Archive - Jun 1, 2011

And so the thunderous herd of highly overpaid and always wildly inaccurate Wall Street lemmings better known as "economists" starts moving. Yesterday it was that paragon of the 0.000 batting average Joe LaVorgna who cut his NFP forecast from 300,000 to 225,000 (a number we expect will be cut to about 155,000 today, or indicative that little Joey was off by about 100% as usual), and today Morgan Stanley has already fired the reactionary salvo, trimming its NFP forecast for this Friday's number from 175,000, accompanied by Credit Suisse which cuts from 185,000 to 120,000. And these lemmings are paid 7 digit salaries why again? So far the most resilient is Goldman's Jan Hatzius, who just threw up all over the ADP number, but has so far refused to cut his NFP prediction of 150,000. We give him at most 48 hours before he does following today's upcoming abysmal CPI number.

Banks, balance sheets, guaranteed crashes, and why no one ever asks who's going to backstop all of the sovereign debt CDS being written out there...

The latest economic data is out and it is horrendous: with expectations for the ADP employment number to come at 175K, following a downward revised 177K print previously, it tumbled to a puny 38K in May. While this number is extremely irrelevant in terms of correlating to the actual NFP number due out this Friday, expect to see a spate of downward NFP revisions on this latest confirmation that the US economy has stalled even with QE2 still in effect for another 29 days (and soon to be extended). From the report: "Today’s ADP National Employment Report suggests that employment growth slowed sharply in May. Employment in the nonfarm private-business sector rose 38,000 from April to May on a seasonally adjusted basis.  A deceleration in employment, while disappointing, is not entirely surprising. In the first quarter, GDP grew at only a 1.8% rate and only about 2¼% over the last four quarters. This is below most economists’ estimate of the economy’s potential growth rate and normally would be associated with very weak growth of employment." Precisely as expected by Zero Hedge.

The hacker collective Anonymous Operations may not be the most organized but they sure are passionate. Following the latest disinformation campaign of a Greek bailout, the hackers, which had previously expressed their solidarity with the Greek people (see below) have no made it clear that the latest target of their wrath (which a few months ago was the Federal Reserve) is now the IMF. Or at least its website. As of a few minutes ago, "Anonymous" tweeted that the target of its imminent DDOS attack will be www.imf.org. Alas, since the IMF has always been merely a figurehead for global bailout efforts, in this particular case spearheaded by various banking interests, we give Anonymous a few days before they realize that the target of their "anti oppression" move has a website with a .com suffix, not .org. And regardless of how (in)effective this action is, at least it sends the message that someone is willing to do something to at least protests against the rape that will soon occur in Greece, hidden by the very polite word: "privatization."

Markets around the world are still creeping higher, while economic fundamentals are crumbling everywhere. And there are more signs on the horizon that things about to make a change for the worse: collapsing cattle prices!

• Is bond trading dying? (Reuters) - of course it is; everyone is trading CDS
• Russian president comments on wheat export ban lift (Kremlin)
• Europe struggles towards new Greek rescue deal (Reuters)
• A new Greek deal with troika imminent (Kathimerini)... since refuted... then confirmed... then refuted again... then confirmed again... etc
• Rehn Sees Greek Solution in Bond Rollovers, Cuts (Bloomberg)
• Kan Ouster Risk Rises as No-Confidence Vote May See DPJ Split (Bloomberg)
• China May Assume Some Local Government Debt (Bloomberg)
• SAC Faces Probe Of Biotech Trading (WSJ)
• Australia GDP Falls Most Since 1991 (Bloomberg)
• NATO extends Libya operations to September (Reuters)... 2020...
• World’s Wealthy Rose by 12%: Boston Consulting (Bloomberg)

The ISM, ADP, and vehicle sales for May: all expected to be horrible. In other rhetorical observations, what kind of stingy depressionary economy won't let a Fed chairman buy a virtuous economic cycle for $800 billion?

Bloomberg reports this morning that Turkey imported 25.7 tons of silver in May, up from 61 kilograms in April, the Istanbul Gold Exchange said in a report on its website. This is a huge increase in demand and suggests that Middle Eastern demand for silver, which has not been noteworthy to date, may soon become an important catalysts for higher silver prices. Silver demand is particularly strong in China and Asia and among a minority but increasingly vocal and influential band of silver advocates who believe that silver is a superior form of money and will help protect people from developing problems in the western and global financial and monetary system. Bloomberg reports this morning that U.S. silver eagle coin sales through May 2011 are the best since 1986 (see news below). 18.9 million ounces have been sold so far in 2011. While that may seem like a lot, to put that number in context, it is only worth some $661 million. Ireland, a small country, may need an extra €50 billion to be made available under the EU/IMF programme to allow it to remain out of the markets for a longer period. The average daily turnover on foreign exchange markets is in excess of US$4 trillion. The US has monthly budget deficits of over $200 billion.

Two more indicators of a stalling global economy came out of China and the UK overnight, where manufacturing Purchasing Managers Indices posted substantial drops. Growth in the Chinese manufacturing sector slowed to a 10-month low in May, with both production and new orders gains moderating during the month, according to the final HSBC Purchasing Managers Index released Wednesday. The final May reading stood at 51.6, up from the May flash reading
of 51.1 reading but down from 51.8 in both April and March. Total new orders rose for the tenth consecutive month but at a slower pace than in April, while new export orders contracted for the first time in three months, though the rate of contraction was only marginal. This caused the pace of output growth to slow to a ten-month low, HSBC said. However, the pace of new employment rose at the fastest rate in five months. The rise in input price growth eased to a nine-month low in May. Yet the modest Chinese slowdown was nothing compared to the now confirmed stagflation gripping the UK, where Manufacturing PMI fell from 54.4 to 52.1 in May, weaker than consensus expectations (54.1) and its lowest level since September 2009. As Goldman reports,  consumer-facing manufacturers registered the sharpest contraction in output on the month. Some of this is attributable to temporary effects; some may be indicative of more sustained pressure on household incomes. Nowhere was the impact of this more evident than on the GBPUSD pair which took a nearly 100 pip overnight tumble, and has weighed on European markets overnight. Other global PMI readings also confirmed that the world economic is approaching stall speed, which should certainly be favorable for global bizarro stocks.

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