Archive - Mar 24, 2011

After staging a brief recovery in the last few weeks following the undeterred pursuit of the successful completion of Bernanke's wealth effect crusade (Russell at 36,000 or bust), consumer confidence has once again realized that while the rich are getting richer, it means jack for everyone else. As a result the Consumer Comfort index, which recently was moved from ABC to Bloomberg, has just plunged to a 7 month low, indicating comparable slides are coming in the other two reflexive market indicators, the UMich and the CONference Board. "Consumer confidence in the U.S. fell last week to the lowest level since August as more Americans became despondent over the economy. The Bloomberg Consumer Comfort Index dropped to minus 48.9 in the period to March 20 from minus 48.5 the prior week. The measure of the current state of the economy slumped to a 15-month low." And contrary to Central Planning assumptions that Americans are mostly idiots, the recent surge in gasoline prices to near 3 year highs was not missed: "“Given the rise in fuel and food costs, households are clearly indicating frustration over the need to reduce discretionary spending to meet demand for basic necessities,” said Joseph Brusuelas, a senior economist at Bloomberg LP in New York. “Even better-off households are feeling the pinch of rising prices, primarily at the pump.”"

Keynesian economists are propagandizing the media with a unified message; in one breath lightly touching on the human tragedy in Japan, while in the next anticipating with delight the economic recovery it will (supposedly) create. The natural disaster in Japan is tragic both on a human level and economically. Japan may, possibly, enjoy a GDP boost in six months or so as a result of some rebuilding, but the billions in present-day lost productivity will easily negate any future upside...Let’s follow the Keynesian approach. I have come up with the top ten ways we can boost the US economy using that same Keynesian rationale.

And while futures rise as the market anticipates the latest central bank intervention to paper over the global financial insolvency, the radioactive fallout from Fukushima continues to worsen as Iodine 131 levels in the seawater hits the highest since the start of the crisis. "According to Tokyo Electric Power Co., radioactive iodine-131 146.9
times higher than the legal concentration limit was detected Wednesday
morning in a seawater sample taken around 330 meters south of the plant,
near the drain outlets of its troubled four reactors. The level briefly fell to 29.8 times the limit on Tuesday morning from
126.7 times on Monday, but rose to its highest so far in the survey
begun this week apparently due to rain and water sprayed at spent fuel
pools from outside that caused radioactive materials to seep into the
sea, it said." What's far worse, reactors 5 and 6 which have been supposed to be ok, are also leaking: "The firm also said it found both iodine-131 and cesium-137 in a sample
taken from near the drain outlets of the plant's No. 5 and No. 6
reactors that stabilized Sunday in so-called ''cold shutdown.'' The bad news is not only in immediate proximity to Fukushima: "Iodine-131 19.1 times higher than the limit was also detected Wednesday
afternoon in a sample taken some 16 kilometers south of the nuclear
power station, up from 16.7 times on Tuesday."

Not much surprise in initial claims, which came at 382K on expectations of 383K, following the traditional upward revision in the previous number from 385K to 387K. Continuing claims came at 3,721K, higher than expectations of 3,700K, and another previous revision from 3,706K to 3,723K. But the biggest shocker was in Durable Goods, which plunged from a revised 3.6% in January to -0.9% in February, on expectations of 1.2%, as a result of a plunge in machinery shipments and new orders. Durables ex transportation dropped -0.6% on a 2.0% increase expectation. Lastly Nondefense Capital Goods orders ex aircraft was down -1.3% on expectations of 4.3% increase. The stagflation is ramping up.

While the DXY continues to languish in the depths of Ben Bernanke's sado-maso dungeon, money allocated to new reserve currencies: gold and silver continues unabated. Earlier, gold was on the verge of breaking out to fresh all time highs, while silver at last check just hit a fresh 31 year high, pennies away from $38. And just $10 dollars from its all time Hunt Brothers nominal highs.

Markets positive again this morning as investors eagerly await news out of the EU summit. The U.S. tax code may see changes as several Republican Congressman are taking up the matter as announced yesterday. Much attention is focused on the tax deferral of repatriated profits, a $1T sum. Portugal’s failure to reach an agreement on austerity measures yesterday and the subsequent resignation of PM Socrates has taken the country one step closer to accepting an international bailout. However, any such aid is severely limited by the hobbled constraints of the EFSF and the lack of (good)will between payer and payee countries. The BOJ said today that the efforts involved in the earthquake rebuilding may overcome the GDP contraction associated with the original damage.

The heroic but sad story of the Fukushima Fifty may be about to take a turn for the tragic. Two of the three workers involved in the dead end procedure to repower the plant's blown up cooling systems have been rushed to the hospital following radiation induced injuries to their feet. In yet another startling example of the stupidity of TEPCO, the injuries appear to have resulted after irradiated water has seeped into the protective suits. In other words, these are supposedly safe, and completely isolated radiation suits... that are not even watertight? Once again, we wonder just how long will the Fukushima restoration procedure be handled by senior level executives who continue to demonstrate beyond a responable doubt they have no idea what they are doing, except of course to cavalierly risk the lives of 50 or so people (who will soon be far less) with each and every hairbrained idea. And the cherry on top is that the exposure to the two was "only" 180 millisieverts: well below the "new normal" baseline safe threshold which as readers will recall was raised for no reason but to mandate the continued risking of innocent lives from 100 to 250 millisieverts a week ago.

Two days ago we demonstrated that the the charts of Irish bonds, which has now joined Greece, and soon Portugal, in being locked out of capital markets, looked like, as Citigroup put it, a Nightmare on Kildare Street. Today in an attempt to normalize the market, yet which will only remove even more marginal (pardon the pun) liquidity, LCH once again hiked Irish bond margins, from 30% to 35%. And just as the case is with precious metals, soon no margin will be allowed and 100% cash (or gold) collateral will be demanded. In the meantime, look for bid/ask spreads to surge, the ECB buying to be the only buying in all peripheral markets, and CDS traders to once again start being demonized following the starting EU summit which will achieve nothing, but spread further confusion, and even more doubt about the viability of the euro.

Jobless claims, Durable Good Orders, and a Q&A with Elizabeth Duke. Rounding it off is a $5.5-7.5 billion POMO.

RANsquawk European Morning Briefing - Stocks, Bonds, FX etc. – 24/03/11

GBPUSD has made a strong move back into the neutral zone after some strong selling yesterday. EURUSD made a similar move but remains in the long zone even though it has dropped back considerably. We have a slew of PMI data coming out of the EuroZone from 4am EST onwards. Retail Sales out of the UK are likely to have a strong impact on retail positioning, Core Durable Goods Orders at 8:30 am EST is the big number out of the US.