Archive - Feb 1, 2011

Any minute, Egyptian president Hosni Mubarak is address the nation in a speech in which he may or may not announce he will step down, but one in which he most certainly will state that he is not running for presidential reelection. We are not sure what this slap of a gesture toward the Egyptian people is expected to achieve: that is the equivalent of hiring Ben Bernanke as your advisor on how to economize on toner ink.

Much has been said about Bernanke's wealth effect and how it impacts a whopping 1% of the US population (traditionally, those very same bail out recipients who would be insolvent had Gen Ben not rescued the entire financial system at the expense of the DXY, which at last check was below 77 again). Unfortunately, a little less time has been spent discussing the equal and opposite effect: that of the poverty effect. Luckily, every month we get an update on this just as useful metric. And as of November, the SNAP program had 43.6 million participants, an increase of 400k from October, and a 14% increase, or 5.3 million from a year prior. We are confident that this 15% of the US population will be delighted to know that their rapidly diminishing dollars will end up acquiring increasingly less and less stuff.

Of course, all of this is just financial speculation and trading models. No sane person could possibly invest in the Euro today based on fundamentals. After all we’ve already seen Greece ask for an extension of its bailout payments from three to 30 YEARS. And it’s not as though investors are interested in buying bonds from Spain or Portugal (see the recent bond buying activity from the ECB). And then of course there’s the Irish wild-card now that the elections will be held in late February.

For all those who looked at today's Priced Paid component of the ISM, and had a very bad feeling about what this signifies for not only corporate margins (one word: shrinkage), but broader inflation, we good news for you: you are absolutely right. A simple regression analysis of Prices Paid to CPI data indicates that the median CPI 12 months following a PP greater than 80 (such as this morning's 81.2) is over 6%! Which of course means that the far more volatile non-core components of the CPI will likely be surging at double digit rates by then. In other words, in one year, based on a simple historical regression, the US will well be on its way to inflation that will even leave the Chinese cowering in shame. And if consumers still refuse to leverage by then, then Al Jazeera will be covering riots (following the FTC's shut down of all US media) from our own back yard. If they do, on the other hand, and with $2 trillion in excess reserves, say hello to the Shazam moment.

The puppet show.

A short recap of today's meeting...

Recently, BOE head Mervyn King came out with a very surprising warning to his compatriots, accompanied with an apology that our own Ben Bernanke will never offer, namely: "I sympathise completely with savers and those who behaved prudently
now find themselves among the biggest losers from this crisis." Of course, the US central bank believes it has completed its third mandate job now that the US stock market, not to mention commodities, are starting to be reminiscent of the parabolic phase of the Harare stock market. But back in Europe, even as the EURUSD is surging (killing the dollar, and the primary driver behind US stocks) now that it is accepted that the continent will proceed with its latest full on ponzi scheme and have the EFSF acquire insolvent bonds, even as the ECB proceeds to raise rates, things are getting worse. This is precisely what King warned about in a speech that not surprisingly got absolutely no coverage in the US. Luckily, here is Simon Black's take on the very surprising speech by King which confirmed that the only beneficiaries of Bernanke's policies continue to be the top 1% that make up the financial oligarchy.... as always.

Thank you, President Mubarak ... for educating the world about the concepts of agents provocateur and false flags ...

RANsquawk US Afternoon Briefing - Stocks, Bonds, FX etc. – 01/02/11

Forget "million man march" ... Egypt has over TWO million.

One of the benefits of America finally seeing what Zimbabwe went through as it entered hyperinflation, ignoring for a second that the Zimbabwe stock market was the best performing market, putting Bernanke's liquidity pump to shame, is that very soon everyone will be naked, once companies finally realize they have no choice but to pass through surging input costs. And while some may be ecstatic by the S&P's modest rise YTD, it is nothing compared to what virtually every single agricultural product has done in the first month of 2011. To wit: Corn spot up 7.76%, wheat up 5.63%, Rice up 10.08%, Hogs up 10.16%, Sugar up 5.64%, Orange Juice up 3.33%, and cotton.... up 17.08%. That's in one month!

Google's Android is now the undisputed top selling mobile OS in the world, unseating Research in Motion's Blackberry, Apple's iOS and Nokia's Symbian/MeeGo in record time. Being that Android is essentially a front end to Google's cloud services and apps, does this mean that Google now has (or soon will have) more application reach than Microsoft - the world's largest software company? Pretty good performance for a search engine, eh?

Our friends at The Forensic Factor have been busy. After exposing one after another alleged Chinese fraud reverse merger, and forcing management teams to address investors about numerous allegations of impropriety, the small research boutique has come out with a report exposing what it dubs "the most preposterous Chinese reverse merger yet." As usual, in a world of shady transatlantic backdoor dealings, and cash strapped US exchanges willing to list anyone and everyone, regardless of whether their financials are even remotely valid, we believe it is our duty (without intent to profit) to expose companies that may or may not be fraudulent, particularly now that it is obvious that the SEC is fully endorsing the ponzi scheme of US capital markets. Quote TFF: "after a deep dive into AutoChina (Nasdaq: AUTC), The Forensic Factor ("TFF") has concluded that AutoChina is potentially the most dangerous Chinese reverse merger that we have examined. As the AutoChina story gets exposed, we would expect a significant share decline of at least 50% and a material increase in the short interest (incredibly, less than 1% of the shares are short - a true rarity among the Chinese reverse mergers). TFF believes investors would be prudent to avoid AutoChina at all costs. At the same time, we implore regulators to protect the investing public and launch an investigation into AutoChina."

One more month, one more chance for GM to stuff its dealers with cars. Sure enough, in the just release January sales PR, the company announced that "General Motors dealers in the United States reported 178,896 total sales in January, a 23-percent increase from a year ago for the company’s four brands. The gain was driven by solid retail sales which were 36 percent higher than a strong January a year ago." And behind the scenes, GM has continued to shove a whopping 510,000 cars with dealers: In January 2011, the firm had 510k cars at its dealers, compared to just 390,000 in January 2010, a 30% increase. Furthermore, as the only component of consumer credit that is surging, non-revolving loans, indicates that virtually all car purchases are made based on the old formula of "no money down." And with the government backstopping both the car maker and the lender banks, we would be very interested in discovering just how bad the delinquency rate in non-revolving car debt is over the past year, especially as it relates to GM.