Archive - Nov 10, 2010

The third annual ranking of the chief executive/applied finance group wealth creators—and destroyers—sees new contenders surface and several that sustained performance through tough times.
Now in its third year, the wealth creation index developed by Chief Executive, Applied Finance Group and Great Numbers! attempts to identify those business leaders who have performed best in creating true economic value—as opposed to mere accounting value—as measured by GAAP metrics.

With today's POMO schedule coming at 2pm, the brigade of Fed Prime Broker front-runners will feel dazed and confused around 1pm as they will have no idea how promptly after the auction they will be able to do their unconstitutional duty of buying Treasuries then flipping them right back to the Fed. And the last thing the long-end needs now is further uncertainty. As Morgan Stanley's Igor Cashyn demonstrates, the October 30Y auction had some of the weakest metrics in a year, and with foreign tensions escalating, if China wanted to "teach" the US a lesson, today would be the perfect time to do it (which would be contradictory to yesterday's record indirect take down of the 10 Year). Still, with the 30 Year yield surging, the dynamics of today's auction will be a major harbinger of things to come vis-a-vis demand for this orphaned sector of the yield curve.

Watch live video of the London protests via SkyNews.

Wonder why the EURUSD just dropped by over 120 pips in an hour? This may have something to do with it:

Rosie's latest letter looks at yesterday's events in the market and calls it the 'watershed' event. Alas, where Rosenberg sees a deflationary-driven event precipitating the move in gold lower, we see merely exchange intervention. Aside from that, Rosie's skepticism is of course justified. More importantly, the Gluskin Sheff strategist focuses on the topic we pointed out a few days ago, namely that Dick Fisher has now opened up the door to Bernanke's impeachment by confirming that the Fed is doing precisely what the Chairman swore under oath he would never do, i.e., monetize.

The more things are bankrupt, the more things stay the same. Evidence #1: Goldman's FUG (Francesco U. Garzarelli) sends a letter to clients in which he implies that Europe should promptly add Portugal and Ireland to its list of wards of the state, so that the Dow can go back to targeting 36,000 on short notice. Apparently this latest European nuisance (punctuated by the Irish Bund spread passing 600 bps) is too much for Goldman strategists, who are perplexed by this stunning inability of the ECB and EMU to grasp that in this market where the only buyer of everything are Central Banks and no market risk is supposed to exist, that Europe still has refused to step up to the plate and debase their currency by a few hundred bips. And after all, the only reason the EURUSD is trading where it is, is so that it has a whole lot of buffer room to fall.

To all who thought the bank system is insolvent only in the developed world, it appears there is a new development: Brazil is now on the hook too:

• PANAMERICANO LIQUIDATION COULD DESTABILIZE SYSTEM, FERREIRA
• PANAMERICANO ASKED SUPPORT OF BRAZIL DEPOSIT INSURANCE FUND

Net result: stock down almost 30%.

This was at 500 a week ago. The catalyst is a statement from EU's Rehn that there has so far been no request of EU financial aid from Ireland. Otherwise nothing much to see here: the higher the spread goes, the faster the market will ramp up. After all, worst case the Fed will merely have to give the ECB a few hundred billion in excess liquidity which in turn will be funneled into bankrupt Irish banks, which, in turn will turn around and buy Amazon and E-bay.

After making some very unwelcome advances calling for a return to the gold reserve, World Bank head Robert Zoellick is again back, and refuses to shut up. The FT reports that earlier Zoellick said
the increasing use of gold as a monetary asset was an “elephant in the room”
that was being ignored by policymakers in the debate over how to correct global
trade and fiscal imbalances. It gets worse: during a conference presentation, Zoellick said the price of gold indicated that the world was heading towards a new monetary system in which the US dollar would be only one of a number of reserve currencies with flexible exchange rates. As we highlighted yesterday, a variety of factors have already conspired to make it appears that not the dollar, but the Chinese currency is increasingly starting to act as a reserve currency on its own merit.

Raising margins was not an exchange ploy to hurt you. But when was the last time margins were raised after a sell off? It has probably happened but I’m willing to bet the action is lopsided to the rally side. Raising margins was not a scheme to crush you. But why is it needed, when for every long there is a short? And when the shorts have infinitely more capital than you, and there is no short squeeze of physical (as evidenced by the contango in the spreads) Trading SLV doesn’t help, they arbitrage both sides from one account. You unfortunately do not have a letter of exemption for position limits and for carrying positions in 2 markets and cross margining agreement with your clearinghouse.

As Zero Hedge pointed out, yesterday's CME rise in the silver margin served to crush the "speculative" mania in precious metals. Now it appears the exchanges are set on through going market after market, and making sure that only prices of stocks are going up, instead of actual commodities. Today's casualty: cotton, where the ICE just hiked initial and maintenance margins across the board (to $5,600 and $4,000). Next up - every item whose price is strategically evaluated by wall street as being "too high": coffee, soybeans, wheat, pork belly, hookers, strippers (especially those in law school), cocaine, and of course, gold.

Initial jobless claims came in at 435K, a drop of 24K from the prior week's 459K, which of course was a downward revision from the past week's reported 457K. There have now been 36 downward revisions in 2010, and 6 upward ones. The weekly number, which is irrelevant until the following week's adverse reaction, is the lowest since the week of July 10. And while seasonally adjusted claims dropped by 24K, the NSA number increased by 28k to 449,905. Continuing Claims were 4,301K vs. expectations of 4,305K, while the previous number of 4,340K was naturally revised worse to 4,387K. This is the 42nd downward revision in 2010, out of 44. For a chart of 28 out of 29 upward revisions look below.

• G-20 Unity Born in Crisis Fractures as Leaders Pursue Own Ends (Bloomberg)
• IMF Calls on UK to Plan for Surprises (FT)
• Rare earth prices to rise again? (Reuters)
• Wall Street Collects $4 Billion From Taxpayers as Swaps Backfire (Bloomberg)
• Food Price Fears As US Warns On Crop Yields (FT)
• EU threatens to block Chinese bids for public contracts (Telegraph)
• Fed-Bashing Three Ways: Beating up on the Fed used to make you an oddball. Does it still? (Slate)
• Debt Limit Impasse Could Drag On For Months (RCM)

• API reports surprise declines in US fuels inventories.
• China ordered some lenders to increase their reserve ratios by 50 bps from Nov. 15.
• China posted a larger-than-forecast $27.1B October trade surplus.
• EU fined 11 airlines a total of $1.11B for forming cartel to fix air-freight tariffs.
• FDIC Board voted to take initial steps to implement higher fee structure for its deposit-insurance fund.
• G20 draws up two-tier bank plan; Global and national regulators to split focus.

Several data points today, with data on claims (accelerated by a day) and imports supplementing a twin (trade and budget) deficit day… But since all econ news is now noise, with good news beinbg sold, and vice versa, at 2 pm we get the new POMO schedule, which is really all that matters.