Archive - Nov 27, 2013

Regular readers know that at the end of every month we look at the next month's POMO schedule, and urgently advise against shorting stocks on POMO days. That in the New Normal POMO days are pretty much every single day, may have something to do with why the S&P is set for a +30% close in 2013. However, in December the Fed has something very special served up. In addition to the usual $45 billion in total monthly wealth effect injections (which happen to quietly end up directly in Singapore private wealth offshore accounts), in the next month, Ben Bernanke's parting gift to the 0.1% will be not one... not two... but a whopping three days with double POMOs: December 3, December 9 and, drumroll, December 19, aka the day after the final 2-day FOMC meeting of 2013, when Kevin Henry and his peers will monetize up to a whopping $7.5 billion in one day!

"Governments cannot reduce their debt or deficits and central banks cannot taper. Equally, they cannot perpetually borrow exponentially more. This one last bubble cannot end (but it must)." What is the alternative to the present system of debt serfdom and rising inequality? Eliminate the Federal Reserve system and revert to the national currency (the dollar) being issued by the U.S. Treasury in sufficient quantity to facilitate the production and distribution of goods and services. Is this possible? Not in our Financialized, Neofeudal-Neocolonial Rentier Economy.

Greater-est fools? Or different this time?

Ed Snowden's latest revelation may leave SEC officials quaking as the NSA "has been gathering records of online sexual activity and evidence of visits to pornographic websites as part of a proposed plan to harm the reputations of those whom the agency believes are radicalizing others through incendiary speeches." Of course, as we have seen, this 'information' would never be used by the government for non-radical-terrorist suppressing reasons, as the ACLU notes, is is "an unwelcome reminder of what it means to give an intelligence agency unfettered access to individuals' most sensitive information using tactics associated with the secret police services of authoritarian governments."

In early 2013, many were mystified when one of the most vocal deflationists, and hence stock market bears, David Rosenberg, turned furiously bullish. Just what was the motive behind this transformation many wondered? Thanks to a just filed Gluskin Sheff compensation table, we can put all such lingering questions to rest: the reason, or rather reasons: 3,082,441... all-cash.

In a move reminiscent of the "radical" Tea-Party demands of a few weeks back, the administration has decided:

*OBAMA DELAYING ONLINE INSURANCE ENROLLMENT FOR SMALL BUSINESS
*SMALL BUSINESSES SAID TO USE `DIRECT ENROLLMENT,' NOT WEBSITE

The one-year delay - to Nov 2014, follows the initial Oct 2013 delay citing "sometime in November 2013" availability. The delay applies only to the federal-run SHOP exchanges in almost three dozen states.

Goebbel, Goebbel, Goebbel!!!

Keep a close eye on China: it is on the cusp between the end of the leverage cycle (where as we reported over the past two days, it has been pumping bank assets at the ridiculous pace of $3.5 trillion per year) and on the verge of having its debt bubble bursting. What happens then is unclear.

In the US and Europe, 95% of the buyers are male. Average age is 55. What's different in China?

Recently, newspaper headlines declared that Greece would have a balanced budget for 2013 as a whole. The news came as quite a shock: Recall that when Greek officials came clean about the true state of their country’s public finances in 2010, the budget deficit was more than 10% of GDP – a moment of statistical honesty that triggered the eurozone debt crisis. It seemed too good to be true that the Greek deficit would be completely eliminated in just three years. In fact, it is too good to be true.

As many expected:

• *ITALY SENATE REJECTS MOTIONS TO ALLOW BERLUSCONI TO KEEP SEAT
• *FORMER ITALIAN PREMIER BERLUSCONI OUSTED FROM SENATE

Of course, Sylvio is not happy:

• *BERLUSCONI SAYS HIS OUSTING WON'T LEAD HIM TO RETIRE TO CONVENT
• *BERLUSCONI SAYS TODAY IS 'BITTER DAY' FOR DEMOCRACY

Indeed!

If this week's 2 year auction was an indication of a rising Bid to Cover, and the 5 Year yesterday showed a modest decline, the just completed 7 Year auction was evidence that any rumors of a pick up in ultimate demand in the belly and the long-end of the curve are greatly exagerated. The initial indication of how weak the auction would be came moments before the 11:30 am announcement, when the When Issued was trading at 2.094%. When the formal announcement from the Treasury came that the bond had priced at a high yield of 2.106%, or tailing by a 1.2 bps, the bond complex promptly exhaled. Things only got uglier when looking at the internals: as noted above, the Bid to Cover came at 2.36: a sharp drop from the last auction's 2.66, well below the TTM average of 2.62, and the lowest going back all the way to the 2.26 in May 2009. The takedown was just as unimpressive, with Direct interest sliding to just 16.14% of the final allocation, Indirects likewise seeing their allotment tumble from 42.30% to 34.07%, the lowest since February, which left Dealers holding half of the auction, or the most since June 2012.

While we identified long ago the "wealth effect" nerve center of the New Normal, one thing largely unavailable, was pictures of this trading desk with seemingly no sell buttons. Until now: below, courtesy of Wall Street on Parade, we present a modest compilation of not only what the current NY Fed trading desk looks like but also compare it to its predecessor, as it appeared on vintage photos from the 1930s

Something curious happened earlier today when the DOL revealed its latest initial claims number: while the seasonally adjusted print declined by 10,000 to an expectations beating 316K (a change that identically matched what happened to the Seasonally Adjusted print a year ago), the unadjusted number rose by 37,229 to 363K. That's ok: after all that's what "seasonal adjustments" are for - to take a volatile number which historically posts an abnormal jump or drop in any given week and smooth it out, right? Wrong. Because as the DOL also reported a year ago, the supposedly same "seasonal adjustment" applied to the same week in 2012, when the claims number was 390K adjusted and 359K unadjusted, should have been adjusted in the same direction. And while the 390K claims print in 2012 was indeed a 10,000 drop from the prior week's 400K, the unadjusted number instead of being an increase, was actually a drop, one of 44,768 jobs. How does this same "recurring" seasonal adjustment look further back - after all it is seasonal, so there should be some recurring logic for a specific time of the year? The answer is shown on the chart below.

Unlike every other measure of consumer confidence, sentiment, or comfort, the 'final' UMich Consumer Confidence print recovered its "flash" collapse and managed to beat expectations. However, before the party streamers are broken out, this uptick leaves the confidence data the 2nd lowest since Jan 2013 - led by - drum roll please - the expectations for the future (which rose from a preliminary 62.3 to final 66.8). Perhaps troubling is the drop in inflation expectations - down to 2.9% year ahead, the lowest since Oct 2010. So unlike the rest of the surveys, UMich finds consumers more confident about the future but in the baffle-em-with-bullshit category, expecting disinflationary pressures to grow. Of course, there are seasonality factors - its the holidays nearly - and we note that the 75.1 print is lower than any Nov print from 2004-2008.