Archive - Aug 18, 2011

-700K NFP print coming?

The market is now at a very simple crossroads: bonds are pricing in the hyperdeflation that the resumption of the global depression brings in, while gold is pricing in the central planning policy response to that hyperdeflation, which is nothing but print, print, print. Anyone who feels like arbing the spread on the trade (which has a very unpleasant end in either case), should go ahead and do it now.

QE3 is being dragged, kicking and screaming, into the arena. As for the Philly Fed number below, there is no comment necessary.The 10 Year just took out 2.00% and is at 1.99%.

Panic mode is fully back with stock plunging to Friday lows, while both gold and bonds are at records, 10 Year touching a record low 2.03%, the S&P plunging to Friday's lows and gold as is well known, back at all time highs. The catalyst: the same thing Zero Hedge reported yesterday, namely that one bank in Europe has a dire dollar squeeze (note not EUR) to the tune of $500 MM. The real market is thus now pricing in both hyperinflation and hyperdeflation at the same time, while the Fed's policy instrument, stocks, is now pricing in Lehman part deux (but don't nobody mention SocGen or the black choppers will come after you). As for those who followed Doug Kass' advice and bought XLF yesterday, we have four words: iShares Inverse Kass ETF.

The market, sleeves rolled up high, prepares to follow the president on vacation.

After accurately predicting the Pan-European Sovereign Debt Crisis, which sparked our prediction of the French Bank Run which appears to be causing a panic induced market run as I type this, we've found the big US bank most likely to suffer contagion  from the fallout... As I have said in the past, Lehman was just the warm up routine, you ain't seen nothing yet!

Just one data point to note: Germany: +10

The president, after a whirlwind media tour, has begun his much deserved vacation at Martha's Vineyard. We wonder what is the market bloodbath threshold for Obama to announce he is cancelling it, and is rolling up his sleeves to get stocks higher -3%? -5%? Here is the president's complete daily schedule:

• 10:30 am - Meets with senior economic advisers
  
• 11:50 am - Meets with national security team
  
• 3:30 pm - Departs White House
  
• 5:15 pm - Arrives Martha’s Vineyard

By then the market should be, thankfully, closed.

All trading on Russia's MICEX stock exchange has been halted until 17:15 GMT. Next up: our very own Rule 48.

Following yesterday's upside surprise in the PPI, it was only logical that CPI would come higher than expected. However, printing at a 0.7% swing M/M, or the highest in years, was not expected. Broad CPI came at 0.5% in July after dropping -0.2% in June, or 3.6% Y/Y. This was far more than consensus which expected 0.2%. Core CPI however was in line with expectations at 0.2%. The reason for the surge? Gas, food and clothes. "The gasoline index rebounded from previous declines and rose sharply in July, accounting for about half of the seasonally adjusted increase in the all items index. The food at home index accelerated in July and also contributed to the increase, as dairy and fruit indexes posted notable increases and five of the six major grocery store food groups rose...The apparel index continued to rise sharply, increasing 1.2 percent in July; it has increased 3.9 percent over the past three months....The index for nonalcoholic beverages increased 0.9 percent in July as the coffee index continued to rise sharply." Elsewhere confirming that as expected the unemployment situation is deterorating, with 408K initial claims printing, on expectations of 400K, and making sure we dont have a revised 19 out of19 week of consecutive 400K+ prints was last week's revised 395K claims to, hold on to your seats, 399K.  That's right: a 1K in jobs breaks the trend, huzzah! Just as importantly, those on EUCs and Extended benefits continued to plunge, dropping by 43K in the last week. And most frightening, the one year change in Americans receiving Emergency Compensation (EUC) has plunged from 4.7 Million to 3.1 Million. That's 1.6 million Americans who no longer even collect any benefits from the government.

• Fed Dissenters Say Pledge Gives Appearance of Targeting Stocks (Bloomberg)
• U.S. Inquiry Eyes S.&P. Ratings of Mortgages (NYT)
• 6 dead in string of attacks in southern Israel (CNN)
• ECB’s Nowotny Says Italy Not Greece, Too Early for Euro Bonds (Bloomberg)
• France, Germany Push for Sanctions (WSJ)
• Breaking Europe’s cycle of enfeeblement (FT)
• Biden tells China's Xi that cooperation key for global stability (Reuters)
• Hong Kong Exchange in Venture Talks With Shanghai, Shenzhen (Bloomberg)

Bull markets almost always end in a mania phase where there is a near universal belief that an asset class or security is going to rise and there is no risk involved. This has been seen throughout history and was seen with the Nikkei, the Nasdaq and more recently with property markets in Ireland, the UK and the U.S.  It was also seen with gold in the 1970’s when gold increased 128% in 1979 alone. On January 2nd 1979 gold’s London AM Fix was $227/oz. By the 31st of December, gold’s London AM fix was $524/oz. 21 days later gold had increased another 60.9% to $843/oz. This is parabolic. Today’s 27% rise year to date in dollar terms is very tame in comparison.

A busy data schedule, with the CPI, existing home sales, jobless claims and the Philly Fed index, all of which will be ignored as the market focuses entirely on European headlines once again.

And the vile, despicable short selling speculators are nowhere to be blamed. EOM. Move along.

Rule 48! Rule 48! Rule 48!