Archive - Nov 2010

"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.

• Fed takes bold, risky step to bolster weak economy (Reuters)
• Oil rises towards $86 on Fed, weak dollar (Reuters), we expect $90 oil within a week
• Asia Girds for Stronger Currencies, Bubble Threat From Fed Move (Bloomberg)
• Obama Says He'll Negotiate With Republicans on Bush Tax Cuts (Bloomberg)
• Sarkozy To Meet Hu As France Takes G20 Lead (FT)
• Pettis Op-ed: Targeting Currencies Will Not Stop Trade Imbalances (FT)
• Bank of America Edges Closer to Tipping Point: Jonathan Weil (Bloomberg)
• Analysis: Strategic tensions threaten Asia as China rises (Reuters)
• Goldman's Pay Pool Shrinks Fastest as Traders' Fortunes Dwindle (Bloomberg)

• BOJ confronts two-decade land slump with planned purchase of REITs, ETFs.
• U.S. sales of cars and light trucks rose 13.4% in October from a year ago.
• AES's Sept. net income declines from $185M to $114M.
• Aetna's net rose 53% on invt gains, lower costs. Ups 2010 EPS view to $3.60 (prev $3.05-3.15).
• Alcatel-Lucent Falls on lower-than-expected operating margin
• Amdocs sees Q1 EPS at $0.49-0.58 (cons $0.60); revs of $760-780M (cons $774.39M).
• Becton Dickinson reports in line; posts Q4 EPS of $1.24, Revs up 1% at $1.87B.

Reports today on the Monster index (already out - it fell, but hey, QE2), initial claims, productivity and costs, and spending at retail chains….Oh yeah, and a $5-6 billion POMO.

Morgan Stanley is also extending its abysmal track record in CRE with the 97% in Revel. The bank took an effective loss for the common shareholders, even when backing out the DVA effect (which is a non-cash charge) as long as you normalize one time items. There is plenty more pain in RE to come, and Morgan's track record is horrendous at the same time expenses are rising with talent fleeing.

RANsquawk European Morning Briefing - Stocks, Bonds, FX etc. – 04/11/10