Archive - Oct 2010

I see this development as Risk Off.

Durable Goods prints at 3.3%, higher than expected 2.0% (even as the previous is traditionally revised from -1.3% to -1.0%), which however was pushed exclusively by transportation, as durable goods ex. transportation dropped by 0.8% on expectations of 0.5%, (and down from a revised 1.9%), which was the second drop in the past three months. In fact the transportation segment surged by 16%, mostly due to Boeing which announced receipt of orders for 117 aircraft, compared to 10 the month before. Remove the $6.6 billion contribution from the doubling in non-defense goods and you have a major headline miss, as the M/M change would in fact have come in negative. But just as iPads now determine the tech component of the economy, why not have one-time 787 sales define the broader GDP? Depending on adjustments, today's report may actually bias the October 29 GDP report higher. Lastly, and confirming the weakness of the September report was the Non-defense cap ex aircraft, which came at -0.6% on expectations of 0.8%.

• Foreclosure Lawyers Go to Gardner's Farm for Edge on Lenders (Bloomberg)
• Employers in U.S. Start Bracing for Higher Tax Withholding (Bloomberg)
• Fed leaks more data via WSJ: Fed Gears Up for Stimulus, and will buy
  trillions, $100 billion at a time as long as Depression continues and
  bonds available for purchase don't run out (WSJ)
• Fed looks set for new round of monetary easing (Reuters)
• Florida Foreclosure Auction Cancellations `Frustrating' to Judge (Bloomberg)
• Asian Leaders Head to Hanoi Amid Concern at China Yuan (Bloomberg)
  
• Fed Won't Join Banks in Discount-Window Appeal (WSJ)
• CNBC now just 9 months behind the curve, discovers insider selling: Insider Selling Volume at Highest Level Ever Tracked (CNBC)

“Goldman, unlike the rest of the street and practically the rest of the I banking world, is ratcheting up VIE risk!!! Is BoomBustBlog the only one inquiring as to WHY??? We have a few reasons in mind… And to think, many thought the Enronesque days of “hide the sausage” games have come to an end…”

It is settled: the only country that may have more pathological liars than the US, is Greece. Eurostat, whose revision of Greek GDP numbers in April was the catalyst that led to the country's insolvency and riots in early May, and subsequent bail out, is on the scene again, and has once again confirmed that Greek authorities can be relied on 100%... to lie. Reuters reports that Greece's much-revised 2009 budget deficit will be set "once and for all" by Eurostat at above 15 percent of GDP, the country's finance minister said on Wednesday. And the revision is certainly a little more than just "modest": "Remember the 2009 budget was projecting a deficit under 3 percent, then a few days before the (Oct. 4) election the reported deficit to the EU Commission was 6 percent," Finance Minister George Papaconstantinou told a conference in Cyprus. "We realised it was over 12 percent. And actually, even after the final revision by Eurostat ... which will validate Greek numbers for 2009 once and for all, it will be above 15 percent. We are talking about a five-fold difference." This is data fudging that will make not only China but the BLS blush with envy.

• API: Oil inventories rise 6.4 million barrels.
• Australian Consumer Prices rise 0.7%, less than estimates; Currency drops.
• Average rates on 30-year fixed-rate mortgage expected to jump above 5%: MBA.
• Fed won't join banks' appeal to High Court over emergency-loan disclosures.
• Most Asian stocks rise on earnings; Japan's exporters gain on weaker Yen.
• US mortgage lending to drop below $1 trillion, lowest since 1996, bankers say.
• US Treasuries snap five-day decline as Dudley says economic momentum slowed.

Finally we enter the informal “blackout” period for policy-related FOMC commentary one week ahead of the scheduled announcement from next week’s meeting, which means the Fed chatterboxes finally shut up. Just one speech today with little likelihood of breaking new ground, following the morning's data on mortgage applications, durable goods, and new home sales…Most importantly, no POMO. Futures already reflect it.

If I don't see you no more in this bubblified world then uh I'll meet ya on the next one...
And don't be late

RANsquawk European Morning Briefing - Stocks, Bonds, FX – 27/10/10

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.

Add in the cost of our military presence in the Middle East and the true, fully costed price for Saudi crude is a staggering $219/barrel! We are literally spending $100 billion extra to buy $60 billion worth of oil a year. Bail on Afghanistan and Iraq, and oil prices would fall, our military budget would plunge, the federal budget deficit would shrink, and our taxes would likely get cut. Please don’t tell ExxonMobile or BP I told you this.

The market was quiet today as it digested marginal macro news and even more marginal earnings news while it continues to wait for next week's QE2 which promises to be a worse proposed sequel than Amistad II: The Return Trip Home.

Perhaps the biggest, and most overtouted, silver lining of the US depression is the massive (presumably) amount of cash held by corporate America, built up over the past two years thanks to massive headcount reductions, overall cost-cutting, and record drops in CapEx investment. And while American non-financial companies currently do indeed have a record $943 billion of cash (of which however $233 billion is in short-term investments), they also have a record amount of debt to go with the cash: 3,394 billion at mid 2010. In addition, as we have long cautioned, nearly a quarter of this cash is held abroad and can not be repatriated. Furthermore, putting the $1 trillion in perspective, it is slightly higher than the total combined annual corporate capital spending and dividend payments by non-financial companies. As such, the cash buffer is certainly not as big as is touted by assorted permabulls. In fact, as even Moody's, which has just released the most comprehensive analysis on US corporate cash discloses, "companies are unlikely to spend their cash on expansion and hiring until there is greater certainty about the direction of the U.S. economy." The primary culprit: companies are all too aware of the record excess capacity slack, and that there is no need to invest for the future until others do so first. But we already knew that. And since we have already been digging underneath the surface of the US cash hoard, and uncovered a variety of unpleasant facts, it has been remarkable how quickly this topic is no longer a talking point among CNBC's anchors and is only brought up by its most clueless guests who don't realize only the dunces now use this argument (kinda like the whole "green shoots" thing that did miracles for Dennis Kneale's career). So here are all the details about the corporate cash stash, and a whole lot more.

Australia’s CPI data was released this evening at 0.6% with expectations of 0.7% disappointing the computers which instantly sold off the AUD/USD 50pips. …expect ES to follow AUDJPY

Sovereign wealth funds are a force to be reckoned with. Some like Singapore's GIC have started to selectively take on more risk while others, loading up on domestic debt, are in for a nasty surprise...