Archive - Sep 2010

It is always fun to read Mort Zuckerman's post-"dark side" conversion rants. Especially since they tend to be very much spot on. His latest focuses on the nightmare of US homeownership, which incidentally is the last thing that prevents the all out collapse of the US economy. Should the dwindling mass of homeowners (sometimes referred to in endangered species textbooks as the "middilus classius") realize that just like stocks, owning a home is very much an overrated premise, that could well be reset push this country so desperately needs.

The only thing that matters today is the ongoing drubbing of the USD, which has just surged to 1.345 to the Euro, even as the Yen meanders this morning but continues to gradually push higher post overnight lows. Expect angry statements from the ECB, and promises to do more of the same failed thing. In the meantime, the middle class' purchasing power was once crushed. The Fed's transfer of wealth from savers to debtors continues. Which is the only thing that matters to stock.

August Durable Goods come all over the place - total number is a major miss to expectations, but stripping away transportation and aircraft, these beat. As expected, the market will cherry pick what it likes and surges on the news.

• US Durable Goods Orders (Aug) M/M -1.3% vs. Exp. -0.1% (Prev. 0.3%, Rev. to 0.7)
• ( Update 1 , 08:32)
• Durable ex. Transportation (Aug) M/M 2.0% vs. Exp. 1.0% (Prev. -3.8%, Rev. to -2.8)
• Non-def Cap ex. Aircraft (Aug) M/M 4.1% Exp. 3.0% (Prev. -7.2%, Rev. to -5.3)

Perhaps someone should point out to Boeing and all US defense companies that Nondefense aircraft and parts shipments and new orders plunge by -13.5% and -40.2% in August.

• CNBC's new pet blog is off to an unsurprising start: not only does it steal Zero Hedge stories without attribution, but apparently it discovered the entire correlation story - (NetNet). As a reference, Jeff, here are Zero Hedge's nodes on implied correlation going back into 2009, and here is our Nicholas Colas post. But yes, we also were very shocked someone out there read this to begin with. So keep stealing guys, nobody will catch it.
• Two quotes of the day: "Irish debt agency CEO not worried about daily swings in bond spreads" and "Irish Finance Minister says concerned by yields in recent debt sales "
• China Will Focus On Peaceful Development: Wen (China Daily)
• China Takes Lead In Financial Deals (FT)
• Spat Tests Japan's New Government." (WSJ)
• Eurozone Crackdown On Public Finances (FT)
• Spain Under Pressure to Show `Hair Shirt' Budget as Yields Rise (Bloomberg)

Love them or hate them, they’re going to be around for another 75 years. From gilded blue bloods to “Mack the Knife” to the “suits” in one generation. Saving the firm twice. Successfully demanding a huge equity infusion from the Mitsubishi Group, while simultaneously holding at bay the wolves from Wall Street and Washington. (MS).

At least one asset class is very much happy from the BOJ's latest FX intervention failure (see chart below): gold. Spot is pennies away from $1,300 and will pass it within hours if not minutes. To all those who still fail to see why the world is forcing a return to that barbaric relic - the gold standard - our condolences: keep shorting. To everyone else, to whom the fiat devaluation story presented on Zero Hedge almost 40% gold percent ago, is now as obvious as to those trading the JPY, well... 40%. Nuf said.

• Asian stocks fall for third day on global economic concern.
• Bank of Japan mum on intervention talk after yen's sudden drop against dollar.
• China's control of a key minerals market has US military thinkers, policy makers worried.
• Democrats abandoned plans to vote before Election Day on extending Bush-era tax cuts.
• Euro weaker at $1.3317; dollar up to 84.72 versus yen.
• German business confidence improves modestly in September; highest since June 2007.
• Oil floats near $75 in Asia; mixed US economic data suggest weak crude demand.

RANsquawk European Morning Briefing - Stocks, Bonds, FX etc. – 24/09/10

Retail Traders as a herd are wrong…most of the time (sorry guys its true).

This daily report is designed to help traders find opportunities to trade against this group. The premise is very simple we are looking for 66% of retail traders to be trading either long or short a currency pair, we then look for opportunities to fade (trade against) this group. For example if 72.99% of traders are long the USD/CHF we look for opportunities to short that pair.

The half-life of central bank interventions is getting shorter and shorter. After Shirakawa decided to show the Fed who is boss, only to be met with the biggest beatdown the dollar has experienced since March, tonight the BOJ decided to show Bernanke how it's done. Too bad the idiots at the BOJ have learned nothing from the SNB's Hildebrand, who was last seen cowering in a fetal positions, underneath his desk. After surging by 100 pips post the second intervention in a row, the "wolfpack" is back, and the yen has retraced more than half it losses in under 2 hours. This pathetic attempt to weaken its currency has just cost the BOJ another few trillions yen, while the end result is the same: a Japan whose export economy is about to be crushed, and a central bank president who will now be forced to join the ranks of the unemployed within a month.

Will Moody's force states to accelerate pension reforms?

Today, there is not a single government in the world that has provided an adequate or sustainable solution to our global monetary crisis. The most prominent criticism from Keynesian apologists regarding our monetary crisis is that supporters of Austrian economics always complain but offer no solutions. This simply is not true. Rather, our global leaders refuse to hear or consider the solutions we present. Today, citizens desire real change, not change disguised as maintenance of the status quo that politicians and bankers offer to us.

Things are getting wierder and wiered: China has confirmed it has detained 4 Japanese officials due to "violation of a Chinese law relating to protection of military facilities." Xinhua reports: "The state security authorities in Shijiazhuang, capital of Hebei, have taken measures against the four people according to law after receiving a report about their illegal activities." It is unclear if the four suggested recommending nuking the 3 Gorges dam for risk of cracks and terminal collapse during the next massive earthquake. Next up: Chinese defense forces amassing in Manchuria. In other news President Obama believes he can tell Hu Jintao what to do...

Alaska is one of the most prospective and yet most underexplored areas in the world. There are good reasons for the neglect, most notably the long, cold winters and the lack of infrastructure. Whether the latter is a result of, or a cause of, there being few people in the state is an open question. One clear result, however, is a rather small economy: Alaska’s 2009 GDP was US$47.3 billion, comparable to that of the Dominican Republic or Bulgaria. The state is ranked 44th by GDP among its U.S. peers. In terms of metals, Alaska produces gold, silver, copper, lead, and zinc. Being well endowed with natural resources, Alaska’s mining history dates back to the early 1800s, when Russian explorers prospected the region, looking for placer gold. But not until after Russia sold Alaska to the United States did exploration activities start to develop rapidly, both on placer and hard rock deposits.

A month ago we discussed a recent paper by the IMF's Carlo Cottarelli titled "Default in Today's Advanced Economies: Unnecessary, Undesirable, and Unlikely"which we noted had "conclusion that are at best questionable, and at worst, completely worthless." Today, Citi's Willem Buiter does a much more eloquent job if dissecting the paper yet at the end of the day, reaches precisely the same conclusion: "A recent IMF study argues that sovereign default in today’s advanced economies (AEs) is “unnecessary, undesirable and unlikely”. We do not agree with this unqualified blanket assertion...the study represents the triumph of dogma over evidence and logic." And since sovereign default will be the primary topic for years and years to come, as more and more countries go tits up, here are Buiter's key disagreements with the IMF.