RANsquawk Market Wrap Up - Stocks, Bonds, FX etc. – 29/09/10
The massive, and completely unjustified, September ramp in stocks has done nothing to restore investor faith in a broken market: ICI has just reported that in the week ended September 22, domestic equity mutual funds saw a 21st sequential outflow of $2.5 billion, bringing the total Year To Date to over $70 billion. And here is the kicker: the programmed stock rally in September which was supposed to "restore" confidence in the market, has resulted in $16 billion worth of September... outflows. Congratulations New York Fed, NYSE, Getco, Goldman, and, of course, SEC. You have totally killed any hope of restoring market confidence. Which brings us to an interesting question: if Brian Sacks ramps the DJIA to 36,000 on tomorrow's POMO, and nobody noticed or cared, did Brian Sack ramp the market up?
Update: BN *JPMORGAN ASKS JUDGES TO DELAY RULINGS IN `PENDING MATTERS'
We predict that within a week, all banks will halt every foreclosure currently in process. Within a month, all foreclosures executed within the past 2-3 years will be retried, and millions of existing home sales will be put in jeopardy.
And like that, mortgage fraud goes global. JPM stock down on the news, as the American foreclosure process is now effectively shut down. More as we get it.
With each passing day, the revalations in mortgage-gate, which has for now implicated GMAC and JPMorgan in foreclosing on mortgages without titles, and will likely soon proceed through the entire mortgage origination industry like wildfire as more and more of those foreclosed upon begin to challenge the process (we wonder just what the statute on limitations for retroactive challenges is), are getting increasingly more bizarre. Today, courtesy of Alan Grayson's office we discover that not only are servicers foreclosing on mortgages to which nobody apparently owns the title, but that servicers, representing such reputable firms as Deutsche Bank National Trust Company, are willing to counterfeit court summons in their pursuit of a clean and efficient foreclosure mill. As Grayson's office points out: "Apparently what’s happening is that private process servicer companies may not be serving people with summons, and are simply counterfeiting the documents so they can keep the fees without doing the work. That means that you could theoretically be foreclosed on without ever knowing there was even a foreclosure case against you." What it also means, is that banks may have been participants in this outright criminal judicial fraud, which we are confident will be uncovered in many more cases, as this is highly unlikely to be an isolated case. And the ultimate outcome, as the Florida Bar News states, is that soon, the entire foreclosure process will halt, thereby creating a huge bottleneck to cleaning out excess inventory as more and more squatters are allowed to reside in properties that no longer pay their mortgages to anyone, now that it is obvious that nobody (ahem Freddie, but how else can you keep bailing out the banks, pardon, the GSEs, via fraudulent fund flows) owns the actual deed. “If we had everyone defending their foreclosure, we’d never get through this.”
Plosser Says 2010 GDP Outlook "Somewhat Lower Than What It Was", Sees Very Limited Amount Of Things That Can Be Done To Improve EconomySubmitted by Tyler Durden on 09/29/2010 - 14:18
After earlier saying in prepared remarks that "based on my current outlook, I do not support
further asset purchases of any size at this time," Philly Fed President Charles Plosser has confirmed he is firmly in the anti-QE camp of Fed members. And as remarks from the Q&A following Plosser's speech hit the tape, we discover just how ugly the situtation in America's economy truly is. Among the soundbites, Plosser has said that there is a "very limited amount of things we can do at this point", noted that he is "worried about the downside of further easing", says that the doesn't see "deflationary expectations emerging" , and, last but not least, tells everyone else after Fashion Island apparently already was well aware of all this weeks ago, that the 2010 forecast is "somewhat lower than what it was." This statement validates Kocherlakota's reduction in his 2011 GDP forecast earlier from 3% to 2.5%, which we discussed previously.
Last week, to much pomp and circumstance, Petrobras IPOed in a $69 billion offering of stock, which was promptly praised by Brazil president Lula as the "the biggest equity offer in the history of capitalism." Yet when one digs through the numbers it becomes glaringly obvious that not only was the "real" IPO one third the size of the vaunted amount, but that a major part of the offering is nothing less than a major shell game, which not only distorts the perception of end demand for the offering for other, more naive investors, but also allows the Brazilian government to lie in open public that it has met its primary account surplus of 3.3% of GDP. Market News has broken down the math works behind what is quickly becoming the biggest act of diversion since the days of Houdini.
And so the Treasury records continue, as does the reach for yield. Today's 7 Year came at the lowest yield in history or 1.89%, while the Bid To Cover surged to an all time high 3.04. And as we have been asserting for months, foreign investors continue to creep ever longer on the curve, with Indirects once again taking down more than half of the auction, or 50.24%. Directs oddly jumped by over 50% from August, taking down 13.38% of the auction, leaving the remaining 36.38% to the primary dealers. And so the divergence continues: those who no longer trade stocks (i.e., humans), are bidding up any fixed income paper they can get, even if it means being stuck for 7 years with a taxable annual yield of under 2%. At the same time the vacuum tubes are buying rental DVDs at a quadruple digit PE multiple. Obviously, this divergence is unsustainable, and the longer it persists, the greater the pain all around when it finally collapses.
One of the last true defenders of a long lost honest and efficient market is riding away into the sunset. Today, at 2:15 PM Delaware Senator Ted Kaufman will deliver his farewell address on the Senate Floor. The full speech will be broadcast here. He will be sorely missed by everyone who laments the days when good news meant to buy stuff, while bad news did not mean to buy ten times more stuff. Alas, in the great race for technological supriority, the market broke some time ago, and the retail investing class, which accounts for a vast majority of the stock market's capitalization via its trillions in ever diminishing investments, has now lost all faith that stocks reflect anything but the Fed's desire to reflate the troubles of a few massively underwater bankers away. It is sad, but it is a fact. There is no more fair and efficient market. Which is why we know that those corrupt and captured cronies of the status quo at the SEC will be applauding Kaufman's departure - after all he was the last voice in Washington who dared to put up a fight for the little investor. Soon, everything will be back to normal, where the only guaranteed outcome of any stock trade is a loss. In the meantime, we present to you Senator Kaufman's last speech (of seven) on market structure issues and the unending scourge that is high frequency trading. We also present Carl "Shitty Deal" Levin's follow up comments to Kaufman's speech.
Must read commentary by BigMacro & Co.'s Daniel Somos on how "Apple is really taking over the world" which confirm why the entire market can be summarized by the following equation: APPLE = STOCKS = AUDUSD = GOLD.
In a market where the Fed has assured that up is always and forever, or at least until such time as Primary Dealers can take down 99.9% of any given bond auction, down, it is no surprise that even monthly and seasonal patterns are completely inverted. The traditionally weak September market performance, has been flipped on its head in an attempt by all those involved to rescue the vast majority of underperforming hedge funds which would otherwise see an influx of redemption notices and terminations (ref: DE Shaw). So now that September is in the books, what does conventional knowledge tell us about October, so that in this Fed-induced bizarro world traders can come in and do the opposite. We look to Art Cashin for the answer.
Bill Gross Proven Half Right (For Now): Fed's Kocherlakota Just Reduced His 2011 GDP Forecast From 3.0% To 2.5%Submitted by Tyler Durden on 09/29/2010 - 10:31
A week ago we wondered how it was that Pimco's Bill Gross, who is now rumored to be Larry Summers replacement as the QE infinity whisperer on the right side of President Obama, had an advance look into how the Fed will adjust its GDP forecast ahead of the general public. Today, we got the first half of the response: in a speech to the European Economics and Financial Centre in London, Minneapolis Fed president Narayana Kocherlakota has just lowered his GDP forecast from 3% to 2.5%. And most importantly, the Fed President's speech in decidedly QE-negative: our favorite quote on QE from a Fed president so far: "The Fed cannot literally eliminate the exposure of the economy to the risk of fluctuations in the real interest rate. It can only shift that risk among people in the economy. So, where did that risk go when the Fed bought the long-term bond? The answer is to taxpayers." Thank you Fed.
In what appears to be a beginning of the rerun from late April, when mints all around the world were running out of bullion and dealers had no coins in inventory, the US Mint has announced it has run out of one ounce Gold Buffalo coins: "The United States Mint has depleted its inventory of 2010 American Buffalo One Ounce Gold Bullion Coins." And even though one can't eat the gold coins, this is happening as gold is touching daily fresh record prices. Oddly enough, as Reuters reports: "The mint said it will not stock more of the 1-ounce, 24-karat American Buffalo bullion coins." Keeping in mind that the Buffalo is "among the world's purest gold coins in terms of the fineness of the metal they contain" one wonders just how heavy the physical depletion of ultra pure gold must be for the mint to only stock "more diluted" versions of gold bullion.
The recent decline in the futures is attributed to a 40 pip move lower in the EURUSD (yes, it is pathetic that the entire market once again is merely a tick for tick xerox of the FX pair, which in turn is driven almost exclusively by excess liquidity expectations/QE on either side of the Atlantic) which is attributed to the just released September issue of the EU Banking Sector Stability report. In it, the central bank opens up fresh wounds, by reminding just how fragile the European banking system is. Which should be a stark reminder for all who believe the euro will go straight up without interruption, that Europe is currently panicking and will soon gladly retract everything said recently in the Stress Farce about how stable the banking system is, if it means a drop in the euro and a resumption in exports.
As concerns over Green Mountain, well, mount, here are the first two sellside responses following last night's GMCR 8-K announcement of an SEC inquiry into its "revenue recognition practices and the Company’s relationship with one of its fulfillment vendors."
There is no debating that the FOMC announcements and liquidity injections are if not the key factor that drives stocks then certainly one of the main ones. Yet for those who wish to frontrun the Fed without participating in the stock market, which these days would be pretty much everyone, as the risk of a market crash increases exponentially with every single day that equities ramp ever higher not on fundamentals but merely liquidity, Morgan Stanley has found another cheap FOMC-coincident trade that at least on the surface allows for a quick and painless pick up in a few bps, and can be conducted without touching stocks at all.