ECB Releases SMP2.0 Aka Outright Monetary Transactions Details

The ECB has released the details of its SMP 2.0 program, aka the OMT program, which will be pari passu, unlike the SMP 1.0. The full details are a whopping 472 words. Furthermore, we hope that it is quite clear to Greece that if the ECB has bought Greek bonds under the new SMP 2.0 program instead of SMP 1.0, its debt would now be about €100 billion less.

From the ECB:

Hungary Rebels Against IMF, Declines Aid Conditions

Even as Goldman's representative to the ECB continues to drone, a few hundred miles east of Frankfurt, one country has rebelled against the new world world:


What is wrong with them? Don't they know that the globalist central-planning dictators always know what is best for them? Needless to say the Hungaria Forint tanks, just as intended.

ADP Jobs At 5-Month High, Beating Expectations For 3rd Month In A Row

It was the best of times, it was the worst of times. A dramatic beat by the ADP jobs number at 201k vs expectations of 140k is the third month in a row of beating expectations for jobs and the highest add of jobs in 5 months. QE-off? Good is bad? Well there is some bad is good in here too - the manufacturing industry only added 3000 jobs. Perhaps, rather ironically, the rise in jobs is due to the election providing a stimulus - someone has to do all that fact-checking and empty-chair-lifting.

Mario Draghi Live Webcast

At 2:30 pm CET, 8:30 am EST, Mario Draghi will take the podium and either whip out the Bazooka, which may lead to the resignation of Jens Weidmann from the ECB governing council and further unpredictable consequences (the ECB already broke European money markets when it lowered the deposit rate to 0.00%), or a water pistol, in the process destroying any remaining credibility he may have once and for all. More importantly, what today will show is who currently has the upper hand: Goldman, via its assorted money printing muppets, or Germany, for whom Weimar is always one CTRL-P away. Find out as soon as the ECB building fire alarm goes off and when Mario Draghi presents the latest and greatest details of his plans to reporters.

In Greece, It's The Police Vs The Riot Police

As unemployment (broad and youth) goes from the sublime to the ridiculous in the troubled nation, Reuters is reporting that tensions are rising - even among the Police themselves. "They make us fight our own brothers," one riot-policeman urged with regard the Greek police protesting austerity cuts and preventing riot-police from leaving to secure other demonstrations this weekend. The government plans to slash police pay in a new round of spending cuts worth nearly EUR12bn over the next two years, which the police, firefghter, and coast guards will be prtesting later today in Athens. How soon before TROIKA demands 8 days a week and 99% taxation - as the hair-trigger on the gun they are holding to their own head becomes more and more sensitive.

This Is Economic Death: Greek Unemployment Rises By 1% In One Month

The chart below needs no commentary, neither does what it represents. In May Greek unemployment, pre revision, was 23.1%. It was subsequently revised higher to 23.5%, but this is merely to make the jump to the June number more palatable. What was June? 24.4%. In other words, no matter how one looks at it, the unemployment rate rose by 1% in one month.

Frontrunning: September 6

  • Draghi Credibility At Stake As ECB Tries To Save The Euro (Bloomberg)
  • Clinton Returns to Back Obama (WSJ)
  • Taxi fares up 17% in New York City (Toronto Sun)
  • High Speed Scandal: Ferrari Incident Rocks China (Daily Beast)
  • China’s Richest Man Benefits From Thirst For Soft Drinks (Bloomberg)
  • China August export growth seen weak, imports slow (Reuters)
  • Death to PowerPoint! (BusinessWeek)
  • Sweden surprises with interest rate cut (WSJ)
  • IMF demands greater clarity on Irish austerity plans (Reuters)
  • At Abercrombie & Fitch, Sex No Longer Sells (Bloomberg)
  • And the best for last: California Treasurer Backs Law to Ban Costly Long-Term Bonds (Bloomberg) -> legislating low, low yields

Previewing Today's Main Event And Overnight Summary

There is only one event on pundits and traders minds today: the ECB's press conference, during which Draghi will announce nothing material, as the substance of the bank's message has been leaked, telegraphed and distributed extensively over the past three weeks before just to gauge and test the market's response as every part of this latest "plan", which is nothing but SMP-meets-Operation "Tsiwt" was being made up on the fly. And not even a weaker than expected Spanish short-term auction in which €3.5 billion in 2014-2016 bonds were sold at plunging Bids to Cover, sending yields paradoxically spiking just ahead of what the ECB should otherwise announce will be the buying sweet spot, can dent the market's hope that Draghi will pull some final detail out of his hat. Or any detail for that matter, because while the leaks have been rich in broad strokes, there has been no information on the Spanish bailout conditions, on how one can use "unlimited" and "sterilized" in the same sentence, and how the ECB can strip its seniority with impairing its current holdings of tens of billions in Greek bonds without suddenly finding itself with negative capital. Elsewhere, the Swedish central bank cut rates by 25 bps unexpectedly: after all nobody wants to be last in the global currency devaluation race. Ironically, just before this happened, the BOJ's Shirakawa said that he won't buy bonds to finance sovereign debt: but why? Everyone is doing it. Finally, in news that really matters, and not in the "how to extend a ponzi by simply diluting the purchasing power of money" category, Greek unemployment soared to 24.4% on expectations of a rise to "just" 23.5%. This means there was an increase of 1.3% in Greek unemployment in one month.

Spot Gold $1700

Earlier we noted Gold's seeming clairvoyance with regard the expansion of the Fed and ECB balance sheets over the last few years. It seems the EUR strength overnight (or stop-run) has provided just enough USD weakness impetus to nudge spot Gold (not futures) back over $1700 for the first time since March 13th.

Why The Market Expects The ECB To Soak Up All Remaining 2012 Issuance

Just what is priced in? That is the question. Based on the aggregate size of the Fed and ECB balance sheets, it appears the S&P 500 is pricing in an increase of around USD300bn in the short-term. This USD 300bn amounts to EUR 240bn - a very special and rather too coincidental number. Based on expectations of supply, the EMU16 nations have EUR 245bn issuance remaining for the rest of 2012. So, it would appear that the market, in its ever-hopeful ebullient way has priced in the expectation that the ECB will soak up the entire remaining debt issuance of the 16 (remaining) Euro nations for the rest of the year. Anything less will be a disappointment - and remember each nation will have to ask for 'help' before receiving this 'support'. Coincidence, maybe? Over-confidence, perhaps? Reality, not a chance.

Retirement Reality Full Frontal: Why Every 30 Year Old Must Risk It All To Be Able To Retire

Exceptionally low interest rates are bad for banks, insurers, and, more generically, anyone wishing to save money. Of the three, it’s the situation of the savers that is most untenable. In particular, Citi notes in a recent report, those wishing to retire at 65 or thereabouts are in for a nasty surprise when they start to run the numbers. Given that real yields are negative for Treasury bonds inside of 20-years, the steady stream of inflows into investment grade bond fund that hold a mixture of government, agency, and high grade corporate securities, will simply fail to return an adequate rate of return commensurate with the current savings rates of most retirement savers. What savers need to do is find higher asset returns or increase their personal savings rate. As the chart below shows, there are few options but to go all-in to the most excessive ends of the risk spectrum, or raise the proportion of savings and higher savings rates lead to lower consumption, a decline in corporate profits, and recession.

Why Cowboys' Fans Are Laughing All The Way To Giants' Fans Banks

Are you ready for some.. free-money? With 15 minutes until the NFL season opens this evening, we thought this little gem from Bloomberg was perfect to stoke the fires of Giants-Cowboys fanatic antagonism. That’s because the 80,000-seat Cowboys Stadium was built partly using tax-free borrowing. The resulting subsidy comes out of the pockets of every American taxpayer, including Giants' fans. The money doesn’t go directly to the Cowboys’ billionaire owner Jerry Jones. Rather, it lowers the cost of financing, giving his team the highest revenue in the NFL and making it the league’s most-valuable franchise. "It’s part of the corruption of the federal tax system, subsidizing activity that the private sector can finance on its own." This is not just the Cowboys but such tax-free public borrowing 'municipal' debt helped build structures used by 64 major-league teams, including baseball, hockey and basketball. As Bloomberg concludes, “You come back to this thin line of, ‘What is a legitimate municipal government undertaking?’ If the owner can get away with the public putting up part of the money, he’s going to do it.”

Guest Post: Gina Rinehart Is A Bubble

"Australian mining magnate Gina Rinehart has criticised her country’s economic performance and said Africans willing to work for $2 a day should be an inspiration. Ms Rinehart is said to make nearly A$600 (£393) a second." The richest woman in the world is making an increasing number of public appearances, and speaking of increasingly controversial topics. I wonder why. It couldn’t be that she is becoming increasingly aggressive and controversial because her core business is in trouble, could it? Marc Faber suggests so: "There have been four mega bubbles in the past 40 years. In the 1970s it was gold; in the 1980s it was the Nikkei, and in the 1990s it was the Nasdaq. Bigger than all of them, though, has been the iron ore bubble, a tenfold increase in prices in less than a decade."

Citi's 'Red Flag' Warning From The Credit Markets

It seems the world is willing to come on TV and tell the rest of the world that consensus is bearish, sentiment is weak, and that this rally 'proves' that investors are resilient. We have shown in recent days that the consensus is much more bullishly positioned in fact and as Citi's HY credit desk noted today:

"I'm a little cautious on how much further this rally goes. Not because I think that the September road bumps that have been very well flagged are going to come and bite us, but more because the consensus, which towards the end of August was mixed, to slightly wider, is now getting into a "this market is bullet proof, the ECB and FED put is there, and the technical is still great, and we're only going one way... Tighter". When the market consensus moves like this, it's small red flag, even though it definitely doesn't feel like that at the moment."


"One recurring lesson of the last few years is that the threats of central bank intervention tend to be far more effective than the actual programs."


Presenting The Democratic National Convention's "Ron Paul Moment"

Moments ago we learned that the Democrats have once again reinstated language into their party platform that recognizes Jerusalem as the capital of Israel as well as the words "God-given" that were removed in this year's platform. However, the 'vote' on this controversial decision (shown in the clip below), brings back vivid memories of the GOP convention's own Ron Paul moment; and must be seen to be believed as the true state of our nation's "democratic process" is once again exposed for all to see. Simply remarkable...

Bad News For NFP Bulls: Help Wanted Ads Plunge By Most Since Lehman Collapse

There is one major problem, for the administration at least, when it comes to presenting labor data that is not "compiled" by the Bureau of beLabored Statistics and its Bank of Spain-endorsed Arima-X-13 seasonal data fudging program: it reflects realty, not statistical or seasonal adjustments, and certainly can not be skewed this way or that depending on what best suits the incumbent presidential candidate two months ahead of the election. Which is why one won't read anywhere that one of the most reliable indicators when it comes to real time hiring data as reported by the actual job market and not by some conflicted, data challenged organization which on top of everything has data leak issues, namely Help Wanted ads just plunged by the most since the Lehman collapse.

AAPL And High-Yield-Credit Crunch As Bonds, Stocks & USD Unch

As Elvis (oops) Jerry Lee Lewis might have said if he were a trader "there's a whole lotta shakin' going on" but not much else. Cross asset-class correlations were weakening, ranges were very narrow today in stocks, credit, Treasuries, commodities, and FX, and volumes were well shrug. The three biggest items of note to us were among 'leadership' assets: AAPL dropped rather notably into the close - ending -0.7%; HYG (the high-yield bond ETF that has been so flow-/yield-grab-driven) dropped significantly into the close (saved by a last minute rescue) after heavy volume at the close last night and relatively heavy today as we sold down; and the major leveraged financials GS and MS - soared intraday (GS>MS) far exceeding their peers - but MS gave a significant amount of it back into the close while GS kept pushing up (+3%) with some major volume and VWAP action. Everyone is waiting for the great and good Draghi to anoint this rally tomorrow morning but the last hour pull to VWAP in S&P futures was not followed by VIX, as we note today was the lowest average trade size (amateurs) day of the year in S&P futures.

The Post Globalized World Part 1: Why The PIGS Are Out Of Luck

There are three key factors to modeling trade flows - or relevance - in a post-globalization world. While competitiveness is important, countries gain from being generally 'Technology-rich', 'Labor-rich', and/or 'Resource-rich'. The following chart, from Deutsche Bank, shows where the world's countries fit into the Venn diagram of give-and-take in a post-globalization market. The red oval highlights where Italy, Greece, Portugal, and Spain (and Argentina sadly enough) do not fit into this picture. Two words - Euro-sustainability?