Archive - Jun 2011

I find it odd (to say the least) that anyone on the planet even considers paying attention to the Fed’s CPI measure. According to CPI inflation has only risen 3.2% in the last 12 months. This is during a period in which gas rose 33% while ground beef, cheese, and vegetables are all up in the double digits as well. Heck, even RENT rates have jumped in the last year. But somehow because housing prices and iPads have fallen in price… inflation is under control.

About a year after Tim Geithner literally top-ticked the economy with his first Op-Ed, "Welcome to the Recovery", which came days ahead of the QE 2 announcement, he has just released his Op-Ed #2 "A Rescue Worth Fueling" in the WaPo, in which he praises the administration for using billions in taxpayer capital to save a few hundred thousand union jobs. His bottom line: "The domestic automakers are getting stronger. For the first time since 2004, each has achieved positive quarterly net income." Perfect release timing: just as both GM and Ford announce a drop in monthly sales, and GM discloses record channel stuffing. If there is one call to fade and short all the US automakers, this is it.

We really hope that the guy who bought LNKD at $122 on its first tday of trading has sold, because while one may debate the merits of gold and silver as an alternative currency to the infinitely dilutable linen/cotton contraption that has become enemy #1 of every central planner alive, there is absolutely no debating that LNKD is and will be nothing short of a dot com bubble until it drops to its fair value, somewhere 60% lower than current prices...where its fwd PE will be at most triple digits. Yet that will hardly be a consolation to LNKD longs: since everyone who got an allocation at the IPO has since sold, the entire LNKD long base (that has not booked a profit) is now at a loss.

The shiny metal still looks good ... in the long-run

This is, by far, the best time I've ever witnessed to be a consumer of mobile computing technology. Alas, this is going to be the worst of times for those companies that come in any where under 2nd place in the Mobile Computing Wars - including some pretty big names... RIM, NOK, MSFT? INTC?

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

At this point it looks bad for the working middle class and it looks
like they aren’t going to make it through the next banker made financial
crisis. The middle class just wants the chance for a new beginning.
They want jobs. They know the country has been hijacked by the banking
corporatocracy, supported by the corrupt political class in D.C. It is
time for the middle class to channel their inner Josey Wales and get
plumb mad-dog mean. It is not time to lose your head and give up. The
middle class are being pursued by Wall Street bounty hunters and
government crooks trying to finish them off. It is time to make a stand
and fight. It is essential that we know our enemies and how they
achieved their power. It all began in 1913 with the creation of the
Federal Reserve and the implementation of the personal income tax. I’ve
previously detailed how the baby boom generation contributed to our
fiscal plight in Part One – For a Few Dollars More,
how the actions of the Federal Reserve’s over the last few decades have
impoverished the middle class and placed the country at the brink of
collapse in Part Two – Fistful of Dollars and addressed the nefarious creation of a central bank in Part Three – The Good, the Bad, and the Ugly.

There is little we can add to what can only be classified as career suicide facilitated by terminal incompetence from one of CNBC's most beloved "economists" (in this case, naturally, Deutsche Bank's Joe LaVorgna), who just cut his NFP estimate from 300,000 to 160,000 in two days. From yesterday: "Our preliminary estimates were for +300k on payrolls and a three-tenths decline in the unemployment rate to 8.7%. However, in light of the softer tone of the data—particularly the inability of initial jobless claims to recover below 400k—we trimmed our projections. We lowered our May payroll estimate to +225k and raised our unemployment rate target to 8.9%." And from 10 minutes ago: "In light of the significant downside surprise in the ADP employment numbers earlier today, as well as the equally important slowdown in the ISM employment component, we are trimming our May nonfarm payroll projection to 160k from 225k as we previously estimated. We project private payrolls to increase 185k. We continue to anticipate a one-tenth decline in the unemployment rate to 8.9%."

Grains are probably going up, leading to higher liquor prices ... and wealthy people who have a taste for sake or shochu would probably pay top dollar for "clean", pre-Fukushima beverages ...

That GM sales declined in May by 1.2% on expectations of a rise of 1.5% in May is not really surprising: as we have been saying for a nearly three months now, the Japanese earthquake, far from adding points to US GDP, is now impacting every aspect of the US and global economy (yes, Japan is and will be the global economic wildcard for a long, long time: should we get Shirikawa to agree to a $250 billion QE the dynamics of the global prisoner's dilemma will change promptly). Furthermore, the bulk of these purchases are the government-funded equivalent of subprime home purchases from 2005-2006: take away government funding and the sales collapse would be historic. Yet what is surprising, and what continues to be the only important metric in the monthly GM sales report, is the monthly channel stuffing update, aka the "month-end dealer inventory." We hope nobody will be surprised to find that it just hit another all time record of 584,000, 7k more than April and 177 more than a year ago. Although in reality, considering that GM car assembly should have been impacted by the Japanese earthquakes, one would have hoped for this inventory to decline. Which is the truly surprising part. In other words, In May, channel stuffing at GM went into overdrive.

Tho only thing different this time is the date..."see you in the debt world and don't be late..."

Remember when the European Stress Test round 2 was supposed to be "credible" and restore "confidence", this time for realz? Well, as Reuters reports, "A second round of data gathering is needed for the European Union's health check of banks because of "errors" and "unrealistic assumptions", the European Banking Authority said on Wednesday. Arising from the peer review and quality assurance process, the EBA is currently assessing and challenging the first round of results from individual banks," the EBA said. "This will mean that another round of data will be required from banks. Errors will have to be rectified and amendments made where there are inconsistencies or unrealistic assumptions."  Data from the second round won't be received until mid to late June -- the time when the EBA had indicated it would publish the results of the test. What else could one expect from a continent which is run by a bureaucrat who has openly admitted he lies to prevent a crash in the EURUSD.  Plus really: who gives a flying fornication? At this point nobody, and we mean nobody, believes that any bank in Europe is even remotely not bankrupt. It is time for the kleptocrats to actually save the taxpayers some money and just pull the whole farce.

From a note just released by Sanford C. Bernstein & Co. Brad Hintz:

"Goldman Sachs wont face criminal precaution related to sales of mortgage linked securities because such a move could threaten the US financial system."

Really, that's all you need to know.

So finally, after much delay, the market lemmings realize that after QE2 comes QE3.

If you think this through, there is only one ethical thing for the maiden to do: toss the spiked sugary drink in the face of the predator and deliver a swift, hard kick between his legs "where it counts." Greece should respond to this planned predation with complete and total default: not a "haircut" or "extended terms," a complete and total refusal to pay any of the debt. We are constantly warned that the resulting collapse of the "too big to fail" banks would trigger a global implosion. That is false; life would go on after the predators declared bankruptcy and were liquidated. What the predators fear most is an awareness that any disruption in normal life would be brief and relatively painless compared to the vast suffering imposed to render them their pound of flesh.