- Asian stocks decline, Yen strengthens on concern global growth is slowing.
- Australia's first female PM faces voter backlash at first election.
- BoJ said to be still assessing economic impact of stronger Yen.
- China shares fall on criticism of local finance vehicle.
- Euro steady above $1.28 in wake of poor US economic data.
- Oil slips below $75 in Asia as economic news renews expectations of weak crude demand.
- U.S. Budget Deficit forecast increased by CBO to $1.066 trillion for 2011.
- US jobless claims climb, Philadelphia factories slump as recovery slows.
- Aeropostale's Q2 net rose 12.9% to $43.6M helped by 9% rise in revs to $494.7M.
- Apple to shut down Quattro wireless Ad network.
Nothing like a little geopolitical ruckus to spoil the fun...the fun. Xinhua reports that hours ago, and just a day before the Bushehr nuclear reactor is supposed to go online, Iranian Defense Minister Ahmad Vahidi said that Iran had test fired a surface-to-surface missile, Qiam, footage of which was shown on state television. Surely this fits well as a time slot segue from the recent clip showing mass graves prepared for Iran's "aggressors."
EUR Plunges Against Majors, Drops To Month Low Vs Dollar On ECB Comments, Rumors SNB Unwinding Euro PositionsSubmitted by Tyler Durden on 08/20/2010 - 06:55
Things in Europe this morning have a decidedly deja vu May feel. The EUR has plunged against all majors, touching a one month low against the dollar as John Taylor is proven correct for the nth time, having top ticked the EURUSD inflection point literally to the day. Further validating the return of European concerns fo the main stage is the fresh all time record yield on the Bund, with the future rising above 133 for the first time. There are two key reasons cited for today's weakness: the first are extremely dovish comments from ECB's Aexl Weber that the central bank should keep "unlimited lending through year end." This simply means that Bernanke's QE Lite idea is not lost on Europe, whose own little mini gold age has ended, and the continent is once again considering ways and means to kill its currency. Don't be surprised if Germany decided to throw Greece on the sacrificial altar - in that regard, the recent Spiegel article may just have been the warning shot. Additionally, there are rumors that the SNB is unwinding its hundreds of billions of EUR holding. The indirect evidence: a surging CHF, which however could merely be a return to the flught to safety of the old regime, as Europe once again realizes just how bad things truly are beneath the surface.
RANsquawk European Morning Briefing - Stocks, Bonds, FX etc. – 20/08/10
Hinde Capital's Ben Davies, long known for his expansive analyses of gold's undervaluation, this time focuses on silver, and the metal's relative value vis-a-vis gold and other commodities. In the report below, posted initially on King World News, Davies lays out the case for a violent move higher in the price of silver, predicated by the inability of the value suppression cartel to keep the price artificially low going forward, as well as a return to silver's fundamental value.
Senior NOAA Scientist Admits He Lied That Gulf Spill Oil Is Gone, Puts Administration's Spill-Disclosure "Credibility" In QuestionSubmitted by Tyler Durden on 08/19/2010 - 16:43
The fears of all those who had long believed that the administration, either in collboration with BP or otherwise, had been flagrantly lying about the true situation in the GOM, have been confirmed by The Guardian (via BNO). "A senior U.S. government scientist on Thursday admitted that
three-quarters of the oil that was released into the Gulf of Mexico
after BP’s Deepwater Horizon spill was still there, contradicting his
earlier claim that the worst of the spill had passed, the Guardian
reported. Bill Lehr, senior scientist at the National Oceanographic and
Atmospheric Administration (NOAA), presented a radically different
picture than the one the White House had presented to the public earlier
this month. He contradicted his own reports from two weeks ago that
suggested that the majority of the oil had been captured or broken down.
“I would say most of that is still in the environment,” Lehr told the
House energy and commerce committee." So just how many other thing are the President and his crony corrupt "scientist experts" lying about?
I apologize as I have not provided much added commentary on relative value trading ideas these past few days, I have been solely focused on trading bet (or risk) and digging into the data of last year's POMO days to isolate patterns and trends associated with Federal Reserve market operations. Regarding that last point I will have a comprehensive analysis out tomorrow, so far the results are interesting, maybe that will convince a few traders out there to actually come in on Friday to read it tomorrow! As far as relative value is concerned, I had recommended bear conditional flatteners right at the highs. While the curve has lost a lot of delta to the curve, it is well in the money as we have flattened dramatically the past week. Why a bear flattener? Clearly a bull flattener would have been more profitable but the trade had no negative carry, in case of further bull steepening you would therefore have broken even, and since on a sell-off a flattening was virtually guarantied, the risk reward for that trade was excellent. On the flip side bull flatteners had negative carry. Still a good trade and the odds are that now market is going to keep flattening aggressively with steepeners getting carried out on stretchers, low participation overall, and the demand for yield pushing buyers ever further out the curve. - Nic Lenoir
Today we got our first Hindenburg Omen confirmation. The number of new highs was 136, and new lows was at 69 (per the traditional WSJ source). Granted this particular criteria set was a little weak as the 69 is precisely on the borderline for confirmation (the 2.2%), and the new highs number was not more than double the new lows (although it was close). Less gating were the McClellan oscillator which was negative at -83.6, and the 10 week MVA, which rose, which were the two remaining conditions. The first omen was spotted on August 12 - a week later the H.O has been confirmed. The more confirmations, the scarier it gets from a technical perspective, not to mention the conversion into a self-fulfilling prophecy (like every other technical indicator).
RANsquawk Market Wrap Up - Stocks, Bonds, FX etc. – 19/08/10
Two days into the proposed Nikkei-SPX convergence, the ROI stands at about 4% after last night's ramp in the Nikkei and today's plunge in the S&P. Granted, it is disingenuous to not account for the today's Nikkei session which is why absent a 4% down day in the Tokyo index, the trade should still be profitable. We are still confident that the BOJ will be forced to act to stop the Yen surge, unless the most recent PM wants to have a tenure even briefer than that of his predecessor, at which point the convergence will outperform further toward the goal of 10%. Regardless, those who believe deflation has a firmer foothold in Japan may be wise to unwind. The flipside is that the US will be unable to pursue further QE steps until September 21 at the earliest when the next Fed meeting will be held. Which is why the trade can likely be held for at least a few more weeks without any adverse catalyst on the horizon.
Social Security is a demographic and financial time-bomb. With something like 60 million Baby Boomers about to begin retiring, the so-called “Social Security lock-box” is going to take quite the beating—especially considering that that famed “lock-box” is stuffed not with money but with nothing but Treasury IOU’s. Politicians of both parties are making rumbling noises, essentially in two directions: Cutting benefits, and finding an “alternative system". One of those alternative systems some American pundits and politicians have been looking at is the Chilean system of AFP’s—Administradoras de Fondos de Pensiones, literally “Managers of Pension Funds”. This system is a workable free market solution to the problem of funding worker pensions, and has worked like a charm for the past 30 years. Unfortunately for this good idea, the system was imposed by decree by the Right-wing dictator Augusto Pinochet. - Gonzalo Lira
A few days ago we presented the most recent investor letter by Egon von Greyerz of Matterhorn, whose pessimism makes David Rosenberg seem like a CNBC staple cheerleader. Today, CNBC invited the hyperinflationist to its European studio where von Greyerz engaged in some entertaining sparring with the anchor over two totally different worldviews. Those who have read the letter previously, and have followed the inflationist side of the argument, will not be surprised by any of the disclosures: decades of debt fueled prosperity, $20 trillion backstop of financial institutions, deteriorating fundamentals, reckless money printing, and gold as the only real store of value: in other words - all the things that those who see no treasury bubble will close their eyes to and quickly walk away from.
As we expected, the murder (or whatever a group thereof is called) of wall street Ph.D. lemmings is appropriately positioning its collective tail between its legs and duly following Jan Hatzius into preliminary double dip(ression) territory. JPM's Robert Mellman just cut his Q3 and Q4 GDP forecast from 2.5% and 3.0% to 1.5% and 2.0%. The firm has not touched its 2011 estimates yet. Obviously once Q2 GDP is revised to sub 1% as we are fairly confident will be the final revision, it will. We are waiting for the hilarious capitulation from Wall Street's most discredited cheerleader: that of BofA's David Bianco.
Who’s putting out those estimates for the Philly Fed Survey? Obviously not an exact science but I demand a Congressional Investigation. While they are at it, how about a look into the crush in the Spoos and NDX futures after 4 pm yesterday (on no news) for 6 and 14 points respectively. That’s all I have to say about that. The market unraveled on the worse than expected Philly Fed Survey with a couple of support levels being taken out. Around noon, the S&P found support at 1070 but with the NYSE a/d off worse than 5 to 1 negative, I don’t expect a bounce to carry that far. If the market continues its slide tomorrow, I expect the S&P 500 to make a stand in the 1055-1060 area.