the policy prospects before the Federal Reserve so much more daunting.
As we head into a new week, one of the bigger development expected out of Europe will be "imminent" launch of a €5 billion Greek bond issue, to prefund some of the nearly €20 billion in maturities expected over the next 3 months. However, bulls who expect this "good news" to force short covering may have to put the champagne on ice. Dow Jones previously quoted the former Public Debt Management Agency head Spiros Papanikolaou (who was replaced by former Goldman operative Petros Christodoulou), "There will be another syndication, most likely 10 years. We will go for EUR3 billion to EUR5 billion and depending on the market reaction it could be more, although a 10-year bond is a bit more difficult" to make their case that the new auction is imminent. Yet it is this very same Papanikolaou, who when quoted by Debtwire, pours cold water all over the bulls plans: "Reports about us imminent issuing a ten-year bond auction are totally inaccurate - there is no truth in it at all." And so the great Greek disinformation sopa opera continues.
A must read paper by Redburn Partners, "Gold War - Gold is money and nothing else", written in November 2007, which due to its extreme prescience on not only the shift of the economy following the bursting of the credit bubble, but being virtually spot on in its prediction on the price of gold, can serve as an sufficiently comprehensive introduction to anyone wishing to get up to speed with the primary forces determining the price of gold and its implications in a fiat-money world (and especially the prevailing current variant in which competitive devaluations galore).