Archive - Mar 2011

Public employees and their leaders could publicly recognize the structural and demographic changes in the U.S. economy, and vow to tax the top 1% instead of supporting terribly regressive junk fees and sales tax increases on the working poor and the middle class tax donkeys who pay most of the taxes. The fact that they refuse to acknowledge these realities and refuse to take on the Financial Elites speaks volumes.

A day in the life of Ras Lanuf: Rebels fire machine guns at passing Gaddafi planes overhead as reporters hug the ground to avoid getting hit by bombs. And a concise eyewitness report: "They have surrounded the square with snipers and tanks. The situation is not so good. It's very scary. There are a lot of snipers," said a Zawiyah resident."

Now that the market is reaping the aftereffects of GETCO hiring "deisgnated market makers" at the drunk simian exhibit at the local zoo, and the ES is enjoying the price stability shock of the Fed's central planning, here is some more coverage for those who are now bored with 100 points Dow swings in the span of minutes. Follow the protests in rebel-controlled Bengazi in four exciting camera angles.

Just because Greece is now terminally locked out from regular capital markets, with its CDS trading points upfront, doesn't mean the country can't drink from the same Hopium trough as every other US investor. According to Reuters: "Greece has filed a shelf registration with securities regulators in the United States to be able to sell so-called diaspora bonds to retail investors, the head of the country's debt agency said on Wednesday." In other words, Uncle Pap wants YOU to bail out the country that even the ECB appears to have given up on. And if not for G-Pap, do it for Angela: because if the euro falls apart, the the DEM returns, how will Germany export its way in a non-eurozone environment, if the fair value of Germany's currency is realized and exports plunge? And to all US citizens who are jealous they are not the target source of funds for this last ditch attempt to stave off bankruptcy (again) fear not: pretty soon (if Uncle Bill is correct), Uncle TurboTax will give the very same opportunity to all 300+ million US hopium addicts.

Piece of #*%#.

Who needs the barbarous relic? Not the Oracle of Omaha. But his anti-hard asset strategy only works if you are Warren Buffett.

Another quite odd data point about the US Economy: while US wholesale inventories came at 1.1% on expectations of 0.9%, (a drop from the revised 1.3%), wholesale sales increased by 3.4% on expectations of 0.5%, (and the previous revised from 0.4% to 1.1%). A headline glance would indicate a trend of improvement, as the Inventory/Sales ratio dropped to an all time low 1.13. Yet digging into the wholesale data indicates that not is as it seems: "Compared to last month, sales of motor vehicle and motor vehicle parts and supplies were up 7.8 percent and sales of electrical and electronic goods were up 3.4 percent. Sales of non durable goods were up 4.4 percent (+/-0.9%) from last month and were up 16.2 percent (+/-2.1%) from last year. Sales of petroleum and petroleum products were up 10.6 percent from last month and sales of farm product raw materials were up 5.7 percent." It appears that the bounce in wholesale sales was attributed primarily to stockpiling of oil products in advance of what many anticipated (correctly) would be an oil price shock. Look for this metric to plummet in February and March as prices have no caught up with reality.

As this is coming from Libyan State TV, the object and the subject may well be inverted, but it doesn't matter who blew it up. What matters is someone blew it up. The endgame is fast approaching, and the No Fly Zone escalation is now likely inevitable. We will post the naval update, and remark on just how far from the shores of Tripoli the USS Enterprise is, later today.

From Reuters: U.S. OFFICIAL EINHORN SAYS BELIEVES IRAN SEEKS TO REACH THRESHHOLD OF NUCLEAR WEAPONS CAPABILITY

If indeed this is the first step of a forced provocation (shocking "weapons of mass destruction" discoveries coming?) we can't wait to hear how much more excess capacity Saudi Arabia can suddenly find and come to market with. It may however be slightly troubled to replace lost Russian output too: Reuters now reports that crude products exports blocked in thick ice at Russian Baltic ports according to St Peterburg Port Authority.

Bad news for crude bears all around today.

More facts that support the ascension of a new order in mobile computing...

And many thought Bill Gross was only posturing when he said he is getting the hell out of dodge. Based on still to be publicly reported data by Pimco's flagship Total Return Fund, the world's largest bond fund, in the month of January, has taken its bond holdings to zero (and -14% on a Duration Weighted Exposure basis). The offset, not surprisingly, is cash. After sporting $28.6 billion in "government related" securities, TRF dropped to $0.0, while its cash holdings surged from $11.9 billion to a whopping $54.5 billion (based on total TRF holdings of $236.9 billion as of February 28). This is the most cash the flagship fund has ever held, and the lowest amount in Treasury holdings since January 2009 before it was made clear that the Fed was going to adjust QE1 to include Treasurys in addition to Mortgage Backed Securities. PIMCO's Treasury holdings peaked in June 2010 at $147.4 billion and have declined consistently ever since. And while we expected that the spike in MBS holdings (at times on margin) was indicative of an expectation that QE3 would monetize mortgage backed securities, the ongoing decline in that asset class now leads us to believe that Bill Gross is now convinced there will be no QE3 at all, at least based on his just putting his money where his monthly pen is! And if Bill Gross, the most connected person to the upcoming actions by the Fed, believes there is no more quantitative easing, it is really time to get the hell out of dodge in all security classes - bonds, and most certainly, equities.

• Jury to hear gripping opening of Rajaratnam trial (Reuters)
• S.E.C. Chairwoman Under Fire Over Ethics Issues (NYT)
• Remember this rumor? OPEC sees no need to meet, supply ample: delegate (Reuters)
• Berkshire Takes $2.25 Billion in Dividends From Burlington (Bloomberg)... triple the
  railroad’s payout rate prior to the February 2010 acquisition. Better to milk company than to actually use cash to hire people.
• China Growth Plans to Slow Commodities (FT)
• Tchenguiz brothers arrested in Kaupthing raids (Telegraph, Bloomberg)
• As Oil Muddies Outlook, Fed Policy Less Certain (Reuters)
• Deja vu idiocy: Europe Blinks on Bank Test: Regulators Seen Easing 'Stress' Gauge, Undercutting Effort to Restore Confidence (WSJ)
• S&P Warns on Asian Inflation (WSJ)
• Americans Oppose Government Shutdown, Fault Cuts in Poll (Bloomberg)... You don't say

Update: Rebel witnesses say storage tanks in east Libya terminal of Es Sider hit an exchange of fire between Gaddafi forces and rebels . Reuters reports that three plumes of black smoke are rising from the area around As Sider oil terminal. This is in addition to Al Jazeera video coverage of comparable activity at Ras Lanuf. Whether this indicates that Operation Apres Moi Le Deluge by Gaddafi has commenced, is unclear for now.

Two top ECB officials indicated yesterday that interest rate increases might come sooner than ECB Trichet alluded to last week. Given Europe’s slow economic recovery, opinions are mixed on the matter. Recession-predicting economist Nouriel Roubini told reporters yesterday that if oil reaches $140/barrel, a level seen in the summer of 2008, the rate action will cause many advanced economies to slip into double-dip recession. Recent turmoil in the Middle East has sent oil prices nearing $120/barrel. Greek, Spanish, and Portuguese yields rose again yesterday as Friday’s EU summit on a new debt crisis solution draws closer. Portugal sold €1.0B in 2Y bonds at 5.993% v 4.086% prior with b/c 1.6x v 1.9x prior. The SOVXWE widened out again to 183bp from 177bp a week ago with Spain underperforming as it is most vulnerable to rate hikes. We feel that the longer the periphery/core support process drags out, the more rating agencies will be forced to look at interest rate burdens for periphery countries as being normal moving forward. German industrial production rose 1.8% MoM v 1.7%E. Greek unemployment for December moved up to 14.8% v 14.5%E and 13.9% prior. U.K.’s visible trade balance for January strengthened to -£7.1B v -£8.5B E, its smallest deficit since April of last year. The figures show an improvement over December’s -£9.7B even after considering weather’s impact on exports that month.

Do you see what happens Larry when your labor participation rate (wink wink BLS) doesn't plunge to near all time record and the unemployment rate reflects, gulp, reality (pro forma for Goldman Sachs currency swaps)? "Greece's unemployment rate in December jumped to 14.8 per cent, with
more than 40,000 people losing their jobs in a month, The Hellenic
Statistical Authority (ELSTAT) said Wednesday. ELSTAT, providing
the latest jobless data it has available, said that the December jobless
rate compared with 13.9 per cent in November. In December a total of 41,068 people lost their jobs, pushing the number of unemployed to almost 734,000. As
unemployment keeps rising, survey results released earlier this week by
the Greek daily Kathimerini newspaper showed that job prospects in the
coming months appeared to be gloomy, particularly in the construction
and manufacturing sectors. Greece agreed to a series of
cost-cutting measures in exchange for a 110-billion-euro (154 billion
dollar) rescue package by the EU and IMF in May to avoid bankruptsy." Not to worry, Greek CDS have just hit all time wides well north of 1,000 bps, confirm that all is fucked, which only means that the ECB is about to bail out the totally and utterly bankrupt country once again, as more European taxpayer money is thrown down the sovereign funding black hole. In other news Greece is not Libya (for now).