Archive - Nov 2010

RANsquawk European Morning Briefing - Stocks, Bonds, FX etc. – 25/11/10

The currency with the world’s worst fundamentals is finally making its move. (FXY), (YCS).

You can take anything you want, from Hank's Restaurant...

After we noted earlier that the latest trending topic regarding Europe's insolvency was that the €440 billion EFSF rescue facility will likely not have enough cash to bail out Spain, the ECB immediately came to the rhetorical rescue, with Governing Council member and Bundesbank head Axel Weber speaking at a conference in Paris, telling participants that "The European Financial Stability Fund should be
sufficient to dissuade markets from speculating against the solvency of
Eurozone member countries, and if not, more money will be provided." Lamenting the market's idiocy, which refuses to stop punishing bankrupt stats, Weber further added that markets suffer from "limited rationality" and players
often follow market movements to the neglect of "fundamentals." Of course the same should be said for all those who are buying into this rally, which is driven exclusively by the genocidal desire of central bankers to ramp up stocks, kill currencies, and make the cost of living unbearable for half their constituencies. But nobody has ever accused central bankers of objectivity, or ever doing something that puts the interests of a few billionaire "Jenny 20" rejects over a billion or so filthy peasants.

Ireland's new austerity measures are cutting into everything, including public pensions and Hungary is moving one step closer to nationalizing pensions...

“I draw the conclusion that, assuming no important wars and no important increase in population, the economic problem may be solved, or be at least within sight of solution, within a hundred years. This means that the economic problem is not – if we look into the future – the permanent problem of the human race.” (John Maynard Keynes, Economic Possibilities for Our Grandchildren, 1930). There have of course been some “important” wars (though in truth they were, and remain, mere installments in a Long War that is by no means over). And there has of course been an “important” increase in population (the abreaction, for the most part, of the premodern underbrush that was uprooted amid the modern nation-state’s relentless campaign of unification, centralization, and consolidation). But let us give Keynes his due for imagining a time, in the not-too-distant future, when “the economic problem” – which is to say, the scarcity that impels all economic endeavor – will at long last have been solved, and universal abundance is at hand. Let us do so, however, with no illusions about who the man was, fully acknowledging that he was “a charming but power-driven statist Machiavelli, who embodied some of the most malevolent trends and institutions of the twentieth century” – so malevolent, in fact, that one is left to wonder what Keynes might have had to do with the fact that, eighty years later, a solution to “the economic problem” seems more out of reach than ever.

Don't strip the Fed of its "Dual Mandate" ... just strip the Fed of its power.

A summary of all the key events in stocks, rates, corporates, FX, commodities, vol and a quick look at tomorrow's negligible calendar.

Yesterday, we posted John Taylor's observations on where the EURCHF is headed (much lower). Today, right hand man Jonathan Clark follows up with his views on the EURUSD, which the world's biggest FX hedge fund now sees as testing 1.260 if 1.3160 is breached (which it probably will be as today's break in the EURUSD with ES means the AUDJPY once again is the funding carry pair du jour). Additionally, FX concepts does not see the pair passing a 1.3610 resistance, and recommend selling any temporary strength above the mid-1.36 area.

Goldman's Erin Nielsen is early in his weekly outlook report which however will not catch anyone by surprise. Somehow the Goldman strategist looks at recent economic data coming out of Europe, which even CMA said was indicative of a start of a double dip, and calls these "great macro numbers" - this kind of stunning subjectivity used to get analysts fired in the past; now it gets you promoted to partner; oh well, you can get the man out of the bias but you can never get the bias out of the man and all that. Furthermore, despite Germany making it expressly clear than any future bailouts will hinge on restructuring, Nielsen is adamant that this too is a misread: " I strongly disagree with some of the aspects of what has been reported in the press today as being the German proposal, particularly as it relates to making a future rescue conditional upon debt restructuring." Well, Erik, there is the German people, and there is your opinion. q.e.d. The balance of the note is filled with the same traditional permabullish fluff, which would have forced those who followed Nielsen's always rosy advice to incur irreparable P&L damage. But since the man has a verbiage quota to fill (regardless of content quality), and skeptics to amuse, we are confident he will have a long and prosperous career at Goldman. In the spirit of thanksgiving: we thank you Erik for providing countless hours of naive amusement.

RANsquawk Market Wrap Up - Stocks, Bonds, FX etc. – 24/11/10

It seems that the European bailout buck will stop with Portugal for one simple reason: when Europe created the EFSF it did not think it would need to serially bail out everyone; now the EFSF does not have enough money to cover a bailout of Spain. From Dow Jones: "The European emergency fund, promoted as having the financial firepower to douse a financial crisis in the euro zone, may not even have enough money to cover a bailout of Spain. "[The fund] will be very close to the line, it will be precarious and it won't leave anything for anybody else," said Whitney Debevoise, a sovereign-debt lawyer with Arnold Porter and former World Bank executive director." Of course, if and when Spain is bailed out, other bail outs will be irrelevant, as at that point the vigilantes will focus squarely on Germany. At that moment, nothing less than a complete dissolution of the currency union and an unmitigated monetization ala Weimar will save what is left of the productive powers remaining in Europe.

An entertaining, and no holds barred fictional look at what America's post QE4 future may look like.

If you are looking for guidance and clarity from the Federal Reserve, your trust will be misplaced. The recently released minutes of the Federal Reserve Open Market Committee's (FOMC) November meeting reveal a deeply divided Fed with no clear consensus on the effectiveness of their policies.

Any minute now, any minute, we promise, investors will regain all their confidence in this non-charade of a market which reflects all the fundamental realities of the economy. Just not yet: last week saw the 29th consecutive outflow from domestic mutual fund flows, which incidentally surged to $2.8 billion from the $677 million outflow the week prior. Sarcasm aside, nobody except for CNBC's Fast Money is putting money in the market. Well, so are the Primary Dealers, and to an extend the Hedge Funds. Although now that the letter no longer have access to pervasive insider info courtesy of expert network, it may be up to just the Fed, HFT and the 18 primary dealers to take the Dow to 36,000. After all, there is a wealth effect to be created. Also, ICI reports last week muni funds saw a massive $4.8 billion outflow. Have no fear - this will also be spun as bullish. Incidentally, from its 2010 lows in July, the market has risen to fresh all time highs as investors have pulled just under $60 billion from mutual funds. Once Bernanke is done with his latest mandate which is nothing short of genocide, he is a shoe in to replace David Copperfield at the MGM.