Archive - Oct 22, 2010

In the wake of the sovereign debt crisis, Europe has chosen to respond with measures of austerity as various euro-zone countries pledge to cut spending dramatically in order to bring their respective budget deficits down to a few percentage points of GDP apiece. These measures also come in the much bigger wake of the credit crisis of 2008. Even more severe is the United Kingdom’s recently revealed plan to cut £81 billion or a sum equivalent to 4.5% of projected GDP and characterized by the FT as “the most drastic budget cuts in living memory, outstripping measures taken by other advanced economies which are also under pressure to sharply reduce spending.” In fact, the UK’s public sector will lose 500,000 jobs as a result of these cuts. The United States, on the other hand, is favoring stimulus to austerity by maintaining near-zero rates and planning another round of quantitative easing or the buying of longer-term Treasury securities to flood the system with liquidity. The exact amount and timing of QE2 is unknown, but it comes on top of the $1.7 trillion pushed into the system by the Fed starting in 2009.

• The real stock rally killer: Analysis: Bush tax cuts might just expire after all (Reuters)
• Bondholder `Immunity' to Losses Challenged as Irish Bail Banks (Bloomberg)
• Fed's Hoenig: Further Easing Poses Risk To Nascent US Recovery (WSJ)
• Fed's Bullard Favors Open-Ended Bond Purchases (MarketWatch)
• Ohio AG: foreclosure probe won't stop post-election (Reuters)
• False expectations: The historic infrastructure investment that wasn’t  (Economist)
• Democrats slam another campaign opponent: China (Reuters)

• Asian stocks rise as US earnings, Jobless claims boost growth optimism.
• California plans to sell $10B of notes in mid-November to pay bills.
• Fed's Bullard proposed the central bank buy $100B in long-term Treasuries in Nov.
• German two-year government note yield rises to 1%, first time since April.
• Gold set for first weekly decline in six as Dollar's strength cuts appeal.
• Hoenig says US economy is in recovery and 'growing modestly'.
• AIG said to raise $17.8B as AIA unit completes record Hong Kong IPO.

RANsquawk European Morning Briefing - Stocks, Bonds, FX etc. – 22/10/10

Support and Resistance PowerZones for the Russell 2000 (TF Dec), Nymex Crude (CL Dec) and Comex Gold (GC Dec). These zones are created by combining multiple support and resistance methods including Volume Profile, Elliott Wave, Fibonacci, Pivot Points, Trend lines and Market Profile amongst others.

Here’s a little cross pollination to attract bears from all over. Karl Deninger, the editor of the Market Ticker, invited me over for a half hour chat on his Blog Talk Radio show to discuss things such as foreclosure fraud, banks, derivative risk and the markets. You can access the original airing podcast on Karl’s site. I have taken the liberty to append some graphics to the background to add some information to the discussion (see below). Enjoy!

Retail traders are notoriously wrong at picking market direction/tops and bottoms. Most retail traders very naturally seem to adopt a counter-trend stance and this offers very accurate signals for individuals looking to trade against this group. This daily report is designed to help traders focus their efforts on higher probability pairs. So what are the signals?

After repeated admonitions from Larry Summers, Tim Geithner, and even President Obama to engage in more Keynesian stimulus, Germany's Chancellor Angela Merkel firmly rejected those demands and had the gall to suggest that such policies weren't right for Germany. Now she has the last laugh as Germany is recovering and we slip back into recession.