Archive - Sep 14, 2010
Jan Hatzius Q&A On QE2
Submitted by Tyler Durden on 09/14/2010 23:01 -0500From Tungstenman Sachs: "Our view remains that the Federal Open Market Committee (FOMC) will once again ease monetary policy via unconventional measures in late 2010 or early 2011. Our views have not changed, and today’s comment discusses them in Q&A form. We believe that purchases of US Treasury securities cumulating to $1 trillion or more are the most likely cornerstone of the program; that the September 21 FOMC meeting is probably too early for a big announcement, but that November 2-3 is a possibility; and that it would likely “work” to a limited degree, perhaps boosting real GDP growth by a little under ½ percentage point per $1 trillion in purchases."
The Republican Portfolio
Submitted by madhedgefundtrader on 09/14/2010 23:00 -0500Expect a dramatic roll back of the leftward policies the country has adopted over the last two years, and a sudden revival of the industries that have suffered as a result. Big oil, defense, health care, coal, nuclear energy, and for profit education companies are all big winners. And alternative energy too.
Currency Intervention, Bitches
Submitted by Tyler Durden on 09/14/2010 21:26 -0500
After a six year wait, the BoJ has finally had enough of the Federal Reserve's endless manipulation and has itself intervened in the currency market. The USDJPY jumps over 150 bps, the Nikkei surges 250 pts (that ES-Nikkei convergence or whatever the hell it was is closing soon) as the BOJ sells between 200 and 300 billion worth of yen. Yes, this is the time to short, short, short because if the now useless SNB interventions have taught is anything it is that central banks are populated by pompous morons who believe they can control the world, when the best thing they can do is hope for the last Viagra shot to result in priapism. For those who have not taken Psych 101 - look up learned helplessnes. Next up - the SNB, and after that the Fed once again, and after that, the slow but sure end of fiat. The race to the currency devaluation bottom is now in the third and last lap. And incidentally, for all those who missed it, the BOJ's intervention is a symbolic capitulation, and the beginning of the end for the Keynesian system. Rejoice.
Guest Post: The Curse of Fiat Money
Submitted by Tyler Durden on 09/14/2010 18:27 -0500It may come as a surprise to many, but the relative size of the US commercial-banking industry has not declined following the so-called credit-market crisis, which developed in the second half of 2007. On the contrary, it has increased since then. While nominal GDP rose 4.2% from the second quarter of 2007 to the second quarter of 2010, banks' total assets rose 18.4%. In a recession one would expect an unwinding of credit-financed investments that have turned sour. Economically unsuccessful firms go out of business, malinvestment is liquidated, losses reduce investor equity capital, and the cost of borrowing increases, providing incentives for reducing overall indebtedness. However, this is not what happened in the banking industry as a whole. The Federal Reserve, in an attempt to prevent the bank system from collapsing, supplied any amount of base money that was deemed necessary to keep banks afloat. This can be illustrated by the drastic increase in banks' base money holdings since around the third quarter of 2008.
Government Using Anti-Terrorism Laws to Crush Dissent
Submitted by George Washington on 09/14/2010 17:55 -0500Claims of "national security" are used to keep basic financial information - such as who got bailout money - secret. That might not bode for particularly warm and friendly treatment for someone persistently demanding the release of such information ...
GLD ETF Adds 6 Tons Of Gold Today, Still 22 Tons Away From All Time High
Submitted by Tyler Durden on 09/14/2010 17:04 -0500
In one day, GLD added 60% of the gold that Bangladesh bought from the IMF a week ago and made major headlines. Of course, we do hope that the ETF actually did buy the 6 tons of gold, instead of just some logic gates being triggered by a few electrons here and there, causing a screen to output a data set that was previously goalseeked, while no actual gold ever exchanged hands. But that of course would be improper. Either way, GLD's NAV in tons is now back to 1298.7. Yet, even with gold spot actually rising to a new all time ever high, the fund is still about 22 tons short of its peak holdings of 1320.4 recorded on June 30, when spot was $1,244, or about 1.7% lower. This means that in a perfect world, GLD will soon need to buy up quite a bit of the gold it sold recently (and then some), and thanks to the magic that are "convex" events, the resulting feedback loop will only lead to an even greater jump in the price of gold, especially if, as rumors are suggesting, there is a shortage of the actual physical for delivery.
Visible Supply - Fast Markets
Submitted by Bruce Krasting on 09/14/2010 16:43 -0500I think the action is heating up.
False Alarm: Morgan Stanley Recants From Its Expectation Of A QE2 Event In One Week
Submitted by Tyler Durden on 09/14/2010 15:55 -0500Today's peculiar stock trading action was exclusively due to Morgan Stanley's previously highlighted expectation that the Fed would announce QE 2 in one week (and had nothing to do with Hatzius' announcement that there may or may not be a November event: Hatzius has been claiming this for two exactly months running now, for all those to whom this may be news). Which is why David Greenlaw's just released announcement which essentially eliminates MS' expectation of a hike may wreak some havoc on stock prices tomorrow (and potentially gold, although now that it has passed a new psychological level, we think the odds of that happening are modest). Quote David Greenlaw: "we now believe the likelihood of additional easing being announced at the Sept FOMC meeting is quite low (perhaps 10% to 20%)." Sorry, no QE2 for at least two months, and most likely not until January, but which point it will be too late to do any actual good to the economy (but not to surging gold prices).
Guest Post: “Shut-up And Eat Your Paint Chips, Kid” – Miseducating America
Submitted by Tyler Durden on 09/14/2010 15:35 -0500Today we’ll be exploring the mathematics behind the US housing market over the last thirty years to determine how smart we really want our kids to be. If you can successfully complete (or at least understand) the accompanying quiz you’ll have a more thorough understanding of economic realities than every Ivy League professor (including Nobel Laureates) active in government and mainstream media.
RANsquawk Market Wrap Up - Stocks, Bonds, FX etc. – 14/09/10
Submitted by RANSquawk Video on 09/14/2010 15:19 -0500RANsquawk Market Wrap Up - Stocks, Bonds, FX etc. – 14/09/10
Gallup Confirms Consumer Confidence Deteriorates Despite Recent Move Higher In Stocks
Submitted by Tyler Durden on 09/14/2010 15:17 -0500
It may not have the pull of those two "other" consumer confidence polls (which always magically seem to beat expectations just when the market is about to roll over), but for sheer depth of polling, the Gallup look at consumer confidence arguably presents a far more detailed and accurate picture than either the Conference Board or the UMichigan index. And today Gallup is out with a report titled: "U.S. Economic Confidence More Negative Than a Year Ago - More Americans rate the economy as "poor" and say it is "getting worse" - of course, as this report is based on truthiness and not on birth-rate adjustments, the only places you may read about it are a variety of fringe blogs. Amusingly, even Gallup acknowledges that the primary driver of consumer confidence (which itself ends up driving stocks), is stocks themselves (they don't call it the dog wagging indicator for nothing) are the computerized and generally arbitrary moves in the stock market: "Despite the recent upturn in the nation's equity markets, Gallup's
Economic Confidence Index, at -34 during the week ending Sept. 12,
confirms a downward trend in consumer confidence that started in
mid-August." We don't expect this level of honesty and objectivity to be repeated in either of the soon to be released other "confidence" indicators, which is sad, because if consumers and investors realized that we have now gotten past the point where the natural ponzi drive of the market works (i.e., confidence correlates with the S&P, people may have been able to save a lot of money which they will otherwise lose in the S&P). But that does not fit with the Fed's agenda, so don't hold your breath on the truth finally coming out on this.
Guest Post: Gold Confiscation - Straws in the Wind
Submitted by Tyler Durden on 09/14/2010 14:35 -0500In the emails that our readers at Casey Research send our way, questions and concerns about the possibility of gold confiscation rank high. My somewhat standard response is that, yes, it’s possible, but that we should see straws in the wind well before it happened… allowing us to take measures to protect ourselves. While I don’t want to make too big a deal about it, there have been clear signs of late that the U.S. government is taking an unhealthy interest in your gold. My recent article “I Smell a VAT” touched on one such straw. The relevant point being that, thanks to a regulation slipped into the healthcare legislation, coin dealers – and all businesses, for that matter – will have to begin reporting any purchases of $600 or more from anyone, including clients selling back their gold. While I think the overriding intent is to pave the road for the implementation of a value-added tax (VAT), there’s no question that the legislation simultaneously paints a target on the back of the free trade of precious metals.
Goldman Does Not See A SNB Hike In 48 Hours, Eliminating Chance Of CHF Snapback On No Hike Announcement
Submitted by Tyler Durden on 09/14/2010 14:24 -0500Earlier today, news that UBS had expressed the iconoclast opinion expecting the SNB to hike its rate by 25 bps to 50 bps, put the CHF into afterburner mode, inspiring a 100 pip move from the then prevailing level of 1.0030 in the USDCHF, to well below parity. Yet it appears other banks refuse to follow through, in adjusting their expectations. Goldman's Dirk Schumacher has released a note in which the European strategist says: "We expect the SNB to leave its target for 3-month Libor at 0.25% in this Thursday’s Monetary Policy Assessment and the overall tone of the statement to remain broadly unchanged." Oddly enough, it would be far more beneficial for the CHF if everyone did expect a hike, only to cause a snapback in the CHF in case there truly is no announcement. As it is however, the CHF will likely not budge all that much once Thursday news of no change hit (and it already is well linside parity with the USD). On the other hand, should the SNB indeed hike, then watch as the CHF hits all time highs, and Brequet, Patek Philippe and Milka factory workers picket the SNB demanding an accommodative monetary regime (what, you think lazy Americans are the only ones who can do it?)
Another Day, Another Flash Crash
Submitted by Tyler Durden on 09/14/2010 13:35 -0500
It has been about a week since we have had a flash crash in our broken markets, and we were getting a little antsy. Then Nucor showed up and traded at $0.01. At 11:52:21 something broke, and as the QR chart below shows, it was basically precisely the same algo malfunction that either goes and hits all bids all the way to zero, or some HFT decided to shut down, and wipe out the entire bidside orderbook. The stock which had been trading at $39.58 literally milliseconds earlier, saw a SkyNet T-1 unit go berserk and take out the bids at $37.22, and $35.77 in sequential fashion, with the next trade being at at the residual stub quote of $0.01. Of course, circuit breakers were triggered, but not before even more irreversible damage to investor confidence was suffered. And those idiots 'upstairs' still wonder why tomorrow we will report another massive outflow from mutual funds.
Dylan Grice On What Weimar Republic Popular Delusions Can Teach Us About Japan's Upcoming Hyperinflationary Bankruptcy
Submitted by Tyler Durden on 09/14/2010 12:35 -0500Dylan Grice loves debunking popular delusions. Perhaps that is why he has picked precisely that phrase as the title of his periodic research piece at SocGen. In his latest piece Dylan asks a question so simple and profound that it should immediately force all Keynesians to provide a definitive answer, or else they should all be fired for being nothing else than card-carrying shamans of the world's most destructive religion (and if you thought the Catholic Inquisition was bad, you obviously have never been drawn and quartered by four of Bernanke's most vicious and bloodthirsty printers). Here it is: "For all I know, Keynesians might be even right in thinking policy makers can fiscally jolt economies back to life, allowing them to recover back to their ‘default mode.’ But their assumption is that ‘default mode’ is positive growth. But what if it isn’t? What if the ‘default mode’ is falling output because the population is declining? Japan might just have spent the best part of twenty years trying to fiscally stimulate its way out of a demographic compression. If this is correct, and population decline has blown the hole in Japan’s government balance sheet there’s still plenty of damage in store because the demographic compression isn’t over yet." Zero Hedge has long contended that Economists dwell so high up in their ivory towers of (flawed) theoretical construction, that they always ignore the simplest things that have the most profound systemic impact... such as demographics. Consider the creation of the Social Security Trust Fund, which would have been perfectly solvent in perpetuity... If only people died quietly as they were expected to do so in 1930s, some time in their mid- to late-60s. Now it is insolvent. Keynesianism, as an economic theory itself, is an anachronistic artifact of another time. As such, Dylan's question is arguably the most critical one that Krugman, Koo, and even the Kretins (sic) from the Fed should answer before they propose any additional and infinitely more destructive theories, and conduct any more failed experiments on a world population of roughly 7 billion people.






