Today's Economic Data Docket - Market Moving Rumors; Also Claims, Philly Fed And Existing Home SalesSubmitted by Tyler Durden on 10/20/2011 - 07:55
While the only market moving events today will come out of Europe, where we will learn just how much of a ponzi scheme the EFSF will be, we will also get largely irrelevant and ignored for anything but HFT kneejerks data on claims, the Philly Fed index, existing home sales, and speeches from several Fed officials.
COT data in the US shows that speculative sentiment has fallen dramatically which is bullish from a contrarian perspective. The Got Gold Report reports that silver futures market data is the most bullish it has been since 2003 - eight years ago. Silver was priced at about $4.40 per ounce then. Large commercial shorts have dramatically reduced their positions after the selloff in recent weeks suggesting that we are likely at or very close to silver bottoming. While the figures for gold are not as dramatic they too show that speculative positions and sentiment has been reduced significantly. Venezuela will repatriate some gold reserves held abroad before December 24th, Central Bank President Nelson Merentes told reporters today in Caracas according to Bloomberg. “I can’t give you an exact date for security reasons,” Merentes said. Venezuela will keep an unspecified portion of its gold reserves in foreign institutions, he said. In August, President Hugo Chavez ordered the central bank to repatriate $11 billion of gold reserves as a safeguard against volatility in financial markets. Venezuela held 211 tons of its 365 tons of gold reserves in US, European, Canadian and Swiss banks as of August.
- France, Germany Split on Crisis Solution (Bloomberg)
- Franco-German deadlock over ECB’s role in rescue fund (Telegraph)
- Merkel Risks Own Downfall to Save Greece (Bloomberg)
- Sustainable debt needed to qualify for EFSF support (Reuters)
- Bill Would Give Residence Visas To Foreigners Who Spend At Least $500,000 To Buy Houses In The U.S. (NYT)
- Couldn't happen to a nicer person: SAC Capital Faces Second Deal Probe (WSJ)
- Bullard Says Fed Policy ‘Appropriately Easy’, Relapse Unlikely (Bloomberg)
- Eurozone leaders meet in Frankfurt (FT)
- Geithner: TARP Refinancing Under Lending Program ‘No Mystery’ (WSJ)
It was only a matter of time before following banning everything else that it could, and that is not under its control, Europe would go after the only thing that matters: the First Amendment. From Bloomberg: "Michel Barnier, European Union. Financial Services Commissioner, wants to give the European Securities and Markets Authority the power to temporarily prohibit credit-rating companies from publishing ratings about ailing countries, Financial Times Deutschland reports. Such a ban could prevent ratings from being published at “inappropriate moments” that could have negative effects on the financial stability of nations as well as on the global economy, the proposal states, according to the German newspaper." Next up: ban on anonymous blogs whose disclosure of the truth could have "negative effects on the financial stability of nations as well as on the global economy." After all the proposal has already been floated by one Todd Martin os Morgan Stanley and currently SocGen fame, with whom, we must admit, we forgot to preclear this post. Full FTD report here. Read it before it has been "filtered" by Europe's commission on truth sterilization.
Following two poor bond auctions in the overnight session from Spain and France, things once again looked set to fall apart in both the stock futures and the FX (EURUSD) markets until the latest deus ex appeared after the latest report by international creditors on Greece’s finances recommended paying the next installment of aid to Greece as soon as possible. Naturally: after all such a payment is merely passthru funding which Greece hardly sees one sent of, and the bulk of the capital is immediately recycled to creditors in the form of interest expense and debt maturities. Bloomberg quotes “The Commission services recommend the sixth disbursement to Greece to take place as soon as possible: as soon as the agreed prior actions on fiscal consolidation, privatisation and labour market reform, which were announced by the government, have been legislated,” the report by the so-called troika of officials from the European Central Bank, EU Commission and IMF said. Of course, were the Troika to allow full disbursement without any "stern" warnings over the deterioration in the Greek economy, in which nobody works any more, the Finance Ministry is occupied and a general strike is the "new normal", it would have been beyond farcical. Which is why the Troika noted that the Greek debt ratio, which exceeded 140% of GDP at the end of 2010, will remain “at very high levels for many years,” according to a draft report by the Troika. “If fiscal consolidation and privatization targets are respected, and growth responds to structural reforms, the debt ratio may start declining from 2013 onwards...When compared with the outlook of a few months ago, the debt sustainability has effectively deteriorated’." And it will continue deteriorating because Greece now knows too well it can demand anything and everything from Europe and it will get it, since nobody at the Troika can ever refuse to fund the insolvent country's monthly pre-alimony payment.
When it comes to manipulating income and wealth data, the government and the BLS are second to none (well, maybe only second to China but we digress): after all there is nothing that gets Americans to spend more than thinking Joe Blow down the street may outspend them. And at 70% of GDP, Americans have to consume. And what better way to do that, than to fill the airwaves with propaganda that spending is going up, up, up (even if said surge is nowhere to be seen). So far so good. Yet one place where nominal and real income data can absolutely not be fudged is the Social Security Average Wage Index based on withholding data reported by employers, particularly the median wage, whose nominal change can then be extrapolated in real terms using CPI to create a chained series. And here is where things get messy: as John Lohman demonstrates in the chart below, real income based on median wages, dropped (in real terms) by 1.2% - the biggest year over year slide in over 20 years of data, which is surely news to Joe Blow, whose impetus to spend, spend, spend would be substantially less, if the awareness was there that everyone is making and thus spending less, which in turn would lead to even more accelerated deleveraging, which would ultimately lead to a faster return to the mean for the overall economy: a mean which is sustainable without constant monetary and fiscal intervention. And yes, there will be lots of pain in the transition from the current Frankenstein state to a true equilibrium state - something that Ron Paul has been pounding the table on for years, and is the reason why unfortunately he is unelectable - Americans can not stand to hear the truth. For this and more factual trivia, see the chart below.
Doctor copper that is. Because apparently someone forgot to tell China that "Europe is fine." As a result, over the past 3 days we have seen a relentless selloff in all risk assets and commodities when China is open (the weak GDP print sure didn't help), at time bordering on liquidation, but most notably in copper which is now down 7% on the week, and which in a feedback loop forces domestic speculators to sell anything that is not nailed down, due to copper's use a core Letter of Credit pledge. As a result, any drop in copper leads to leveraged selloffs in all other assets, which leads to even more selling in copper and so on. Perhaps the Beijing editions of the FT or The Guardian can promptly put an end to this lunacy, which can be ignored by vacuum tubes only for so long...
While Morgan Stanley only recently became a second derivative for everything European-related (thank you financial short selling ban in Europe, and also thank you Mr. Gorman for updating investors on your firm's $39 billion gross derivative exposure to French banks (not France the country). What's that? You didn't provide one? Oh, our bad, just as it is "anonymous bloggers" bad that your CDS blew out this quarter and generated over $3 billion in "income" for your firm - you are truly welcome), Bank of America has, for quite a while, been a proxy for all that is wrong with America's mortgage industry, courtesy of that most value-destroying purchase of the insolvent criminal entity that was Countrywide Financials. For a while the market was content that the proxy would not be in need of a shallow grave, unlike the US housing market (go ahead, ask where PrimeX closed today), after the bank managed to bribe enough "plaintiffs" and proceed with a quick and painless $8.5 billion settlement on all of its mortgage putback claims. A settlement that, however, had a very weak link: "Article 77", a critical provision enabling the deal in its current form. And as we first reported and explained back on August 26, said weakest link was attacked by David Grais of Walnut Place, who "filed a request to transfer the lawsuit from State Court to Federal Court where everything basically begins a new." Well, today Grais won, and Bank of America lost after US District Judge William Pauley ruled that "Bank of America Corp.’s proposed $8.5 billion settlement with Countrywide Financial Corp. mortgage-bond investors must be considered in federal court instead of the New York state court where it was first filed." Not content with making a factual statement, the Judge proceeded to skewer the bank which, on top of evertyhing, recently decided to stuff its depositors with a bill as large as $53 trillion should things turn sour, added "The settlement agreement at issue here implicates core federal interests in the integrity of nationally chartered banks and the vitality of the national securities markets." Integrity? From a bank which secretly, though with the Fed's blessing, has tried to put its client interests over those of depositors of over $1 trillion, and over the objections of the FDIC? Don't make us laugh.
Steve Wynn Epic Anti-Obama Rant Part II - Full Audio And Transcript With Complete #OccupyWallStreet ThoughtsSubmitted by Tyler Durden on 10/19/2011 - 18:41
One quarter after going on an epic anti-Obama monologue at the end of his Q2 earnings call, Steve Wynn comes back with a sequel, confirming that when it comes to completely justified anti-presidential rants, he is truly second to none. Topics touched upon include massive government deficits, the business climate, the administration's horrendous handling of the economy, and of course, Occupy Wall Street. His damning conclusion: " I am watching my employees standard of living drop off because of deficits. I think that the American public is beginning to make the connection between deficits and their own loss of the standard... I say right now that the Democratic agenda of spend and bribe the public has bankrupt this country, and until it stops, the citizens of this country are in for more hard times. And fancy speeches aren't going to change that. Only a fundamental realization that citizens are going to have to take real, sophisticated responsibility for how we allocate the resources of this country."
Less Than Two Months After Its First Rate Cut, Brazil Once Again Lowers Key Interest Rate 50 Bps To 11.50%Submitted by Tyler Durden on 10/19/2011 - 18:13
The world may not be re-entering a recession (after all just look at the S&P in the past two weeks - reputable economists will tell you there is no way the market can soar like that if the world was entering a double dip - and everyone would believe them because they have a Ph.D.), and America may be decoupling from everyone all over again just like every other time it was supposed to decouple but didn't, however Brazil is not waiting around to see the result. Less than two months after its first rate cut, the Brazil central bank just cut its main "selic" interest rate by another 50 bps, this time citing a "more restrictive global environment" instead of "substantial economic deterioration." At the end of the day, the result is the same. So will China finally follow suit and join the global loosening game?
Well, it is not just the CDS ban, the fact that Greece is now done is also a modest factor, but since nobody can short Greek default risk unhedged, the only option is to short the bonds. As they did today en masse. Greek 1 Year bonds: the most liquid proxy for default in the absence of 1 Year CDS, closed at 183%, after hitting an all time high of 188%, following yesterday's 173% close. To all those who bought 1 Year Greek bonds when yields hit 100% a month ago because "they just couldn't possibly drop any more, and you would double your money in one year guaranteed", condolences for the 50% loss. We are certain that a new batch of bottom callers will emerge, this time calling for doubling your money in six months.... Then three.. Then one and a half... etc... Until finally Zeno's paradox catches up and you either double your money overnight or you lose it all.