Archive - Nov 2010

Somehow the China Daily story we pointed out yesterday morning that China and Russia are expanding their trading terms and will conduct all bilateral trade exclusively in local currencies, thus dropping the dollar as an intermediary, is only today starting to make the rounds. Alas, this story is nothing but more posturing for several reasons: Bloomberg notes: "China and Russia will drop the U.S. dollar for bilateral trade and use their own currencies for settlement, China Daily reported, citing Chinese Premier Wen Jiabao and Russian Prime Minister Vladimir Putin." Oddly enough this is an identical overture from June 2009: yet very little has happened in terms of actual dollar lock out since then. Note the following story from June 17, 2009: "The leaders of Russia and China agreed to expand use of the ruble and yuan in bilateral trade to lessen dependence on the U.S. dollar a day after they took part in the first summit of the so-called BRIC countries." And judging by the market's reaction, and the dollar resurgence overnight it appears that everyone has read through this as just posturing. Furthermore, keep in mind that Russia was not even a top 10 trading counterparty of China in 2010. If China does the same with any of its top 10 partners then there may be a reason to worry. For now, China is merely testing the waters, and has absolutely no intent on isolating the US, nor making its nearly $3 trillion US FX reserves lose a double digit percentage of their value overnight.

• Asia stocks continue retreat on Korea clash; shelling adds to uncertainty.
• China orders crackdown on commodity speculators in widening anti-inflation campaign.
• Euro drops to 2-month low against US dollar amid concerns.
• Fed considered long-term rate target in secret; Numerical inflation objective also discussed.
• Fed officials disagreed on benefits of $600B stimulus, FOMC minutes show.
• Fed trims 2011 outlook on growth, jobs : FOMC Minutes.
• Ireland credit rating cut two levels to A by S&P as bank bailout adds debt.

With bond spreads in Europe refusing to slow down for the Thanksgiving holiday (unlike the US, Europe will be open through the end of the week), and both Portuguese and Spanish spreads jumping to fresh records, with Spain nearly approaching the bailout threshold of 5%, it appears that the market has now pretty much skipped Portugal whose insolvency is a given, and has commenced the "pack of wolves" thing on Madrid. Expect to hear many accusations that CDS traders, and their naked shorting, is the spawn of satan any minute now, and for CDS trading limits to be imposed imminently (not to mention LCH hiking Portuguese and Spanish margins as early as today), even though as we have demonstrated repeatedly in the past, it is all cash bond sellers who are driving the price down. Nonetheless, it is a fact that "price action is now self-reinforcing" - what this means for Spain and for Europe is explained by Goldman's Francesco Garzarelli. Note that this is only a small part of the story. As Zero Hedge discussed first in early July, a far biggest systemic threat is what is happening (or rather, not happening) in the mortgage space, where just like in the US, Spanish Cajas continue to misrepresent the "phantom" bad debt on a national level, however unlike the US and the nationalized GSEs, there is no sovereign backstop to a nation full of delinquent mortgages. Back then the Stress Test farce brushed this biggest risk under the rug. Now that reality is back, this topic will soon come back with a vengeance.

The Mortgage Bankers Association’s index of mortgage applications is reported to have risen 2.1% in the week ended November 19. At this writing, we have no further details. Market wise, there will be no POMO today.

RANsquawk European Morning Briefing - Stocks, Bonds, FX etc. – 24/11/10

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You're not the same!

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.

U.S. stocks dropped more than one percent on Tuesday with two Korea's exchanging fire adding to the already worrisome Irish debt crisis in Europe. Europe's debt crisis has mostly been factored in, so the new development in Korea is what really jolted the market.

The market is limping in to Thanksgiving like Kenny Easterday with a broken wrist thanks to the European Union being on shakier ground than Gabourey Sidibe on a tight rope, North Korea dropping bombs on South Korea after South Korea's TSA apparently tried to touch Kim Jong-ils junk, and the Fed...

The prospect of major hedge funds and mutual funds getting redemption notices makes traders on Wall Street very nervous. This is the type of stuff that makes me nervous too because you don't know how it's going to play out. It might turn out to be nothing, and blow over, or it might snowball and wreak havoc in financial markets.

Following last night's escalation in hostilities between the two Koreas in what was the worst peacetime incident in over 5 years, the AP has compiled a visual summary of not only the events that transpired, and the generations of conflict built up between the two countries that have led us to the current predicament, but most importantly, a comparison of the military strengths of the two countries. A most useful resource for all those who would like to know if the over/under on either country winning the next shelling incident is on the money.

Peep-and-grope ... coming to a venue near you?

Once a year, the International Energy Agency (IEA) releases its World Energy Outlook (WEO), and it's our tradition here at ChrisMartenson.com to review it. A lot of articles have already been written on the WEO 2010 report, and I don't wish to tread an already well-worn path, but the subject is just too important to leave relegate to a single week of attention. Because some people will only read the first two paragraphs, let me get a couple of conclusions out right up front. You need to pay close attention to Peak Oil, and you need to begin adjusting, because it has already happened. The first conclusion is mine; the second belongs to the IEA. Okay, it's not quite as simple as that; there are a few complexities involved that require us to dig a bit deeper and to be sure our terms and definitions are clear so that we are talking about the same things.

A summary of the day's key events in equities, vol, FX, rates, commodities, credit, insider trading, corruption, monetary manipulation, racketeering, prostitution, and a forecast of tomorrow's market travesty.