Archive - Jul 4, 2012
To Hollande, With Love
Submitted by Tyler Durden on 07/04/2012 21:31 -0500The plan to fleece the entire country in order to sustain the survival of an obsolete social welfare system is doomed, yet it may be implemented for a few months. But endeavouring to also fleece our German friends is a dangerous and reckless ambition. Why should they accept to contribute to the financing of a 60 year retirement age in France when they have just raised it domestically to 67? Certainly, Germany would have a lot to lose with the implosion of the euro. But it is politically untenable to demand support for social benefits that the Germans have denied for themselves and unrealistic to imagine they can single-handedly carry the burden of a spendthrift Europe.
David Rosenberg Explains The Housing "Recovery"
Submitted by Tyler Durden on 07/04/2012 21:17 -0500Confused by all the amusing arguments of a housing "recovery" (because if you believe in it, it just may come true.... maybe) in the sad context of a reality in which the economy is once again turning from bad to worse missing expectations left and right (for every report surprising to the upside, two do the opposite), corporate earnings and margins have rolled over, US states and cities and European countries are filing for default or demanding bailouts at an ever faster pace, and only headlines such as "stocks rise on hopes of more central bank easing" appear in the good news columns of mainstream media? Don't be: David Rosenberg explains it all.
The Ultimate History-Of-Markets Chartbook
Submitted by Tyler Durden on 07/04/2012 14:36 -0500
Whether gold-bug, permabull, or deflationst; BofAML provides a little something for everyone in the most complete picture guide to 'financial markets since 1800'. A collection of almost 100 charts on asset price returns, correlations, volatility, valuations and many other market and macro factors for the US, UK, Europe, Japan, and Emerging Markets.
“History does not repeat itself but it does rhyme.”
-Mark Twain
Bernanke – My Goal is to Wreck Social Security
Submitted by Bruce Krasting on 07/04/2012 13:28 -0500Happy 4th. Big fireworks coming....
Banking Regulators Drop Libor … Adopt New Standard
Submitted by George Washington on 07/04/2012 12:51 -0500"Limor"
The Fed And LIBOR - The Biggest Manipulator Of Them All
Submitted by Tyler Durden on 07/04/2012 11:30 -0500
The Fed does everything it can to keep LIBOR low. The Fed cannot affect LIBOR directly, but in general LIBOR trades in line with Fed Funds. You can see that historically as Fed Funds was changed, LIBOR responded appropriately. That all started to break down in 2007 and re-ignited in the late summer of 2008 and peaked after Lehman and AIG. The Fed was blatantly clear that it wanted borrowing costs to go down. They had the obvious tool of reducing Fed Funds to virtually zero, but when LIBOR didn't follow, the Fed took further action. The Fed has done a lot and trying to control LIBOR as a key borrowing rate is one of the things they have worked on, both directly and indirectly.
On America's In Dependence Day
Submitted by Tyler Durden on 07/04/2012 11:24 -0500
"Our forefathers shed blood rather than render unto King George. Yet today we madly mortgage our nation’s future to foreign powers, piling debt upon debt without limit or thought as to how it will be repaid. These debts ensnare our children and grandchildren even as we stop having them, confident in the knowledge that the government will take care of us in our old age, so why bother with the trouble and expense? If we were still a nation capable of shame with enough intellectual integrity to call things as they are, if we hadn’t debauched our language as badly as our currency, if we had the courage to look in the mirror and see how woefully we have squandered our Founders’ legacy, this Fourth of July would be a day not of celebration but of atonement. Give some thought to what we have lost as we mark another In Dependence Day. May providence have mercy on our nation, lest we end up getting what we deserve."
04 Jul 2012 – " Independence Day " (Bruce Springsteen, 1977)
Submitted by AVFMS on 07/04/2012 11:05 -0500With the US closed, the afternoon simply dragged on with a light ROff feeling as the Periphery drifted slowly wider, France on stand-still and the Core squeezed tighter. Credit weaker with Financials giving back yesterday’s gains and more. Sudden change of mind in equities, paring morning losses loss ahead of tomorrow in very low volume.
Nothing strong, nor concrete, nor very firm, but Core EZ unease with the ESM discussions of last week, as seen by the South, is just seeping through. Opposition parties, Central Bankers, junior government partners, constitutional issues in the Northern part all seem via titbits and comments ready to sand in some of the discussions or to delay the processes. Give it another 2 weeks and everyone will have gone on holiday (despite the ECOFIN claiming to remain on stand-by).
Closing in unconvinced ROff mode and treading water ahead of tomorrow’s Spanish auction, ECB / BOE meetings and US claims numbers. EUR ticking down to low 25s Yet another not especially inspirational day to write about. Libor-gate turning into mudslinging contest, with possible further fall-outs on the industry.
EURUSD Retraces 75% of EUphoria As Credit Underperforms Stocks
Submitted by Tyler Durden on 07/04/2012 10:42 -0500
With Spanish bond spreads over 30bps wider from their open this morning, EURUSD has just broken its 200-hour moving average trading back close to 1.2500 for the first time since the summit. While this is an 75% retracement of the EUphoria, broad equity markets are only modestly off their highs (we assume on rate cut hopes - which is likely helping driven EUR down a little) - and yet corporate and financial credit spreads are at two-day lows. Hope fades even in equity markets where once we dig into the individual indices that most are down modestly (though Spain and Italy are down around 1%). We also note that Bunds have outperformed Treasuries by 20bps from the initial risk-transfer spike on Friday morning - though TSYs are closed today as Bund yields dropped 10bps from open to close today. On a side-note, Spanish 5Y CDS briefly traded wider than Ireland 5Y CDS today for the first time in two years.
Guest Post: They Don’t Call Them Real Interest Rates For Nothing
Submitted by Tyler Durden on 07/04/2012 10:05 -0500The idea that short-duration bond funds are a good bet due to “the FED’s complete control with regards to suppressing and maintaining short-term interest rates” is completely wrong on every level; they’ve been a losing investment in real terms for most of the last 5 years, and the Fed is determined to keep it that way. The Fed’s control over nominal interest rates is precisely the reason that I wouldn’t want to invest in treasuries; not only has it consistently made bonds into a real losing proposition, but it also creates a good deal of systemic currency risk. Simply, the Fed will — in the pursuit of low-rates — monetise to the point of endangering the dollar’s already-under-threat reserve currency status. The only things that would turn bonds into a winning proposition — rising interest rates, or deflation — are anathema to the Fed, and explicitly opposed by every dimension of current Fed policy. Of course, creating artificial demand for treasuries to control nominal rates has blowback; if the buyers are not there, the Fed must inflate the currency. Hiding inflation is hard, so it is preferable to a central bank that old money is used; this is why Japan has mandated that financial institutions buy treasuries, and why I fear that if we continue on this trajectory, that the United States and other Western economies may do the same thing.
Germany Will Choose to Bail on the EU Rather Than Bail It Out
Submitted by Phoenix Capital Research on 07/04/2012 10:00 -0500Germany will leave the Euro the moment that the EU Crisis spreads to France. At that point any discussion of EU bailouts is pointless, as the very countries needing aid (France, Italy, Spain, and Greece) account for 53% of the ESM’s funding.
Meet Anthony Browne: The New Head Of The British Bankers Association
Submitted by Tyler Durden on 07/04/2012 09:40 -0500
Three weeks ago, before Lieborgate broke and the world finally understood what so many had been warning about for so long, we noted something else: that not only was LIBOR manipulated and fudged daily between 2005 and 2008, but as the chart in the attached post shows, it has been gamed every single day in 2012 as well. More importantly, we noted something else - the transition at the top of the British Bankers Association: the organization responsible for compiling LIBOR submissions from member banks, and reporting what the daily Libor fixing is. Because in the second week of June, the BBA's new head became... the former head of lobbying for none other than Morgan Stanley, Anthony Browne, a firm which itself was just caught red-handed manipulating rating agency "independent ratings" to benefit its bottom line (and which itself miraculous was downgraded by less than what the market expected in order to allow it to avoid several billion in collateral calls). And what did Anthony do at Morgan Stanley until June 12: he was head of Government relations for Morgan Stanley for Europe, Middle East and Africa and was previously an economic and business adviser to London Mayor Boris Johnson. That's right - "head of government relations" for a rather prominent TBTF bank, being put in charge of daily Libor fixing. But everyone is shocked, shocked, that gambling has been going on here for years.
Emerging Market Liquidity Flows At Crisis Levels
Submitted by Tyler Durden on 07/04/2012 09:39 -0500
The growth in Emerging Market 'External Liquidity' recently was only ever slower in the quarters either side of the crash in 2008. This is a very worrying sign. EM nations are highly dependent on 'external' capital inflows (to smooth current account deficits) and have empirically been exposed to the 'sudden stop' nature of these inflows. It appears that Europe's banking crisis and deleveraging is indeed having a critical impact on EM nations - which may oddly mean domestic policy adjustments will be necessary (raising rates to encourage capital inflows) that will further exacerbate the problems as global growth slows. This brings to mind our recent comments on the shadow banking system and the drop in deposits among traditional risk-hungry EM funding banks - as we note that the more deposit-free the banking system, the slower the funds will flow. The newer the debt- and asset-inflation-based 'capitalism', the faster it is impacted at the margin - and it appears many EM nations are being affected rather rapidly.
Gold Seen At USD 3,500, 6,000 And 10,000 Per Ounce
Submitted by Tyler Durden on 07/04/2012 09:08 -0500Negative interest rates continue to penalise pensioners and savers in European countries and this will lead to further diversification into gold. Financial markets are already starting to wonder about the solidity of last week's summit measures to tackle the euro zone crisis and soon they may question whether even looser monetary policies will help prevent recessions and sovereign defaults. With Independence Day today (Happy July 4th to all our American followers, clients and friends), the ECB decision tomorrow and NFP on Friday, trading should be quite today but as we know illiquid markets can lead to outsized market moves. We tend to try and avoid predictions in GoldCore as the future is largely unknowable and there are so many variables that drive market action that it is nigh impossible to predict the future price of any asset class. However, our opinion has long been that over the long term all fiat currencies will depreciate and devalue against the finite currency that is gold. For this reason we have long held that gold would reach its inflation adjusted high of $2,400/oz and silver its inflation adjusted high at $140/oz and the equivalent in euros, pounds and other fiat currencies. Gold at just over $1,600/oz today remains 33% below its record nominal high in 1980. Silver at just over $28/oz today remains 80% below its record nominal high in 1980. However, we have tended to focus on the important diversification, store of value and safe haven benefits of owning physical gold (and silver) bullion.








