Archive - Jul 2010

Some very negative observations from the Fed in the latest FOMC minutes including views on unemployment deterioration, the economic outlook, the duration of the depression, and lastly, on QE.

In his latest letter to subscribers, Shadowstats' John Williams dissects recent economic data, and after providing yet more evidence that after the recent period of "bottom-bouncing at a low-level plateau of business activity" the economy has once again entered a double dip. Overall, it has cost the US taxpayers several trillion in debt (which will never be repaid), and a major hit to the value of the paper in their wallets, just to play the game of extend and pretend for a just under 18 months. The positive effects of the sugar high are now gone, leaving just the negative, one of which is the propaganda spin engulfing the entire legacy media complex whose survival depends on the ongoing perpetuation of the Ponzi lie that all is well. And courtesy of Mr. Williams we have prima facie evidence of precisely why formerly reputable channels such as CNBC are in the process destroying their credibility and causing an exodus of viewers, with the few remaining viewers remaining primarily for the opportunity to heckle the openly lying talking heads. To wit from Shadowstats: "Let me recount two personal experiences. Back in late-1989, I contended that the U.S. economy was in or headed into a deep recession. CNBC had me in to discuss my views along with a senior economist for a large New York bank, who was looking for continued economic growth. Before the show, the bank economist and I shared our views in the Green Room. I outlined my case for a major recession, and, to my shock, his response was, "I think that pretty much is the consensus." We got on the air, I gave my recession pitch, and he proclaimed a booming economy for the year ahead. He was a good economist and knew what was happening, but he had to put out the story mandated by his employer, or he would not have had a job. More recently, following an interview on a major cable news network (not CNBC), I was advised off-air by the producer that they were operating under a corporate mandate to give the economic news a positive spin, irrespective of how bad it was." And that is how the free media operates in this now doomed country, programmed from above to lie to its viewers.

Chaos ...

The last coupon auction for the week was a success, pricing at 4.08%, the lowest yield since October 2009 when the auction priced at just 4.009%. Bid to cover was also the strongest in many months, matching the March interest and lower then just the September 2009 record of 2.92. Primary Dealers took down 46.4%, higher than the past 3 auctions but in line with the long-term average. Surprisingly Indirect bidders showed the greatest appetite for the 30 year part of the curve taking down 37.4%, the highest since the 40.7% in January. Direct Bidders continue declining, and at a 16.1% take down, was the lowest allocation since January's 4.9%. Based on this very strong auction, investors seem to put far more faith in a deflation than inflation scenario.

Earnings season has arrived and the eyes of the world are on corporate America as they share their fare on the state of affairs. After a tenuous second quarter stretch -- one that could have been entirely worse given the sovereign situation -- the market slapped on a brave face for reporting season, rallying 7% since the third quarter began and inching within a kitten’s whisker of the flat line. As analysts sharpen their #2’s and investors wait with bated breath, the other side of the world stirred this week when China’s leading credit agency stripped America, Britain, Germany, and France of their AAA ratings, accusing Anglo-Saxon competitors of ideological bias in favor of the west, according to the Telegraph UK. So what, you say? Could this be a one-off rant? Au contraire Mon frére, Dominique Strauss-Kahn, chief of the IMF, validated the view by offering, “Asia’s time has come.” - Todd Harrison

One can almost smell the LBMA panic at the highs of the day. The resultant paper gold assault is a sight to behold. Either that, or HFTs have decided to extend the Hurst Exponent to 100 as yet another market gets "fractalized."

RANsquawk European Morning Briefing - Stocks, Bonds, FX etc. – 14/07/10

RANsquawk US Afternoon Briefing - Stocks, Bonds, FX etc. – 14/07/10

Looking at broad market volume during most recent Central Bank facilitated ramp, did someone just send out a memo for everyone to stop trading as JPM's buying wave takes everything higher on no volume? Yet with volume non-existant, VWAP has barely moved from the lows as not even VWAP reversion algos work in this market.

RanSquawk notes market talk that JPM is behind the latest uptick in EU equities, and reports talk of a EUR currency buying program in place ahead of cash close. As everyone knows JPM is merely the proxy for the FRBNY. So once again, it is not surprising that global central banks refuse to permit stocks to even consider having a downtick on a day that was supposed to be a blowout courtesy of Intel (which in turn is seeing record selling into earnings strength, which has pushed the stock from being up 8% after hours to just 3% higher now).

Don't be surprised if Microsoft is the one to pull to the lead of the smartphone wars! There's something to be said for being the de facto enterprise standard in productivity, a top server vender, the majority market share in browsers, and owning one of the top gaming platforms. Plus, now their motivated due to Apple and Google taking their lunch money.

To all those fewer and fewer optimists who believe the economy may avoid a double dip (or alternatively suffer the realization it never really got out of the depression in the first place), David Rosenberg provides a glimpse just how tenuous the so-called recovery has been, even despite the unprecedented attempts by everyone at the top to shepherd the economy into growth at any cost, and the daily reminder from Ben Bernanke that risk is dead and the Fed will never let capital markets drop again. As for the future, Rosie asks the logical question: how is it that earnings are expected to grow by 20% in 2011, when it is becoming increasingly obvious that GDP growth next year will be negative?

They call the yellow metal the barbaric relic for a reason. Obama has not suddenly turned into a paragon of fiscal rectitude, and Ben Bernanke still has the keys to the printing presses. Politicians of both parties see the only way to win elections is to inflate. The output of gold has fallen by 12% annually for the past decade, compared to a doubling of production costs to $500/ounce. Barrick Gold (ABX) isn’t opening a new mine at 15,000 feet in the Andes because it likes the fresh air. (GLD), (UGL), (ABX).

For all those celebrating that Spain and Greece can peddle a few billion in short-term Bills to the ECB and a few Chinese investors (did SAFE recover yet from the massive drubbing it suffered in its US stock holdings earlier this year when it was begging for more capital?) it may be prudent to consider that, as Bloomberg reports, Spanish banks borrowed a record 126.3 billion euros ($161 billion) from the European Central Bank in June. This represents a 48 percent increase from the €85.6
billion borrowed in May. Which is why we hope that anyone claiming liquidity conditions in Europe are anywhere even close to normal, will be brave enough to lend even one dollar to Spain's Cajas or appropriately tickered bank Santander (NYSE: STD), because nobody else has done so for over two months!

This could get interesting. A disgraced Central Banker. What a novel idea.