Archive - Oct 26, 2012
Guest Post: A Golden Opportunity
Submitted by Tyler Durden on 10/26/2012 18:27 -0500
The euro debt crisis in Europe has presented Germany with a unique opportunity to lead the world away from monetary destruction and its consequences of economic chaos, social unrest, and unfathomable human suffering. The cause of the euro debt crisis is the misconstruction of the euro that allows all members of the European Monetary Union (EMU), currently 17 sovereign nations, to print euros and force them on all other members. Germany is on the verge of seeing its capital base plundered from the inevitable dynamics of this tragedy of the commons. It should leave the EMU, reinstate the deutsche mark (DM), and anchor it to gold.
More than a Dozen Nuclear Plants Near Hurricane Sandy’s Path Brace for Impact
Submitted by George Washington on 10/26/2012 18:10 -0500North Carolina, Virginia, Maryland, New Jersey, Pennsylvania, New York and Connecticut
The Complete 'Advanced' Economy Sovereign Ratings Cheat-Sheet
Submitted by Tyler Durden on 10/26/2012 17:50 -0500
S&P recently acted to markedly downgrade Spain, and Moody’s has ended its recent ratings review, leaving Spain at Baa3; and while ratings could remain largely stable in the short-term (supported by OMT's promise and the possible delay of GRExit), there are a few exceptions such as France and and the UK that Citi's Rates group expect to see downgrades on in the short-term. The following table provides the full breakdown of Moody's and S&P's ratings for the advanced economies along with Citi's model views - which imply weak outlooks for most of Europe in the medium-term as Greek reality hits home.
Could the U.S. Election Release the Bulls?
Submitted by Burkhardt on 10/26/2012 17:18 -0500The Bear. Or the Bull. That is the question. With polls tightening, traders around the world are looking for that perfect hedge to be in the green regardless of who takes office in the coming presidential election in November.
Guest Post: Putin Is the New Global Shah of Oil
Submitted by Tyler Durden on 10/26/2012 17:16 -0500
Exxon Mobil is no longer the world's number-one oil producer. As of yesterday, that title belongs to Putin Oil Corp – oh, whoops. We mean the title belongs to Rosneft, Russia's state-controlled oil company. With TNK-BP in its hands, Rosneft will be in charge of more than 4 million barrels of oil production a day. And who is in charge of Rosneft? None other than Vladimir Putin, Russia's resource-full president. Gazprom in control of Europe's gas, Rosneft in control of its oil. A red hand stretching out from Russia to strangle the supremacy of the West and pave the way for a new world order– one with Russia at the helm. It is not as far-fetched as it might seem – or as you might want it to be. Or imagine this: Russia could join OPEC.
Friday Humor: Barack Obama talks about Communism
Submitted by dottjt on 10/26/2012 16:49 -0500Of course, I leave the best till last. "I'm sorry, but interrogations are in order."
Forget 1%, 99% Or 47%: It Is The Turn Of The 70% To Be Pissed
Submitted by Tyler Durden on 10/26/2012 16:30 -0500
People are going to be pissed off no matter who wins this election and that is a very important social dynamic we believe is vastly under appreciated by the majority of mainstream pundits and analysts out there. This is also very distinct from the environment that prevailed in 2008. Should Romney win, the 28% of Americans that identify as Republican will be thrilled, and the remaining 72% will be largely upset and on edge. Should Obama win, similarly, the 32% registered Democrat with be thrilled and the remaining 68% will be upset and on edge. Hence, the 70% referred to in the title of this article. This is a recipe ripe for social unrest and it will be coming to our shores as we outlined recently in The Global Spring.
Why The Real Earnings Picture Is Bad And Getting Worse
Submitted by Tyler Durden on 10/26/2012 15:49 -0500
Listening to the incessant chatter of confirmation bias from CNBC, you could be forgiven for thinking that earnings are 'not that bad'. Headline-makers like AMZN, GOOG, and AAPL scare for a few moments but we are reassured back to numb BTFD-land by some disingenuous analyst (or worse a PM) who says he is buying with both hands and feet. The misleadingly top-down positive impression of looking at a 'beats-to-total ratio', suffers from one rather annoying bias (that often gets forgotten): analysts constantly revising their expectations throughout the reporting period, and hence rarely deviates from the current level of 71%. But, as Citi notes, if one examines results relative to analyst expectations prior to the reporting season, it's clear just how disappointing Q3 has been - especially given the sell-side mark-downs already factored-in.Intriguingly, for as downbeat as third quarter results have been, we've yet to see the sell-side revise down estimates for next quarter or 2013.
Kevin Henry Gets The Bronze
Submitted by Tyler Durden on 10/26/2012 15:38 -0500
Kevin Henry, of FRBNY cross-market monitor fame, may or may not have been instrumental in getting the Dow Jones to close (just barely) green (Chuck Schumer don't care about the S&P; the Dow Jones is the only index politicians have heard of), but his intraday presence on these pages should be sufficient to inspire substantial female interest in his daily exploits while barhopping this evening. Because it is not everyday that a senior Fed trader from Rutgers gets to be the 3rd "Most Viewed Person" of Bloomberg users today.
Draghi's Dike Defended As Market Ends Week Range-Bound
Submitted by Tyler Durden on 10/26/2012 15:22 -0500
As we noted this morning, today seemed more about defense than offense (even though stocks managed to rally off Draghi's Dike twice). Dow 13,000 and S&P 1400 remain safe. Today's theme is 'V-shaped-recoveries' as AMZN managed some magic last night, AAPL managed some super-magic intraday - bouncing off its 200DMA and then fading into VWAP to close on volume, and S&P futures oscillating between post-Tuesday highs and lows all day (with the ubiquitous dump to VWAP into the close after the 3pm ramp on cue)...
Chuck Schumer to Kevin Henry: "Must close green, Mr. Henry"
— zerohedge (@zerohedge) October 26, 2012
Vietnamese Banks Who Paid Dividend On Stored Gold, Were Quietly Selling It To Appear Solvent
Submitted by Tyler Durden on 10/26/2012 14:39 -0500
Several months ago, we reported about a troubling development in Vietnam, happy inflationary host of one of the world's most rapidly devaluing and best named currencies, that in direct refutation of Ben "Gold is not money, it is tradition" Bernanke's claim that gold is just a trinket one can fondle with no inherent value, the local banks had gone as far as paying the local residents a dividend to "store" their gold (recall all those charges against gold that it never, ever pays a dividend....). However, as we subsequently warned, any time a bank, and especially an entire banking sector, is willing to pay you paper "dividends" for your gold, run, because all this kind of (s)quid pro quo usually ends up as a confiscation ploy. Sure enough, as Dow Jones reports today, the gold, which did not belong to the banks and was merely being warehoused there (or so the fine print said), was promptly sold by these same institutions to generate cash proceeds and to boost liquidity reserves using other people's gold, obtained under false pretenses.
UBS To Terminate 10,000, Or One Sixth Of Its Employees
Submitted by Tyler Durden on 10/26/2012 14:07 -0500
There is down-sizing; there is trimming-the-fat; and then there is UBS. The once-giant Swiss Bank just announced it will cut up to 10,000 jobs. This comes on top of the 3,500 from last year - which makes a rather dramatic weight-loss strategy for the 63,500 employee firm. As the FT reports, they will not happen all at once (so just after the election then?) but will lead to the closure of a sizable part of UBS' fixed-income trading operations (and other capital intensive areas of the investment bank). Perhaps in the understatement of the day: "There were several options on the table but UBS has decided on the most radical one," a person familiar commented as the plan is hoped to reduce complexity and costs - so no more Bloomberg Terminals? One thing surely gone is a source of fixed income axes: "The new strategy, hammered out in several executive board meetings in New York this week and set to be announced next Tuesday, will lead to the closure of a sizeable part of UBS’s fixed-income trading operations and other capital-intensive areas of the investment bank." The winner: Goldman of course, which in a world of collapsing trading revenues has taken to Lehmaning its competition once again, only this time not using brute force but the far more classical war of attrition in a collapsing economy.
What Do High Yield Bonds Know That No One Else Does?
Submitted by Tyler Durden on 10/26/2012 13:20 -0500
Wizened old market participants are often heard mumbling into their cups of green tea that "credit anticipates, and equity confirms" and so it is once again that the credit markets - fresh from the exuberance of endless technical flows, CLOs, and PIK-Toggles - has made a rather abrupt U-Turn in recent weeks. As Barclays points out, the ratio of High-Yield bond spreads to Investment-Grade bond spreads is its highest in three years as IG has been dragged lower by QEtc's impact on MBS and rotation up the spread spectrum. Typically, this kind of push would mean high-beta credit would outperform but far from it as cash bond markets have gapped out very recently. With call constraints (thanks to ZIRP) on high-yield bonds, the extreme price dislocation (given HY's inability to rally 'enough') will likely drag IG credit out - and that is a very crowded trade. Just one more unintended consequence from the Fed.
A modern day feudal system for real estate
Submitted by drhousingbubble on 10/26/2012 12:43 -0500There is an interesting dynamic unfolding in the housing market. Real estate agents in places like California are arguing that there is a lack of inventory and are also generally against the government unloading blocks of properties to big investors. Why? There has been bulk selling and buying to the investor class and a large amount of crowding out has occurred. This brings about an interesting set of problems for your average buyer in the current market. They are competing with swaths of big investors but also local flippers trying to make a quick buck once again courtesy of low interest rates and another mania in some markets. SoCal is now in a mania again as you will see with some of the patterns occurring. This is also happening in many other states as well. A new feudal system has emerged. The banks were bailed out by the Fed, were allowed to circumvent accounting standards, and now deep pocket investors in the financial class are buying up these places either to increase prices on flips or to hike up rents. In the end, if you want to compete in today’s market you need to bow down to the Fed, put on a football helmet and go head-to-head with big investors, flippers, suckers, and take on a massive mortgage.
UBS On The Erosion Of Central Bank Independence
Submitted by Tyler Durden on 10/26/2012 12:35 -0500
There is a possibility that the realm of monetary policy could increasingly merge with that of fiscal policy and national debt management policy. Globally, UBS believes, central banks are edging down monetary policy paths that can be viewed as increasingly backstopping budget deficits as lawmakers of respective governments continue to fail to make progress toward fiscal consolidation. As we have vociferously stated, a progression down this road could lead to many unsavoury outcomes, as fiscal and monetary policies entwine themselves in an increasingly negative dynamic - coining the term “Fonetary-policy” – fiscal policy plus monetary policy.






