Archive - Jul 8, 2010
Guest Post: I Smell A Vat
Submitted by Tyler Durden on 07/08/2010 23:51 -0500The good folks over at numismaster.com report that, starting on January 1st in 2012, U.S. federal law will require coin and bullion dealers to report to the Internal Revenue Service all gold and silver coin purchases and sales greater than $600. The report is written by David L. Ganz and is headlined "$600 Sale? Get Ready for Tax Form." Apparently this little jewel was an add-on to the national health care legislation. But there’s a new bill being introduced by Rep. Dan Lungren (H.R. 5141), which has gathered over 80 members of Congress as co-sponsors to repeal this section... so we'll see how that turns out. According to the author of the article Ed references, the rationale for the new regulations is that the taxocrats believe that people conducting off-book trading in precious metals are chiseling them out of $17 billion in lost revenue annually. The net result, however, will be that the government will soon know who’s got the gold. We reached out to another well-informed source who confirmed that the new regs would apply to all businesses. For example, under the new regime a plumber who does work for you in excess of the $600 threshold would be required to file a 1099 report. The implications of this move transcend just the precious metals. Rather, this is a deliberate step in the direction of implementing a VAT – once the government has everyone reporting essentially every transaction, taking the next step is a snap.
Surreal Macabre Circus Is Now In Session: Stocks Surge In Week When Lipper Reports $11.6 Billion In Equity Fund Outflows
Submitted by Tyler Durden on 07/08/2010 21:52 -0500
Today's Lipper/AMG fund flow data confirmed the ICI data disclosed earlier: in the week ended July 7, in which stocks have rallied by who knows how many percent - nobody without Gallium Arsenide logic gates really keeps track of the market anymore, equities saw outflows of $11.6 billion. We'll repeat it because it bears repeating: stocks have surged as mutual funds have seen one of their biggest weekly outflows in 2010. Will someone with a Ph.D. from a reputable institution please explain that one to us. Furthermore, HY fund lows saw yet another exodus, this time of $166 million, following last week's $322 million. On the other hand, things in IG land are back to normal: after seeing their first outflow in 69 weeks last week for a tiny slip of $32 million, investors are back to dumping all their money in investment grade corporates, with inflows of $896 million. And most notably, money market funds saw their biggest inflow in 2010, at $18.5 billion, following last week's outflow of $11.6 billion. So yes, money was actively being allocated to cash yet somehow the powers that be managed to ramp the computerized stock market farce that is the Dow by something like 500 points in 4 days. Whatever. Will the three blind mute retarded monkeys who actually still have any faith left in our ridonculously manipulated market please follow all the other lemmings over the cliff, not forget to pay Goldman Sachs the $200 suicide fee, and shut the light on their way out.
Fed to GSEs – Put it on the Balance Sheet!
Submitted by Bruce Krasting on 07/08/2010 19:59 -0500I have no clue what this is about. But it is interesting.
Must Read Reflections From GMO's Edward Chancellor On The Sovereign Debt Crisis
Submitted by Tyler Durden on 07/08/2010 19:41 -0500GMO's Edward Chancellor has written what is arguably the coup de grace of papers analyzing the dynamics of soveriegn default, together with the conditions required to succumb to this terminal condition, and is the functional equivalent of months of research and combing through all the recent literature on the topic. By initially highlighting the reasons for government default, which include i) a reversal of capital flows, ii) unwise lending, iii) excessive foreign debts, iv) a poor credit history, v) unproductive lending, vi) rollover risk, vii) weak revenues, and viii) rising interest rates, Chancellor presents the frame of reference in which every potential sovereign default situation should be analyzed. Chancellor also highlights several examples where a sovereign default was all but assured (Britain post the Napoleonic wars, Sweden in the 1990s), analyzes the opportunity cost of hyperinflating instead of pursuing default (when inflation is more convenient, when it resolves political conflicts, when avoiding inflation is a low priority, and when there has been a public credit flameout), and makes an exhaustive analysis using historical parallels of today's sovereign debt crisis. He summarizes the different view of the current sovereign fiasco as follows: i) this time is (really) different, ii) we are not all Greek, iii) posits that the US is not on the verge of a default, iv) that inflation is more likely than default. He concludes by analyzing potential tipping points, which in a herd mentality market such as ours, are all that matters, and suggests that Japan is precisely on the verge of such a tipping point. Yet his two most critical conclusions, in our opinion, are the following: "public finance is a ponzi scheme" and, for all those who are fans of Rosie's thesis that bonds are the go to investment currently, "Current yields on government bonds in most advanced economist are at very low levels. Under only one condition - that the world follows Japan's experience of prolonged deflation - do they offer any chance of a reasonable return. But this is not the only possible future. For other outcomes, long-dated government bonds offer a limited upside with a potentially uncapped downside. As investors, such asymmetric pay-off profiles don't appeal to us." Must read for everyone who wants to have an intelligent opinion on the matter.
Pensions Drinking Themselves Silly?
Submitted by Leo Kolivakis on 07/08/2010 18:16 -0500In what is surely one of the more unusual approaches to a pensions shortfall, Diageo, the drinks group, has offered up a veritable lake of its whisky as collateral for the growing shortfall in its benefits scheme. In my opinion, this is a bad idea. If pensions want to drink themselves silly, they should be focusing on the liquidity tsunami driving risk assets higher.
Daily Oil Market Summary: July 8
Submitted by Tyler Durden on 07/08/2010 18:13 -0500Oil prices advanced again on Thursday, after this week’s DOE report showed another larger?than?expected drawdown in crude oil stocks. In the process of moving higher, August crude oil prices touched their highest intra?day figure yet in July. It was a second day of gains following six days lower, and it continued to look like a rally more than a genuine advance. It was, not coincidentally, also a day during which equities were higher. The DJIA and crude have not been moving point?for?point, but they have had similar?sized gains in numbers these last two days. The DJIA gained 120 points while crude gained $1.37/bbl. The oil complex had been trading higher before the DOE report was released. Traders had been positively impressed by the American Petroleum Institute (API) report out Wednesday evening, because it had shown draws across the board. Even though the two reports are often quite different, the API numbers can provide insights into the DOE report released the following morning. In this case, both reports showed large draws in crude oil stocks. - Cameron Hanover
Appeals Court Refuses Obama Demand For Stay Of Deepwater Drilling
Submitted by Tyler Durden on 07/08/2010 18:06 -0500Fresh from Reuters:
A U.S. appeals court on Thursday rejected the Obama administration's request to put on hold a ruling that lifted a temporary moratorium on deepwater oil drilling in the wake of the BP Plc oil spill.
The U.S. Court of Appeals for the Fifth Circuit, based in New Orleans, ruled about an hour after hearing arguments over the administration's request to put on hold a lower court ruling that lifted the six-month moratorium.
Another slap in the face for a president who believes the constitution is something that has to be taught but not really followed. Of course, the appeals court ruled against Obama in the Chrysler case too, only to have the most corrupt "judicial" organization in the US, the Supreme Court, rule in favor of abolishing creditor rights at the end of the day.
Official Estimates Confirm Zero Hedge Projections That SNB Will Suffer €8 Billion In FX Interventions in Q2
Submitted by Tyler Durden on 07/08/2010 17:47 -0500A few weeks ago it was speculated on Zero Hedge that the total losses experienced by the SNB as a result of ongoing currency interventions in Q2, were in the €8 billion ball park arena. Today, the FT picks up on this theme and reports that "the Swiss National Bank may have suffered paper losses of up to SFr10bn (€7.5bn) from huge interventions in the currency markets to restrain the value of the franc. The central bank is expected by market observers to report a big loss when it publishes second-quarter accounts in mid-August. Economists cannot make a precise forecast, as the SNB does not reveal when, or at what rates, it has sold francs and bought other currencies – mainly euros – in recent months. However, Martin Neff, chief economist of Credit Suisse, said: “It’s certain there will be a big loss.” And while that may not seem like a large number at first glance, as Bruce Krasting pointed out, "The 8.4b loss for the SNB would be equivalent to a $200 billion loss for the Fed. So actually this is a very big deal."
Harrisburg Chapter 9 Imminent As Controller Tells Debtwire Bankruptcy Best Option
Submitted by Tyler Durden on 07/08/2010 17:16 -0500In what will likely be the first major municipal bankruptcy of the New Normal, Harrisburg is likely about to shut the gates. In an interview conducted with restructuring site Debtwire, the City's controller Dan Miller said Harrisburg would be better off filing for Chapter 9 than trying to restructuring finances under Act 47, the Financially Distressed Municipalities Act. He added that the latter has never solver the problems of any municipality that entered the program and the institution of a commuter tax in Harrisburg to avoid a Chapter 9 would be unworkable. On the other hands, "when reached for comment, long-time opponent of a Chapter 9 filing for the city, PA governor Ed Rendell said Harrisburg officials have not given him any indication that they will seek Chapter 9 protection. Rendell said he hopes that the city "will either sell assets or seek Act 47" before making a Chapter 9 filing." Alas, it appears the nearly bankrupt city has run out of options.
UN Security Council Condemns Cheonan Sinking, An Act North Korea Had Stated Would Be Considered An Act Of War
Submitted by Tyler Durden on 07/08/2010 16:41 -0500On June 15, North Korea threatened military action Tuesday in response to any UN censure over the sinking of a South Korean warship. As AFP then reported, "We don't want the Security Council to take measures provoking us," Pyongyang's ambassador to the United Nations, Sin Son Ho, told reporters in a rare press conference here by North Korea. If the 15-member UN Security Council takes action against Pyongyang "follow-up measures will be carried out by our military forces...I (will) lose my job," he warned. It appears the UN's Security Council has decide to call North Korea's bluff. The AP reports that "The United States has introduced a draft statement in the U.N. Security Council that would condemn the deadly sinking of a South Korean warship and express "deep concern" at the finding of an international investigation that blamed North Korea for torpedoing the vessel." It was however, unclear, if according to the draft statement would directly place the blame on North Korea, or if the condemnation would be targeted at nobody in particular, leading to a major political victory for the communist country.
Guest Post: EXTEND & PRETEND: Stage I Comes to an End! The Dog Ate my Report Card
Submitted by Tyler Durden on 07/08/2010 16:16 -0500Both came to an end at the same time: the administration’s policy to Extend & Pretend has run out of time as has the patience of the US electorate with the government’s Keynesian economic policy responses. Desperate last gasp attempts are to be fully expected, but any chance of success is rapidly diminishing. Whether an unimpressed and insufficiently loyal army general, a fleeing cabinet budget chief or G20 peers going the austerity route, all are non-confidence votes for the Obama administration’s present policies. A day after the courts slapped down President Obama’s six month gulf drilling moratorium, the markets were unpatriotically signaling a classic head and shoulders topping pattern. With an employment rebound still a non-starter, President Obama as expected was found to be asking for yet another $50B in unemployment extensions and state budget assistance to avoid teacher layoffs. However, the gig is up: the policy of Extend and Pretend has no time left on the shot clock nor for another round of unemployment benefit extensions. A congress that is now clearly frightened of what it sees looming in the fall midterm elections is running for cover on any further spending initiatives. The US electorate has been sending an unmistakable message in all elections nationwide. White House policies are unmistakably in shambles. We are rudderless with terribly outdated Keynesian zealots at the helm as the storm continues to worsen. Stage I of Extend & Pretend is over – RIP!
Paulson Hit With $2 Billion In Redemption Requests, Likely Source Of Recent Gold Market Liquidations
Submitted by Tyler Durden on 07/08/2010 15:27 -0500Absolute Return+Alpha reports that John Paulson's $33 billion hedge fund is now substantially lighter in AUM courtesy of scared investors pulling $2 billion in redemptions by the end of June. Whether this was driven by the disclosures of the fund's participation in the allegedly illegal Abacus transaction, or the fund's deplorable performance in June is unknown and irrelevant. What is relevant is that this confirms our suspicions regarding volatile moves in gold in recent days, are driven primarily by liquidations, most likely those emanating from John Paulson's gold portfolio, which as of the most recent 13F, accounted for 30% of the fund's total assets via ETFs (GLD), miners and other secondary exposure.
Detached From Reality Market Hits Escape Velocity On No Volume Whatsoever
Submitted by Tyler Durden on 07/08/2010 14:59 -0500
The latest market trampoline action on horrendous consumer credit news should be sufficient to get every last sane person out of this illegal, yet fully government endorsed, backdoor gambling operation, or at least those that are stupid enough not to be trading with other people's money. Today marks the most recent long white candlestick on almost record low volume for a ramp day. Note the straight line higher immediately following the consumer credit collapse and the leak that QE2 is coming any minute. Our only question is how bad is the news coming this weekend for the primary dealers to need to surge the market so high on nothing. Well, that, and also we wonder if after the circus rang the closing bell on the Nasdaq two days ago, whether today the Sicilian mafia will be at the NYSE close.
Consumer Credit Plunges In May, April Revised Much Lower, As Government Only Marginal Lender For Two Months In A Row
Submitted by Tyler Durden on 07/08/2010 14:24 -0500
The latest consumer credit number continues the decline we have seen in recent months, plunging from $2424.4 billion in April to $2415.3 billion in May, a $9.1 billion decline, or 4.5% annualized, on consensus of $2.3 billion. Yet the biggest stunner was the April revision which was whacked from +$1 billion to a revised -$14.9 billion! In other words, there has been a $24 billion decline in consumer credit in the past two months. The biggest hit was, as usual, experienced by revolving credit accounts, which fell by a 10.5 annualized rate to $830.8 billion, from $838.2 billion in April, and just north of $910 billion a year earlier. The bottom line is that consumers continue to retrench as the deflationary wave gets ever bigger. And the only lender, for the second month, running, is guess who... Yet stocks, which confirm again they are now completely decoupled from facts, statistics, or reality in general, jump on this very negative development.
RANsquawk Market Wrap Up - Stocks, Bonds, FX etc. – 08/07/10
Submitted by RANSquawk Video on 07/08/2010 14:07 -0500RANsquawk Market Wrap Up - Stocks, Bonds, FX etc. – 08/07/10





