Archive - Jun 16, 2010

Raising the retirement age from 60 to 62 isn't exactly what I consider major reform. But this is France, and you know what they say, Vive la Différence!

The EURJPY, and its immediate computerized secondary derivative, the general market, its taking a nosedive. The reason, as HuffPo's Ryan Grim reports, is that the Senate has now accepted an expanded Fed audit. As usual, we will believe it when we see the full list of banks bailed out by the Fed, the collateral they pledged, the cash they received, the amount of bonus paid out, the Fed credit facilities involved, the total taxpayer money lost and never to be recovered, etc. Which is why we don't buy it for a bit, and we are fairly confident that Chris Dodd is blatantly misrepresenting reality, when he tells the House panel that "the Senate will accept an expanded Federal Reserve audit proposal from the House as part of Wall Street conference committee deliberations."

According to Barron's, Simmons is shorting at least 8,000 BP shares thus putting in question a possible "conflict of interest" when he went on numerous interviews making outrageous comments regarding BP and the Gulf oil spill.

Ok, this is getting scary: first, Cramer bashes the entire market yesterday, saying it is a stupid, rapacious, capricious and a bunch of other words we would butcher absent spellcheckurrrr. Then, the CNBC frontman goes out on a full blown tirade against High Frequency Trading, against ongoing flash crashes (melt downs and ups) in names such as the ones we discussed earlier like Diebold and Washington Post, against the whole concept that the market is sane and stable, and lastly, Cramer agrees with us that the only senator worth listening to is Ted Kaufman, who also happens to be a guest on this particular Cramer show. Are we now mainstream or is Cramer too much of a fan? Is it time to switch our motto to "on a long enough timeline we all succeed and prosper courtesy of a neverending Keynesian ponzi pyramid." Is this the market bottom? Being on the same side of the trade as Cramer is...never good.

I give this one less than a month.

These are the kinds of stories that just make one's blood boil: the WaPo reports that the Office of Congressional Ethics (find the 10 oxymorons) is investigating either allegedly violently corrupt congressmen who held fundraisers within 48 hours of the House vote on Wall Street reform. This is not only pathetic, this is stupidity on a gargantuan scale: America deserves its manifest despotism for allowing such cretins to be voted in. And who leads this particular parade of 8 dunces? Why our old friend, North Carolina Democrat, Mel Watt, whom we have written extensively about before, specifically in his capacity of Fed advocate #1, who repeatedly tried to kill the Paul-Grayson bill to audit the fed (we refuse to capitalize this institution any longer). For previous stories on Watt's BofA/Wachovia/American Express/ABA-facilitated escapades, read here and here. And just in case the purpose of the probe was not quite clear to our less than cynical readers, here is the WaPo explaining why these are 8 Congressmen who have hopefully just waved all their chances to reelection goodbye, and hopefully will find a job at their Wall Street-based sponsors: "The probe is focused on whether the timing of accepting the campaign checks created an unacceptable appearance of a conflict, according to sources familiar with the investigation and letters sent by the OCE to lobbyists requesting information. The OCE's spokesman declined to comment for this article, citing the ongoing nature of the investigation."

Stress in the Spanish banking system is nothing new but with DS-K swooping in this week from the IMF, and the oh-so-trustworthy Stress-Tests due to be announced, anxiety was running high as Spain sovereign risk broke back above 250bps and BBVA and Santander struggled wider and flattened (CEE sovereigns also floundered today). Of course, far more importantly, World Cup favorites Spain lost their first round football match to the Swiss 1-0 (shame I hear you all cry).

I hope that this response will dispel some of the myths and misinformation surrounding hyperinflation, Gold and our paper money system...

The oil complex started Wednesday under selling pressure. Weak housing starts, retreating equities and a declining euro all sent oil prices lower in trading overnight and early Wednesday morning. By the end of the day, though, prices had recovered.
Home construction in the US dropped steeply in May, with housing starts down 10%, which was well beyond the expectations for a decline of a little more than 5%. Housing starts fell to 593,000 with the expiration of tax credits, and new permits were lower. Single-family housing starts fell by 17.2% to an annualized rate of 468,000, the lowest rate seen in 17 years. This follows on the heels of a sharp decline in the confidence index reported by the National Association of Home Builders. This helped establish the lows for the day yesterday, and equities and oil prices scratched their way back. - Cameron Hanover

A quick observation for those who care to see just how disconnected from rality the market is at these levels, comes courtesy of Smithers & Co., which has updated its CAPE (Cyclically Adjusted PE) and Tobin q chart. Briefly, as of June 10, the S&P was 46% overvalued based on CAPE and 50% overvalued based on q. Incidentally, this makes perfect sense: when the FNM and FRE churnamathons advised their HFT sponsors they would no longer be able to play hot potato with these two bankrupt stocks, they immediately dropped by 50% as soon as the HFT brigade exited stage left. It is not a stretch to see how the computerized trading brigade has made a comparable valuation anomaly with the broader market. Shut down HFT, and next thing you know the market will drop to its fair value: somewhere 50% lower.

Silver has been sizzling and causing lots of buzz in the industry. Investors are excited. Part of the hubbub is due to its current run. Since its February 8 low, silver has roared ahead 22.4% (through June 21) and has doubled from its November 2008 low. This excitement has spilled over into greater investment demand – especially so for coins. The U.S. Mint sold more Silver Eagles in the first quarter of this year – just over nine million – than any prior quarter in its history. The Royal Canadian Mint produced 9.7 million silver maple leafs in 2009, also a record. Silver bullion ETFs are growing, too, experiencing a five-fold increase in metal holdings since 2006.

There’s plenty we could talk about with silver, but our goal is to make money. So let’s focus on answering just two questions: Is today’s price expensive or cheap? And, what are the best silver coins, ETFs, and stocks to own?

We have all the answers straight ahead, including lots of actionable info, so let’s jump right in...

Members of the
House-Senate Conference Committee on financial regulation are meeting
for a third day of deliberations on the Restoring American Financial
Stability Act of 2010. As part of the offered modification language which we discussed yesterday, the Committee today will focus to do all it can to eliminate any and every Fed-unwelcome initiative as part of the audit the Fed provision in the Congressional version of the Fin Reg bill. All those who want to see how corrupt politicians destroy any chance of fair and effective financial regulation are encouraged to tune in and focus their attention on Barney Frank.

C-Span Link Here

Reader Wally the Tiger has done an impressive job of connecting the dots in a highly complex situation involving a convicted securities fraud criminal, his wife, and her incredible stock-picking track record, and in providing a list of questions, which if answered without complete satisfaction, would likely provide the SEC with at least an open case of potentially criminal behavior. We would like to use this great piece of research to open up Zero Hedge to reader submissions for comparable such distributed investigative efforts, which, unfortunately, seek to do the job of the woefully inefficient Securities and Exchange Commission. At least, there is always that promise of an SEC bounty for every tip that leads to civil charges. Of course, the receipt of one would imply that in addition to surfing for porn all day, the SEC spends countless hours reading this very blog (which they do) instead of actually doing their job.

RANsquawk Market Wrap Up - Stocks, Bonds, FX etc. – 16/06/10

George Osborne, the UK's Chancellor of the Exchequer, a role equivalent to that of Tim Geithner in the US, at least in public office, not sure about tax "avoidance", has just announced the abolition of the FSA - the English just as worthless equivalent to the SEC. It is time Mary Schapiro's corrupt organization share the same fate. From the FT: "George Osborne moved to redress what he described as the spectacular regulatory failure of the City, announcing the abolition of the Financial Services Authority and a sweeping increase in the Bank of England’s powers." And in other news, UK's Bernanke-equivalent will now double up as uber regulator and Viceroy of the West Indies, due to amazing new powers given to him by the Osbourne super mushroom: "Mervyn King, the Bank’s governor, will become one of the most powerful central bankers in the world, with a new remit to prevent the build-up of risk in the financial system in addition to his monetary policy role." In other words, one big step forward, and an infinite number of steps back. After all why bother with petty theft, when the Central Banks will soon be funneling trillions away from what's left of the global middle class, perfectly legally, in broad daylight, and at record 2s10s.