Archive - Mar 2011

RANsquawk European Morning Briefing - Stocks, Bonds, FX etc. – 08/03/11

EURUSD remains in its uptrend, however we are seeing a rather large sentiment shift in retail positioning with the EURUSD very close to Neutral territory after a spell in the strong long zone, GBPUSD is now also in the Neutral zone. Key news events that could have an impact on positioning are CAD Housing Starts released at 8:15 EST, and also tentatively timed is a speech by BOE Gov King.

The market sold off today as the Fed came out (not that there is anything wrong with that) and said...

Wonder why the US mint has not sold a single ounce of silver so far in March? Here is a clue: "The United States Mint today announced that it is requesting public comment from all interested persons on factors to be considered in conducting research for alternative metallic coinage materials for the production of all circulating coins. These factors include, but are not limited to, the effect of new metallic coinage materials on the current suppliers of coinage materials; the acceptability of new metallic coinage materials, including physical, chemical, metallurgical and technical characteristics; metallic material, fabrication, minting, and distribution costs; metallic material availability and sources of raw metals; coinability; durability; sorting, handling, packaging and vending machines; appearance; risks to the environment and public safety; resistance to counterfeiting; commercial and public acceptance; and any other factors considered to be appropriate and in the public interest."

On Friday, free and efficient market champion Ted Kaufman, previously known for his stern crusade to rid the world of the HFT scourge, and all other market irregularities which unfortunately will stay with us until the next major market crash (and until the disbanding of the SEC following the terminal realization of its corrupt and utter worthlessness), held a hearing on the impact of the TARP on financial stability, no longer in his former position as a senator, but as Chairman of the Congressional TARP oversight panel. Witness included Simon Johnson, Joseph Stiglitz, Allan Meltzer, William Nelson (Deputy Director of Monetary Affairs, Federal Reserve), Damon Silvers (AFL-CIO Associate General Counsel), and others. In typical Kaufman fashion, this no-nonsense hearing was one of the most informative and expository of all Wall Street evils to ever take place on the Hill. Which of course is why it received almost no coverage in the media. Below we present a full transcript of the entire hearing, together with select highlights. The insights proffered by the panelists and the witnesses, while nothing new to those who have carefully followed the generational theft that has been occurring for two and a half years in plain view of everyone and shows no signs of stopping, are truly a must read for virtually every citizen of America and the world: this transcript explains in great detail what absolute crime is, and why it will likely forever go unpunished.

Love the beaches, hold off on the bonds.

Nothing to see here... Keep moving along people... Your regularly scheduled programs will not be interrupted...

One of the more important data points in today's G.19 (consumer credit release) statement was that the Loan To Value ratio on vehicle financings (at least those reported by the government) in January dropped to 80%, from 81.8% in December, which is a new all time low in the history of the series. The recent swing in this ratio has been very perplexing: the plunge from 95.1% in July 2008 just before Lehman to 84.9% in September of 2009 is explainable: after all lending virtually ceased and banks were cautious with lending out any money absent a material depreciation buffer (and yes, at the peak of the credit bubble, the LTV ratio hit 100.4% in September 2006, when banks were willing to finance more than the value of the car, confirming just how much excess credit money was sloshing around courtesy of a cranking securitization ponzi and a humming shadow banking system). Then following the March 2009 lows, LTV ratios once again moved higher and peaked in December 2009/January 2010. They have been in decline ever since, and the decline has accelerated over the past 4 months, when it was 86.5% in September, down to 80% in January. In absolute terms, this means that in January the amount financed was $26,673.4 per car, the lowest since February 2009. Yet this has happened even as the average car prices continues to rise, and the implied January 2011 car price was $33,342. In other words, the average equity check that buyers have to finance is a record $6,668!

Funding for U.S. state pension plans improved marginally in 2010 as the economy recovered from the recession, a report from Wilshire Associates said. Will battered plans continue doing better?

"You put Lloyd Blankfein in pound-me-in-the-ass prison for one six-month term, and all this bullshit would stop, all over Wall Street," says a former congressional aide. "That's all it would take. Just once."

My take is that there's nothing inherently wrong with unions, as long as they are voluntary associations of people – they're just associations working in certain trades or in certain places. It's natural. Sure, why not? But there are problems with the way unions exist in reality today, particularly when membership is made mandatory. That's a violation of the human right to work. When you can't work unless you join the union, and union membership is limited – often to people with political connections or family relations with union officials – it's clear that the union is not a defender of the little guy, but a kind of protection racket. It's a fraud. That doesn't just harm the individual worker who may wish to enter a unionized field; it has broad economic consequences. When only union members can work, the union can set wages at whatever level they want. That makes the product or service in question more expensive for everyone in society. In other words, unions don't help the average working man – they only help those who can get into the unions. They hurt everybody else: non-union workers, employers, and consumers at large. And it gives union bosses extraordinary power.

The last time Charles Biderman appeared on CNBC, he was carted onstage (and promptly off) in the late hours before Christmas Eve, when it was virtually assured nobody would hear the self-evident truths out of his mouth such as this one: "individuals have been selling, companies are net selling, insider
selling and new offerings are swamping any buyback and any cash M&A
activity since QE 2 was announced. Pension funds and hedge funds don't
really have that much cash to invest. So what nobody's asking is what
happens when QE 2 stops: if the only buyer is the Fed, and the Fed stops buying, I don't know what is going to happen...When
I was on your show a year ago I was saying the same thing: we can't
figure out who is doing the buying it has to be the government, and
people said I was nuts. Now the government is admitting it is rigging the market." Now that the great muni scare forced retail to take proceeds from muni liquidations and invest in stocks just as the market topped out, CNBC brought Biderman on again, hoping to get something, anything, bullish out of the flow of funds expert. Wrong. "In December of 2009 received a lot of ridicule for saying that the Fed is rigging the market which as everybody is well aware." As for the "sustainable economic recovery" i.e., what happens to Quantitative Easing: "They probably will end for a while, we think there is going to be a QE3 and 4, or until the market says: "No Mas - we are not going to believe this game the Fed is playing... The Fed is printing over $100 billion a month to buy other assets and pay bills, and economic growth is picking up at a $200 billion annual rate. This is very inefficient method of boosting the economy, and then how do we repay these trillions that have been created out of thing air in the future." At which point the producer "screams get him off my show."

Where do the likes of Warren Buffet get off when he's all in favor of the death tax and allowing the government to redistribute your wealth yet he leaves his pile to Bill Gates's foundation, neatly avoiding the death tax.

After consumer credit seemed poised to be at a critical inflection point in December, after total credit increased by $6 billion, and all important revolving (i.e., credit card) credit component increasing by $2.3 billion, and the government - recently the only source of incremental consumer credit - largely absent from the monthly pickup, the January number confirmed this single month occurrence was largely a fluke, and was predicated by the already discussed consumer weakness seen in the beginning of the year. Not only did today's consumer credit update indicate last month's increase was revised lower by 33%, to just $4.1 billion (revolving revised from $2.3 billion to $2.1 billion), the revolving credit improvement is now dead and buried, after there was another drop in total revolving credit to the tune of $4.2 billion, more than wiping out last month's increase and printing the 28th of 29 consecutive monthly declines in revolving credit. Yet what is most troubling is that while non-revolving credit increased by $9.3 billion, $24.9 billion of this increase was due to the Federal Government, while the traditional source of credit: consumer banks, plunged by $15.1 billion M/M, the biggest monthly drop since the securitization-commercial reclassification in March of 2010. In addition all other holders of debt saw their notional amounts decline with the exception of savings institutions which increased by a token $345 million. Unfortunately for the Fed, consumer deleveraging is alive and healthy, meaning that the US government will need to fund the private sector indefinitely in the future, which also means monetization of the relentless surge in debt (note today's record $224 billion monthly budget deficit) will continue.

And the imminent update, which is just as expected: "AL JAZEERA SAYS INTERIM REBEL GOVT REJECTS GADDAFI OFFER OF MEETING TO CONSIDER HIS RESIGNATION"

Just out from Reuters: "AL JAZEERA SAYS GADDAFI OFFERS REBELS TO HOLD PEOPLE'S CONGRESS TO LET HIM STEP DOWN WITH GUARANTEES"