Archive - Dec 13, 2012

In a little under three minutes, CNBC's Rick Santelli clarifies (in a much-needed manner) that we do not live in a monarchy or dictatorship (hoping for benevolence) - no matter how many Democratic senators and congressmen believe the President was given a mandate leaving him "holding all the cards" - we live in a republic (where the sovereignty rests with all individuals) and removing 'debt ceiling' checks and balances (for example) is a ride down a slippery slope. The chagrined Chicagoan then goes on to discuss the fact that the Fed, having unloaded another package of potentially infinite unsterilized money-printing, was actively discussing its exit strategy. Put simply, Santelli notes, "mark my words" the market will decide that exit - and the Fed had better be ready when it comes.

From the open of the US equity market day-session, gold and silver have diverged aggressively. Gold is notably outperforming silver - in fact today is the biggest jump in the Gold/Silver ratio of the year. The Gold/Silver ratio has also retraced upwards to its 50DMA. It seems there is overall pressure on precious metals post-Bernanke but the relative preference is for Gold so far.

How much phantom housing collateral is still on the books? Nobody knows, and that in itself renders the housing/mortgage sector fragile.

From macro positives to macro negatives, from Democrats to Repblicans, and from idiosyncratic issues at AAPL to systemic global debt issues in the UK, today has been quite a ride already... -1.5% from post-FOMC highs, will we see QE5 next week?

The drainage of AAA quality collateral contonues as S&P cuts it outlook on the United Kingdom to negative...

• *BANK OF ENGLAND OUTLOOK TO NEGATIVE FROM STABLE: S&P
• *UNITED KINGDOM OUTLOOK TO NEGATIVE FROM STABLE BY S&P

more as we get it...

Here, for your comparative studies analytical viewing pleasure, is the current recession recovery in context. Across activity indicators, consumer behavior, labor market developments, and housing & construction, there is a little here for everyone. From vehicle sales to disposable income and from durable goods to industrial production, it seems grading this economy's performance is a matter of 'see no evil, hear no evil, speak no evil'.

'Twas the seconds before the open, and all through the market, not a trader was stirring... well apart from Johnny 5 and his algo friends. From our friends at Nanex, in case you missed it, there were numerous algo-inspired flash-crashes this morning right before the open... HPQ (traded down to $3 from $14 in about 100ms), S (from $5.50 to $2.75 in 150ms), GS (from $117 to $94 in 45ms) and C (from $36.00 to $20.00 in 90ms) are among the NOT fat-finger moves we saw as the charts below show. Now move along and BTFD! Bernanke has told you so...

Nancy spoke and markets followed her words down. Will Boehner be the bright shining light of compromise and positivity that so many are hoping for? (So far his record is 4 sell-offs and 1 rally) It appears going in to the speech that the market is anticipating less-than-compromise... We will see at 1115ET - live-stream below...

No one wants to mention that the Fed Chairman has changed the rules of the game in the middle of the game but there you are; a backsliding Federal Reserve Bank whose statements are only crafted for the moment and future moments may be brief; we just don’t know. Apparently we have transitioned to a “whatever is convenient” policy at the Fed and we all should bear that in mind when assessing probable actions. When money talks, nobody pays any attention to the grammar. The Treasury issues, the Fed prints money and buys, the cost of financing for the country is incredibly low and the yields for investors are paltry. In the risk markets there will now be a demand as instigated by the Fed, that overwhelms the supply of new issuance. Between the coupons paid and the maturities for 2013 the figure is about $1 trillion in excess demand more than estimated forthcoming supply. Given the 36% loss in wealth that took place in America during the 2008/2009 period the odds of an asset allocation shift out of bonds and into equities is de minimis in my opinion and so the “Great Compression” will continue.

Believe it or not the article itself is actually a lot worse than even the title implies.  These microphones are in many cases being coupled with cameras in order to gain an even greater level of surveillance.  All with grants from the Department of Homeland Security (DHS).  Now honestly, does anyone really think this is for Al Qaeda? The 4th Amendment is dead.  I repeat, the terrorists won.

With gold and silver down this morning - following a mysterious vertical plunge last night (once again) - we thought ConvergEx's Nick Colas' timely discussion of gold was worthwhile. As he notes, Gold is the ultimate personality test for investors.  Some hate it, excoriating its adherents for their lack of faith in human ingenuity – gold has been valuable since before humans could write. And some swear by the yellow metal, in the belief that it is the last vestige of rationality in a world of financial assets manipulated by central banks and opaque trading venues.  What gets lost in the wash is that gold is a commodity and can be analyzed as such. On that basis, here is the 'Top 10' list of real-world fundamentals for gold.

We are sorry to interupt regularly scheduled Banzai7 Holiday Programming with this consummate farce...

Presented with no comment...

If the Mayans are correct, the world has just over a week before it goes poof. But, the hard-core chartists will say, is there any technical analysis suggestion they may be right? Let's take a look: the chart below shows all the 450 MunichRe-documented natural disasters that have taken place in the first half of the year, running at at annualized pace of a near record-setting 900 in 2012 alone. Is this enough to set off the most terminal selling event in the history of the world in 8 short days? You decide.