In a pathological example of nearly clinical hypocrisy, PIMCO's Bill Gross yesterday dedicated 4 meandering essay pages full of polemical ramblings to the characterization of America's sad political and financial hybrid reality. Yet the billionaire's saddest message is precisely the self-deluded aggrandizement that Gross decries yet willfully takes advantage of every single day. Because after bemoaning the fate of America's broken political system, and ridiculing the Federal Reserve's kleptocratic-friendly ways, it is precisely people like the PIMCO chairman that are most guilty of taking advantage of every single loophole presented to them, even as they criticize just this activity. This, beyond all the petty trivialities that Gross discusses, is precisely what is most wrong with America - at this point everyone, and especially Mr. Gross, knows too well that the wealth transfer from the middle class to the elite 1% of society will not end until such time as America itself defaults. Yet having the very people that benefit the most from this, write non-apologetic letters in which they criticize the very system that lets them walk home every day with an extra zero in their bank account simply due to their special connections within this very broken system, is beyond reproach.
- Asian stocks rise, led by carmakers, banks; Copper gains, bond risk falls.
- Australian retail sales rose 1.8% in November - the most in eight months.
- China’s central bank said it will target “moderate” loan growth in 2010.
- Dollar near 3-week low on signs global rebound gaining momentum.
- Oil pulls back below $83 in Asia after cold weather sparks 20 percent rally since December.
- Spot iron ore delivered to China rose to the highest in more than a year amid “panic buying” by steel mills.
RANsquawk 7th January Morning Briefing - Stocks, Bonds, FX etc.
"As we look to December data (reported this Friday) if the seasonal adjustment multiple returns to anything in the range of historical norms it should provide a huge lift to the reported m/m change. In quantitative terms a return to the 1996–2008 average would create a seasonal lift of 431K to the as-reported m/ m change. In comparison the 1996–2007 actual December m/m change (unadjusted) was 116K. Put differently, if this was an average December for job creation and the adjustment factor returns to a historical average we would see a non-farm payroll print of +316K on Friday." - Stifel Nicolaus
SEC Hearing On HFT, Dark Liquidity And Sponsored Access Next Wednesday Will Achieve Absolutely NothingSubmitted by Tyler Durden on 01/06/2010 - 17:31
The SEC's highly overpaid bureaucrats will have to wake up early next Wednesday and read all the Goldman Sachs pamphlets on what a bid ask spread is, what predatory algos are, and why HFTs have hijacked the market in order to sound somewhat intelligent at a "Sunshine Act" hearing on high frequency trading, dark liquidity and sponsored access. Being insufferably worthless Wall Street puppets, the hearing will achieve nothing, and will be followed by a Sunset Act hearing in a few years, where a post mortem of all that could have been accomplished, but wasn't, will be eulogized, together with aremembrance of America's once alive capital markets.
Just as yesterday we shared the top 10 groputhink reasons for the rip in 10 years from 3.84% to 3.75%, so today we provide 10 possible justifications for the round trip back to 3.83%. Most likely, none of this is true or relevant, but we have to fill posts with content, even if it is complete bullshit.
Today's action is more of the same: aggressive selling on the far end of the curve has pushed the 2s30s to steep to quite steep levels yet again. In the meantime, the Mortgage spread is down to 64 bps, a 52 week, if not all time tight spread. Soon the Fed's purchases of MBS will make the mortgage market "safer" than 10 years. The 30 year MBS is already trading well inside of comparable Treasuries. So beside the constant and unrelenting market insanity, all is normal.
The Committee emphasized that it would continue to evaluate the timing and overall amounts of its purchases of securities in light of the evolving economic outlook and conditions in financial markets. A few members noted that resource slack was expected to diminish only slowly and observed that it might become desirable at some point in the future to provide more policy stimulus by expanding the planned scale of the Committee’s large-scale asset purchases and continuing them beyond the first quarter, especially if the outlook for economic growth were to weaken or if mortgage market functioning were to deteriorate.
In Order To Make The Ponzi Market Keep Going Ever Higher, Barney Frank Tries To Make Shorting Virtually ImpossibleSubmitted by Tyler Durden on 01/06/2010 - 15:01
As part of the Barney Frank proposed Manager's Amendment, which will accompany HR4173, the "Wall Street Reform and Consumer Protection Act of 2009", are three little-noticed rules that, if adopted, will make shorting stocks if not impossible, then extremely problematic and difficult. It is obvious why these rules would end up in an amendment: the outcry from retail and institutional traders would have been huge had these proposals made the full text of the proper Bill, and into the full view of the Mainstream Media. So why bother with these - simple. As everyone is aware, Ponzi schemes only work when constantly growing, as otherwise they blow up, implode under their own weight, once price discovery is attempted by all. Case in point: when Madoff's securities was unable to find another greater fool in the face of collapsing asset values, the jig was up overnight, and the value of the pyramid went from $50+ billion to $0 instantaneously.
In this manner, Ponzies are like sharks - they need to swim to live: any deviation from the norm threatens their very survival. By comparison, shorting has always been the most traditional way to force price discovery: as idiot money pension funds tend to be long-only, selling only occurs in times when book gains have to be realized, and facilitates a rising market without any natural checks and balances. If this amendment passes, the entire equity market will have become Madoff securities to the dot. It will continue going up, until market values are a reflection of no underlying fundamentals, but simply the latest pension fund long-only dumb terminal willing to throw managed capital into the bonfire of an inevitable future stock market collapse. And, to borrow another page from the Madoff analogy, when the inevitable correction does occur, it would not be 10% or 20%: the entire worth of the Ponzi would be gutted.
"Foremost among the concerns of many is how to design a strategy that does not on the one hand raise interest rates prematurely, thereby prematurely nipping the economic recovery in the bud, while on the other hand does not keep rates too low for too long, thereby creating conditions that lead to a surge in inflation or inflation expectations. What’s needed is an effective policy to prevent the unprecedented monetary stimulus from becoming a destabilizing influence on price stability. Another key is accurately predicting inflation over the next few years.
Fed Chairman Ben Bernanke and other senior Fed officials are quite confident that they have the tools and the determination necessary to prevent an unwelcome acceleration in inflation or inflation expectations. Unlike previous episodes, though, the magnitude of the policy responses to the financial crisis and the Great Recession suggests that the FOMC’s margin of error seems much smaller than at any time in the Fed’s history." - Kevin Kliesen, St. Louis Fed
The key observation today is crude oil which is attempting to break out to new highs. A close above 82 would be resolutely bullish. Given recent price action and the lack of any resistance is seems the market is bound to break out to the upside. However it is worth noting that, until the spike that occurred around inventory releases, we had a possible evening star formation which would be validated if crude closes below 80.63. We therefore have a very tradable reversal/break-out market in place. A retracement should take us back to at least $75, while on the upside I see 96 as the next extension of the rally with intermediary resistance at $87.20 marked by the topside of the channel. - Nic Lenoir
One table, two markets. All you need to compare the present market with 1982, courtesy of David Rosenberg. The numbers, unlike TV stations, don't like.
Schapiro Forces Perot Insider Trader To Refund $8.6 Million Profits, Still No Announcement On NYB Insider Trading CaseSubmitted by Tyler Durden on 01/06/2010 - 12:00
The SEC, which had its Dell-Perot insider trading case handed to them by various blogs, has forced the disgorgement of $8.6 million in profits from the perpetrator Reza Saleh. And while this action is completely insufficient to warrant the continued abuse of taxpayer money by the SEC, and its ongoing worthless existence, we still demand that the SEC immediately initiate an investigation into the blatant insider trading, most likely facilitated by a person at the FDIC, in regard to the New York Community Bancorp taxpayer funded acquisition of recently defunct AmTrust Bank. We will keep reminding the Chairwoman of her grotesque failing as anything but a bureaucrat who managed to milk FINRA for so much more than she is worth ($3.3 million to be precise, and other insane pension benefits), and is currently merely a figurehead, whose sole responsibility is to let the Ken Lewises off the hook with nothing but a handslap.