Archive - Sep 10, 2009

For the third time, gold soared past the $1,000 level, causing the market to eye the precious metal's record of $1,033.90 reached in March 2008. While Citigroup is predicting a $2,000 scenario by next year due to continuing dollar weakness, a number of bullish factors, both near and long term, have converged to boost gold.

"Estimates of the impact of the ARRA made by comparing actual economic performance to the predictions of a plausible, statistical baseline suggest that the Recovery Act added roughly 2.3 percentage points to real GDP growth in the second quarter and is likely to add even more to growth in the third quarter."

A surprisingly robust auction, indicating that demand for US Treasuries despite a continuing supply onslaught, will not taper off. Is this merely more rotation out of agencies and MBS? Whether this demand is coming from foreign purchasers or has domestic sources is, at this point, unclear.

• Yields 4.238% vs. Exp. 4.289%
• Bid-To-Cover 2.92 vs. Avg. 2.48 (Prev. 2.36)
• Indirect 46.5% vs. Avg. 48.46% (Prev. 50%)
• Allotted at high 85.35% (BBG)

The dominatrix being cautiously pessimistic. Jim Rogers tells us how she really feels.

With cumulative TICK readings inching ever higher intraday, the S&P is ignoring what amounts to a concerted push to force stocks up. What other tricks remain up various sleeves?

"Given the substantial financial assistance that Treasury and the Federal Reserve have provided to the enterprises during their conservatorships, it may be very difficult to credibly privatize them as largely intact entities. That is, the financial markets likely would continue to perceive that the federal government would provide substantial financial support to the enterprises, if privatized as largely intact entities, in a financial emergency. Consequently, such privatized entities may continue to derive financial benefits, such as lowered borrowing costs, resulting from the markets’ perceptions. In exploring various options for restructuring the enterprises, Bernanke has noted that some privatization proposals involve breaking the enterprises into smaller units to eliminate the perception of federal guarantees."

With an ever decreasing supply of bearish realism, the massively unlevered ETF tracking the Rosenberg, Janjuah and Edwards trio is constantly increasing in value. And today SocGen's Albert Edwards goes for the 52 week high with the following pearl: "It’s almost as if the biggest credit bubble in history never occurred. Investors are increasingly convinced that a sustainable global recovery is emerging out of the wreckage. All praise to the central bankers (and Gordon Brown) for saving the world! I’m waiting till someone writes about the return of The Great Moderation and suggests Ben Bernanke is the new Maestro. Then I’ll know the lunatics have taken over the madhouse…..yet again!"

From the reader mailbag:

I have no idea if this is real, but it looks cool for the non-UK views who have been neglected.

In its first bond auction since announcing its budget deficit was set to double in 2010 (talking a massive $20 billion here, nothing as puny as $9 trillion over the next 10 years), the Polish government sold only half of the 2 billion of the 5.75% bonds due 2011 it was hoping to offload to investors to plug the hole. It appears, unlike Tim Geithner, Polish Finance Minister Jacek Rostowski does not have Wen Jiabao on speed dial. Then again, after they have taken over America, who knows where Chinese interests will look next: that Bison grass vodka sure is a strategic asset.

Biz is booming for guns and ammo. This is not one of those 'Green Shoots' however.

...Alas does not exist. Which begs the question how have iShares and Direxion not made a quintuple levered, dollar vol tracking index yet? Aside from another class action lawsuit in the making, it would provide the heatmappers with a whole new level of adrenaline now that habituation levels have set in with FAZ and BGZ.

“The August report demonstrates that there is still an ample supply of properties filling the foreclosure pipeline even while the outflow of bank-owned REO properties onto the resale market is being more carefully regulated. After hitting a high for the year in July, REOs dropped 13 percent in August, but we also saw a record high number of properties either entering default or being scheduled for a public foreclosure auction for the first time.” James J. Saccacio, RealtyTrac

• July trade deficit at decade high $32 billion, Cash For Clunkers leads to jump in auto imports: Obama is now officially subsidizing the Japanese economy (AP)
• Wen Jiabao: "China can not and will not pull back from economic stimulus measures" - let the bubbles continue forever (Bloomberg)
• London suicide connects Lehman lesson missed by Hong Kong woman (Bloomberg)
• Bernanke: Greenback's new father (NYT)
• Jobless claims yoyo around as more and more people move to "exhausted" list (Bloomberg)
• Never say never to monetization (SafeHaven)

Reserve Bank Governor believes "a patchy recovery is underway" and inflation expectations are likely to band in the normal range.