And just as everyone was starting to bet on the great USD renaissance, here comes Thomas Stolper to spoil the party, by not only refusing to close out his EURUSD trade reco after losing 800 pips in two weeks (and still being profitable), but by actually doubling down: "We have changed our forecasts to project more Dollar weakness."The reason is that the US apparently has a thing called a massive trade deficit that has to be normalized: "Since the last revisions to our forecasts, the Dollar decline has roughly tracked the expected path. Large structural imbalances in the US are highlighted by weakness in the tradable goods sector.The outlook for monetary policy differentials and BBoP trends remains USD-negative. Dollar weakness is common during periods with slowing GLI momentum." The bottom line: "We now see EUR/$ at 1.45, 1.50 and 1.55 in 3, 6 and 12 months, and $/JPY at 82, 82 and 86". Oddly enough, there is no mention of the real reason to position for a USD plunge. (Hint: Hewlett Packard). On the other hand, this may be the time to go balls to the wall long the USD, as it appears that Goldman is doing another USD fundraising campaign courtesy of its clients. Oh, and speaking of Goldman's clients, it's best to baffle them with bullshit. Here is Goldman's Jim O'Neill with a blurb from his Sunday note on why China is going down (among other things): "it seems to me that a bigger risk premia is still necessary for the Euro. I can’t see how it can remain at about 1.40." Yes. From Sunday. If your head didn't go boom yet, that's ok. It will soon enough. And way to cover your bases there Goldman...
Just because today was lacking a little on the whole surreal news track:
- MUNICH RE SAYS PROSTITUTES ATTENDED AGENTS' REWARD PARTY
- MUNICH RE SAYS ABOUT 20 PROSTITUTES WERE AT 2007 BUDAPEST PARTY
- MUNICH RE SAYS PROSTITUTE PARTY AT SPA VIOLATED COMPANY POLICY
Well at least someone was rewarded at the peak of the credit bubble. In completely unrelated news, Munich Re gets a Buffett boost
The Economist has stolen InTrade's thunder on the matter of IMF head odds and has compiled a list of the most likely candidates to take over for DSK, whose entire world has come crashing down in the span of a few minutes. This particular selection process may be more complex than usual, as it will see non-European countries vying for representation, as well as the possibility of PR damage control of having a woman, Christine Lagarde, on top. What is certain is that no matter who ends up standing when the conclave is over and white smoke is released, Mohamed El-Erian will be again correct: the process will high on pomp, even higher on Feudal traditions, and lacking in any true significance. From the Economist: "The head of the IMF has traditionally been a European, but calls from emerging countries to break with this unwritten rule, which they consider unfair, have been growing louder in the aftermath of the Strauss-Kahn imbroglio. But Europe seems unwilling to give up the privilege of having one of its own at the top of the IMF, particularly at a time when the IMF’s main job is crafting bail-out packages for euro-area countries. Here are some of the people viewed to be plausible contenders to replace Mr Strauss-Kahn, and the odds on their getting the top job according to William Hill, a British bookmaker. A win for a non-European would be a first for the IMF, as would the appointment of Christine Lagarde, who would be the first woman to head the organisation."
David Stockman Says US Has "Run Out Of Runway" On Debt, Compares The Treasury Market To A "Roach Hotel", Endorses A Tobin TaxSubmitted by Tyler Durden on 05/18/2011 - 14:54
David Stockman has become every major news organization's (and CNBC) go to critic when it comes to bashing each stupid idea currently preoccupying the DC C-grade soap opera artists. Obviously, at the current time this would mean the budget deficit and the debt ceiling. On both those issues, Stockman's position is well-known. Today, when asked by Bloomberg's Tom Keene to compare the current deficit with that of Reagan's, Stockman spares no praise: "The essential distinction is that we had a clean balance sheet then - $1 trillion of national debt. Today we have $14 trillion in national
debt. We have used up all the runway, so to speak. We
have piled our national balance sheet with so much debt that the
government is at the very edge of a huge solvency crisis that isn't
going to be addressed unless both parties dramatically change their
position, and I see no sign of it. So we're going to have a gong show." Stockman also opines on the Monetary Roach Hotel that the US debt has become: "We have not had a two-way bond market. We have had a rigged
market that has been dominated by not just the Fed, but all the central
banks. Today over half of the $9 trillion in publicly-held debt is in
central bank vaults. I call it the 'Monetary Roach Hotel.'" Lastly, on a proposal endorsed by Zero Hedge back in the summer of 2009, namely the introduction of a Tobin tax for Wall Street's high-frequency casino: "Wall Street needs to have a transaction tax. I know they won't like it.
A tax on every trade, a small amount, would go a long way to putting
money in the coffers." As usual: absolutely spot on recommendations, which have little to no chance of occurring before the final bond crash finally takes away the multiple-use heroin needle from both DC and Wall Street.
April FOMC Minutes: Fed To Raise Rates Before Selling Assets, Q1 Economic Weakness Blamed On Weather, Inflation "Transitory"Submitted by Tyler Durden on 05/18/2011 - 14:05
Key highlights: "Participants viewed the weakness in first-quarter economic growth as likely to be largely transitory, influenced by unusually severe weather, increases in energy and other commodity prices, and lower-than-expected defense spending. As a result, they saw economic growth picking up later this year....Recent increases in consumer food and energy prices, together with the small uptick in core consumer price inflation, led the staff to raise its near-term projection for consumer price inflation. However, inflation was expected to recede over the medium term, as food and energy prices were anticipated to decelerate...Nearly all participants indicated that the first step toward normalization should be ceasing to reinvest payments of principal on agency securities and, simultaneously or soon after, ceasing to reinvest principal payments on Treasury securities....A few members remained uncertain about the benefits of the asset purchase program but, with the program nearly completed, judged that making changes to the program at this time was not appropriate...The participants who favored earlier sales also generally indicated a preference for relatively rapid sales, with some suggesting that agency securities in the SOMA be reduced to zero over as little as one or two years. Such an approach was viewed as allowing for a faster return to a normal policy environment, potentially reducing any upside risks to inflation stemming from outsized reserve balances, and more quickly eliminating any effects of SOMA holdings of agency securities on the allocation of credit."
Some say that QE3 won’t happen. The U.S. is done with stimulus and force-feeding liquidity and inflation down the world’s throat. Okay, it’s austerity then. How much austerity does anyone think we’re going to have here in America? What is the critical mass and when will we reach it? How much inflation can our creditors handle before they reach their critical mass and have to allow rates to rise? Paradoxically enough, the real question has become ‘can we afford austerity’? I believe the answer is ‘not anymore’. Due to relatively recent events, austerity has become a mathematical impossibility.
Just because the US (and Sarkozy-led NATO) has done such a bang up job with Libya, the Nobel prize winner has decided to take his humanitarian intervention to Syria (unwillingly one must admit: after all Syria barely has any oil, and the risk of an escalation that will involve Israel is rather profound) where the US has just announced it is imposing sanctions and freezing the assets of president Bashar al-Assad and 6 aides, demanding that Syria "cease its brutal crackdown on protesters." And as if the sudden assassination of bin Laden was not enough, it now appears that the US administration (for right or wrong reasons) is dead set on antagonizing the entire Muslim crescent once again. Lastly we wonder, just how much of the USD jump over the past several weeks is due to the repatriation of dollars by other 3rd world 'dictators' in preparation (and avoidance) of comparable asset freezes against one and all?
Take a moment and conduct a mini thought experiment. Imagine that you're from the future many hundreds of years from now, researching what life was like in the early 21st century. You pull up an archive of newspaper headlines from the year 2011 and read the following...
And just like that, without rhyme or reason (well, technically the draw down in crude was substantial with crude inventories dropping by 3.8MM barrels, on expectations of a 1.7MM build, not to mention gasoline dropping from 1.275MM to 119K) the entire commodity complex explodes, after the market tired of today's 3 hours of contractionary speculation and rotates the dial from Max deflation to Max inflation, bypassing anything in the middle. Expect the ramp to continue until the robots, which have now made commodities their latest stomping ground, tire of lifting every offer and go into full sell off mode, since it appears that once again nobody knows how to trade the end of QE2 and/or start of QE3. In the meantime, silver is up about 5% since yesterday. "Price Stability."
While the jury is still out on whether David Rosenberg went bullish on equities just as the market topped out (Rosenberg certainly denies it), it is without doubt that in his note today to premium subscribers, in addition to some traditionally cautious and correct observations on the economy, the former Merrill strategist has "just said no" to silver. It remains to be seen if there will be another clarification note following this one should silver (and/or gold) resume the gradual roll higher (especially since with just 90 contracts traded on the HKMerx, the brand spanking new contract may need to lower margins to attract participation). Quote Rosie: "for now I think it is time to step back and adopt a more defensive and cautious posture towards the group...I would not recommend being aggressive in the commodity space until many of the clouds that have recently surfaced begin to part."
While the causal connections between the decline of community and TV, the Internet, two-earner households, suburban sprawl and long commutes, etc., are visible in a common-sense fashion, they miss the primary unspoken causal factor: the growing domination of the Central "Savior" State in every aspect of the economy and society. From an anthropological or natural-selection point of view--i.e. one informed by sociobiology-- community and marriage alike are at root highly advantageous survival techniques: a group has far more resources than a similar number of isolated individuals, and offspring are more likely to survive and prosper if two parents are devoting resources to their upbringing rather than only one adult is carrying that burden. In nations dominated by Savior States, there is less reason to invest in community or self-reliance, because the government handles everything.
Now that the NYSE no longer has to concern itself with various overeager acquirers procuring highly confident letters from the likes of Jefferies that it can procure 10x Debt/EBITDA B2/B- HY bonds to purchase every single public exchange in the world, it can focus on doing what it does best: busting flash smash trades, and taking away the profits of those who are lucky enough to spot an algo gone apeshit and trade against it. Earlier this morning the stock of Strategic Hotels and Resorts 8.25% Cumulative Preferred Shares (BEE.PR.C) traded from $29 to $2,600 in just about a second. Thank you NYSE, SEC and fair and efficient markets. Or, according to Mary Schapiro, Waddell & Reed. Naturally none of this is any consolation to those who may have prudently been hoping that some idiot robot will take the stock into the stratosphere and had a $2,600 sell limit: all trades (all 15,900 of them) above $29.74 were cancelled. Thank you fair and efficient SkyNet.
Yesterday when we broke the news that DSK was housed in Rikers Island "West Facility" reserved for inmates with infectious diseases, we speculated, jokingly we hoped, that this may be due to his affliction with a certain sexually transmitted disease. Alas, if what the the NY Post reports this morning ends up being true, the situation may be substantially more serious: "Dominique Strauss-Kahn may have more to worry about than a possible prison sentence. The IMF chief's alleged sex-assault victim lives in a Bronx apartment rented exclusively for adults with HIV or AIDS, The Post has learned. The hotel maid, a West African immigrant, has occupied the fourth-floor High Bridge pad with her 15-year-old daughter since January -- and before that, lived in another Bronx apartment set aside by Harlem Community AIDS United strictly for adults with the virus and their families." Oops.