It's official: the US credit card has officially been maxed out, just as we predicted on Wednesday, and throughout Q1 and Q2. The United States is expected to reach the legal limit on its debt later on Monday and will start dipping into federal retirement funds to give the country more room to borrow, a Treasury official said. As Reuters reports further, The U.S. Treasury will settle $72 billion in maturing bonds on Monday, which will push the country right up against its $14.294 trillion borrowing cap, the official said. To all those who thought only the insolvent government of Ireland will plunder pension funds, our condolences.
At 9 am, Treasury released its March TIC data. While the headline number of $116 billion in total net TIC flows was slightly higher than February at $116.0 billion compared to $97.7 previously, the net number (offset by US transactions in foreign securities) missed expectations of $33 billion, printing at $24 billion. Notably, of the $116 billion in foreign flows into US securities, foreign central banks were ($10) billion (and privates were $126 billion), indicating that the central banker cartel may be in need of some additional funding soon. Net foreign purchases of long-term U.S. securities were $54.7 billion. Of this, net purchases by private foreign investors were $44.9 billion, and net purchases by foreign official institutions were $9.9 billion. Foreign holdings of dollar-denominated short-term U.S. securities, including U.S. Treasury bills and other custody liabilities, decreased $18.3 billion. Foreign holdings of U.S. Treasury bills decreased $21.9 billion. And while we will provide a full breakdown later in the day, the key trend in US paper holdings continues to be China, whose total US debt holdings dropped for the 5th consecutive month in a row at $1144.9 billion, and the largest one month decline since November 2010.
One part of space history comes to a close. The shuttle will blast off from Kennedy Space Station any second. It will be Endeavour's 25th and last ever mission.
- Tepco Says Fuel in 2 Reactors May Have Melted (Bloomberg) "The findings at the No. 1 reactor indicate the likelihood
that the water level readings in the other reactors aren’t
- The Destruction of Economic Facts (BusinessWeek)
- US residents flee sacrificed Mississippi flood towns (BBC)
- 'Dominique Strauss-Kahn Is Finished' (Spiegel)
- IMF in Wake of Scandal Turns to Lipsky (Bloomberg)
- The Known Unknown of Greek Debt (WSJ)
- Greece Aid May Be Clouded by Strauss-Kahn Arrest (Bloomberg)
- Lowe’s Profit Trails Estimates as Home Projects Curbed (Bloomberg), and, you guessed it, bad wearther blamed
- Warning signs on market liquidity risks (Reuters)... pretty much as warned on Zero Hedge in April 2009
Empire State Manufacturing Index Plunges, Comes At 11.9 Down From 21.7, And Big Miss To Expectations Of 19.55Submitted by Tyler Durden on 05/16/2011 - 08:37
And the US stagflation continues. The just released Empire Manufacturing index has plunged nearly by half from 21.7 to 11.9 in May. The general business conditions index fell ten points to 11.9. The new orders index declined fi ve points to 17.2, and the shipments index slipped three points to 25.8. The inventories index climbed to 10.8, its highest level in a year. The prices paid index rose to 69.9, its highest level since mid-2008, and the second highest ever, while the prices received index held firm at 28.0. And more on the stagflation as defined by the ongoing surge in Prices Paid: "The prices paid index rose sharply, indicating that price increases accelerated over the month. The index advanced twelve points to 69.9, its highest level since mid- 2008, with roughly 70 percent of respondents reporting price increases, and none reporting price declines. This index has moved up a cumulative fifty points over thepast six months." Downward GDP revisions are a-coming.
Many have been wondering why Bill Gross, with his atavistic aversion to holding US paper, has not yet branched out into precious metals which are the natural hedge to surging rates (not to mention sovereign default). Probably the primary reason for this is that the firm's flagship credit funds do not have the mandate, nor permission, to invest in such asset classes. As such, the firm's $200+ billion TRF flagship fund, at least, is limited to fixed income securities. However, the same limitation does not apply to the firm's other funds, especially the recently launched $1.2 billion equity fund, the Pimco EqS Pathfinder. The fund was launched in 2009 under the stewardship of Anne Gudefin and Charles Lahr, who jointly ran the $16 billion Mutual Global Discover mutual fund. So in an interview recently granted to Fortune by Gudefin, we were not very surprised to hear her response on what her largest investment position is in: "The largest position in the fund is gold, which we think is a very good form of protection against what can go wrong. We were encouraged by the fact that a lot of the central banks, especially in Asia, are big buyers. We think that's an underlying trend that's very favorable for gold." So to all those asking why Gross does not invest in the yellow metal, here is your answer.Should the EqS Pathfinder fund grow in AUM, one can assume that an increasingly bigger pro rata portion will be allocated to precious metals.
The Shanghai gold exchange demonstrates that unlike in the US, where margin hikes only go one way, following a surge in volatility which results in margins getting hiked, once said volatility declines, margins usually are cut. According to a press release from the exchange issued overnight, the Shanghai Gold Exchange said it will lower margin requirements for silver to 15% from 18% after the close of business Monday if there are no sharp price movements during the day. It will reduce upper and lower limits to 10% from 13%, effective Tuesday, if Monday's intraday trading doesn't hit either limit, the exchange said in a statement on its website. This is the second margin drop at the exchange following a comparable one last week when margins peaks at 19% only to see a 1% decline. For those not versed in math, this is a whopping 20% drop in silver margins over the span of two days. In the meantime, the crickets from the CME continue, and in fact we are hearing rumors of more margin hikes from the Chicago boys.
The Financial Times reported on Saturday that “the sharp drop in gold and silver prices has stimulated a surge in buying from India in a sign that consumers in the world’s largest gold-buying country retain faith in the decade-long bull story for precious metals.” Chhabil Jain, a Mumbai silver trader told the Financial Times that “demand for silver bars was going through the roof” and that “many vendors were starting to run low on stocks”. “People are booking incredible amounts of silver as they see the current drop in prices as a great opportunity to buy more ... most are buying for pure investment,” he added. Bloomberg reports this morning that silver was the most traded commodity in April.
Lots of data with Empire Index, Capital Flows and the Housing market index on deck, but the biggest news everyone will be waiting for is the predicted debt ceiling breach, which should be formalized at 4:00 pm today.
As expected, the world's most grotesquely disguised LBO in the form of the debt-financed acquisition of the NYSE by Nasdaq and ICE, has been pulled, formally on grounds of regulatory approval concerns, realistically but due to "market conditions" manifesting in the form of a market downtick. This could very well be the market top.
Second Rape Investigation Against DSK Launched As Tristane Banon Officially Deposes Complaint For Rape And SequestrationSubmitted by Tyler Durden on 05/16/2011 - 07:16
Yesterday we brought up the likelihood that more women would step up against DSK now that his supposed reign of terror is over, with revelations that journalist Tristan Banon, goddaughter to his second wife, may have been raped by the IMF head some time ago, a topic now picked up by the Guardian. Well according to BFMTV, as of this morning she has officially deposed a complaint in the police office of Neuilly-sur-Seine (92), France for rape and sequestration. As a result DSK is now technically under two rape investigations: one in the US and one in France. And this is just the beginning.
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We decided to round off this weekend's barrage of surrealist news with some comedy. This is what some expect the imminent escape from Harlem NYPD by the IMF head will look and sound like (and there were those who said Raj Raj is a flight risk).
Minutes ago the IMF announced that it has postponed its informal crisis meeting which was supposed to take place this evening, following the rapidly changing situation in New York, where it was just announced that DSK's court arraignment would be delayed until tomorrow, in order for him to undergo a physical examination checking for scratches and other DNA evidence from the accuser. And for those concerned about DSK's well being now that he is relegated from a $3,000 a night room to a metal cot in a Harlem cell, his lawyer said that "He's tired but he's fine." Presumably this means that DSK does not have to consult with a physician as an erection longer than 4 hours has failed to materialize.
A French reader of Zero Hedge steps up and makes the following bold prediction: a "Tiger Woods effect" is now imminent, as many other rape accusations against Dominique (or will that soon be Demonique?) Strauss-Kahn emerge, since yesterday's rape episode is most certainly not the first time this has occurred (granted, DSK is innocent until proven guilty). "Until now, hes has been bale to fight back allegations by "fixing" the situation through influence and keeping the French press shut up, or by pressuring the women into not getting into a public battle with him." Now this status quo is over, and it is very likely that very soon many more will step up from under the cloak of anonymity and tell their story.