Archive - Jan 2011

Morgan Stanley's real estate division hits yet another home run in (in fees) as investment clients get (literally) taken to the bank.

For all seeking a reason why China will never voluntarily drop its CNYUSD peg, and why it will now actively buy PIIGS debt indefinitely, in its attempt to keep its currency low against the EUR and fixed against that ultimate debaser of currencies, just take one look at the December trade surplus. Even as gross trade surged to an all time high with total imports and exports just shy of $300 billion, at $295.2 billion, December's trade surplus plunged from $22.9 billion in November to just $13.1 billion, the lowest since March and April when China actually had a stunning trade deficit, and a nearly 50% miss to consensus which was at $21.4 billion. The total 2010 trade surplus was $183.1 billion, down from $196.1 billion in 2009 and $295.5 billion in 2008. This means China has increasingly less linen (primarily dollars) to recycle in purchasing such items as copper and gold, and, to a much lower degree, US Treasurys. As the charts below demonstrate, the drop in exports was largest to the US (down 16.4% sequentially), the EU (down 11.5%) and, to a lesser degree, the Rest of the World (- 9.1%). Bottom line: should the EUR hit parity with the USD, and should the CNY continue appreciating vs the USD, this trend will get increasingly uglier, slowing down the Chinese economy even more, which in turn will continue to make the case for a China-led rebound ever weaker, and the case for increasing Fed UST monetization ever stronger (in the absence of Chinese purchasing power). Welcome to the connected world, where monetization is really an indication of weakness.

RANsquawk European Morning Briefing - Stocks, Bonds, FX etc. – 10/01/11

Liu Wei, a director with China's State Administration of
Foreign Exchange, the foreign exchange reserve manager responsible for administering $2.6 trillion in FX reserves, told Caing.com today that "Quantitative easing carried out by the U.S. Federal
Reserve could exacerbate global currency interventions, hurt the
developed countries and fuel flows of speculative capital into emerging
market economies." Additionally, and contrary to all those who believe that commodity prices have in some cases tripled over the past year based purely on goodwill and not excess money, Wei also said that the Fed's quantitative easing program may have some
stimulus impact on the U.S. in the short term, but also that it could
add to global inflation pressure and fuel asset bubbles "so that the
global economic recovery and growth face greater uncertainty." Pretty much as we have been claiming all along.

Retail traders are notoriously wrong at picking market direction/tops and bottoms. Most retail traders very naturally seem to adopt a counter-trend stance and this offers very accurate signals for individuals looking to trade against this group. This daily report is designed to help traders focus their efforts on higher probability pairs.

Just in time for the second crash in housing?

Confused by the recent downdraft in the price of (paper) silver... Even more confused by what is happening with the record open interest in the metal? Have no fear. The bears are here, and explain things in their traditionally simple and sound effect-filled way.

The WaPo shares the full criminal complaint with all 5 counts, as well as the affidavit by FBI special agent Tony Taylor which discloses that according to documents seized from 7741 N. Soledad Avenue in Tucson, Arizona, where Lougner resides, that there was an envelope recovered with "handwriting on the envelope stating "I planned ahead," and "My assassination" and the name "Giffords," along with what appears to be Loughner's signature." There goes the temporary insanity defense.

More bad news for the BofA/Wells syndicate. After on Friday two of the biggest mortgage lenders in the world were hit with bad news out of the Massachusetts supreme court, today it is seven of the nation's major pension funds, between them representing nearly half a trillion in capital, which are demanding that "the boards of directors of Bank of America, Citigroup, JP Morgan Chase, and Wells Fargo immediately undertake independent examinations of the banks’ mortgage and foreclosure practices." The coalition of pension funds called for the banks’ Audit Committees to launch independent examinations of their loan modification, foreclosure, and securitization policies and procedures. “This will help to prevent future compliance failures and restore the confidence of shareholders, regulators, legislators and mortgage markets participants,” the coalition advised in its letter. The coalition members’ insistence on immediate action reflects the urgency of their concerns over mishandled mortgages. But Jim Cramer on Friday said there was no urgency, and no reason to be concerned, and that this is nothing but a buying opportunity for the lemmings which jut got one step closer to the cliff.

Keeping track of the pace of US recovery will probably be the main focus of markets. The key US data releases are retail sales, industrial production and CPI, which are all out on Friday. We expect a robust retail sales print for both headline and ex-autos, after the indications from the autos and the same store sales report last week. For CPI (and PPI the day before), we expect a relatively sharp rise on a headline basis, but much more muted gains ex food and energy. As mentioned, concerns in the Eurozone continue to rumble in the background. The Portuguese and Spanish bond auctions planned for this Wednesday and Thursday respectively will be important to monitor.

When it comes to providing analytical perspectives and empirical insights into the realm of sovereign deterioration, few come close to the work of Reinhart and Rogoff. Citi’s Willem Buiter is one such man. In his latest summary piece describing in excruciating detail just how bad things are at the sovereign level (and judging by tonight's opening print in the EURUSD more are starting to realize this), Buiter provides a terrific country by country guide of what is now an insolvent world, starting with the merely extremely risky, going through the backstop-baiters, and finishing with the time bombs that have already gone off and everybody pretends not to care. For those who do care, this is a definitive guide to what each individual European (and not only) country can look forward to in an age of global moral hazard. The only open question: with China's interest now to preserve the Euro's viability, how will Beijing act in the next few months as the eurozone finally starts unraveling.

Since the start of the New Year, West Texas Intermediate (WTI) crude oil have been moving with significant bearish sentiment. However two new events that could disrupt supply worse than Hurricane Ivan will likely turn the momentum aournd very quickly....

Cramer mustered up that old-time revival feeling on his Mad Money show Wednesday on CNBC when he excitedly proclaimed “We got the correction this morning, Dow fell 35 points."

The new Fed Vice-Chair is using smoke and mirrors to make her point.

Since more than 8 million jobs were wiped out by the Great Recession, but the nation added only 1.1 million jobs in total last year, so the 0.4% drop in unemployment rate in December simply does not make much sense.