Archive - Jun 6, 2011

Throughout most of 2009-early 2011, any and all bad news regarding the US economy was perceived as positive for stocks due to traders’ belief that a weak economy would mean more money printing from the US Federal Reserve. That situation now appears to have changed. The last two months have seen big misses on virtually every economic data point: the PMI, ISM, Housing, etc. However, rather than rallying, stocks have dropped nearly 5%, taking out numerous lines of support.

It's one thing for the EU to vote on a rescue plan for Greece that bounds the population into lives of servitude to pay off Central Bank loans but quite another to get the people to accept it.

Now that both the early April swing support of 1283.75, which also happens to be the 150 DMA, have been taken out, the next support in the market is the 200 DMA, which is also the post-Fukushima March lows. A breach of that level would mean the market goes negative for the year. As a reminder: the next 30 minutes are NYSE circuit breaker coffee break time.

It appears Jean-Claude Jun(c)ker has been sniffing hallucinogenic Spanish cucumbers again:

• JUNCKER SAYS EURO OVERVALUED VS OTHER MAJOR CURRENCIES
• JUNCKER SAYS EURO AREA SHOULD HAVE EXCHANGE-RATE POLICY

The tautological question of whether he is lying we leave to the logicians. What is apparent is that Europe is finally getting pissed they are dead last in the FX race to the bottom. Cue Tim Geithner's strong dollar policy.

And in far more important news, Greece's G-Pap says that he is willing to consider a referendum on the Greek bailout measures. If so, it's goodbye EUR: a referendum has a snowball's chance in a Comcast business channel in passing.

Presented without commentary (well, we'll say one thing: for QE3 to work, it would have to be a surprise... so much for that).

Nearly three weeks ago, on May 17, Zero Hedge, when analyzing the complete collapse in car and thus Industrial production made the following observations: "The immediate impact: the drop in the industrial production already
seen, but the bulk of it due to delayed aftereffects will likely impact
the May number, as the follow through from the Japanese supply chain
halt starts ringing a loud alarm bell across Wall Street. Of course,
this is another thing that all those calling for a 4% H2 GDP could have
absolutely not foreseen (and in fact it was originally supposed to be
positive for the economy, eh Deutsche Bank?). Expect to see drastic
downward cuts to May Industrial Production and next, to Q2 GDP." Fast forward to today, when, in an example of poetic irony, none other than Deutsche Bank's grossly overpaid economists also known as Shaman witchdoctors in less than polite circles, have just come out with a note titled: "Quantifying the impact of autos on Q2 real GDP" in which they, gasp, discover that "a near 30% decline in motor vehicle production is consistent with roughly a two full percentage point drag on Q2 real GDP. In our forecast, we are assuming a decline of around 1.5% because we think that we might see a small bounce in June production that will push the quarterly decline in motor vehicle production to something closer to -20%." Well, better late and always cluelessly wrong, than never... and still cluelessly wrong.

Amid the usual meandering propaganda, Tim Geithner finally catches up to Zero Hedge from February 2010: "The three largest U.S. banks account for 32 percent of total banking assets in the United States, in comparison to 46 percent for the three largest in Japan, 58 percent in Canada, 63 percent in the UK, 65 percent in France, 70 percent in Germany, 71 percent in Italy, and 76 percent in Switzerland. And total banking assets are 461 percent of GDP in the UK, 178 percent in Germany, and 820 percent in Switzerland." Supposedly this is intended to indicate just how much less concentrated the US banking system is compared to other nations: "Some argue that the U.S. financial system is too concentrated, which could promote systemic risks.  But the U.S. banking system today is less concentrated than that of any other major economy.  And
total banking assets in the United States today are only about the size
of U.S. GDP – much lower than in other developed economies." So just because the entire system is broken beyond repair, it makes sense to tout that the US is broken just a little bit less than everyone else? Also, where is the mention of the fact that the bulk of these balance sheets are chock full of toxic US securitized detritus and that without the US selling its worthless crap around the world, we would not be in the predicament we are in now. In the meantime, here is what Zero Hedge presented in February of last year...

Duh ...

Last week, more than 70 days after President Obama sent our military to attack Libya without a congressional declaration of war, the House of Representatives finally voted on two resolutions attempting to rein in the president. This debate was long overdue, as polls show Americans increasingly are frustrated by congressional inaction. According to a CNN poll last week, 55 percent of the American people believe that Congress, not the president, should have the final authority to decide whether the U.S. should continue its military mission in Libya. Yet for more than 70 days Congress has ignored its constitutional obligations and allowed the president to usurp its authority....I believe these resolutions and amendments indicate that the tide is turning in the right direction. I am confident we will see Congress move toward ending our unconstitutional wars. The American people are demanding no less. The president's attack on Libya was unconstitutional and thus unlawful. This policy must be reversed.

John Taylor is again making the media rounds, following last week's CNBC appearance in which his punchline is that next year was going to be "truly miserable", today he was on Bloomberg continuing his thesis of how doom and gloom will be with the US for a long, long time, and that courtesy of no QE3, risk is about to go bidless (he differs with the Zero Hedge outlook only on whether there will be QE 3 or not). His response to what an environment of no fiscal or monetary stimulus (in case it was not clear): it is bullish for the JPY, bullish for the USD, bearish for commodities and bearish for stocks. More importantly, in terms of timing, Taylor says that after being short the dollar, he went long a "week and a half ago" and expects a big upside USD catalyst in the next "3 or 4 days." which he follows up with the cryptic: "Our analysis of the markets has shown that they are very, very dangerous." Another trade that JT has on is a long JPY, short EUR - the reason for the EUR bearishness is that Taylor is very "confused" by the second European bailout. As for his long USd conviction, it is based on his belief that the market appears to believe that QE 3 is coming, and that once it is made clear that there will be no further monetary easing (good luck with that), the dollar will surge, following a slowdown in the economy, and a shortage of dollars.

Another piece of crap to watch out for.

The good news: this week's insider sales to buys were half of last week's 147x. The bad news: this week's insider selling to buying came at 69.3x. As a reminder, a baseline bearish indication occurs whenever the insider selling surpasses 30x. That it has surpassed that threshold for virtually every week in the past two years seems to continue to be lost on investors. There were 8 insider purchases of S&P 500 stocks for $3.4 million, the bulk of which was in Marshall & Ilsley stock for $1.7 million, while the sales were focused on Heinz, Iron Mountain, Agilent, Broadcom and NetApp, where insiders dumped a total of $86 million.

A snapshot of the US Afternoon Briefing covering Stocks, Bonds, FX, etc.

Market Recaps to help improve your Trading and Global knowledge
Weakness in CAD evident after mixed Canadian economic data

There is so much ideological, quasi-religious fanaticism around "free trade" (there is no such thing as "free trade," there are only various permutations of managed trade) and "industrial policy" (every nation has one, explicit or implicit) that it is difficult to make any sense of the many intertwined issues. Ideological purity is not a substitute for knowledge, any more than a superficial admiration of machines equals actually knowing how to assemble, maintain and repair them. As a background context, we might start by noting that Marx outlined how finance capital comes to dominate industrial capital, as industry comes to depend on the credit extended by the banks/finance capital. The key takeaway: if you don't control the banks, then they will end up dominating industrial capital. In the U.S., we have the worst of both worlds: a dominant financial Elite and various cartels (military-industrial, sickcare, agribusiness, etc.) that have captured what little of the Central State that isn't already beholden to financial capital.

This is not good. From the RT clip: "A nuclear rabbit has sparked online panic in Japan. Amateur footage shows an earless mutant rabbit, and the person who made the video claims it was shot just outside the exclusion zone near Japan's crippled Fukushima plant. The clip has given rise to fears the radiation threat in the area is far worse than previously thought. The funny bunny has caused an online frenzy, with predictions that babies in Japan may soon be born with mutations."