Just in case Americans weren't schizophrenic enough, listening to Obama and CNBC telling them to spend, spend, spend, even if that means maxing out all credit cards (relax, Uncle Sam will take care of that 1,800 day delinquent account by covering 99.999% of principal losses once hyperinflation hits a few quadrillion % per day), here comes the FDIC, with the other side of the coin, imploring" consumers across the nation to consider establishing a basic savings account or boosting existing savings." And with that the insanity that is now the United States of America is laid ba(ir)re for all to see. The question of just how underfunded US banks are if the FDIC has to resort to such fund raising gimmicks is obviously irrelevant. Well, not quite - luckily, the FDIC will come out this week with its quarterly banking update so we can all see how many tens of billions the DIF burned through in the past 3 months.
The market reaction to last week's discount rate change (unique in that it was not accompanied by a Fed Funds rate hike) was notable in that while it pushed futures down substantially, the bulk of the market impact was buffered by Asia, as by Friday morning the Fed talking heads had done sufficient damage control to make it clear the Fed has no intention of raising rates for quarters if not years. As a result the market closed slightly up. Yet what can we expected for the next month? Luckily, website Quantdna provides a useful empirical service which tracks the performance of various products over time post a discount rate change announcement, not accompanied by a change in the Fed Funds rate. The results are purely statistical, and represent a compilation of all data for 30 days following this specific gating event. While there is absolutely no implied predictive ability to these numbers, they do demonstrate some peculiar trends based on prior precedent.
Copper has recently retested the former channel support now resistance. AUDUSD has tested and rejected the 50-dma, USDCLP (highly correlated to copper as Chile's main source of revenue is... well copper!) looks like it is completing the second shoulder of an inverted H&S. USDBRL has pulled back towards the overlap level at 1,80 and 50-dma at 1.7949 which now acts as support. Without a daily close below 1.79 the market should rally towards 1.90 before going to test the next resistance at 2.0350. Finally USDCAD has retraced 76.4% of the recent rally and we anticipate a rally towards 1.0780/1.0870. If this last resistance is bypassed we should rally to 1.1275/1.1300. - Nic Lenoir
After releasing its Gold Investment Digest last week, which is merely a summary piece of prevailing observations, the World Gold Council today released its much more detailed Q4 and 2009 Gold Demand Trends report (somewhat of a misnomer as it also has an extended supply discussion). The report's summary disclosure: "The volume of total identifiable gold demand during 2009 was down 11% on 2008 levels at 3,385.8 tonnes. In $US value terms, the two years were broadly on par. Tonnage demand in Q4 was down 24% on Q4 2008, equivalent to a 5% rise in $US value terms. If we add the less visible side of investment, total tonnage demand in 2009 enjoyed an 11% rise over 2008 levels." Bottom line - despite materially higher YoY prices, adjusted demand for gold increased over 2008. Surely the Tim Geithener/Ben Bernanke duo can sympathize with this phenomenon.
Headlines for now. Hold the rioting. Plus, this is surely just that other, "technical" assistance thing.
The chart below paints a vivid picture of market breadth dynamics both recently, and since the July rally: for the past month, beginning with the 2010 highs "correction", the down channel has been accompanied by spikes in volume, compared to the "bounce" leg, which, and this should come as no surprise to anyone, has been on well below-average volume, both during the recent period, and during all prior micro "correction" rebounds. So, for the benefit of the cheap seats, here is leg xyz of the magical bear market rally, once again occurring on fumes, and that's being generous. And for all those looking to start a quant operation, here is all you need to know - If low volume then buy, else sell.
- Yields 2.229% vs. Exp. 2.195%, bond was trading at 2.164% just before 1 PM auction
- Bid To Cover 2.45 vs. Avg. 1.89 (Prev. 2.27)
- Indirects 42.40% vs. Avg. 45.28% (Prev. 47.45%)
- Indirect Hit Ratio of 88.05%
- Allotted at high 66.57% - large number on the margin
- Direct bidder take down 6.4%
The Chairman Of Goldman Sachs Bank, And Former FRBNY President, Says Many European Countries Used Comparable Debt-Hiding Swap TransactionsSubmitted by Tyler Durden on 02/22/2010 - 13:52
In a speech before the UK Treasury Select Committee the Chairman of Goldman Sachs Bank, Gerald Corrigan, who also happens to be a former New York Fed President (and people still wonder where Tim Geithner will end up) noted that it is not Goldman who is at fault in the whole Greek swap fiasco but Eurostat, "which was consulted on the transaction at the time it was entered into and which offered no objection." What is troubling is Corrigan's revelation that "Goldman Sachs was by no means the only bank involved with countries
in these types of transactions...These transactions were not limited to
Goldman Sachs and Greece." Just whose debt numbers will be put under the microscope next?
Not much commentary possible (or needed) here, really has to be seen to be believed. Surely Mrs. Harbinger must have had some of her husband's business acumen rub off on her (and on her fashion taste) if she invests in such surefire blockbusters as Mariah Carey films. One thing is certain - the former Spanish Harlem resident of "welfare background" certainly has no problem with gravity or with grammar, as witnessed by the following quote "For my life I think my purpose is to actually help children with Leukemia, or whatever my movies are gonna be about, they are pretty much gonna help the children, involved in the same type of situation of, of, of, the based of..." (mic pulled).
Reuters reports that hopes of a Nakheel pay down in whole or in part are getting increasingly illusory. The $980 million Nakheel issue maturing on May 13, which had initially been rumored to be paid off in full (at about the time PIMCO was selling it after buying it up in the sub 50 cent range), then at 60, now seems will not get any consideration at all. Reuters quotes a source as saying "It is very unlikely that the bond will be paid off. Incredibly unlikely." Of course, now that M&A rumors don't exist per se, as it is all really just SEC-endorsed insider trading, the rumor mongering has focused on Dubai and Greece, which leads us to believe that this is simply some Nakheel short talking up (or down, as the case may be) their book.
Full press release from Goldman Sachs giving the company's perspective on the recent topic du jour about its arrangement of numerous Greek currency swaps. One wonders why pour more gas on the pr nightmare fire, if indeed everything was according to the books. One also wonders just how many of the "European member states with foreign debt outstanding" that performed comparable transactions will be presented as a shocker to Eurostat, which at last check was only 7 years behind the curve.
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