Archive - Oct 10, 2013

GROSS: 6 weeks reprieve from the gallows. Washington sure knows how to put on a show. Buy 5yr Treasuries and Corps.

— PIMCO (@PIMCO) October 10, 2013

Here's where we stand...

One wonders: was this just another case of mistaken ticker identity euphoria. After all TW Telecom's ticker: TWTC. That of Twitter: TWTR. And if so, now may be a good time to put on limit sell orders 20% above the NBBO in all other permutations of TWT_ tickers.

Snatching failure from the jaws of victory...? 10/17 T-Bills are 9bps off their low yields of the day and the S&P 500 has given back 5 points of its gains as the White House potentially snubs Boehner's offer.

U.S. HOUSE REPUBLICAN LAWMAKERS CONCERNED THAT CLEAN DEBT LIMIT INCREASE WOULD NOT FORCE OBAMA TO NEGOTIATE-SENIOR REPUBLICAN AIDE
OBAMA IS WILLING TO NEGOTIATE ON BROAD BUDGET ISSUES, BUT ONLY AFTER CONGRESS ENDS SHUTDOWN, LIFTS DEBT CEILING-WHITE HOUSE OFFICIAL

Of course, this dip also coincides with the end of POMO.

The Speaker of the House has a plan - apparently - that enables the debt-limit "can" to be kicked 6-weeks down the line to Nov 22nd in a "clean" bill that appears dirtied by the lack of a CR for the government shutdown (though including a broader budget talks process). Democrats are already pushing for an end-2014 debt-ceiling extension that McConnell says "wil not fly." We look forward to hearing from Boehner on how this is not a "fold" and how the rank-and-file will agree to this... see you in six-weeks... (and while stocks are incapable of discounting anything that far out, T-Bills are starting to price in that reality). But. U.S. HOUSE REPUBLICAN LAWMAKERS CONCERNED THAT CLEAN DEBT LIMIT INCREASE WOULD NOT FORCE OBAMA TO NEGOTIATE-SENIOR REPUBLICAN AIDE and HOUSE REPUBLICAN LEADERS PLAN TO PRESENT PROPOSED SHORT-TERM DEBT LIMIT HIKE TO WHITE HOUSE ON THURSDAY; WANT TO SEE WHAT OBAMA OFFERS IN RETURN-SENIOR REPUBLICAN LAWMAKER

The S&P 500's 32 point rally off the lows yesterday has some excited that the "All-Clear" will be signaled soon from Washington and traders can go back their business of BTFATH. In an effort to provide guidance for just what that would mean, and assuming Yellen/Bernanke (absent any jobs data to guide their hand from the "buy" button to the "strong buy" button) stays the course, the Fed balance-sheet flow suggests an End-October S&P 500 Target of 1,800... and all driven by the optimistic expansion of multiples.

Is it any wonder that there are rumors of CEO after CEO turning down the top-job at Microsoft? As Gartner just announced, the 2013 "back-to-school" sales quarter experienced its lowest PC volume since 2008. Excuses are myriad - from inventory channel delays, currency volatility, and operating system upgrades - but the bottom-line is that "cheaper Android-based tablets attracted first-time consumers," and the PC slide continues to its sixth consecutive decline in worldwide shipments.

Two bailouts, a default and a half later, it should be obvious that Greece was stripped of its sovereignty for nothing. Should I say "I told you so"???

Gold may not be money, but the proceeds from selling it sure is, at least to the IMF, which moments ago announced that it has received government approval to "transfer the profits from gold sales low-income countries." Reuters reports that "The International Monetary Fund has received approval from its member nations to transfer the profits from gold sales conducted a few years ago to a fund to help low-income nations, IMF chief Christine Lagarde said on Thursday. "We have just reached the threshold of enough approval from our membership to transfer the existing gold profit to meet the financing needs of our low-income countries," she said at a news briefing opening the fall meetings of the IMF and World Bank." What was left unsaid is that the bailout needs of the high-income countries, once the debt crsisis comes back with a vengeance as it always does - which as the Keynesian uberminds have demonstrated can only be "solved" with more debt, more monetization, and more pent up inflation - will make sure that gold prices jump right back to new highs at which point the IMF can sell another batch of gold to fund the "poor countries" again, and so on, repeating the process until all fiath is extinguished, or until the IMF runs out of gold, whichever comes first.

Forget about the headlines, the most concerning statement from the entire circus of Jack Lew's hearing was his comment that the world counts on the US to be responsible. It seems that boat sailed a long time ago. The following succinctly summarizes the key aspects of his testimony and the Q&A. As a reminder, Lew noted "Obama did negotiate," denied the chance of "prioritization," and warned that other nations appear ready (and somewhat excited) for the US to falter.

After reading the coverage of Janet Yellen’s Fed Chair nomination yesterday, it feels as though it’s 2006 all over again. Confidence in our central bankers seems to be approaching all-time highs, little more than five years after it collapsed alongside the financial sector. The overwhelmingly positive response to Yellen’s nomination is worrisome because, well, it’s overwhelming positive. As Galbraith once astutely observed: “In economics, the majority is always wrong.”

As investors "celebrate" a potential can-kicking "resolution" - the T-Bill market is pricing in a recurrence of the catastrophe in just 6 weeks. While the shortest-dated bills are rallying, the End-November to mid-December bills are selling off dramatically... the 12/05/13 Bills are now +8bps to 12bps.

As we noted last night, finally, it appears that the resolution to the debt ceiling, now due to hit in one week, will be a 6 week can kicking to late November, early December so the whole thing can repeat again, while the government shut throughout according to the GOP proposal, which also means no nonfarm payroll reports for September, October and November:

• *HOUSE REPUBLICANS SAID CONSIDERING CLEAN 6-WEEK DEBT-LIMIT BILL
• *REPUBLICAN LEADERS TO PRESENT PROPOSAL TO MEMBERS TODAY
• *U.S. GOVERNMENT WOULD REMAIN CLOSED UNDER HOUSE PROPOSAL

The USD and Treasury Yield are soaring, US equities are waking up slowly to the news but T-Bills remain unimpressed for now. Bear in mind this was originally reported on October 5th.

Initial Jobless Claims spike 66k this week, to its 2nd highest print of the year. For 5 weeks in a row we have see initial claims slide lower as the market celebrated multi-year lows and rallied on recovery hopes... and now it's all gone. Continuing claims has also missed expectations for the second week in a row. The Labor department explains this credibility-destroying data as due to the government shutdown and to "glitches" in the California computer system (which were supposedly resolved two weeks ago when the claims number was printing in the mid 200k range) as well as due to 15,000 non-Federal workers filing claims (being fired) due to the government shutdown. Of course, anyone fired in the past week can and likely will say they were fired due to the shutdown. The market shrugged off this data as irrelevant, which it is for the simple reason that initial claims reporting, now flawed for 5 weeks in a row, has become the latest "data" set to succumb to total farcism.