Two-Thirds Of Voters Say Obama Has Kept His Promise Of "Change", Although 56% Find He Has Changed It For The WorseSubmitted by Tyler Durden on 07/09/2012 - 13:35
Four months before Obama's reelection vote, the people have spoken, and agree that when it comes to Obama's first election promise of "Change", the president has kept his promise... with a twist. As The Hill reports, following a poll of 1000 likely voters on July 5, "Two-thirds of likely voters say President Obama has kept his 2008 campaign promise to change America — but it’s changed for the worse, according to a sizable majority. A new poll for The Hill found 56 percent of likely voters believe Obama’s first term has transformed the nation in a negative way, compared to 35 percent who believe the country has changed for the better under his leadership." So still more or less a toss up. However, one thing is certain. As we reported previously, when it comes to defending America from an alien invasion: "The two presidential candidates may be neck and neck in most (un)popularity polls, and according to some metaphorical sources are even the same person just with different Wall Street backers, but when it comes to the critical topic of resisting an alien invasion, Obama is far better prepared, according to two thirds of the population." And that is really all that matters.
Despite BoE's Tucker telling us this morning that there is no need to look at any other market but LIBOR, it appears the world has moved on from this debacle of indication of anything. As we pointed out here, the 'stability' of LIBOR given everything going on around it is incredulous (whether due to the ECB's crappy-collateral standards-based MROs or the Fed's FX swap lines - since unsecured interbank financing is now a relic of the pre-crisis 'trust' era). Furthermore, as we discussed yesterday, the machinations of the LIBOR market and calculations (which Peter Tchir delves deeply into below) suggest that this not the act of a lone assassin suggesting quite simply that complaining or suing Barclays is redundant - any Libor-related suits (from the public or the government/regulators) must sue all the submitters or it misses the critical facts of the manipulation.
The undisputed champion of European political ranting (UKIP's Nigel Farage) discussed the sad reality of Europe's inevitable demise with the reigning US chief of non-hype Rick Santelli in a no-holds-barred cage-match of like-minded skeptics. From Rajoy's incompetence to the 'genius of mutual indebtedness', Farage explains the problem is 'bedeviled with complexity' as, for example, the last summit left "the Finnish and Dutch finance ministers leaving with a very different perspective on what happened than the rest" and now even Merkel is arguing domestically what she has and has not agreed to. From the simple self-referential idiocy of Spain's EUR100 billion bailout - that creates vicious circles on all the peripheral 'bailing' nations; to "the same bundle of money going round and round in circles" leaving Nigel tempted to describe it as "a giant ponzi scheme"; Santelli, not to be outdone, explains how the US is just such a money-circulating ponzi scheme as "one part of the government issues debt as another part is buying". The ECB, of course, is becoming plagued with more and more of the ponzi-like peripheral paper and as Farage notes "the day Greece leaves the Euro - and it will - the ECB is left with a massive paper loss" leaving the ECB under-capitalized - which in all its wonderful craziness means "it has to go and get fresh capital from the other countries that themselves have been bailed out and are in fact in trouble". A farcical perfect storm as the "medicine is killing the patient", and he fears if the nettle is not grasped (Euro break-up) now then the markets will overwhelm the whole thing this summer.
WGC stresses that when looking at the effects of variables like money supply and inflation on the gold price, it is important to look at the global economy, and not concentrate only on what is happening in the US. After the start of the financial crisis in 2007, many governments and central banks in the world implemented monetary and fiscal policies to help their economies, but these policies have led to a large increase in the global money supply.
More and more Asian nations — led by China and Russia — have ditched the dollar for bilateral trade (out of fear of dollar instability). Tension rises between the United States and Asia over Syria and Iran. The Asian nations throw more and more abrasive rhetoric around — including war rhetoric. And on the other hand, both Obama and Romney — as well as Hillary Clinton — seem dead-set on ramping up the tense rhetoric. Romney seems extremely keen to brand China a currency manipulator. In truth, both sides have a mutual interest in sitting down and engaging in a frank discussion, and then coming out with a serious long-term plan of co-operation on trade and fiscal issues where both sides accept compromises — perhaps Asia could agree to reinvest some of its dollar hoard in the United States to create American jobs and rebuild American infrastructure in exchange for a long-term American deficit-reduction and technology-sharing agreement? So the future, I think, will more likely involve both sides jumping off the cliff into the uncertain seas of trade war, currency war, default-by-debasement, tariffs, proxy war and regional and global political and economic instability.
"Europe looks as bad as we thought it would, but our US economic outlook was too optimistic" is how JPMorgan's Michael Cembalest describes the recent environment (adding that US equities have stayed relatively stable thanks to resilient corporate profits and a ton of liquidity). However, with negative pre-announcements mounting (and corporate cash piles startiong to burn a little), we suspect the unusual disconnect between profits and economics will end soon enough. As the following two charts show, when US economic data has been generally sub-par (as exemplified by the plunge in Citigroup's economic surprise indicator), US equities have deteriorated notably in the past. For now, it appears there is a 15-20% disconnect in the S&P' 500's performance relative to the real economy's performance - and the current 'hope' gap looks extremely similar to last summer's before reality set in.
Last week the biggest point of contention in the testimony of Bob Diamond before the House of Commons Treasury Committee was who told him what, and when, with a special circle in hell saved for the BOE's Paul Tucker, who was alleged to have explicitly ordered Barclays to lower its fixing (which as was shown last week had a pretty dramatic impact on the bank's self-reported LIBOR rate). In a few short moments, Tucker himself will be in the hot chair, where an emphasis will be on the emails he sent to Bob Diamond which we presented previously, and whether he acted alone in "nudging" the bank to represent itself as strong than it otherwise would. Watch the full webcast of Tucker's testimony after the jump.
The politics of the EU summit appear quite tense, and as JPMorgan's CIO Michael Cembalest notes, you have to wonder if this is how monetary unions are made or broken: by strong-arming the Chancellor of the country primarily expected to fund the Euro’s survival. In order to better comprehend the shenanigans, Michael provides an aerial view of the summit and how these maneuvers played out. The next move is Germany’s.
Fed Forces Primary Dealers To Buy Ever More Short-Dated Paper As Corporate Bond Holdings Drop To Decade LowSubmitted by Tyler Durden on 07/09/2012 - 10:53
Earlier today, Bloomberg came out with an article titled "Dealers Declining Bernanke Twist Invitation" in which the authors make the claim that "Wall Street banks are increasingly choosing to hoard their U.S. bonds rather than sell them to the Federal Reserve as speculation grows that a slowing economy and global financial turmoil will only make them more dear." As the argument, Bloomberg points out ever lower Bids To Cover in the near-daily sterilized POMOs that the Fed conducts as part of Twist, which actually is a meaningful if very volatile argument and which may be far more impacted by how much money the New York Fed is letting banks skim off the margin in daily POMOs as ZH has discussed previously. More impotantly, BBG notes the record holdings of Treasury bonds by Primary Dealers (something we too did a month ago). It even goes on to quote 'serious people' - "People are not willing to sell Treasuries" said Thanos Bardas, a managing director in Chicago at Neuberger Berman LLC, which oversees about $89 billion in fixed-income assets, in a June 28 telephone interview. "The data in the U.S. doesn’t look as good. The labor market has lost momentum. There will be more upside left in Treasuries despite the low levels of rates." All this would be correct if it wasn't for one small detail: the distribution of UST holdings within the Dealer inventory. As we have repeatedly shown, once one looks at just what Dealers hold, the story flips diametrically. In fact, according to the most recent Primary Dealer data released by the FBRNY (as of June 27), of the $106 billion in Dealer Treasury holdings, a whopping 78% are in the 3 Years and under category, in other words precisely what the Fed is selling to the Dealers per Twist!
The sole driver of risk in the past 3 years has been nothing but continued pumping of liquidity into markets by central banks: aka the Global Central Bank Put. How does this look visually? The below summary charts showing global balance sheet expansions should blow everyone's minds.
The terrible trinity of a China harder-than-soft landing, a European depression/crisis, and now a US slowdown are all tied together in a burdensome bow by Punk Economics' David McWilliams in his latest must-watch macro clip. While people apparently still worship at the alter of retail, the Irishman notes that they are missing these three oncoming trucks. From the Politburo paniccing as "since dropping its Maoist fundamentals, the only legitimacy it has is growth" with "prosperity (not equality) for all" the latest slogan as he rhetorically asks "what's the Chinese for 'it's the economy stupid" as he notes that despite two rate cuts in a month, the problem is too much capacity (so building more simply makes things worse) - pushing commodities down. He rotates to the US where Obama's election-critical recovery is fading away noting the current impotence of the Fed to fix things in the real world. As the much-hyped recovery evaporates in the US, the euphoria of the latest EU Summit has vanished and McWilliams dives into the details of the desperate to-and-from between Germany and its neighbors (adding that France is economically all mouth and no trousers) "either Germany pays for everyone or the Euro falls apart" as he explains the dilemma facing massive refinancing needs of Italy and Spain with little to no growth and illiquidity - with German savings the ultimate arbiter (though poltically impossible given Merkel's election next year). "Even if the Germans paid for everything right now... it still wouldn't solve the core competiveness problem" leaving the world indeed stuck between a German rock and a global hard place. Eight minutes well spent for a succinct world view - and its not encouraging.
The French were willing to 'slash' retirement ages by a few days as the Greeks tied property tax payments to electricity supply in an effort to raise revenues but it seems the much-talked about austerity that is such a great hardship for Europe's non-German/Fins/Dutch is missing in action. Today we hear of the progress in Italy as la Republica explains the incredible provocation of the under-secretary of the economy Gianfranco Polillo that: "We are in a country where you work an average of nine months each year, and I think that now we must think that these nine months of work are too short," suggesting - shock, horror - that "if we gave up one week of vacation, we would have an immediate impact on GDP of around 1%". First of all - adding 1% from an additional week seems a 'stretch' but nevertheless as Wirtschaftsfacts notes that these comments only "reinforce the prejudices in the northern countries of the euro zone, that many employees are in the southerners lazy and workshy." So the next time we hear Monto proclaiming the need for Zee Germans to step up or the ECB to monetize, it is clear now what exactly he is protecting - his all-year tan!
When that canned remarks by Fed Doves is all that is left as a hope-based upside "risk catalyst", as was just defined by Citi's Steven Englander, things are really sad for those who have to justify their excess testosterone by trading every uptick (Econ Ph.D. dissertation on the topic most certainly in progress).
With a few hours until BoE's Paul Tucker takes the stand, the venerable institution has finally acquiesced to the Freedom of Information Act request from British MP John Mann and released all copies of emails and transcripts of telephone conversations between Tucker and Bob Diamond between 10/1/08 and 11/30/08. The emails make for some fascinating reading when one considers the sources of the conversation. The thrust of the discussion is Tucker's concern at UK Libor rates being considerably higher than US - especially as US rates were dropping; Tucker's 'shock' at the cost of funding for Barclays' government-guaranteed debt; and finally the explanation/admission for why the BoE's liquidity hosepipe was not fixing the solvency problem in British banks - a lack of eligible collateral. Smoking gun maybe; nail in the coffin of independent Central Banks for sure; hangings in the streets - we are not so sure.
Back in January, an article by Reuters' head financial blogger on the topic of the Greek bond restructuring, which effectively said that Greeks have all the leverage, prompted us to pen Subordination 101 (one of the year's most read posts on Zero Hedge), in which we patiently explained why his proposed blanket generalization was completely wrong, and why litigation arbitrage in covenant heavy UK-law bonds would be precisely the way to go into the Greek restructuring. 4 months later, those who listened to us made a 135% annualized return by getting taken out in Greek UK-law bonds at par, whereas those who listened to Reuters made, well nothing. What is amusing, is that such examples of pseudo-contrarian sophistry for the sake of making a statement, any statement, or better known in the media world as generating "page views", no matter how ungrounded in financial fact, especially from recent Loeb award winners, is nothing new. To wit, we go back to May 29, 2008 where courtesy of the same author, in collaboration with another self-proclaimed Twitter pundit, we read "Defending Libor" in which the now Reutersian and his shoulder-chipped UK-based academic sidekick decide that, no Carrick Mollenkamp and Mark Whitehouse's then stunning and quite incendiary discoveries on Liebor are actually quite irrelevant, and are, to use the parlance of our times, a tempest in a teapot. His conclusion: "What the WSJ has done is come up with a marginally interesting intellectual conundrum: why is there a disconnect between CDS premia, on the one hand, and Libor spreads, on the other? But the way that the WSJ is reporting its findings they seem to think they’re uncovering a major scandal. They’re not." Actually, in retrospect, they are.