There are so many "meta" things going on in here, we wouldn't even know where to start, so we will simply present Goldman's just released analysis of the implications of Carney's "surprise" appointment to the head of the BOE as is, in all its faux "shock" glory.
It is truly amazing to what lengths the mainstream media will go to avoid talking about what really got Goldman's former head of the Canadian Central Bank the role of Goldman's current head of the Bank of England. But it could be worse: a word search for Goldman in the BBC's just released profile of Mark Carney shows one instance of said word, and as a parenthetical at that. Hey, it could have been zero...
We warned on Thursday and Friday of last week that the rally in European risk assets had begun to disperse (with stocks continuing to the final bell on Friday while credit markets were far less excited). Today saw stocks roll over modestly (less than 1% drops in general today) and credit markets continue to slide. Sovereigns leaked modestly wider once again (except for Portugal which weakened considerably - given a good chunk of last week's gains back in its illiquid way). EURUSD is practically unchanged from Friday with cable (GBPUSD) the most active as Carney is named the new BoE head. German 2Y remains at 0%, Swiss 2Y drifts lower (more negative), 3-month EUR-USD basis swaps dropped their most in 2 weeks, LTRO-encumbered bank spreads continue to underperform, and Europe's VIX jumped its most in 3 weeks.
Moments after Goldman completed the trifecta of controlling every major developed world central bank, with its tentacles now in charge of the Fed, the ECB and now the BOE, Obama announced his designee for the new head of the SEC. The name of Mary Schapiro's replacement: Elisse B. Walter, and no, she did not most recently work for Goldman. Yes. Shocking (for Gary Gensler). Oh, and don't worry Mary Schapiro. Nobody will shed any tears over your departure: perhaps if someone had known you were there even one day over the past 4 years this would be different.
Art Cashin's Cynical Recollections Of Black Fridays Past And The End Of Washington's Cone Of SilenceSubmitted by Tyler Durden on 11/26/2012 - 11:20
The two day rally, wrapped around Thanksgiving, is hardly a surprise to UBS' Art Cashin. It’s an old pattern that he discussed on CNBC on Tuesday. What was a surprise to him was the magnitude of Friday’s move. "A bit unusual" he notes, adding that "the markets then began to buy into the Black Friday hype that filled TV screens. Mobs of people clutching all manner of electronic devices. That seemed to inspire interest and short covering in the recently depressed tech sector. That allowed the market, led by the techs to close the abbreviated session with a full flourish," but Cashin warns that this new week often starts with a rethink - as he advises a "solid skepticism about early reports... Other years, we learn that Black Friday success just cannibalized other sales. We’ll see what happens this year." Also, with over 400 microphone hunting legislators returning to Washington, the cone of silence on the fiscal cliff is probably just a memory.
We can only imagine the HP-12C buttons being ripped from their almost-extinct cases as we are faced with this beauty of a Bloomberg headline:
- *EUROGROUP PAUSES FOR AN HOUR FOR CALCULATIONS, EU OFFICIAL SAYS
No matter how many times you divide by zero haircuts or zero growth - the number still comes out the same - 'unsustainable'.
We know many will be devastated by the loss of such a leading figure in the oversight and prosecution of fraud throughout our financial system...
- *SEC CHAIRMAN MARY SCHAPIRO TO STEP DOWN DECEMBER 14
In the interest of openness and fairness, please use this open forum to leave your farewell wishes for Ms. Schapiro as she heads into what we can only imagine is some influential position in compliance at a major sell-side financial institution.
Back on July 3, we made an explicit and very simple prediction: "now that the natural succession path at the BOE has been terminally derailed, it brings up those two other gentlemen already brought up previously as potential future heads of the BOE, both of whom just happened to work, or still do, at... Goldman Sachs: Canada's Mark Carney or Goldman's Jim O'Neil. Granted both have denied press speculation they will replace Mervyn King, but it's not like it would be the first time a banker lied to anyone now, would it (and makes one wonder if this whole affair was not merely orchestrated by the Squid from the get go... but no, that would be a 'conspiracy theory'.)" We are, once again, 100% correct, and have beaten all the bookie odds which had Tucker as a favorite and Mark Carney as along odds outsider. Pity: all one needs to realize and remember how the events in the world play out is to remember one simple thing: GOLDMAN SACHS RUNS IT. Everything else is secondary.
UPDATE: Release shows a plunge in Capacity Utilization and Production to their lowest in a year, Inventories surged to 3 month highs, Shipments dropped, Capex fell and Finished Goods dropped to its lowest in two years!
It seems the Thanksgiving week has wreaked havoc with governmental timepieces. The Dallas Fed manufacturing headline data was just released 15 minutes early and has dropped back into negative territory with the largest miss in four months, due we are sure to Sandy in some way.
The wunder-farce continues as hope remains that an accord on Greece can be reached this evening. German Finance Minister Steffen Kampeter believes "Greece has delivered" as pledged on reforms but, unlike the rest of the rational mathematics-capable free-world, believes that Greece can bridge its fiscal gap without a writedown, adding that:
- *KAMPETER SAYS GREEK OSI WOULD MARK `END OF GERMAN SOLIDARITY'
- *KAMPETER SAYS 16 [of 17!] EURO STATES REJECT GREEK OSI WRITEDOWN
Will beggars become choosers once again this evening?
We are in a “different moment” now than in the past several years and that is the point of my commentary today. Promises have come and gone, the central banks have supported the fiscal system as political decision making waned with indecision and the difficulties of the choices. Complacency took hold as a kind of “everything will be fine” mentality inundated the market places. Soon, in my opinion, everything will not be quite so fine as the politicians in America and Europe have to earn their salaries and the ramifications of many decisions are going to be unpleasant as they are released. If we regard America’s fiscal cliff or the pending decisions about Greece or the separatist movement in Spain or the lack of a budget for the European Union; it is all politically centered and the battlefields are rife with perhaps surprising decisions. In each of these four arenas the easy answers have now come and gone. The “can kicking” if you will is over.
The ongoing debacle surrounding Argentina's holdout over holdouts appears to be escalating (in rhetoric at least) once again. As Reuters notes, negotiations or voluntary payment by Fernandez's government appear almost impossible. Economy Minister Hernan Lorenzino called Griesa's ruling "a kind of judicial colonialism". "The only thing left is for Griesa to order them to send in the (U.S. Navy's) Fifth Fleet," Lorenzino told reporters, outlining Argentina's plans to file an appeal against Griesa's ruling with the 2nd Circuit Court of Appeals in New York on Monday. Many specialists think it unlikely that the appeals court will reinstate the stay. "It may be an issue of process, but Argentina will struggle to justify why it refuses to pay the $1.3 billion," Eurasia Group analyst Daniel Kerner wrote last week. "Argentina has the resources to meet the payment, so in the end it will be a political decision (and) there does not seem to be any political support for paying the holdouts at all." The Argentina case surely brings into clear view the murkiness of investing in sovereign debt and the increasing difference between ability-to-pay and willingness-to-pay.
Gold edged down on a Monday as speculators took their profits as prices rallied on thin volumes on Friday to their highest in a month on technical buying. A strong fall in the greenback triggered rapid gains in commodities and options-related buying on Friday. Tonight US Congress will meet to attempt to devise a plan to avert the US fiscal cliff which will throw the US into a spiral of tax hikes and budgetary cuts that will lead the US economy deeper into a recession this January. Another short term ‘resolution’ will almost certainly be achieved which will allow the US to keep spending like a broke drunken sailor and which will again store up far greater fiscal and monetary problems. The scale of these deep rooted structural challenges is so great that they are likely to affect the US sooner rather than later. Global investment demand for gold remains robust with the amount in exchange-traded products backed by the metal rising 0.1% to 2,606.3 metric tons.
Somewhere in the deep bowels of Brussels bureaucratic labyrinth, a murder of European ministers (as they most closely approximate the Corvus Corvidae Genus/Species) currently sitting down and trying to come with a solution that "fixed" Greece. It will do no such thing: in fact, all that the Eurogroup is doing today, in addition to trying to do with it already did twice before without success, is to find a socially palatable way to disclose a policy that will see Greek debt haircut by a very modest amount (modest enough to be considered prohibited under Article 123, but who is counting any more), either through an outright haircut of official sector debt (something Germany has repeatedly said "9" to), or through a debt buyback of existing private debt (something which will have no impact now that the debt has soared following a long-running political leak which has allowed bondholders to trade accordingly). Aside for applying lipstick on a dead pig, what Europe is doing is focusing on the numerator in the all critical debt/GDP ratio. Sadly, this is just half of what Europe should be focusing on. The other half? Why GDP of course. Because it is here that things get truly hilarious.
In summary: Greek 2022 debt/GDP will be 115% if and only if Greece not only cuts its debt by EUR50 billion, but manages to grow its GDP by EUR60 billion.
The S&P 500 achieved its anticipated 4-5% bounce off the recent 7-10% pullback, most of it accomplished in a very light holiday trading week. Much of the gains were attributed to overly effusive optimism over the prospects of resolving the fiscal cliff. Ironically, with Washington abandoned the past ten days for Thanksgiving, we have not heard anything substantive on the negotiations since Senator Reid and Speaker Boehner spoke jointly on the White House Lawn on November 16. The returns in equities that resulted from this perceived positive outlook has likely run its course as the blue chip index has regained the levels from the morning after the Election. Certainly, the mundane increases in open interest for the futures and the outperformance by the blue chips versus smaller capitalization names on a beta adjusted basis hint at such vacuous motivation for the upward move.