Archive - Feb 2011

RANsquawk European Morning Briefing - Stocks, Bonds, FX etc. – 25/02/11

The big news event of the day is the US GDP 10:00 EST expected to come in at 3.3% a deviation of 0.1% or more could lead to some significant changes in trader positioning, we also have UK Revised GDP coming out at 04:30 EST which is also often a big mover. In yesterdays session we saw overall GBP weakness. As a result GBPUSD has slipped from the strong long zone back into the long zone

The Caisse de dépôt et placement du Québec, Canada's largest public pension fund, posted a solid 13.6% return on its investments last year, solidifying its ongoing recovery from a disastrous 2008 loss.

Ouch!

And the scorpion said to the crocodile.....

Just in case there was any confusion in the interpretation of the M2 chart, here is the latest just released Adjusted Monetary Base.

The first, most fundamental, and most necessary step in the transition to a free society is the demise of the modern “monster state.” And the first, most fundamental, and most necessary step in this process is the demise of the monstrous American state, its erstwhile role as a beacon to the world having long ago given way to a superpower that brings not light but heat, pulling a shroud over its own people in the process. The monster will object that it only wants to keep its people warm and safe, of course, but as people elsewhere start kicking their shrouds off, it is increasingly clear that the status – as in statist – quo is changing and that neither suffocating domestic policies nor incendiary foreign ones will be tolerated much longer.

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So here we are, waiting for the “event” which triggers a loss of confidence across the system. Will it be a sovereign, a US state, a bank, QE3 or QE5, the oil price, Chinese fixed investment, a false flag event (a convenient distraction/excuse) or a revolution? When it happens, the speed at which capital will move in today’s over-liquefied world will take people’s breath away. Where will it go? This is the global end of normal (baby) so that, first and foremost, it will go into the strategic assets - gold/silver, energy, food/agriculture, rare earths, etc, (as well as the equities of the financially strongest economies). Bernanke’s QE2 is nothing short of economic warfare, in the form of a wave of inflation, directed at the rest of the world and even his own population (at least anybody without a large stock market, commodities or precious metals portfolio). This inflation is not temporary, as per the false reassurances, it’s baked in. In response, creditor nations have no other choice than to cut purchases of US Treasuries (China is selling), leaving the Fed increasingly standing alone. Rampant or hyperinflation results from the complete loss of confidence in a currency and we are being steered in this direction by the gentlemen above. Sure, they are smartly dressed, well educated (kind of) and pretend to know what they’re talking about with their carefully worded “policies”. It’s all NONSENSE. All they’re doing is leading us down a well-trodden path which has happened time and again throughout history.

Even as silver performed some unprecedented fireworks today, plunging on what was a margin hike in... crude, the metal continues to trade just below its post-Hunt Brother highs. So for those who still have not decided whether or not to take the plunge and buy into the precious metal (which, granted, was selling at $8.80 three years ago, and has since nearly quadrupled in price), we present the following discussion between Jeff Clark of Casey Research and The Daily Crux, which answers "what you need to know about buying silver today." This comes a week after we first highlighted that the Canadian Mint has sold it last stock in silver and has demand for much more.

In listening to some old lectures by Rothbard, I heard him bring up a concept called “social ownership” that was being pushed by communists in the former country of Yugoslavia as a way of managing the ownership of industry. In Yugoslavia there was a communist general named Josip Broz, who commonly went by the name Marshal Tito (how can you not love a guy that walks around calling himself Marshal Tito?). Marshal Tito is not your average run of the mill commie hahaha. I actually somewhat like this guy. Marshal Tito is one of those guys that accomplished a tremendous amount of good for his country, which is why you’ve probably never heard his name before. You see, Tito came to recognize that while the Marxists constantly called for the ownership of industry “by the people,” they never actually got around to making this happen. Tito believed that “ownership by the people” must obviously preclude the ownership of industry by the State. In Tito’s view, communist social ownership should consist of the factory workers owning a share of the company they worked for...The communists ran into some problems though.

As usual, our Onionesque predictive powers are spot on. Two hours ago, when we reported the ICE margin hike, we stated: "We expect the NYMEX will follow suit on its own WTI contract margin hike any minute." 60 minutes later, this prediction comes true. Per Bloomberg: "CME Group’s New York Mercantile Exchange plans to raise margin requirements on its light, sweet crude oil contract for the first time since March 2009, according to the exchange. Margins for speculators will increase to $6,075 per contract from $5,063, and for hedgers to $4,500 from $3,750, according to a notice on the CME’s website. The change will take place after the close of trading tomorrow." The heavy artillery in crude is out. And while margin hikes do nothing any more for silver and gold, the weak hands in crude have at least two rounds of margin hikes before they are flushed out. Of course, the half life of margin hikes is about 2-3 days. We expect this increase to be internalized very quickly. The next one will be priced in within hours. And the third one will be ignored. After that... who knows.

Stratfor explains why the developments in Libya, while important, are materially less relevant from a macro perspective than those in smallish Bahrain: "The reason why Bahrain is very important is because in any negotiation you have to have some give-and-take, and it’s likely that the Bahraini monarchy will have to give some concession to the opposition. And once that happens, it will lead to an empowerment of the opposition, 70 percent of which is Shia — 70 percent of the population of the country is Shia — and that has very large-scale implications for the region, particularly for Saudi Arabia and Kuwait."

RANsquawk Market Wrap Up - Stocks, Bonds, FX etc. – 24/02/11

If anyone is alive after today's utterly insane trading action, congratulations. The volatility lull of the past 6 months is now over: swaption traders rejoice.