Archive - Nov 16, 2010

The EU's finely tuned (and well-greased by assorted bankers) Nash Equilibrium is about to become history. Austria is the first major country to say enough to Greece's endless lies. Why? Who knows - Austrian banks will be first on the firing squad line when, not if, Greece implodes. Perhaps even Europe is getting sick of this charade. Next up - every man for themselves, but only those who defect first win.

Deflation in all the non-core items continues, even as your cotton-based and coffee purchases are about to go up by 30%. The November PPI increased by 0.4% on expectations of 0.8% (and previous 0.4%). More importantly, the PPI ex the things one actually needs, food and energy, actually went down by 0.6%, despite expectations of an unchanged print of 0.1% from September, confirming that all semi-leverage requiring purchases are getting trounced. Also, how the BLS got a -0.1% read in the food PPI is a secret the Department of Truth will take with it to the grave. At least there was some trace of honesty in energy price reporting, which jumped by 3.7% - the highest since January.

• Meet the new reserve currency: Global Power, Influence Shifting From US To China (WSJ)
• IMF Lowers Dollar, Yen Weights in Its SDR Valuation Basket, Increases Euro (Bloomberg)
• Liesman with another hilarious interview: Fed Easing Is Not Aimed at Weakening US Dollar says ex-Goldmanite and current New York Fed president Dudley (CNBC)
• China May Raise Interest Rates Several More Times, Fidelity's Bolton Says (Bloomberg)
• China Selling Stockpiled Pork, Sugar to Cut Prices (BusinessWeek)
• Revaluation pressures on emerging markets (FT)
• Eurozone Members Pressed on Debt Plans (FT)
• Ireland's Cowen to Weigh EU Steps to Shore Up Banking System (Bloomberg)

From Reuters:

IRELAND SAID TO BE IN TALKS TO GET FUNDS FOR GOVERNMENT, BANKS

Also noted that negotiations are continuing and no decision has been reached yet, according to sources. European finance ministers are meeting in Brussels today at 5pm local time. EURUSD jumps 25 pips on the headline but nothing firm yet. After all, could merely be wishful thinking on behalf of the bankers-kleptocrat politician complex, but it appears Ireland may crack soon.

If at first you don't succeed at killing the higher beta stock short hedge, try again. The CME has just raised its margin requirement on silver again, bringing maintenance margins up from $6,500 to $7,250, after hiking it less than a week ago for the first time and preventing silver from surpassing $30. Of course, why the CME is raising it more after the spot price of silver is now far lower than where it was at the first raise is a good question, but is most certainly due to the exchange's "risk mitigation" concerns, and has nothing to do at all with the intent to continue killing PM prices. Far more importantly, the CME has finally relented and also raised gold margins, as we had expected. The new maintenance margin is up from $4,251 to $4,500, a minimal increase just to allow the CME to have the option (and making speculators well aware of this) of hiking rates again at any point it so chooses. All in all, all is now fair in fighting excess record liquidity. Look for a second round of imminent margin hikes in cotton, sugar, coffee and wheat, as the exchanges are suddenly very concerned about what retail margin collapses may mean for the non-existent wealth effect.

• Asian stocks drop on signs regional governments acting to combat inflation.
• China October FDI up 7.86% at $7.663B vs. September's $8.4B.
• China's stocks decline to one-month low on inflation, property concerns.
• Crude oil falls for a third day on signs fuel demand recovery may falter.
• South Korea raises interest rate by 25 bps - for second time in 2010.
• US retail sales rose 1.2% to $373.1B in October, compared with September.
• Aeropostale announces $300M increase to its existing share repurchase program.

When the president of the EU says that the fate of the second worst experiment of the last century (the worst being monetarist-Keynesian-central banking fundamentalism) is on the ropes, people listen. Perhaps people will also finally listen to those who are warning that no matter the words of encouragement, said experiment is doomed: the latest confirmation coming from Greece which has been now caught lying not once, not twice, but five times in a row just to preserve its EU backstops, and allow it insolvent banking system to exist for a few more days. In the meantime, the fate of Europe's bankers lies in the hands of a few good Irishmen, who can precipitate the mark to market (aka zero) catch 22 should the country finally force senior creditors to be impaired. Then not even the Fed will be able to backstop the continent's $50 or so trillion in interlinked assets, which also happen to be the continent's liabilities. In the meantime, here is Herman Van Rompuy doing what bureaucrats and bankers in power are so good at doing when they have no other choice: threatening with global assured destruction if they don't get their way.

Data on producer prices, international capital flows, industrial production, builder sentiment, and one Fed speech. Also, throughout the morning CNBC will be airing portions of an interview with New York Fed President William Dudley. $4-6 billion POMO will close at the usual time.

Despite a full-time job, frequent opinion pieces, not to mention a wife and children, Bill found time to write what I think is an essential book, The Courage to Do Nothing. Flax’s excellent book is a moral defense of markets and freedom, and if read it will greatly strengthen the arguments made by existing free-market advocates, while possibly converting more than a few skeptics.

Cisco delivered a shock to the investment world, lowering its quarterly and fiscal year sales guidance by a notable amount, causing the company’s shares to suffer a 16% drop today. However, we question whether such a drastic drop in share price was justified given the adjustment to guidance.

"The easiest way to attract a crowd is to let it be known that at a given time and a given place someone is going to attempt something that in the event of failure will mean sudden death."--Harry Houdini

RANsquawk European Morning Briefing - Stocks, Bonds, FX – 16/11/10

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.

A flurry of buyouts, headline-y good macro news (just don't read the "not so" fine print), and the Fed promising to print enough dollars to make everyone a millionaire as Bernanke mimics the First Citiwide Change Bank "volume" strategy caused investors to celebrate in the morning by doing the Dougie.