Archive - Mar 2011

It was only logical that hours after Jim Cramer "Whitney Tilsoned" gold, China would come out and say it needs to buy more of the precious metal. After hitting an overnight low of $1,423/oz for some unknown reason, perhaps the latest overdue shakeout of the weakest holders, gold has since retraced half the distance to its all time highs, following a report from Reuters that "China should use some of its $2.85 trillion foreign exchange reserves to buy more gold, a government adviser was quoted as saying by local media reports on Wednesday. Li Yining, a senior economist at Peking University and member of the Chinese People's Political Consultative Committee, an advisory body to the national parliament, said that China should use the precious metal to hedge against risks of foreign currency devaluations. "China should increase its gold reserves appropriately, and China
must take every chance to buy, especially when gold prices fall," Li was
quoted by the official Xinhua news agency as saying." And so the immaculate record of all those calling for the "inevitable" correction in gold continues with a roughly 0% success rate.

Three weeks ago we first mused about the irrational endgame of it all when we asked: "When Hussein left Kuwait he set the oil wells on fire. Will Ghaddafi?" It now appears that this could well be the endgame, after Al Jazeera reports that "desperate Gaddafi might hit oil facilities in an attempt to fend off encroaching rebels, sparking a human catastrophe." And obviously in order to prevent this, the US will be "forced" to institute a no fly zone, thereby commencing a full blown invasion of the country, and eventually destabilizing the region completely.

RANsquawk European Morning Briefing - Stocks, Bonds, FX etc. – 09/03/11

Most pairs are currently having a breather in the neutral zone, with GBPUSD and EURUSD pulling back from the strong long zone we were in a few days ago. EURCHF despite a strong pullback is still hanging on in the short zone, CHF CPI at 3:15am EST could have an impact on this. The big news events of the day effect the AUD with a speech by RBA Gov Stevens and Employment Change/Rate at 7:30pm EST.

Traditional pensions have been vanishing for private sector workers, causing untold retirement anxiety, and American workers want them back...

Earlier, when we penned the post "In Anticipation Of Our Own "Department Of Truth" we disclosed some very blatant examples of media  manipulation by the Chinese propaganda bureau. We left that piece with an open ended query of when we may see comparable "information" massaging in the U.S. We didn't have to go too far to demonstrate a rather clear domestic example. A recent article by Bloomberg's Susanne Walker and Wes Goodman titled "China Adding to $1 Trillion of U.S. Debt Caps Rise in Rates" made the following bold statement: "Investors outside the U.S. have boosted their holdings of
longer-maturity Treasuries to the highest level since the credit markets
froze in 2008, helping curb rising yields amid concern inflation is
accelerating." The data massaging, in case it is not clear, has one goal only: to instill the reader with the impression that foreign buyers are stepping in to buy US debt, despite inflation concerns, and make the role of the Fed's relentless monetization of virtually all US gross debt issuance seem less relevant in response to the recent letter by Bill Gross highlighting precisely the opposite. The authors go on to say: "The shift toward long-term debt shows bond buyers outside the U.S. agree
with Federal Reserve Chairman Ben S. Bernanke’s assessment that
inflation will be contained even as global food and energy prices soar.
Bill Gross, who runs the world’s biggest bond fund at Pacific Investment
Management Co., warned last week that yields on Treasuries are too low
with inflation accelerating and the central bank planning to complete
$600 billion in asset purchases in June." Alas in their attempt to validate their thesis Walker and Goodman make the blatant mistake of comparing Chinese holdings data from before and after the just announced TIC data holdings revision. To wit: "China, the largest investor in U.S. government debt after the Fed,
increased longer-term notes and bonds by 39 percent to $1.145 trillion
in December from a year earlier, while its stake in bills declined 78
percent to $15.4 billion, the most recent Treasury data show." Alas, in making that statement, it confirms how clueless the authors are in interpreting ever critical Treasury data. We can only hope this error was made without premediation, or else we can now conclude that the Department of Truth is now actively manipulating "data" in our own backyard, to reach pre-determined goalseeked conclusions.

Earnings season has always been a crapshoot largely because of the nature of our financial system. To whit, we have accountants whose jobs consist entirely of finding ways to minimize taxes and eek out profits from even the flimsiest of circumstances (financial firms have become masters of this).

Global pension assets are estimated to be – drum roll, please – $31.1 trillion. No, that is not a misprint. It is more than twice the size of last year’s GDP in the U.S. ($14.7 trillion). We know a few hedge fund managers have invested in gold, like John Paulson, David Einhorn, Jean-Marie Eveillard. There are close to twenty mutual funds devoted to gold and precious metals. Lots of gold and silver bugs have been buying. So, what about pension funds? According to estimates by Shayne McGuire in his new book, Hard Money; Taking Gold to a Higher Investment Level, the typical pension fund holds about 0.15% of its assets in gold. He estimates another 0.15% is devoted to gold mining stocks, giving us a total of 0.30% – that is, less than one third of one percent of assets committed to the gold sector. Now here’s the fun part. Let’s say fund managers as a group realize that bonds, equities, and real estate have become poor or risky investments and so decide to increase their allocation to the gold market. If they doubled their exposure to gold and gold stocks – which would still represent only 0.6% of their total assets – it would amount to $93.3 billion in new purchases. If these funds allocate just 5% of their assets to gold – which would amount to $1.5 trillion – it would overwhelm the system and rocket prices skyward.

All those who believe (erroneously) that the Department of Truth is just a euphemism, guess again. Below we share some of the recent highlights that the Chinese central propaganda bureau is attempting to keep secret from the public. One can only weep at the "efficiency" of our own propaganda masters. Luckily, they are quickly learning from the best.

After yesterday TrimTabs Charles Biderman made it all too clear who runs the stock market, today the same firm exposes the system's dirty socialist core: "In a research note, TrimTabs highlights that government social benefits —including Social Security, Medicare, Medicaid, and unemployment insurance—were equal to 35% of all private and public wages and salaries in the 12 months ended January, up from 10% in 1960 and 21% in 2000. “We have no quibble with the view that the U.S. economy is expanding at a moderate pace,” says Madeline Schnapp, Director of Macroeconomic Research at TrimTabs.  “But we believe Wall Street does not fully appreciate the degree to which growth depends on government support.” Schanpp's conclusion: QE3 is inevitable, leaving aside debt monetization concerns, as without it the US welfare state will collapse. DXY: meet 50, just in time for the NYSE Borse to extends its rollup with the Zimbaber stock exchange.

Tech darling FNSR is plummeting after hours, down by $14, or 35%, to $26 after the company released in line Q3 numbers, but an outlook that has left the investor base, not to mention its sellside lemming brigade, stunned. While the current sellside Q4 consensus is of 48 cents a share on revenue of $257.9 million, the company announced that "revenues for the fourth quarter to be in the range of

$235 to $250 million" and "earnings per diluted share is expected to

be in the range of approximately $0.31 to $0.35." The result: a stock that is down 33% after hours. Perhaps it is time form Miller Tabak's Alex Henderson, who has been ranked #1 11 times in the Institutional Investor "All Star" poll, to reduce his $60/Buy Price Target. Yet what is worst is that perpetual tech dynamo, China, is now growing dim: from the mea culpa: "the Company will be

impacted by...a slowdown in business in China

overall." Is this the beginning of the end for the tech bubble?

Paul Farrell is out with another rather dismal outlook on the financial system (better known in the vernacular as the feloneous Ponzi scheme), and how while the immediate causes of the crash, and its disastrous aftermath, which benefits only the upper class at the expense of everyone else, are certainly a function of the current and previous administration, one has to look further back to see the flawed foundations on which everything is built. As far back as Reagan, in fact, and his eponymous Reaganomic doctrine according to Farrell. "Was their Reaganomics ideology so rigid, so blinding, they couldn’t (and still cannot) admit they were wrong? Forcing them to lie to America? Cover up the lies? The evidence is clear. Today, a harsh lesson from history, facts and a warning. Listen closely America. It’s already happening again. The collective Reaganomics Brain has gone from crash to cover-up to comeback kid to capitalism-for-the-super-rich in three short years. Now with absolute power over America." Sure enough, Farrell sees the events of 2008/9 as only the first step in the unwind of Reaganomics. Step two is coming, and it will be the final end of not only the Great Moderation experiment started in the early 80s, but, luckily, of that organization at the heart of it all: the Federal Reserve.

RANsquawk Market Wrap Up - Stocks, Bonds, FX etc. – 08/03/11

Reuters is now quoting witnesses as saying that 50 protesters have been hurt in Yemen, three of them seriously. Earlier on Tuesday, thousands of inmates rioted at the central prison in Sanaa, taking a dozen guards hostage and calling for President Saleh to resign, according to the Associated Press. At least one prisoner was killed and 80 people were wounded, police said. And elsewhere, gunfire erupted in Abidjan, Ivory Coast, where Gbagbo forces killed 4. These are just the latest pieces of news from Reuters in a day in which nothing at all from the tape mattered, as a rumor circulates that the wildcat well drilled in the 1 billion barrel strategic petroleum reserve in Bernanke's back yard has now started producing.

In California ...