An already ubercynical Art Cashin chimes in on Obama's much anticipated, and very controversial (recall the latest Boehner flap on the issue) speech tomorrow and comes out sounding even more jaded than usual. In a word: don't expect any imminent rise in Obama's already record low popularity rating as a result of this speech, which if recent history is an indication, will likely generate even further class animosity within US society, now well on its way to confirming some of the more violent teleological theories postulated by Karl Marx.
...Taking a step back, we are looking at potential Nations defaulting, plus augmenting further austerity measures to try and reduce debt (which will stifle any growth for years to come), the spiral of banks coming close to nationalisation across the developed world, consumer deleveraging, rising unemployment, falling house prices and a rising loss of faith with government along with discontent and civil unrest. Why on earth would you sell gold when the outlets for safe havens are being radically reduced since the SNB move and the threat from Japan to intervene? Plus the fact that currencies offer less in the form of stores of value also. A massive shift from currency investment to precious metals could take place. Currency wars will exacerbate this and whilst the SNB move is from a small nation, what happens if one of the big boys like Japan join in? Carnage basically and trade wars and border issues will ignite and G20 could implode. Just what the world is ill-prepared for but it looks like it is brewing. Civil unrest and regime changes around the world will add to the soup.
As bizarre as it is to say, but yesterday felt like a short squeeze in the US. In spite of SPX finishing down 9 points, the price action felt like shorts getting squeezed. How can that make sense? Well, anyone who set a short ahead of Jackson Hole or just after the speech, likely set it in the 1130-1160 range. The memory of stocks rallying up to 1228 is too fresh in everyone's mind, so shorts were nervous, and longs may have been set too, as hope remained that Obama, Bernanke, Trichet, and Merkel would say or do things to support the market. I believe yesterday's bounce from the lows, then late day 10 point down and back up swing cleaned up a lot of shorts, so the market is much more balanced at 1175 than it was at 1175 at Jackson Hole time. This gives us a lot more ability to trade lower. Maybe it is too bizarre to believe that we can have a short squeeze on a massively down day, but it felt like that, and it feels like people are positioned less bearish than they feel. With nothing resolved in Europe, and some signs of continued deterioration, the market is more vulnerable to a sell-off. My favorite spin yesterday was that the US will muddle along even if Europe is in trouble. Wasn't it just a few months ago that analysts were saying it is okay if the US does poorly, because over half of S&P 500 profits come from overseas? Weren't profits being enhanced because companies were selling things in Europe and translating those profits back into dollars at favorable exchange rates? Is that story gone and now globalization doesn't matter?
Tullett Prebon has been recently making headlines due to its extremely stark, objective and realistic Project Armageddon, in which it "Thinks the Unthinkable" where it reached the conclusion "that Britain’s debts are unsupportable without sustained economic growth, and that the economy, as currently configured, is aligned against growth. Radical solutions are required if a debt disaster is to be averted. All macroeconomic options have been tried, and have failed. The only remaining options lie in the field of supply-side reform. Unfortunately, public opinion may be inimical to the scale of reform that is required." Needless to say, Keynesians around the world are not happy: after all it takes away from their voodoo punch that just doing more of the same insane things over and over should eventually help. Because if not, then all the BS that is taught in Ivy League is just that... BS. Today, none other than the CEO of Tullett Prebon takes such floundering voodoo economists as Ed Balls, Samuel Brittan, Paul Krugman, George Magnus and Barack Obama, and Keynesianism in general, to task by finally saying what we have been claiming for years: Keynesianism, as applied in modern soceity, is ultimately doomed to failure, but not before we transform from an FX war to a trade war to its final state - shooting war. Because there is nothing like spilling human blood in the name of a false economic religion in its last hurrah before it is finally wiped out from the face of the world.
- German Court Upholds Bailouts (WSJ)
- Obama Said to Seek $300 Billion Jobs Package (Bloomberg)
- Euro Woes Stir Currency Fears (WSJ)
- Hilsenrath: Bernanke Takes On a Balancing Act (Hilsenrath)
- ‘Helicopter Ben’ risks destroying credit creation (Bill Gross)
- China Likely to Ease Money Policy, Journal Says (Bloomberg)
- Krugman explains why the price of gold going down is due to deflation, and why it going up is due to... deflation (NYT)
- Bernanke: US Banks' Exposure to Europe Is 'Manageable' (CNBC)
- Greece Pledges to Accelerate Austerity (Bloomberg)
- The German Constitutional Court rejected lawsuits aimed at blocking Germany's participation in the Eurozone bailouts; however said that the ruling is not a blank cheque for further bailouts
- A Eurozone source said that the IMF has agreed to substantially lower the initial estimate for the European banking sector's capital needs
- According to an article in the Irish Times, private sector participation in the Greek debt swap has so far reached the 75% mark
- Higher than expected German industrial production data rendered support to EUR, however GBP came under pressure following worse than expected industrial production data from the UK
Relatively quiet, rainy day punctuated by the JOLTS report, the Fed's Beige Book and speeches from Fed officials. Headline news will again dominate market momentum.
Gold Falls 2% in Minutes In Asian Trade – Global Currency Wars Resume and Markets Digest German DecisionSubmitted by Tyler Durden on 09/07/2011 - 06:25
Gold closed in New York at $1,870.70/oz yesterday and then traded sideways prior to sharp selling in Asian trading saw gold fall 2.3% or nearly $50 in minutes ($1,871/oz at 0514 GMT to a low of $1,827/oz at 0523 GMT). The price fall was odd as there was no breaking news or ostensible reasons for the sell off and other markets were unchanged at the time. Speculation was that the falls were technical in nature after stop losses were triggered. However, Asian traders spoke of some 4,000 lots of gold being ‘dumped’ on the COMEX and of a “large sell order”. This would suggest that the sellers may not have been profit motivated and official selling may have been involved. After the Swiss franc intervention and currency debasement yesterday, market participants are wary of further official government and central bank intervention. With further gains for the Swiss franc artificially capped (at least in the short term), it would be naïve to exclude the possibility of intervention in the gold market and a continuing strategic capping of the price. “The start of full-on currency wars has started in earnest,” said Maurice Pomery, chief executive at Strategic Alpha, quoted in the front page of the Financial Times today. “After currency wars come trade wars and as we see the exporting world pressured as the developed world contracts, tensions will rise.” Central banks, from the SNB to the Bank of Japan, are openly intervening in the currency markets and devaluing their currencies and therefore may be surreptitiously intervening in the gold market.
As widely expected, the Bundesverfassungsgericht (Germany's Federal Constitutional Court) ruled in favor the German government and did not overturn the EFSF bailouts. Of course, this does not greenlight the safety of each and every profligate spending peripheral and core country at the expense of the German taxpayer. The court continued on its path of demanding more from the Bundestag with regard to the strict adherence of conditions, as the budget committee must approve any new guarantees, and this ruling is not a blank check.
A few days ago we learned that the SEC was either objectively going after every single HFT shop by demanding frontrunning blueprints, or it was merely pandering to the requirements of GETCO, which is in dire need of eliminating some of its more profitable competitors. Now, the WSJ informs that the same porn-addicted regulators are going after ETFs: yet another market product that the enforcement regulator, in its multi-year long career-enhancement focused hiatus, has totally forgotten about and is finally starting to realize has more of an impact on the market than virtually anything else currently in the trading domain. The skeptics will say that this is nothing but ETF giant Blackrock stretching its wings and making sure it doesn't have to share the spoils of frontrunning war with anyone. Whether that is the case, we will find out soon enough, in the meantime we learn that the SEC is "looking into whether turbocharged exchange-traded funds amplified August's topsy-turvy swings in the stock market." Apparently years, because it is no longer months, after the flash crash, the SEC has realized that the convexity and gamma brought about by HFTs in the ETF space merely adds leverage upon leverage, sending the market into spasms of unnecessary but inevitable bouts of momentum chasing: "SEC officials are zeroing in on "leveraged" ETFs, which amplify investor bets, often through derivatives. Derivatives are financial contracts with values linked to another asset. The funds typically offer double or even triple the return of an index, such as the Standard & Poor's 500-stock index." Soon enough, we dread to think, the SEC may also realize that it has absolutely no clue about market topology and structure, nor how anything actually works in modern markets. But since the response by the midget porn fanatics will take years if not decades, we doubt anyone is too concerned. After all Keynesianism itself has at best one, maybe two summers left. Max.
I’ve Just Been Fired
I am very sad to tell you that I’ve just been fired over the phone by Yahoo’s Chairman of the Board. It has been my pleasure to work with all of you and I wish you only the best going forward.
Sent from my iPad
When it comes to European bureaucrats, the easiest way to determine if they are lying is whether or not their mouths are open. Yet there are those rare occasions in which even the most hardened of liars let one slip. The Economic Collapse, always the master of compiling impactful bulletins, has prepared a list of just such "slip" quotes that "are absolutely shocking. In Europe they openly admit that the financial system is dying, that the euro is in danger of not surviving and that the EU does not work in its present form." In other words, ignore the ceaseless headlines of promises that all shall be well. Because it won't. Here is all you need to know about the imminent end of the Eurozone, straight from the horses' mouths.