Archive - Nov 18, 2013

As reported earlier today, Paris was the latest city to succumb to a rogue shooter when a gunman shot a photographer at left-leaning French newspaper Liberation, following by a shooting near the  headquarters of French bank SocGen.  The lone gunman is shown on the picture below. How the Paris situation differs from numerous such incidents taking place recently in the US, however, is that so far the gunman has not been captured or otherwise "incapacitated." Furthermore, as was reported subsequently, the Paris prosecutors are now treating the shooting as a "terrorist" case. And now, as the WSJ reports, Paris in now gripped in a manhunt for the gunman who is currently on the loose.

Gold prices pulled back this morning as traders booked gains and stagnant physical demand had the yellow metal out of favour. Recent confirmation by Janet Yellen that she will continue Bernanke's loose monetary policy lifted gold, but tapering appears priced into the metal already.

China's GDP is about to undergo the same magic that US GDP received earlier in the year. The "Chinese system of National Accounts" will see five significant adjustments that are expected to (surprise) boost the size of the nation's estimate of its GDP. The National Bureau of Statistics is considering making the changes to reflect the latest economic and social developments and implement the reform guidelines unveiled at the 3rd Plenum recently. From the addition of research and development - intellectual properrty - (just as the US did) to including mark-to-market changes (read rises) in employee stock options and real estate in consumption data, the Chinese appear dead set on making a once-unbelievably goal-seeked number into an entirely fantastical representation of reality (which of course enables moar higher manipulation as to avoid any debt-to-gdp hurdles that the real world might see as a concern).

The stock below is up 1200% year-to-date. The company in question is insolvent by any and all measures and has a "parent" under great pressure to take whatever gains it can get (as opposed to leave anything for shareholders). The company is exposed to the worst of the worst in the housing market. The smart money (as they are called) is piling in. The company is, of course, Fannie Mae (or Freddie Mac - same discussion). This chart, like none other, reflects the "investment" thesis in America today, as Grenwood's Walter Todd notes, “Either you’re going to make a lot of money or you’re going to lose everything you put into it."

While the domestic euphoria in the stock market bubble has succeeded to sucker in everyone into the biggest multiple expansion rally in 15 years (as was noted earlier today, 75% of the S&P's YTD return has come from its trailing PE expanding to 16.5x now from 13.7x in 2012 - the largest increase since 1998), foreigners continue to vote with their feet. In fact, as today's August TIC data report showed, in August - perhaps due to Tapering fears - foreigners sold $16.9 billion in US equities. This was the fourth largest equity outflow in history. Transactions in other securities were mixed, with $10.8 billion in long-term Treasury sales offset by $16.8 billion in MBS/agency purchases, as well as $2.3 bilion in Corporate Bond buys.

NAHB sentiment dropped to its lowest since June (after hitting 8-year highs just 3 months ago). This is the 3rd miss in a row as a huge rebound in prospective buyer traffic (read hope) in the NorthEast seemed to save the data from a fate worse than death. The prior print was revised down from 57 to 54 as it appears for the 3rd time in 20 years, the exuberance in realtor confidence is shown to be a false flag...

An interesting overview of Germany's attempt to solidify its hegemony in Europe. 

Thanks to some overnght levitation (and in spite of major outflows from foreigner from the US as seen in the TIC data), US equities have opened this morning to new all-time highs. As "investors" watched in disappointment on Friday at the 'miss', the opening this morning - amid a double POMO day - has lifted the Dow above 16,000 and the S&P 500 above 1,800 for the first time ever (now up around 10% from the debt-ceiling lows in the last month). Caracas here we come...

Lately Bill Clinton has not been doing the president many favors. First, the "is" definition-challenged former president had some harsh words about Obamacare, and most recently in an overnight question-and-answer session before a standing-room-only crowd in a Beijing hotel ballroom, Clinton who was in Beijing for meetings with China’s President Xi Jinping as well as to promote the work of his New York-based philanthropic organisation, the Clinton Foundation, while withholding comments on Obama - whose approval rating has plunged to an all time low - refused to criticise Edward Snowden. Instead he said he believed it was "perfectly legitimate" for the US government to search “big data pools… to see if there are patterns of communication between certain numbers or sites and others known to be in the possession of terrorist groups”. But he went on, via AFP: “The question is when, if ever, is the government justified in going beyond the patterns to listen to telephone calls, read emails, read text messages, and who’s supposed to decide that? Mr Snowden obviously thought that it was excessive.”

Amid the Spanish FinMin's "concerns about the pace of the increase" in government debt, and PM Rajoy's confidence that the nation would exit the eurozone-fueled banking bailout by January, bad loans in the still disastrously-troubled nations have re-accelerated to an all-time record high of 12.68% of total loans. Mostly linked to the collapsed property sector, bad loans climbed by 6.9 billion euros from the previous month to an unprecedented 187.8 billion euros ($254 billion) in September. Having almost completed the drawdown of its 41 billion bailout - and with the situation fundamentally worse than ever (e.g. record high unemployment), Spanish bond spreads have collapsed to 250bps - their lowest in 29 months.

As Bitcoin soars over $600, another alternative to the fiat currency system is being monkey-hammered lower this morning as status quo support does everything it can to rotate stocks above the key levels we discussed earlier... because stocks rising on anything but fundamentals cannot be exposed for the liquidity-fueled excesses a rising precious metals price would unveil.

While the relentless multiple expansion (if not so much earnings growth and certainly not revenue contraction) looks set to push all three main stock indices over the key psychological levels of 16000, 1800 and 4000, with the all time bubble high on the Nasdaq increasingly looking like the next big target, the stock market mania has nothing on Bitcoin, which only yesterday crossed $500 for the first time ever, and as of this morning is already 20% higher, having just crossed $600 minutes ago. Which means that anything prices in Bitcoin has entered bear market in just the past day. How high BTC goes, is nobody's guess (Raoul Pal had a truly stunning price target): once the buying frenzy kicks in, step aside, especially since China is increasingly looking like it may be jumping on board the latest mania.

• What can possibly go wrong: Tepco Successfully Removes First Nuclear Fuel Rods at Fukushima (BBG)
• Japan's Banks Find It Hard to Lend Easy Money (WSJ)
• U.S. Military Eyes Cut to Pay, Benefits (WSJ)
• Airbus to Boeing Cash In on Desert Outpost Made Field of Dreams (BBG); Dubai Air Show: Boeing leads order books race (BBG)
• Sony sells 1 million PlayStation 4 units in first 24 hours (Reuters)
• Russian Tycoon Prokhorov to Buy Kerimov's Uralkali Stake (WSJ)
• Google Opening Showrooms to Show Off Gadgets for Holidays (BBG)
• Need. Moar. Prop. Trading: Federal Reserve considering a delay to Volcker rule (FT)
• Raghuram Rajan plans ‘dramatic remaking’ of India’s banking system (FT)
• SAC Capital's Steinberg faces insider trading trial (Reuters)