Archive - Apr 2011

Wednesday afternoon will mark a watershed in Federal Reserve communications strategy. In addition to the Federal Open Market Committee (FOMC) policy statement, Chairman Bernanke will give his first post-meeting press conference and the FOMC's “central tendency” economic forecasts will be released. The expected timeline of events is as follows...

RANsquawk European Morning Briefing - Stocks, Bonds, FX etc. – 26/04/11

And two more highlights from a floundering Europe once again "validating" the EUR spike to near multi year highs. Eurostat came out earlier and reported that the Greek budget deficit, while declining from 15.4% of GDP in 2009 to 10.5% in 2010, missed expectations by a mile, or over 10%, after consensus was for a deficit print at 9.4% of GDP. And while the second to last PIIGS domino to fall also saw its deficit decline modestly sequentially from 11.1% of GDP to 9.2% in 2010, the country's total debt/GDP rose from 53.3% to 60.1%. With austerity like that, who needs the Teamsters?

This could get ugly, prepare to go 'old school'!

Both Italy and Spain came to market this morning, pricing T-bills for E8.5 billion and nearly E2 billion, respectively. And while there was a divergence in bid to cover trends, yields surged across the board confirming that below the European surface not all is as well as the EURUSD would make most believe. Spain priced EUR 1.163 billion in 3-month T-Bills with a slightly improved bid/cover 4.43 vs. Prev. 4.33 although at a cost of a nearly 50% jump in yield or 1.37% versus 0.899% previously. This is the highest yield since December 2010. Spain also sold EUR 806MM in 6-month Bills at a bid/cover 7.11 vs. Prev. 7.65 with the yield surging as well, this time hitting 1.867% vs. Prev. 1.361%. Italy followed suit issuing EUR 8.5 billion in 6 month Bills, however at a lower bid/cover (reduced interest) of 1.432 vs. Prev. 1.61 despite the yield also jumping to 1.659% from 1.396%. Elsewhere the 3 and 6 month Euribor rate fixings continue to skyrocket, hitting 1.361% and 1.657% respectively. Thank you ECB for hiking rates. All this myopic action has done is to make the cost of short-term debt rolls prohibitively more expensive. Luckily, it will last about 3 months tops before Trichet, just like back in 2008, is forced to loosen once again (and yes, AU priced in EUR will be waiting).

And so the proverbial correction in silver may have well been completed in the span of 24 hours. As the attached chart shows from its Sunday night peaks to its Monday night bottom silver has dropped over 10%, what some call a mini bear market (which takes it to those depressionary lows seen on Thursday of last week). Is the climb now set tp resume, although not so much due to anything else (and there is plenty else) but because the USD pounding is back in full brokeback style. The EURUSD is about to break above the Sunday night heights in the mid 1.46s and while weak hands are vacating gold and silver, everyone is scrambling to load up in CHF. We wonder how long until those same people realize that Hildebrand is just as mortal as any other central banker with a balance sheet behind him, and as recently as 12 months ago underwent a failed campaign to halt the surge of the CHF in the process contaminating his assets with some seriously ugly currency assets (if one may call $220 billion of dollars on the left side of your balance sheet assets and thus implicitly "supporting" the SNB liability - the Swiss Franc) whose eventual unwind will not be too kind on the Swiss currency.

There's a White House over yonder...

The Silver market is in a bubble stage right now. No one really knows how long this will last, whether Silver goes up another $5, 10, 20 doesn`t really matter for investors who are buying the physical metal in the form of coins because when the bubble ends they are going to be sitting on a depreciating asset.

Tuesday is my 40th birthday so please be kind as you read through my comment on life, health, work, markets and friendship. I'm also soliciting advice and donations for my blog...

On almost any metric applied, QE2 ends up not only falling well short of its proposed goals, but actually turns certain metrics like GDP growth negative compared with the prior quarter, and heading in the wrong direction.

Over the past hour Zero Hedge has been inundated with reader comments notifying us that Ampex has, validating the earlier post speculating about a possible silver shortage at the metals distributor, launched a "reverse ïnquiry" in which it will pay "you $3.00 over the current spot price of Silver for your Silver American Eagles. ANY year, ANY quantity!" and "We will pay you $38.00 over the current spot price of Gold for your Gold American Eagles. ANY year, ANY quantity!" So aside from this first public confirmation that one of the biggest wholesale retailers of precious metals is now inventoryless [sic], we can certainly see why Asia has decided to take silver down in the afterhours electronic session.

Well, it's official: Ron Paul has launched his 2012 presidential campaign. Per the National Journal: "Rep. Ron Paul, R-Texas, whose outspoken libertarian views and folksy style made him a cult hero during two previous presidential campaigns, will announce on Tuesday that he's going to try a third time. Sources close to Paul, who is in his 12th term in the House, said he will unveil an exploratory presidential committee, a key step in gearing up for a White House race. He will also unveil the campaign’s leadership team in Iowa, where the first votes of the presidential election will be cast in caucuses next year."

Equities (unch) managed to algorithmically outperform credit (wider) and un-sync from correlation and vol on the day amid rather tepid conditions. Up-in-quality remains in cash and synthetic credit and protection in vol seems bid again (for now).

Whether or not you like QE (yes, there are some insane people who think it’s a good idea… unfortunately they work for the Fed), this is the reality our financial system faces. Indeed, if the Fed were to quit QE for good the resulting crisis would make 2008 look like a picnic (the 2008 collapse was triggered by the CDS market which was only $50-60 trillion in size, les than one third of the interest rate based derivatives market).