Archive - Jun 2012

We finally get to continue what we started in 2008. Becuase the TPTB insisted on kicking the can down the road, the resulting pain will be excruciatingly devastating versus simply horrible! Alas, once you get you short positions/puts/futures in before the inevitably ill-informed short ban, money can still be made. 

Europe was leaking on slower growth expectations and ongoing pain in Spain but the US NFP print hit it while it was down and stumbled the already-underperforming German DAX - now down almost 4% on the day. Interestingly the Italian and Spanish yields and yield spreads are compressing modestly (doesn't seem at all clear why unless desperation has brought the rest of LTRO money off the table among Spanish banks - though Bund relative weakness may explain it - though rumors of ECB buying are out - after 4 months off). Bunds are underperforming notably as 10Y TSY - 10Y Bunds drops 7-8bps from this morning's highs - did another safe-haven just get dissed?

The market was anxious going in to the NFP print but once the dismal data point hit, things deteriorated rapidly.

Pre-NFP ->EUR 1.2322, ES 1292, WTI $84, 10Y 1.51%, 30Y 2.59%, gold $1554

Post-NFP -> EUR -10pips 1.2312, ES  -10 1282, WTI -$1.2 $82.8, 10Y -5bps 1.46%, 30Y -7bps 2.52%, gold +$18 $1572

Treasury yields at record lows (10Y well below and 30Y right at Dec08 lows) as Gold pops (QE hope?) but stocks don't for now (reality of QE's inability to really help?). Oil down on global growth markdowns and EUR modestly weaker (choppy but practically unch now) - though looks like its all relative printing expectations now.

And we have NEW QE liftoff, just as we predicted yesterday: "That the ADP would miss today's expectations of 150K is no surprise: after all as we have been explaining for a while, the only way the Fed will have a green light to proceed with NEW QE if it so chooses at the June 19-20 meeting, is if the economic data suddenly turn horrendous. Which means tomorrow's NFP data is make or break: in fact, as far as markets are concerned, the worse the better - should a -1,000,000 NFP print come in, stocks will soar." It may take a little while for the realization to soak in. The actual number of +69,000 was a massive miss to both the expectation of 150,000, and the whisper number 100,000, and a drop from the massively revised April 77K, which was 115K before. And that is with a 204,000 addition from Birth Death. Just a total disaster for Obama who has decided to sacrifice the perception of an improving economy just so he can give Bernanke a green light to goose the stock market.

Maybe the electrician-in-chief can send them some of those unused Solyndra solar panels?

“Gear up!” That is what I say to you this morning. Open your closet door, drag out the flak jacket from 2009, lace up your boots, unlock your guns, bring out the ammo and get ready to go at it one more time because the placid fields of Verdun, long silent, finds the Germans and the French at it once again and we are all about to be dragged back into it; like it or not. There is quite serious business afoot and, just like in war, the political statements made are nothing more than propaganda to mislead the enemy and the enemy is YOU.

T minus 40 minutes and counting to NFP. Here is what the latest whisper number is, and whether "bad is bad" today, or "really bad is great."

We warned Dan Loeb about those Portugese bonds.

• Germany shifts, gives Spain more time on deficit (Reuters)
• Europe must prepare an emergency plan (FT)
• EU Spain reveals €100bn capital flight (FT)
• Spain’s Guindos says future of Euro at stake in Spain (Bloomberg)
• ECB, EU officials warn euro’s survival at risk (Reuters)
• China can ‘cope’ if Greece exits Euro, NDRC Researcher says (Bloomberg)
• Japan Warns Against Rising Yen (WSJ)
• Global stocks investors head for exits (FT)
• Hot Copper Shorts Burning Commodity Firms (Caixin)

All we can say is thank god for Hungary and, well, uhhh, Greece (that would be pre XGD Greece of course) in keeping the monthly average somehwat respectable.

Just about an hour before the US non-farm payroll number is expected to print, and finally resolve the lingering question whether the Chairman will print in 3 weeks, things in Europe have gone from horrible to zombie.  A series of horrendous economic reports out of Europe including record Eurozone unemployment, a confirmation of the final European PMI plunge including the second largest monthly decline on record in UK manufacturing, and various soundbites from Syriza's Tsipras, have pushed the EUR to fresh two year lows, Spanish CDS to new all time wides German 2 Year bonds joining Switzerland in negative terriroty, and finally, Bloomberg, as noted earlier, to be "testing" a placeholder for a post-Euro Drachma.  As BBG summarizes: "European markets fall, led by consumer & tech stocks with the German market underperforming. The euro falls against the dollar and German 2-yr yields drop into negative territory. Chinese manufacturing PMI data below expectations, though above the 50 level; European manufacturing PMI in line with expectations, below 50. Euro-zone unemployment met expectations and seems likely Irish voters endorsed the EU fiscal treaty. Commodities fall, led by oil & natural gas. U.S. nonfarm payrolls, unemployment data due later." In summary - all data today fits with Raoul Pal's less than optimistic presentation from yesterday.

One final attempt to terrify all those who plan on voting for Syriza into submission, or....