Archive - Dec 2010

Perhaps it is time for Eurostat to adjust its Greek economic numbers. According to a back of the envelope analysis, roughly 5% of GDP in 2010 was lost to a string of increasingly more potent general strikes, and another 10% due to downstream effects. A new one is in process currently, which will be particularly crippling as workers in the transportation industry have called for a near week-long shut down of the capital. For those travelling to the city (not sure how as all flights into the city have been cancelled), here is revised operational schedule of various means of transportation: Buses and trolleys will operate from 9 am to 9pm; The metro (all lines) will run from 10am to 6pm; Taxis will not operate between 10am and 2pm. And courtesy of "From The Greek Streets", below is a live update of events from Athens as they transpire in real time.

The two big economic numbers today were a mixed bag: CPI came in below expectations of 0.2%, at 0.1%. Core was in line with expectations of 0.1%, an improvement from the prior 0.0%. Elsewhere, the November Empire Manufacturing index climbed from the abysmal reading of -11.14 (which was largely ignored due to its outlier status), almost exclusively due to a surge in New Orders, which jumped from -24.40 to 2.6. What is troubling is that the Employment index dropped from 9.1 to -3.4, which could be a shift in diffusion indices toward a decline in employment. Then again last month despite a surge in diffusion employment strength, the NFP plunged. So in this version of bizarro world, the worse the employment index, the higher the NFP will likely be. And just as troublingly, priced paid jumped from 22.1 to 28.40: "the future prices paid index was positive and rose sharply, indicating that respondents expected input prices to accelerate." Continuing margin contraction anyone?

• Irish parliament to vote on EU/IMF bailout (Reuters)
• China Consumers Signal Deepest Inflation Concern Since 1999 in PBOC Survey (Bloomberg)
• Japan Confidence Deteriorates for First Time Since Crisis (Bloomberg)
• Japan Cuts Corporation Tax in Growth Bid (FT)
• U.S. at Risk of Rare Earths Supply Disruption (Reuters)
• US SEC's ABS Quandary Still Pending Business (Market News)
• George Soros Op-Ed: Europe should rescue banks before states (FT)
• The countless exemptions, credits and deductions cost the government more than $1 trillion annually in foregone revenue. It's time for an overhaul. (LA Times)
• Germany Stiffens Opposition to Bigger Bailout in ECB Face-Off (Bloomberg)

A summary of all the key events overnight that are shaping market today. Of note, a particularly weak 3M €500 million Bill auction in Portugal which came at 3.403%, up 159 from prior, with a lower bid to cover: 1.9x vs 2.2x before.

After the mortgage applications data we have CPI, a couple of reports on industrial activity, and one on builder sentiment. Also, POMO comes back with a bang.

RANsquawk European Morning Briefing - Stocks, Bonds, FX etc. – 15/12/10

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.

EURUSD whoosh. Somehow the fact that Europe is insolvent is once again lost on the markets who need Moody's to remind them. Let's see how the upcoming Spanish auction will fare under these circumstances. From Moody's:"Moody's Investors Service has today placed Spain's Aa1 local and foreign currency government bond ratings on review for possible downgrade. The main triggers for placing the rating on review for possible downgrade are: (1) Spain's vulnerability to funding stress given its high refinancing needs in 2011. This vulnerability has recently been amplified by fragile market confidence. (2) A potential further increase in the public debt ratio should the cost of bank recapitalisation prove to be higher than expected so far, whether to meet higher-than-expected asset impairments or simply to retain the confidence of the wholesale markets. (3) Increased concerns over the ability of the Spanish government to achieve the required sustainable and structural improvement in general government finances given the limits of central government control over the regional governments' finances."

The Fed's monthly statement on the economy was out today and it was more redundant than a repetitive semantic pleonasm and less telling than a gay soldier (though it's not clear that anyone asked).

In what is increasingly shaping up to be a showdown of epic proportions, the brand new chair of the Monetary Policy Subcommittee, Ron Paul, whose sole purpose in life for the past 20 years has been putting the Federal Reserve out to pasture, and returning to the gold standard, will soon spar with none other, than his, and every middle-class American's nemesis, the Chairman. And it could soon get even messier. In an interview with Fortune magazine's Nin-Hai Tseng, not only does the Texas doctor make it all too clear that he once again has presidential ambitions, but when asked whether he wants to end the Fed, gives the following brilliant reply: "Well, I don't expect to. The Fed's going to end itself when they destroy the system. So yes I would end the Fed but I would do it gradually and have a transition." Good luck Ron. However, there will be no gradual transition. If anything, it will be protracted, very much involuntary, and quite likely violent, as it would mark the end of a century-long scheme to transfer countless ounces (no pun intended) of tangible wealth to the ruling oligarchy in exchange for worthless and infinitely dilutable linen.

A handy infographic explaining how to get ripped off by giving gift cards as Christmas presents.

California Public Employees’ Retirement System has adopted a new asset-allocation strategy in order to better prepare for risk-adjusted performance in the investment world. And that's not all...

Fortunately they straightened me out and we now know that clearly there is no manipulation in the energy markets – can I have my Grandma back now?).

If you can't beat them, might as well get paid by them. Such were the prevailing thoughts in the head of New York Fed veteran Theo Lubke, who after 15 years at Liberty 33, most recently as head of reform efforts in the private derivative market, famous due to its size of roughly €583 trillion which may or may not take the financial system down with it during the next market meltdown. And so, after realizing the derivatives reform is impossible, and further realizing that getting paid a grossly exaggerated government salary for what is basically a lobby job, Lubke has instead decided to get paid an even more exorbitant amount by everyone favorite monopolistic bloodsucking parasite. What is most ironic is that during an ISDA conference in Beijing in April 2009, Ludke said: “It is simply unacceptable in today’s environment that the design and structure of the OTC derivatives market can be controlled by a handful of large dealers.” Oh well - an average government salary is $119,982, an average Goldman Sachs salary is about 4 times greater, an infinite amount of hypocrisy - priceless. For everything else there is the taxpayer bailout debit card.