• Tim Knight from...
    10/21/2014 - 18:16
    Want to live near the 0.1% and their problems? May I present to you 258 Middlefield Road, Palo Alto, California, which is located within walking distance from my house and is a mere $1,800,000 (well...

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The Soap Opera Just Got Very Exciting: Eric Cantor Will Propose Balanced Budget Amendment To US Constitution

Well now things are really getting downright exciting. From GOP House majority leader Eric Cantor "We are being asked by the Obama Administration to approve a debt limit increase. While President Obama inherited a bad economy, his overspending and failure to enact pro-growth policies have made it worse and now our national debt is currently more than $14 trillion. House Republicans have made clear that we will not agree to raise the debt limit without real spending cuts and binding budget process reforms to ensure that we don’t continue to max out the credit card. One option to ensure that we begin to get our fiscal house in order is a balanced budget amendment to the Constitution, and I expect to schedule such a measure for the House to consider during the week of July 25th. I have no doubt that my Republican colleagues will overwhelmingly support this common sense measure and I urge Democrats to as well in order to get our fiscal house in order."

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Russ Certo's Macro Thoughts On Today's Global Coordinated Crude "Rate Cut" And Other "Market Schizophrenia"

Good afternoon. Quick synopsis of macro-thoughts. I’m not used to writing market comments or market updates anymore given the all things government and policy impacts on markets. It seems too often that it was as simple as the Treasury is selling the Fed is buying. And that was it. Simple. Whatever the reasons, there are implications of today’s bizarre events. There are lots of views which can be observed by schizophrenic price action in markets today. Let me share mine.

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Another Algo Gone Wild

Once upon a time, it was fascinating to watch crazy algos go nuts and send the price of any given stock soaring a few hundred percent higher or lower however briefly, then watch as the horrified exchanges come in right after and cancel all trades in hopes of eradicating all signs that the market is now a busted backdoor parlor in which Toby Maguire could make trillions if only hooked up to the Fed discount window IV drip. Now it is like watching a donkey show on infinte rerun. Sad is the only word that can describe it. Yet like true donkeyshow rubberneckers, we present the latest and greatest blatant algo gone wild, as usual courtesy of Nanex: "On June 21'st the stock CNTY ratcheted violently in three cycles within a six minute period, taking the price (in the first and second cycle) to over 100% of it's price just minutes prior. Within fifteen minutes the price had returned to it's previous trading level. As evident by the sheer volume of canceled trades (shown below), this was not normal market behavior and while the majority of these trades were canceled, many were not, raising even more questions."

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Market Surges On Non-News That Greece Has "Reached" An Austerity Plan

Somehow the fact that Greece has "reached" a deal on its austerity plan is supposed to be good for 100 pips on the EURUSD even though this is not news, and has been priced in for a long time. Furthermore it does absolutely nothing to dampen the fear and loathing that this plan will be met by the broader Greek population. But with markets that have absolutely no liquidity and monkeys controlling the buy and sell algos, one can only sit back and laugh.

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Ron Paul Is Currently Holding A Hearing On Legislation For A Full Audit Of US Gold Reserves, Aka The "Show Me The Tungsten" Bill

Domestic Monetary Policy and Technology Subcommittee Chairman Ron Paul is currently holding a hearing on legislation calling for a full audit of U.S. gold reserves. H.R. 1495, the “Gold Reserve Transparency Act of 2011,” calls for an audit by the Treasury that gives a full and thorough accounting of the U.S. government’s gold reserves, requiring an inventory and assay of the gold reserves. The Treasury’s audit is subject to independent review by the Government Accountability Office, allowing them access to any pertinent records or locations, including Fort Knox. "The Treasury Department has been less than transparent with the results of its gold audits,” Paul stated. “It is asking the American people to trust that all the gold is there, while not allowing site visits and not publishing all the data it holds on its audits and assays. Since most of this gold was originally seized from the American people in the 1930s, they deserve more transparency than a handful of financial statements."

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Flip Flop Roundtip: Goldman Cuts Brent Price Target, A Month After Hiking, A Month After Cutting

Uber-Flip flopper extraordinaire Goldman Sachs just cut its Brent target  price a month after hiking its price target to $130, a month after cutting it to $105 (and just as we predicted two hours before the Goldman announcement). The latest number from David Greely: $105-$107/bbl. To wit: "The International Energy Agency announced today that its member countries have agreed to release 60 million barrels of oil from their emergency stocks over a period of 30 days. The IEA has coordinated this release, only the third in its history, in response to the ongoing loss of Libyan light sweet crude oil production and the impact that the resulting higher crude oil prices are having on the world economy. We estimate that a 60 million barrel release by the end of July has the potential to reduce our 3-month Brent crude oil price target by $10-12/bbl, to $105-107/bbl. 125/bbl." Full bizarro day report below, although all that matters is that Goldman is buying Brent again, after the "GS vs Client" scorecard now reads 3:0.

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Mike Krieger Sees Widespread Panic

That’s two press conferences laden with softball questions from “the press” and two epic flops by The Bernank. Two extremely important things that came out of the disaster that was this event yesterday. First, I want to point your attention to the quote I pasted at the top. In response to the question of where The Bernank stood on monetary policy in light of his prior arrogant and cocksure statements a decade earlier about how the Japanese were being too passive in their methods he stated “Well, I'm a little bit more sympathetic to central bankers now than I was 10 years ago.” BINGO. That was far and away the most important thing he said the whole press conference. Why? Well, for several reasons. First, it was pretty much the only spontaneous unscripted thing he said the whole time. Second, because this is him basically admitting that sitting in an ivory tower telling others how to save the free world via monetary policy was a naive and idiotic thing to do (why people still believe in central banking, I mean planning, is beyond me). Talk is cheap and The Bernank now has had time to test his sad statist theories and guess what happened? He failed miserably in front of the entire world. By saying that he is “more sympathetic to central bankers” he is saying that theories are one thing and he now realizes that. This is HUGE. The Bernank has no clothes.

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Number Of European Banks Resorting To 1 Week ECB Liquidity Jumps To Two And A Half Year High

It is not only the Chinese interbank market that has found itself in a liquidity vacuum. A quick look at recent moves in European overnight lending rates shows that in the past two weeks the key Eonia overnight rate hit a multiyear high of 1.549%, which was rather disturbing because as Reuters points out "Factors related to the end of the first half of the year, when banks tend to lend less as they square up their books, also kept cash prices over two weeks near the European Central Bank's main refi rate of 1.25 percent, money market traders said." Of course, concerns about Greece are a far more prevalent factor in the closed loop that is liquidity evaporation. Which is why the Eonia plunge to 1.091% on Wednesday would have been surprising in isolation, but not if one considers that during yesterday's ECB Main Refinancing Operation (MRO), banks borrowed a whopping €186.9 billion in 7 day funding at a fixed rate of 1.25%. This is €50 billion more than what was borrowed in the past week, and as the chart below shows, is the highest since January when the market was once again concerned about European exposure to Portugal and Ireland (then subsequently forgot all its concerns for about 5 months).

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Jon Stewart Explains The Greek Crisis To The Great Unwashed

Tired of highly technical and sophisticated gobbledygook from doomers and other realists, talking about the Greek implosion in terms of CDS, liquidity freeze, Main Refinancing Operations (that is coming in the next post just after this one), FX swaps, contagion, etc? Then here is Jon Stewart to explain the Greek situation to everyone in a few short mintues. The fun starts 2 minutes into the clip.

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Did Former Richmond Fed President Broaddus Just Give The Go Ahead For QE3?

While Bill Gross may be ignored, what a former Fed chairman is saying may be a just a little more important


Now what?

(and no, his first name is not Calvin).

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Bernanke Lies Half Life Reduced To Under One Day As Aflac Scrambling To Shore Up Liquidity On European Exposure

Yesterday during his press conference, the Chairman uttered his latest lie: "We have asked the banks to essentially do stress tests and ask, looking at all their positions, all their hedges, what would the effect on their capital be if -- if Greece defaulted...The answer is that the effects are very small.” Enter Aflac to prove that the half life of Bernanke's lies is now under 24 hours. From Bloomberg: "Aflac Inc. (AFL), the largest seller of supplemental health insurance, may issue as much as 100 billion yen ($1.24 billion) in debt as it records losses tied to investments in banks from Greece, Ireland and Portugal. Second-quarter losses on the assets will probably be about
$610 million, the Columbus, Georgia-based insurer said today in
a statement." Additionally, Aflac CEO Amos has added invesments in public utilities and Japanese government debt to minimize the company's exposure in Europe. Yet what is truly hilarious is that as the EFSF's spokesman Christof Roche just announced in commenting on the sale of 2016 bonds from the CDO, "Asian investors bought 46.5% of the bonds issued yesterday." In other words, by transferring exposure to Japan, Aflac is merely gaining exposure to Europe through yet another insolvent government. But such is life in the unwind phase of the biggest global ponzi ever conceived, in which the smallest mark to market event on the global financial balance sheet in which everyone's assets are someone's else liabilities and vice versa, will launch the biggest house of cards collapse in history.

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Greece Tensions Escalate As Labor Unions Call For Two Day General Strike On June 28-29 To Celebrate Austerity Vote

The last time Greece had a full day strike was a week ago on June 15, when labor unions decided to cut another 0.15% from Greek GDP by doing absolutely nothing, and events on Syntagma square reached the highest level of violence so far in 2011. And unfortunately for the Troica, Greece seems to have realized that the best way to make sure the bailout program craters is by continuing to miss all IMF output and production targets. As a result, as Athens News reports, "according to the General Confederation of Workers of Greece (GSEE) and the civil servants' umbrella federation Adedy, the 48-hour strike is an escalation of their recent industrial action comprising 24-hour nationwide strikes in protest of the medium-term programme. A main demonstration will be held on Tuesday, June 28, at the Pedion tou Areos park in central Athens at 11am, while on Wednesday another demonstration will be held in downtown Klafthmonos Square." As a reminder June 28, is the far more critical Greece austerity vote, which unlike the vote of confidence in G-Pap, already has several PASOK members saying they will vote against it.

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Debt Ceiling Talks Collapse

5 weeks ahead of the day when the debt ceiling "extend and pretend" plan ends, talks have broken down, and in order to hike Congressional Nielsen ratings, this time seemingly terminally. From Reuters: "U.S. Deficit-reduction talks led by Vice President Joe Biden have reached an "impasse," House of Representatives Majority Leader Eric Cantor said on Thursday, adding that he will not participate in the meeting of the bipartisan group that had been scheduled for later in the day. Cantor, a Republican, said the group has identified trillions of dollars in spending cuts, but had been unable to resolve a disagreement over tax increases Democrats sought. A Senate Democratic aide said the two sides "need to continue talking", and were continuing to talk. But an aide to Senator Jon Kyl, a Republican member of the Biden group, declined to comment on whether the senator would attend Thursday's scheduled meeting."

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A Refresher On The US Strategic Petroleum Reserve

Courtesy of Reuters we have this lovely graphic reminder of what the US Strategic Petroleum Reserve looks like. Also, putting the 30 million barrel draw from the SPR in perspective, the US consumes 21 million bpd, and Canada exports over 2 million barrels daily to the US...

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An Ugly Day For "Rose-Colored Glasses" Haute Couture

The big question is how many people are long stocks because they played the 200 day moving average bounce?  We have had at least 3 chances in the last week for investors to buy the moving average.  It seems like a lot of people had stopped buying the dip during the relentless march down for stocks, but everyone seemed to jump on the bandwagon that the 200 DMA was a big support for stocks.  I think a lot of investors got sucked in and allocated capital and are now weak longs.  One group waited until Tuesday when the market really seemed strong and 'was destined to test resistance at 1300' before buying in.  The other group of weak longs are those who typically don't play technicals but found the 200 DMA bounce theory too compelling to resist.  It is always difficult to trade when losing money, but the ability to make really dumb decisions goes up when we have positions that were put on for reasons that we don't normally follow.  The technicians are used to these trades, it is what they do.  The 'fundamentalists' are not and are more likely to react badly to losing money here.  People must be scratching their heads a little, since it seems, according the rose colour glasses world i)  Greece fixed, ii) Contagion avoided, iii) economic soft patch is only a soft patch and no risk of double dip, and iv) Bernanke will be there for us.

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