Archive - Nov 4, 2010

Today's preemptive currency war salvo comes courtesy of Brazil's finance minister Guido Mantega.

• BRAZIL'S MANTEGA CALLS ON U.S. TO CHANGE ITS POLICY STANCE

Hey Guido, join 99% of America. Worst case you can put your Playboy-posing daughter on prime time TV to tell the idiot American public that the Fed is destroying it.

This is part 3 of the 5 part interview with Warren Buffett's biographer Alice Schroeder. It includes insight into what makes the Oracle of Omaha tick that you will not find anywhere else.

Today's POMO has closed, as the Fed injects $4.8 billion of still legacy QE Lite money in the market. The Submitted to Accepted ratio is at 3.9, well below the average, and thus confirming that today's stock market will likely close about 2%+ higher, as predicted earlier. There is one more POMO remaining under the current QE Lite regime, and then it's off to the races, as the Fed commences buying about $15-20 billion worth of Apple each POMO day. The next POMO schedule will be released at 2 pm on November 10. It will be a doozy.

Book 'em, Danno!

Two weeks ago, the FHFA, using Moody's assumptions and modelling, said that a worst case scenario for Fannie and Freddie could result in total costs to taxpayers of $363 billion, an incremental $220 billion to the $148 billion already spent to keep the nationalized housing branch of the US government. Today, S&P has released a stunner which says that actually fixing the GSEs, and "resolving and relaunching" the bankrupt entities, would actually cost as much as $685 billion, or over another half a trillion in taxpayer costs. And as for the reason why the market is surging, and will be until the US annexes Zimbabwe, now that it is pricing in QE 7, S&P says that according to its estimates, the backlog of shadow inventory is 40 months! Tomorrow: another trillion dollar capital defficiency hole, uncovered somewhere in the ponzi that is the US economy, will cause QE 8 to be priced in. And so on.

"Since 1987, conspiracy theorists have maintained that the government operates a secret “plunge protection team” (PPT). Like most conspiracy theories, the PPT is hogwash and not much different from the guy who screams “the race was fixed” when his horse lost. I have listed the many reasons why the PPT is all smoke and mirrors over the years. So to save space, I won’t repeat. That having been said, QE2 is beginning to look like an open-air multi-month version of the PPT." Art Cashin

Some new perspectives on gold, and its very special relationship with Goldman Sachs, courtesy of a London-based King World News source. And some were wondering where Paulson got the long gold trade idea from: King World News source out of London has confirmed that Goldman Sachs has been long gold for years. The source stated, “Goldman Sachs has been getting long the metals for years. Goldman Sachs has essentially been acting as their own central bank, buying on dips for years to hedge their currency positions which are being eroded through coordinated global money printing or currency debasement which they knew would take place. They are long the metals as a hedge and as I said have been for many years.”

Only known prescription is infinite amounts of soon to be defunct paper currency. Side effects include WSJ rumor leakage, frontrunning, mass corruption, trade wars, protectionism, crony capitalism, hyperinflation and revolution.

Alan Greenspan did get a little heat for admitting that higher stocks is the best way to drive economic growth, though in my opinion not nearly enough, but he was retired when he said it. That is in my opinion the one mistake made by Bernanke in the implementation of his evil plan. Coming out and making that unnecessary statement will draw political backlash from all those who criticize his policies precisely for their very direct consequence: boosting asset prices while having little impact on the economy. Doctor Bernanke goes to extrapolate that higher stock prices will lead to second hand spending... so as I said the other day high-end hair salons will offer free manicures while you get your hair done so you can drop a nice $20 tip to your hand-massage therapist on your way out. Meanwhile the next sign of trouble in the economy all those jobs disappear and we will revert to the structural unemployment rate which keeps getting higher by the minute. Amusingly the Fed Chairman does mention that the Fed alone cannot control the economy. I can't wait for the tea-party fanatics to put a bounty on him slapshot-style. - Nic Lenoir

After preparing my taxes last year, my accountant noticed my horror and responded that “You’re not playing the game right. Buy a house with a large mortgage, have children, or do something that’s deductible to reduce your tax bill.” The accountant’s words were true, and a shining example of a wealth transfer that’s not spoken of enough.

While markets across the world have been crashing, the Zimbabwe Stock Exchange has being seeing record gains as citizens turn to equities to protect their money from the country's hyperinflation. The benchmark Industrial Index soared 257 percent on Tuesday up from a previous one day record of 241 percent on Monday with some companies seeing share prices increase by up to 3,500 percent. But before Wall Street traders start packing their bags and heading south, they should bear in mind that these figures are just another representation of Zimbabwe's collapsing economy and are almost meaningless in real terms. Zimbabwe, once a regional breadbasket, is staggering amid the world's worst inflation, a looming humanitarian emergency and worsening shortages of food, gasoline and most basic goods. Inflation is at 231 million percent, but some experts put it more at about 20 trillion percent.

An auspicious start to today's melt up in... cue Tepper... EVERYTHING. Hatzius, first seeing trillions more in POMOs, now reduces his economic growth forecast: "With all the data now in hand, we are reducing slightly our call on total nonfarm payrolls in October to +25k from +50k. Our estimate of the private-sector change remains at +75k. Most of the 50k difference is due to an expected additional loss of state and local jobs."

Goldman: "In practice, QE2 is likely to continue well beyond June 2011—at least well into 2012—if our forecasts for unemployment and inflation are close to the mark. We believe that purchases could ultimately cumulate to around $2 trillion...Under our longer-term projections it is easy to come up with models that show no tightening until 2015 or later." In other news, the economy will not recover for the next five years, but under the Centrally Planned Feudal State of Bernanke, the economy is irrelevant. Incidentally, Zero Hedge now believes a $5 trillion QE3 program will be announced by July 2011, when gold is trading at $10,000, the entire Treasury curve is at zero, and stock prices are meaningless courtesy of a DXY sub 50, and every commodity opening limit up daily.

Who really won this election? I did! There will be a major sell off next year, not just in stocks, but in all asset classes. The election results increase the certainty and the severity of this event. Volatility (VIX) will rise across the board. What The Election Means for Economic Policy. What the Election Means for the Markets.

Just like in mutual fund outflows, the initial claims prior upward revision is spot on as expected: prior week's 434K was revised to 437K, continuing the statistically improbable streak by the Ministry of Truth. Otherwise, the current number, which will also be revised higher next week, came at 457K, 15K worse than expectations of 442K. And continuing claims, which came at 4,378K, was, presto, a decline from the now revised number of 4,382K, which initially came at 4,356K. Net, net: this is the 15th in a row upward revision for initial claims, 14th for continuing: propaganda uberalles.