Archive - 2012

Blah blah Fiscal Cliff blah. Blah blah blahdy blah Cliff. Cliff blah blah republicans blah democrats blah blah blah blah. Blah blah blah blah, blah blah, blah blah blah blah blah, blah blah, Cliff. Blah blah blah blah, blah blahdy blah.... Blah.

This week's pattern remains intact. The US dollar continues to trend lower against the European currencies, but is firmer within the dollar-bloc and against the yen. Spanish and Italian bond yields are lower, while the long-end of the Japanese curve is heavy. Equity markets are finishing the year with a firm note, with board gains in Asian, with the notable exception of Shanghai and Jakarta, and in Europe, with the exception of Stockholm. The euro is at 7-month highs today, pushing toward $1.3300. The next target is near $1.3385. Sterling has been bid to near the year's high set in late September just above $1.6300. There is little chart resistance until closer to $1.6500. The dollar's slide against the Swiss franc has extended to CHF0.91 and appears headed for CHF0.9000. The dollar-bloc is not participating in this move against the greenback. This week, for example, the New Zealand dollar has fallen as almost as much as the yen (1.03% and 1.08% respectively). The Australian and Canadian dollars are off 0.04% and 0.57% respectively. There are a few macro-developments to note:

Investors in the TBTF banks need to understand that the business model for this industry has changed.  Thank Liz Warren

From the sheer hypocrisy of a fight over a few billion dollars when faced with trillion dollar deficits and the eventual austerity that will be forced upon the US, DoubleLine's Jeff Gundlach expounds during this excellent Bloomberg TV interview on his growing concerns at markets where fundamentals "are trumped by policy decisions," and while he does not believe that bond markets are bubbly at the moment, the impact of an inevitable recession could be devastating given valuations. His subtle suggestion to keep powder dry through 2013 and into 2014 (as deploying money at that future point will make all the difference), follows from his view that he does not see much value in US equities (people always want investments to go up like a line... That's just not reality) and suggests great care be taken in US bond markets (focusing on low volatility funds) as he looks at Japan's dismal record (and hyperinflationary possibilities) and reflects on the US that "the issue isn't the fiscal cliff. The issue is the fiscal crisis that the United States has been looking at for the past several years." Must watch.

Following on the heels of Byron Wien, Morgan Stanley's Surprises, and Saxo's Outrageous Predictions, Deutsche Bank's FX strategy team has created a who's who of 13 outliers for 2013. Quite frankly, given the extreme nature of monetary (and now fiscal) policy, asset allocation decisions, and bankers' and politicians' willingness to go into the media and lie directly to our faces, the comprehension of the possible (no matter how improbable) is far more important for risk management than the faith in the centrally-planned unreality our markets (and therefore ourselves) currently find themselves in. As they note, all too often, the tendency to not stray too far from a self-anchoring recent-history-extrapolated consensus (while apparently highly profitable for some for a microcosm of time) leads to unrecoverable drawdowns exactly when career-risk was the limiting factor. From Malaysian elections and EM bubbles bursting to Fed monetizing equities and South China Sea escalation, these outliers seem all to 'normal' in our brave new world.

There is now about 48 hours until the rubber hits the road. What happens in the next 2 days: in a somewhat surprising development earlier, the Republicans today managed to turn the tables on the president, and as reported this morning, proposed an alternative "Plan B", one which the president has already said he will not to accept as it extends the current Bush tax cuts on all those making $1 million or less (and thus not nearly punitive enough in the eyes of Obama's electorate). The reason for this strawman is that unless Obama settles on some compromise definition of 'wealthy' between his already adjusted definition which moved from $250,000 to $400,000 earlier, and the $1 million cutoff proposed by the republicans, republicans will take the Plan B proposal to the House on Thursday and pass it, only so it is immediately voted down by the Senate, but have the popular backstop of saying "they gave it their best" just as Ken Langone suggested to Rand Paul earlier today on CNBC. And as Reuters reported, it appears that the drop dead date for House majority leader Cantor is Thursday, at which point he will vote, and pass, Plan B. At that point the Fiscal Cliff debate for 2012 is as good as over, as the resulting animosity that develops in the subsequent days will guarantee no further compromises are achievable for the balance of the year.

We couldn't have said it better: "Bank of America blocks users from accessing websites that present certain risks to the bank."

Well that did not take long. T+2 days from his re-election, Shinzo Abe has summarily unbudgeted himself. As Kyodo News reports, the sphincterially-challenged wild-man has decided to scrap the country's spending cap for the annual budget. Previously capped at a measly JPY71 trillion (excluding debt-servicing costs) in an effort to create some pretense of fiscal discipline, the new Keynesian has unilaterally decided that moar is better. Not exactly helping, though perhaps exactly what the currency-war-inflaming Abe might like, the trade balance plunged yet again (to -JPY953bn from -JPY540bn) from  - setting a new all-time record negative average as the implicit capital flight continues. JPY weakness has resumed but it is the collapse in JGBs that will be worrying people - the biggest 5-day run-up in 10Y JGB yields in over 13 months.

Reminding the world of just the kind of truthiness that got him sacked originally by that other Italian, the Ex-Goldmanite Mario Draghi, back in November 2011, and which the world has to look forward to when Silvio Berlusconi returns to power some time in 2013, even if not as PM (a position he currently has a snowball's chance in hell of regaining based on current political polls), Reuters informs us that the Italian, who certainly has not read the Goldman book on status quo perpetuation, just said the unimaginable: the truth. To wit: "If Germany doesn't accept that the ECB must be a real central bank, if interest rates don't come down, we will be forced to leave the euro and return to our own currency in order to be competitive." Berlusconi said in comments reported by Italian news agencies Ansa and Agi. The 76-year-old media tycoon has made similar remarks in the past about the possibility of Italy, or even Germany, leaving the euro, but has often at least partially rectified them later." Not this time. Now with Germany and the Buba folding like a broken chair, Silvio is coming back and knows he can demand anything and everything, and Germany has no choice but to accept, Merkel reelection in a few months be damned.

First and foremost, QE does not create jobs. The UK has announced QE efforts equal to an amount greater than 20% of its GDP and has not seen any meaningful job growth. Similarly, Japan has announced nine rounds of QE for a combined effort equal to 20% of its GDP over the last 20 years and job growth remains dismal there.

There is one chart that everyone should see that is part of Reuters' must read special series: The Unequal State of America: Redistributing Up - it is the chart we have said over the past 4 years is the only one that matters for America - that showing the flattening of America's wealth distributon Gaussian curve, aka the plunder and accelerating destruction of America's middle class, at the expense of the poorest and the wealthiest. This is nothing but the inevitable outcome of a co-opted, conflicted and controlled marionette government, which does the bidding of the wealthiest lobby powers (read corporate shareholders and Wall Street), partitioning the bulk of the wealth to the richest, while sending the scraps to the poorest in order to keep itself in power due to the power of the ever poorer, democratic majority. Alas, since there is never a free lunch, and since the Fed does not create wealth but through its currency debasement merely accelerates the transfer of wealth, someone ends up footing the bill? Who? None other than that part of the US population which made the United States of America the greatest country in the world, and is now watching it implode first slowly, then fast.

Just over a year ago:

• METLIFE SAYS `NO MATERIAL EXPOSURE' TO GREECE - BBG

Just over a few seconds ago:

• METLIFE SAYS `NO MATERIAL EXPOSURE' TO GUN MANUFACTURERS - BBG

How the times change. Does this mean that the ECB now accepts 44 caliber hollow points as Tier 1 collateral?

Update: in what may be a death knell for Instagram, National Geographic just announced it would stop posting images to Instagram.

A day after an epic backlash to what many understood was a change in Instagram's TOS, which would see users vacate property and ownership rights over their photos shared on the popular social network - a concept clearly spelled out - and hand these over to Facebook (which recently acquired the Photoshop filters at the backbone of Instagram's business model for an ungodly amount), leading to a furious and perfectly expected exodus of users closing their Instagram accounts, here is the company's panicked response, in which it explains it did not mean what it meant. To wit:"To be clear: it is not our intention to sell your photos." What about selling photos accidentally? Which explains the legalese, because while it may not be "our intention", it is no longer expressly prohibited, is it?

While parts of the world experience economic hardship, a team of Portuguese, UK, Japanese, Italian and Dutch astronomers has found an even bigger slump happening on a cosmic scale. In the largest ever study of its kind, the international team of astronomers has established that the rate of formation of new stars in the Universe is now only 1/30th of its peak and that this decline is only set to continue. The team, led by David Sobral of the University of Leiden in the Netherlands, publish their results in the journal Monthly Notices of the Royal Astronomical Society… Dr Sobral comments: “You might say that the universe has been suffering from a long, serious “crisis”: cosmic GDP output is now only 3% of what it used to be at the peak in star production!”

Why Did We Lose Our Rights if the Government Isn’t Even Keeping Us Safe?