Archive - Jan 2011

A common misconception among less aware segments of the American populace is that the phrase “New World Order” was concocted by attention seeking “conspiracy theorists” in dank basement apartments and sinister mountain shacks across the country. In reality, anti-globalists and Constitutionalists had nothing to do with the term’s creation (and most of us have decent digs, too). The truth is that mumblings of a “New World Order” have been floating around various elitist circles for decades, and every once in a while, those mumblings are publicized in the mainstream media. Globalists created the warped ideal; we just point out that it exists. Lately, we haven’t had to try very hard… As most readers here are probably already privy to, elitist spokesman George Soros (who for some reason reminds me of Baron Harkonnen from the movie ‘Dune’) recently let spill all kinds of NWO gossip in a candid interview with the Financial Times.

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.

Ruh roh. After yesterday's euphoria around the new year wiping the economic slate clean, investors woke up and...

Where is the theft in pensions really taking place?

Can they please at least keep their lies straight? While two months ago the IMF said that "Oil price rise not threat to global recovery", we now get an FT article with the following title: "Oil price ‘threat to recovery’" based on a quote from the IEA." H.M.M.M.M. we wonder whose opinion is more accurate: an organization run by idiots (who subsequently matriculate into modestly coherent people whose only job is to bash their former employer), whose only purpose is to destroy economies under mountains of debt (or is that the World Bank?) and to bail out insolvent PIIGS... or the International Energy Agency? We'll have to get back to you on that.

Was today's broad and very much coordinated selloff in commodities a result of the just announced news that the CFTC's position limit plan may, contrary to prior expectations, be enforced very soon? It appears that outspoken CFTC commissioner has flipped in his stalling tactic and instead is now endorsing the position limit plan. Per Reuters: "Under the system, if a trader's holdings in a commodity reaches a certain threshold, it triggers a new level of heightened regulatory scrutiny by the CFTC where commissioners could vote to require the trader to reduce their positions." This means that JPM's accumulated holdings in various precious and industrial metals are not only about to likely become public, but that the CFTC will be mandated to very shortly enforce a break up on those positions which are deemed too concentrated. It is unclear how foreign entities, to whom the recent accumulation in various precious metals has been attributed, will be impacted by the proposal which now appears may be shortly enacted.

While we frequently make fun at Maxine Waters, and often for good reason, in this case the Congressional Democrat is spot on: the member of the House Financial Services Committee has denounced the BofA-GSE settlement as nothing more than a "backdoor bailout" funded by taxpayers, precisely as disclosed yesterday in the exhaustive Forbes piece that is a must read.

Given the composition of the Fed's assets, when interest rates start rising, the immediate effect on the Fed's income will be negligible. But the Fed's interest expense will respond immediately, because the interest it is paying is interest on deposits that commercial banks are free to withdraw without notice. That's not a healthy combination. Short-term rates would only need to rise above 6.5% for the cost of keeping the $1 trillion sequestered to exceed all of the Fed's income. The Federal Reserve would be operating at a loss. And the crossover rate, at which the Federal Reserve starts losing money, may be about to come down. The Fed is about to begin round 2 of "quantitative easing," in which it creates still more reserves to buy still more long-term Treasury bonds. Suppose that QE2, regardless of what details are initially announced, adds up to a purchase of another $1 trillion of 30-year T-bonds, at the current yield of 3.9%. That will add $39 billion per year to the Fed's income. But it will double the effect that any rise in short-term rates has on the Fed's interest expense. The net effect would be to lower the crossover fed funds rate, at which the Federal Reserve starts operating at a loss, to 5.3%.

A few minutes ago we ridiculed Bloomberg's use of Vadim Zlotnikov's opinion on gold as the basis for the otherwise reputable firm's chart of the day. Below, we present a statement from the actual research report that indicates that the man does not have the first idea of what gold is all about. To wit, and we quote: "Gold, which is effectively just another fiat currency, has recently benefited from its perceived ability to hedge against a variety of potential economic outcomes that are currently foremost in investor's minds: inflation, sources of economic growth, downward spiral in fiat currencies, etc." While there is no point to even discuss any part of this report further, we ask: are imbeciles the best that the anti-gold crusade can come up with?

RANsquawk Market Wrap Up - Stocks, Bonds, FX etc. – 04/01/11

The barrage to get investors to dump their gold is on in full force, after one after another media outlet takes turns to guarantee that a day of profit taking in an asset that two days ago was trading at its time highs, and experienced an uninterrupted 30% run in the past year, means the rally is over pretty much in perpetuity. The motive is clear: get people to abandon the safety of hard assets and throw their lot into the ponzi scheme, based on one week of minimal inflows following endless outflows after the first and certainly not last Flash Crash. The latest such attempt comes courtesy of Bloomberg's chart of the day, whose disturbed logic is just left of alchemy. To wit: the shares outstanding of the GLD etf have declined, therefore you must acquit, or dump your gold. Immediately. And we wish we were kidding.

Rich Bernstein who while at BofA used to be one of the few (mostly) objective voices, today got into a heated discussion with Rick Santelli over yield curves and what they portend. In a nutshell, Bernstein's argument was that a steep yield curve is good for the economy, and the only thing that investors have to watch out for is an inversion. Yet what Bernstein knows all too well, is that in a time of -7% Taylor implied rates, QE 1, Lite, 2, 3, 4, 5, LSAPs, no rate hikes for the next 3 years, and all other possible gizmos thrown out to keep the front end at zero (as they can not be negative for now), to claim that the yield curve in a time of central planning, is indicative of anything is beyond childish. A flat curve, let alone an inverted curve is impossible as this point: all the Fed has to do is announce it will be explaining its Bill purchases and watch the sub 1 Year yields plunge to zero. Yet the long-end of the curve in a time of Fed intervention is entirely a function of the view on how well the Fed can handle its central planning role: after all, the last thing the Fed wants is a 30 year mortgage that is 5%+ as that destroys net worth far faster than the S&P hitting the magic Laszlo number of 2,830 or whatever it was that Birinyi pulled out of his ruler. As such, Santelli's warning that a steep curve during POMO times is just as much as indication of stagflation as growth, is spot on.

The Rich (who control this country) do not want a strong dollar - only people who get paychecks in dollars want them to be strong but the people handing them out in exchange for labor are perfectly happy if Treasury Notes are as worthless as toilet paper.

UNFAIR, DECEPTIVE AND UNCONSCIONABLE ACTS IN FORECLOSURE CASES

While everyone has been focusing on American institutions over the past several months looking for entities that may have claims on Bank of America and other domestic banks which have misrepresented their mortgage portfolios, a question that nobody is asking is why are European, and specifically German banks, not joining the fray? After all, when it came to finding idiot investors, Goldman et al's rolodex would always immediately jump to those in the Ruhr and Rhine valleys. And sure enough, as many German (Landes)banks ended up on the receiving end of Wall Street innovation, and thus bankrupt, it has been shocking that very little initiative has been demonstrated by German investors who lost most or all of their capital when subject banks ended up purchasing misrepresented securities. All this may be changing soon (see below). But even if it isn't, a key question is just what leverage does America have over Germany to prevent the country from pursuing rightful putback demands against the mortgage banks. Our guess: those lovely FX lines from Benny and the Inkjets. After all recall that the Swiss tax disclosure was the quid pro quo in exchange for the unlimited Fed credit facility to the SNB when the country was on the verge, and when UBS needed a bad bank to make sure the Swiss giant survived.