Archive - Jun 2010

This is, of course, total BS. But the market is scrambling for any short-term upside catalysts. So here is the first stick-save attempt of the day. In keeping with the rumormill, the second one will likely be that Radioshack has decided to LBO the S&P 500. Lastly, if market hits -3% by EOD, we anticipate QE 2.0 rumors to be rampant into the weekend.

In continuing my data intense, hardcore, uber-objective dissection of the stuff that is proffered through the mainstream media (MSM), I bring you...

Yesterday, before the market close we urged riskfree tolerant readers to take a long hard look at the ES-EURJPY spread, i.e., sell ES and buy EURJPY, as the spread had blown out: "Selling ES and going long EURJPY is now pretty much risk free." Well, whoever did, congratulations: the spread is now back to zero. If you used unlimited leverage as suggested, your unlimited P&L should provide for a fun Ukraine-Hampton JV filled weekend. And with that our thesis that idiotic computers run the market and have no clue what signals or correlations to even look at eny more, is proven right for the second time this week.

If you owned a Hungarian bond here and you found a bid you would hit it wouldn't you? So should everybody, and then comes Romania with a recently failed auction, and then Ukraine which already received one round of bailout and will clearly need more. Then comes Western Europe, even Germany with its exposure to Eastern Europe, Japan... If dominos start falling it will be nearly impossible to stop them unless theree is enough private wealth left at one point to back specific sovereign entity. With the overall leverage in the system that could mean very few people, though Japan has proved resilient for that very reason despite a huge debt-to-GDP ratio. And even though 4 PMs in 4 years shows that public opinion is losing its discipline in the empire of the rising sun, their politicians still have the good taste of resigning. This is the kind of event that can be the spark of a global systemic crash that would leave very few standing if any. Any optionality in an investment portfolio should be to the downside and there is a good chance a lot of bets would not be honored under that scenario. Cash, Gold, and maybe guns seems sadly to be the answer. Many will say once again that I am not very cheerful and would not make for a very good guest at a dinner or a conference, but it is looking for short term good news at the expense of any critical thinking or hard work that got us there in the first place so that will only help me make my point. - Nic Lenoir

Goldman's Hatzius, whose +100,000 NFP revision to 600,000 yesterday, officially means he has lost the magic touch, offers his take on the NFP disaster. Ever the optimist, he still manages to find a silver lining. Alas, the market doesn't care, and instead is holding its breath to the joint Obama-Biden teleprompter conference praising the -215k adjusted NFP number.

Hilarious. Any time reality kicks in, the bankers (in this case Unicredit, whose CDS looks so fingerlicking good here) have no other recourse than to beg the money printing acolytes of Keynesianism to push things back to the fake trendline of the credit-driven expansion of the past 30 years. We wish them well. Alas, if the CHF is any indication, it is now too late.

So much for that 700,000 expectation. At 431k, less 411k census, and 31k from temporary help services, it sure doesn't look good even without the 215k birth-death adjustment which only conspiracy theorists look at according to Mr. Liesman. 431k minus 411k minus 31k minus 215k = -226k. Nuf said. In other news, those unemployed longer than 27 weeks hits a new record at 46%. Nothing conspiratorial about that number.

Gold was weaker yesterday, as markets favored equities over safe havens (with BP as a notable exception).

The market opened down around $5.00 yesterday and traded sideways for most of the morning. Then around 11:00 AM EDT, a quick selloff occurred taking the August contract from a high during that period of 1219.60 to a low of 1202.40. The selling stopped and futures stabilized in the1208 area, but we feel the damage was done. Hot money and speculative longs are losing patience or new shorts are punting in expectations of bearish info this morning. With the employment numbers due out at 8:30, Nervous Nellies will square books everywhere. We might add that this is about the time that the stock market began in its own sell-off. Gold and equities are moving in lockstep approaching the NFP.

All trading in shares of OTP Bank, Hungary's largest commercial bank, has been halted on the Budapest stock exchange after a plunge greater than 10%. Nothing to see here, go back to reading Goldman's spin on things, and why everything all of this really should be priced in already.

Oops. The Swiss have left the house.

Goldman Sachs: "Nothing is f*$&ed here dude, those CDS traders are just a bunch of f*$&ing amateurs"

To all those who listened to Hugh Hendry's recommendation to panic a week ago, congratulations- you are well ahead of the market today. Hungary CDS is now offerless as investors are shocked, shocked, that the country (and continent) is actually really bankrupt, as opposed to just make believe. IMF's comments yesterday that it does not have the funds to rescue all of Europe are not helping. Hungary CDS is now essentially bidless last seen 120 bps wider, around 430/460 with the bid/ask spread at 30bps, and only dealers daring to take on any risk exposure as the risk off brigade has kicked the optimists out of the building. The one thing up today so far? Gold. NFP better be north of 100 million or else the stick save today will be a tad problematic.

• ADP reported 55,000 gain in private sector jobs and a fall in weekly jobless claims in US.
• Asian stocks fall led by commodities on fears China’s plans will curb growth will lower demand.
• China shares flat on worries Europe debt woes might hurt exports, end week down by 3.8 percent.
• Dollar trades near four-year high against Euro; Won falls on war concern.
• EU threatens Suez Environnement with fine for interfering with antitrust probe.
• Eurozone Q1 economic growth confirmed at 0.2 percent despite big drop in debt-laden Greece.
• Hungary has solvency issues.

Austria, the country most exposed to weakness in Central and Eastern Europe, is back on the radar. After having avoided skeptical investor scrutiny even as the bulk of Europe was collapsing all around it, the country is today's top CDS widener, yet still stunningly trades inside of France and Belgium. Look for this spread to blow out over the next week. Then again, the biggest CDS wideners are precisely the countries formerly seen safe: Austria, France, Germany and Belgium are all the top movers in CDS. So much for the whole North vs South division in Europe.