Archive - Sep 29, 2011

There is nothing that can possibly be added to this hair commercial-cum-news clip, which in 49 seconds says more than a QE + number amount of anti-Keynesian crusaders can say in a century.

Why is Apple showing signs of fatigue? Something Big about to happen?

As demands to bail out Greece wash over Europe, Greek society digs in its heels, and Greek ministries just pulled the rug out from under their prime minister.

There are few things more cringe-inducing than a government-subsidized bank CEO spouting self-serving, entitlement-laden idiocy to the world just because he and his bank might be subject to some extra constraints. That hasn’t stopped JPM Chase CEO Jamie Dimon from acting like a spoiled, sociopathic brat while characterizing proposed Basel III capital requirements and regulations as ‘anti-American’ at every opportunity. They are not ‘anti-American’ but globally risk-mitigating in a time of widespread economic Depression, a point lost in the haze of Dimon’s megalomania....Here’s what’s really anti-American – big banks receiving extreme federal assistance while the rest of the country is crushed, loan refinancing and other foreclosure reducing negotiations are anemic, and both private and public sectors can’t finance enough job growth to alter our horrific unemployment or poverty situation.

A funny thing happened right after the 'successful' EFSF vote in Germany, equity-credit-and-EUR sold off in sync, but this moment of sanity amid the chaos that is the European corporate capital structure did not last as soon after reaching swing lows, European equities surged dramatically ahead of credit markets only to pull back into the US open and stabilize. On a medium-term basis, stocks remain significantly expensive relative to credit expectations but with such a binary outcome (depression or safe-union) the smallest swing in the odds of one or the other tips risk assets rapidly in that direction (as opposed to discounting over a broader set of scenarios).

UPDATE: well that upset the apple-cart as darling of the carry currencies - NZD - gets downgraded - shifting FX carry and thus risk assets in general down with it.

We all know that expansion of debt and financial chicanery are (or at least were) the key drivers of the US economy. And those things have limits as we have learned all too well.

Not left versus right ... but 99.9% versus the .1% ...

Just when we thought we had seen every imaginable form of stupidity out of Bank of America, they go ahead and stun us all over again. The latest shock is that starting next year, the repository of hundreds of billions in underreserved (apparently the SEC finally figured out what was obvious to Zero Hedge readers since October 2010) toxic Countrywide mortgages, instead of shoring up capital, will do the opposite and start charging anyone with a debit card $5 a month fee for said card usage. Needless to say, this is obviously a collusive attempt by all the big banks, who are so desperate to generate some revenue (with the 2s10s flatter than at any time in the past 2.5 years) they are willing to drive away millions of paying customers. The problem is that the bulk of depositor clients will simply walk away from Bank of America (which had $1,038 billion in deposits as of June 30), and any other institutions that piggy back on this (and from a game theory perspective, everyone has to do it, or nobody will do it), and instead pull cash out of any and all checking and time deposit account forms. As a result, the key buffer that big banks have had during the entire financial crisis, cash from deposits, is about to disappear. This comes at a time when every US bank is fighting tooth and nail against Basel III implementation which forces banks to have more not less tangible capital (read cash, up to and including deposit cash). Alas, doomed for failure such idiocy can only come out of the US banking system which should have long been insolvent and replaced, but instead the Fed's policy of intercontinental Moral Hazard continues to encourage such "survival of the anti-fittest" decisions with pride. It goes without saying that we urge any and all of our 5 million monthly readers to pull any funds they may have from Bank of America in retaliation for this insanity.

When it comes to financial collapse documentaries, the public canon has one well-deserving Oscar Winner, "Inside Job", and one straight to HBO exercise in ass kissing and name dropping which shall remain nameless. Ironically, just like during the Arab Spring, it is that "dubious" Al Jazeera that shows US media how coverage of various matters, either geopolitical or financial, is done. Herein we present the first episode of Meltdown, in which we hear about four men who brought down the global economy: a billionaire mortgage-seller who fooled millions; a high-rolling banker with a fatal weakness; a ferocious Wall Street predator; and the power behind the throne. Considering we are about to experience the next Great Financial Crash, since nothing has changed at all since 2008, this should serve as a prominent reminder of all that happened, and a flashback to the future, of all that is certain to occur all over again.

Of all cunning linguists, Bloomberg's Jon Weil may be the cunningest. You see, the savvy news reporter has figured out that the reason there is zero policy coordination, and whenever Tim Geithner gets involved, negative, is not so much due to the fact that we have two broke ponzi continents trying to outsmart each other as to who is least broke, but, lo and behold, because we speak different languages. In Weil's cunning words, "It’s bad enough for average Americans that most European leaders speak English with heavy accents. What’s worse, even when we can make out the words they utter, it’s almost always impossible to figure out what these officials are really saying. That’s because they’re speaking in Euro-ese. Fortunately, there is an answer to their endless riddles: a Euro-to-English dictionary, excerpts of which I have included below. (Click here to read about its close linguistic cousin: the Goldman Sachs dictionary.) To truly see the meaning of the seismic events rapidly reshaping Europe, you must know what the following 10 Euro terms of art mean in plain American English:" So for the sake of the future of the great Developed Nation KomIntern, here are the ten most misinterpreted phrases...

Once again equities are responding to events with more excitement than the credit markets. Yes, Germany approved the changes to EFSF first announced back in July.  That was fully expected and a No vote would have been a shocking disaster at this stage.  The level of cynicism has hit a new high.  I have heard a lot of chatter that now that Germany has jammed this through, they can stop pretending that they are against levering up the funds.  I am not a fan of the politicians or political process, but betting money that Schaeuble and Merkel made such bold-faced lies seems like an act of desperation.  The risks from pursuing the leveraged EFSF strategy are real and high - downgrades of all the top European countries and inability to stop any renewed selling pressure in the future.  Germany has the sense not lose their rating in a futile attempt to defend a perimeter that can no longer be defended.

A little under a year ago, with much pomp and circumstance, Goldman’s economic team proclaimed its multi-year long bearish outlook on the economy over, and on December 1 of 2010, issued a report in which it noted that it was turning a new leaf in its “bleak” perception of the economy, based in big part on its expectation that the combination of an ebullient monetary environment (QE2 has just been launched) and a cornucopic (sic) fiscal stimulus (the first, of many, payroll tax cuts had just been passed) would lead the economy to a sustained growth of not less than 4% (and led Zero Hedge to officially proclaim Goldman as having jumped the shark in conjunction with our prediction that a year hence the US economy would be contracting yet again). Zero Hedge was right, and Goldman was 100% wrong. Today, we however witness something different: in what seem to be a major paradigm shift within the firm’s strategic research team (not Jan Hatzius’ group but that of Dominic Wilson), the firm appears to officially give up on “recovery” as a modal outcome for both the US and the developed world, and instead aims a little lower. Far lower. The report is titled “From the 'Great Recession' to the 'Great Stagnation'” and in an extended analysis looking at 150 years of historical data, it concludes that “those historical lessons suggest that the probability of stagnation in the current environment is much higher than usual, at about 40% for developed markets. Trends in Europe and the US are so far still following growth paths that would be typical of stagnations.” Looks like Goldman just proved us at least half right when we said in January that the keyword of 2011 would be “stagflation.” Luckily, the Fed and the world’s central banks still have 3 months in which to prove the second half of our prediction correct as well.

As ES levitates 20-30pts off overnight lows on 'incredible' macro data and 'hope' in Europe, Bloomberg's Consumer Comfort Index just printed the second-lowest reading ever as 93% of those surveyed had a negative opinion of the economy. In almost every demographic, sentiment has fallen to near record lows (except we do note that in the last week those earnings 75k or more modestly improved their outlook though still drastically low). Perhaps the most critical sub-index, given the dependence on a consumer who is not paying his mortgage and living off food stamps, is the Buying Climate, which has only been lower during Q3 2008. We assume the congressional 'super-committee' is paying attention.

Stone & McCarthy just posted a brief interpretation of the better-than-expected 3rd revision to Q2 GDP noting that the magnitude of revisions do little to improve expectations for Q3. Key takeaways include: Upside Q2 GDP revisions driven in large part by PCE Services; Inventories revised downward setting stage for Q3 restocking; and Q3 GDP looks to be in the 2.5% area. Little wonder markets are hardly overwhelmed and talking heads aren't spinning this into 2012 recovery and Fed Funds futures didn't budge - though for now ES keeps pushing higher into the open - though admittedly feeling squeezed right now by the apparent slew of better-than-expected news - brought to you via Sesame Street and the letter 'J': [J]ermany, Jobs, and [Jee]DP.