Archive - Oct 2010

July foodstamp has just climbed to a new all time high. According to the Supplemental Nutrition Assistance Program (SNAP) at the Food and Nutrion Service, July foodstamp usage rose 1.4% from June, hitting a new record of 41.8 million, and 17.5% higher than the 35.6 million on assistance from a year ago. Participation has set records for 20 straight months. And it gets worse: as per BusinessWeek: "An average of 43.3 million people, more than an eighth of the population, will get food stamps each month in the year that began Oct. 1, according to White House estimates." Somehow we get the feeling these almost 42 million people will have little to no use of discount window or excess liquidity usage once gas hits $10 a gallon, nor will Dow 11,000, 12,000, or even 36,000 do all that much to shorten the soup kitchen lines.

With today being yet another POMO day, it is only fitting to do the definitive summary of how the Fed's Open Markets Group distorts various asset classes with its liquidity ramps. So all those who doubt thet Fed has an impact on stocks, please look at the chart below. Incidentally, today is the day the Fed will likely overtake Japan as the second largest holder of US Treasurys. Recall that Japanese holdings of US paper were $821 billion as of July. Well, as of September 30, the Fed held $811.7 billion in Treasurys, and in the days following, there were two POMOs: one for $5.2 billion and one for $2.2 billion, bringing its total to $819.1 billion. Which means that if today's POMO operation, which launches imminently, is larger than $2 billion, the Fed will become the second largest holder of US paper in the world. And it won't stop there: China is merely $25 billion away. At a run rate of $10 billion in POMO purchases per week, the Fed will be the largest holder of US Treasuries in the world before the midterm elections.

The IMF's latest growth forecast, which will be continuously revised until it finally gets it right and sees a decline in world growth (sorry, boys, and Jim O'Neill, decoupling does. not. work) has the US growing at 2.6% and 2.7% in 2010 and 2011, revised down by -0.7% and -0.6% respectively, from the prior overly bullish estimates, which we ridiculed at the time as well. Hereby, we ridicule these estimates as well: US GDP in 2011 will be flat to down. Period. And instead of wrong speculation, here are some wrong, hard facts: " More than 210 million people across the globe may be unemployed, an
increase of more than 30 million since 2007. Three-fourths of the
increase has occurred in advanced economies, the IMF said." And now we understand why the I in BRIC stands for IMF: "The world economic recovery is proceeding,” IMF Chief Economist Olivier
Blanchard told a press conference. “But it is an unbalanced recovery,
sluggish in advanced countries, much stronger in emerging and developing
countries." In other words, same old strawman song and dance.

The banks and institutions that now run this country are running absolutely wild and out of control.

They do not fear judges or law enforcement.

They do not fear any law.

They do not need permission to kick down your front door, steal what they want and throw everything else into the streets.

What stops them from YOU being their next "mistake"?

Goldman's FX team, which is by far the best contrary indicator in FX trends has just issued its revised currency outlook, which now sees the 12 month EURUSD target up from 1.38 to 1.55. Which means the pair is about to plunge. From Stolper: We are revising the majority of our FX forecasts to reflect broad Dollar depreciation. We have been emphasising for some time that structural US imbalances are the main reason for USD weakness and this remains our key theme. In the near term, a number of factors could still provide a boost for the Dollar, but these no longer form the base case for our 3-month forecasts. Instead, we expect the USD TWI to decline gradually from current levels, by about 4.7%, over the next 12 months and to get quite close to historical lows. Importantly, with USD weakness shared globally, the trade-weighted impact for other currencies would likely be relatively muted. Most other countries would experience relatively little appreciation. For example, the EUR TWI would only appreciate by about 3.9% from current levels, although we project EUR/$ at 1.55 in 12 months. Asia will play an important role and we now expect trade-weighted appreciation in key countries, such as China and Korea." The simple take home: buy the dollar.

• It's Time for a 21st Century Gold Standard (Fox)
• Foreclosure Furor Rises; Many Call for a Freeze (NYT)
• IMF chief warns on exchange rate wars  (FT)
• IMF Cuts U.S. Growth Estimates as Consumer Spending Languishes (Bloomberg)
• As predicted on these pages about 2 weeks before everyone else, Wall Street downbeat on bank earnings (FT)
• The Recipe for Collapse (Of Two Minds)
• U.S. praises Japan PM over China row, stresses ties, (Reuters) and picks wrong side of conflict
• Retailers' Holiday Hinges on Discounts (WSJ)
• Whitney Falters in Trying to Repeat Success of Citigroup Call (Bloomberg)

With gold and silver bulls, since the beginning of this new PM bull in 2001, the four dreaded words that every gold/silver bull has been reluctant to say because it has served as the kiss of death every time gold/silver has been on the verge of a seemingly enormous breakout, is “This time is different.” Yet this time it IS different and here’s why.

ADP printed at a massive miss of -39K compared to a median consensus of +20K (range of -44K to 75K) . And the cherry on top: the previous number was revised from -10K to +10K, for a monthly swing of a whopping 49K. Everyone hoping for one last pre-midterm NFP hurrah this Friday will be disappointed, unless the Beijinigization of US data is now complete. Of course, this means QE2 is now all but certain. Elsewhere, USDJPY drops solidly to pre-intervention territory, printing at 82.70.

The BOJ has now learned the hard way that these days $20 billion doesn't buy you much: specifically - about 20 days, and a Geoffrey Raymond painting of Ben Bernanke running naked behind the US dollar with a chainsaw and a homicidal grin. The USDJPY is now back to where it was when Shirakawa injected Y2.125 trillion, only to see the impact trickle down to nothing. Considering Monday's BOJ action did nothing to weaken the yen, it is almost certain Shirakawa will pull another $20 billion rabbit out of his hat: this time we expect the impact to last at most half as long as the last time.

A couple of readings on the jobs report following the latest weekly reading on mortgage applications, then Secretary Geithner… Of course, the only relevant thing is that the Fed will inject another $2 billion of high beta stock purchasing power via today's second consecutive POMO.

After much posturing, Fitch has finally downgraded Ireland from AA- to A+, with a negative outlook. Net result: bund spread blows out to 415, up 5bps on the day, and will likely continue blowing out. We expect the FinMin to hold another conference call with Citi to reassure everyone how nothing is fucked here, which this time will be recorded by everyone in anticipation of another "mute button malfunction." Elsewhere Irish consumer confidence has plunged from 61.4 to 52.4. The two are speculated to be related.

• Asian stocks advance on speculation central banks will act to spur growth.
• Central Banks may follow BOJ in new bond purchase round as growth falters.
• Copper soared to a 26-month high, on the back of a weaker dollar.
• Hong Kong presses for RMB-denominated IPOs.
• IMF chief warns on exchange rate wars; fears risk to global recovery.
• Japan said to consider imposing capital surcharge over Basel III on banks.
• Mexico to sell $1B of bonds due in 100 years.
• Oil is near five-month high after US services expansion, fuel stockpiles.

As you may be aware, recent intelligence reports have resulted in a heightened threat alert for financial services terrorism. All citizens have been duly warned to maintain an appropriate state of vigilant awareness and to adopt appropriate financial counter measures.
How does one identify a financial services terrorist and what counter measures should be adopted?

RANsquawk European Morning Briefing - Stocks, Bonds, FX – 06/10/10

This daily report is designed to help traders find opportunities to trade against this group. The premise is very simple we are looking for 66% of retail traders to be trading either long or short a currency pair, we then look for opportunities to fade (trade against) this group. For example if 72.99% of traders are long the USD/CHF we look for opportunities to short that pair.