Archive - Feb 2011

More plays and more POMO girls...

As we noted yesterday, during what we called Cairo's D-Day demonstrations, Friday may well have been the last chance for Egypt to push through with a resolute attempt to finally overthrow Mubarak. Because now the doubts set in... and the desire to get back to a normal life. Sky News reports, "As anti-Mubarak demonstrators continue their protests in Cairo's Tahrir Square, away from the area there are signs of growing divisions among their ranks." In this revolution of attrition, Mobarak may have been well aware of the time value of liberation enthusiasm. And now, two weeks after the start, people have realized they also have to eat (even if wheat has gone up well over 20% in the meantime).

The folks at Future Money Trends have released another comprehensive video clip which summarizes the key aspects of the gold price thesis (which should be all too clear to our readers, who have been following it since $800). At 6 minutes long, virtually anyone can afford to take the time and hear it out, which we certainly urge now that we once again have increasing chatter that QE3 is around the corner (those $4 trillion in deficit funding pieces of paper won't monetize themselves). That alone is sure to send gold again in play: after all the biggest jump in the precious metal last year occurred only after the "incredulous" ones realized that Bernanke was not at all kidding about his infinite dilution quest (yes, the Fed will do anything to save the banking masters).

No surprise: blame the US government on the information black out. Shareholders, and the investing public of course, learn last. Our question: when did clients learn?

The man who once actually had some credibility, and has over the past two years become, very deservedly so, the biggest one-sided propaganda joke on Wall Street, Joe "Snow" LaVorgna, is out with yet another career reputation killer note. In his commentary on the BLS, the Deutsche Bank cheerleader dares to go where not even the Comcast-GE schizos fear to tread, namely in the most ridiculed never never land of Green Shoots. Because heaven forbid seasonal adjustments take account for snowfall in the deep of winter. Have no fear it is all good, and just like that other administration rag Mark Zandi, it is all back end loaded, and as a result we will see a 250k pick up in February payroll, February showers excluded... and in fact, should the weather dramatically vary by more than +/-0.01 degree from the median temperature, all bets are off. They don't call it the priced to perfection, Tungstenilock recovery for nothing. But here is the killer: while saying don't believe the bad news from the NFP report, the curly haired, CNBC sideshow Jow says: "However, the sizeable and unexpected drop in the unemployment rate was legitimate." In other words - let's pick and choose the data points he likes from any economic report going forward, blame the bad ones on ridiculous things, and pray that people are so dumb to not see the utter contempt for their intellgience that infuses the entire "analytic" process.

Joe Saluzzi, co-founder of Themis Trading LLC and outspoken exchange expert, is concerned with how high-frequency trading has brought the capital markets into uncharted - and dangerous - territory. "Things have changed," he cautions. With 50-70% of all trades being conducted by algorithms at micro-second time intervals, real human traders are increasingly challenged to understand how our markets actually work. "No longer do the technical patterns - that have lasted for years and years, and are written about all over - work anymore." In the following interview, Joe and Chris plunge into "dark pools" and other poorly-understood elements of our now-machine-dominated financial exchanges. The current system is fraught with risks of further "flash crash"-like disruptions, and at a fundmental level, feels a lot like sanctioned theft by the deep-pocketed institutions who can outspend on technology and speed. This is an important interview for anyone involved in trading (professionally or personally), as well as investors who want to know how today's markets truly operate.

Things are not all unicorns and skittles in the Gulf ...

I was sure that the 10,000 momentum-chasing hedge funds in Greenwich would have piled onto the short side a week ago after the indexes got shanked when the Egypt riots began. After all, all of them have made yet another New Year's Resolution to be the first one to catch the next bear market and make a killing shorting the next wave down. And be able hang out The Hamptons next summer bragging how "I nailed the top within one day". However, the tape whipped back around and a frenzy of buying resumed. When is the market going to finally top out?

Who said this? "The United States is the best looking horse at the glue factory."

BP spreads more love and light ...

Over the years we have not spared our praise for the Nasdaq: the one exchange to first legalize frontrunning aka Flash Trading, to actively promote churning via HFT erection-inducing liquidity rebates in stocks and options, to create novel and ingenious ways to skirt Rule 611, and, most recently, to overtake the NYSE as host for greatest number of fraudulent Chinese reverse-mergers, the Nasdaq has never kept a secret that it cares far more about its clients than the investing public. Yet little did we know that in addition to pervasive manipulation we can also add thorough security breach and compromise to the exchange's list of transgressions. According to the WSJ, "Hackers have repeatedly penetrated the computer network of the company that runs the Nasdaq Stock Market during the past year, and federal investigators are trying to identify the perpetrators and their purpose, according to people familiar with the matter." Now it is sadly ironic that the world's "electronic exchange" (whatever that means in a world devoid of any carbon-based traders) is the one that would succumb to an outside incursion. What, however, is punishable by even the most mentally retarded, transvestite midget porn-obsessed SEC minion, is that US investors have to learn that practically any stock transaction in the recent past may have been frontrun by illegal means (as opposed to just legal ones that are available to any one with a few Mahwah collocated Cisco machines), through a newspaper.

Remember back when Bernanke claimed that more QE would lower interest rates? What was it… less than six months ago. Strange that this claim would be so far removed from every journalist (and the minds of regulators and Congress) when the markets have proven Bernanke to be an outright fraud.

Can markets alone save the pension promise? Of course not, but that doesn't mean we should abolish defined-benefit plans...

Tense and terrible times inevitably summon an odd coupling of two very different and difficult human conditions; honesty, and brutality. Certain painful truths are revealed, and often, a palpable fury erupts. Being that times today are particularly tense, and on the verge of being spectacularly terrible, perhaps we should embrace both conditions in a constructive manner, and become brutally honest with ourselves. This begins by admitting to that which most ails us. It begins by admitting how far we have fallen…

Zero Hedge has previously demonstrated the improbable, for lack of a better word, upward bias in revising initial jobless claims applications. Today, we look at an even greater statistical problem at the BLS: that of Non-Farm Payrolls. Courtesy of today's full year revision announced by the BLS, and a granular sort by John Poehling, we have discovered that while revisions added a whopping 55k jobs in the years 2006-2008, NFPs have now been revised to remove 538k jobs in the 2009-2010 period. In other words, based on data revisions, under President Obama, America has suddenly created over half a million jobs less (even if all of them are part time) simply due to statistical adjustments. We won't even go into analyzing just how much worse the S&P would be trading if all those monthly "upside" NFP reports had reflected true and not completely fudged numbers. At an average 22.4K downward monthly revision for every single monthly NFP report in the past two years, we are 100% confident that not even Iosif Shalom Bernanke would be able to offset the market plunge that would ensue each and every of the past 24 months... if fundamentals were ever to be remotely meaningful again, of course.