Archive - Dec 2010

• Reuters 2011 Investment Outlook Summit LIVE (Link) John Taylor speaking now.
• Irish Vote Likely To Pressure Euro (WSJ)
• Bernanke Says Fed May Take More Action to Curb Joblessness (Bloomberg)
• Jobless Report Is Death of Keynesianism (IBD)
• European Officials Split Over Bailout Fund Increase, EU Bond (Bloomberg)
• WikiLeaks' Swedish servers may be under attack (AP)

Moody's Investors Service has today downgraded Hungary's foreign- and local-currency government bond ratings by two notches to Baa3 from Baa1. The key drivers for the downgrades are: 1. Increased concerns about the country's medium- to long-term fiscal sustainability; and 2. Higher external vulnerabilities than most of Hungary's rated peers. "Today's downgrade is primarily driven by the Hungarian government's gradual but significant loss of financial strength, as the government's strategy largely relies on temporary measures rather than sustainable fiscal consolidation policies," says Dietmar Hornung, a Moody's Vice President -- Senior Credit Officer and lead analyst for Hungary. "As a consequence, the country's structural budget deficit is set to deteriorate." Next up: Austria

• Bernanke says Fed may take more action to curb joblessness.
• Euro Finance Chiefs meet today as Belgium seeks bigger crisis fund.
• Most Asian stocks climb as commodity prices gain; Canon leads drop by exporters.
• Qatar shares surge to 2-year high on winning World Cup 2022 bid.
• US, S Korea, in finalizing a sweeping free-trade agreement.
• White House officials and congressional Republicans closing in on a deal that would extend current income-tax rates for all Americans.
• BofA says it has met condition of Tarp exit; close to raising required $3B via asset sales.

In another superficial attempt to demonstrate that things are stabilizing in the European bond market, LCH Clearnet has just lowered margins on Irish bonds to 30% from the 45% it had raised margins to on November 25. Presumably all it takes for a clearer to get confidence back in a given market is just a few billion in purchases by a given central bank. Perhaps instead of being concerned with a few short sellers distorting the market, LCH should actually consider what would happen to its entire clearing market in European bonds should the ECB bid be pulled. Of course, fudging with margins is so much easier to pretend control over the situation than to really go to the heart of the key destabilizing factor...

Last night, in a less than surprising Op-ed in the FT, Jean-Claude Juncker and Giulio Tremonti, prime minister and treasury minister of Luxembourg and Italy’s minister of economy and finance respectively, once again floated the idea that the time has come for a joint European bond issuance mechanism, because apparently lack of individual monetary policy is not enough, European countries now have to surrender their fiscal decision making to a bunch of dogmatic bureaucrats in Brussels. The desperate duo, which knows all too well, that they could well be next on the bond vigilantes radar, write: " The European Council could move as early as this month to create such an agency, with a mandate gradually to reach an amount of outstanding paper equivalent to 40 per cent of the gross domestic product of the European Union and of each member state." We ridiculed the idea last night, noting that this proposal would only happen over Germany's dead body, which already sees as contributing far too much to keeping the European experiment alive and getting only dirty looks from its voters. Today, Germany steps up and confirms: "Germany on Monday rejected the idea of increasing the size of the European Union's safety net and ruled out a proposal to issue a joint euro zone bond." And additionally recent pressure to hike the rescue fund by the IMF and internally were also promptly shut down by Germany, which as we pointed out last week threatened to pull out of the Euro if the political wrangling by pathological liars such as the Greek elite continued: "We see no reason at all at the moment for an increase in the size of the euro rescue shield -- no reason at all." Which means that with no recourse to do anything structural, the ECB is back to buying up Portuguese bonds in a fake bid to create a sense of normalcy in the bond market, which everyone with half a brain knows will collapse the second the ECB pulls out or runs out of paper.

Look at any international comparison of taxes to GDP, and one can always find the United States at the bottom of the table. The average amount of tax paid by the top 400 US tax payers came to under 17%, less than half the maximum Federal rate of 35%. Why Warren Buffet pays a much lower tax rate than his secretary. My plan for balancing the budget.

RANsquawk European Morning Briefing - Stocks, Bonds, FX etc. – 06/12/10

Folker Hellmeyer, the chief analyst with the Bremer Landesbank, gives an exclusive interview to chaostheorien.de on his take on the global currency wars and China's role in the global economy moving forward.

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.

Not even close.

November US nonfarm payrolls missed big, with a +39k print vs +150k expected and even higher whisper numbers, sending the unemployment rate to 9.8%, above the 9.6% consensus estimates. US stocks & USD sold off in tandem on the news, while Tsys were bid; however, bonds and equities reversed sharply from there, while the USD remained depressed. The x-factor was gold, up over 2% on Friday, which again shows signs of trading more as a rates/FX product than a commodity.

“A thief who steals a check payable to bearer becomes the holder of the check… but does not become the owner of it.” 4closureFraud.org

Last week’s explosive rally was due to three factors:

1) Stocks came perilously close to breaking down so the PPT stepped in
2) A bullish falling wedge pattern in stocks
3) Euro options expiration/ ECB intervention

Regarding #1, stocks came right on the verge of breaking below their 50-DMA. Given the technical nature of the stock market rally (the market hasn’t traded based on fundamentals in months) this would have heralded a major decline.

Just released - apology #3 from Jan Hatzius on his ill-timed "golden age" call. We expect many more. We almost feel sorry for the German strategist and the replacement of FRBNY's Bill Dudley. "Nice timing on our GDP forecast upgrade! The November employment report was a disappointment, and there weren’t a lot of redeeming features buried underneath the headlines. Private sector payroll growth fell back to +50k, the slowest pace since January 2010. The household survey was also weak, with a rise in the unemployment rate to 9.82% and a drop in the employment/population ratio to 58.18%, just a hair above the cycle low seen in December 2009. The jobs report followed higher initial jobless claims on Thursday and a soft manufacturing ISM survey on Wednesday."

Incredible leaked draft of Hillary WikiLeaks Speech...