Archive - Feb 2013

With the entire world, and certainly GETCO's ES and EURUSD algos, focused on every single update out of the Italian Senate race, which now appears certain to not bring the necessary 158 seats to the Bersani-Monti coalition leading to a chaotic revote in the coming months, here is some tangential news of the "who could have ever seen this coming variety." Following last week's Heinz insider trading probe, which implicated a Goldman Sachs account in Zurich belonging to some private wealth client, who was so anonymous not even Goldman knows who it belonged to, we now learn that yet another Goldman employee has just left the company in a totally separate insider trading probe.

The State has monopolized all authority, giving it essentially unlimited power to make things worse. Since concentrations of centralized capital, authority and power does not relinquish control easily, if ever, the Status Quo will have to decay and implode before authority can be pushed down to more responsive, appropriate levels.

Very bad news for the globalist statist banker oligarchy as it now appears that an Italian revote is virtually unavoidable:

• ITALY'S BERLUSCONI WOULD GET 138 SENATE SEATS, CISE SAYS
• ITALY'S GRILLO PARTY WOULD GET 54 SENATORS, CISE SAYS
  
• BERSANI AND MONTI BLOCS WOULD GET 121 SENATORS TOGETHER: CISE

It also means that should Grillo form a coalition with Berlusconi, even if very unlikely, they would have the required 158 seat majority in the Senate. In short: this is a horrible result for Goldman and its technocratic tentacle which got an epic boot from the Italian people.

It seems that as long as lumber futures are rising they are an excellent indicator of the strength of the housing recovery, but once they show any weakness, it is technical or negligible. A few things we know: inventory is epically low; homebuilder stocks are priced for perfection (and missing); NAHB confidence is rolling over; and now Lumber futures have tumbled by the most over the last five days in 15 months. So much for a sustained 'recovery'.

Update: SENATE LOMBARDY: BERLUSCONI 38.8%, BERSANI 27.6%: RAI PROJECTS

With the epic, and very embarrassing, retracement of Italy's (and the US stock market's) entire intraday gains as the revelation that Europe may be very much unfixed all over again, here is yet another vote tracking map, which however is slightly delayed from the real time data, which as of moments ago had Berlusconi at 37.4% in the all too critical Lombardy, while Bersani at just 29.7%, while the latest braoder Senate count per Sky is Berlusconi 31.9%, Bersani 28.7% and Grillo at 24.9%, which means Bunga + Bepe have over 56% of the Senate: an epic failure for Goldman's tentacle. This is very bad news for statists, as the lack of 158 seats even for a Bersani-Monti coalition, means a Hung Parliament, possible loss of OMT eligibility and new elections coming soon, all of which was explained previously.

Well that didn't last long did it?

LATEST SENATE FROM RAI: BERLUSCONI 31.6, MONTI: 29.4, GRILLO 24.9, MONTI 9.2

As noted initially, Italian exit polls are notoriously inaccurate. Sure enough, here is some data which directly contradicts initial pro-statist results:

BERLUSCONI LEADS IN KEY SENATE RACES, IPR PROJECTION SAYS
BERLUSCONI LEADS IN SENATE RACE 31% TO 29.5%: RAI PROJECTION
BERLUSCONI COALITION LEADING SENATE IN SICILY: LA7 PROJECTS

The market may have to ask some questions, after having shot repeatedly already. And it gets better:

Grillo Five-Star movement would be largest single party in Senate based on Rai projection 

A renegade, counter-establishment comic to head it all. What can one say but... Italy.

While the Italian exit polls provided a breath of fresh air for statists everywhere, and hope that despite his recent resurgence, Berlusconi ascent won't result in a Hung Parliament outcome, threatening Italy's access to the ECB's OMT program, the final outcome for the 158-seat Senate majority will hinge on the final Lombardia vote, which as explained previously is critial for the final senate breakdown. Readers can track the real-time data as Lombardia votes come in via Italy's TG24/Sky at the following link, while the general Senate breakdown in real time can be found here.

As I and many others have pointed out for years, unless you are a crony Wall Street welfare queen you can pretty much forget about any high level position in the Obama Administration.  Barack made that clear from day one when he decided to surround himself with two of the people at the core of the 2008 financial crisis, Larry Summers and Tim Geithner.  The trend is simply continuing with the current nominee for Treasury Secretary: Jack “Bailout Bonus” Lew.  The revolving door is institutionalized and at this point as reliable as a Swiss watch.

If one looked at the EURUSD exchange rate or US equity futures one could be forgiven for thinking things did not go so well in Italy's election. The former is fading quite rapidly from its overnight exuberance and the latter is stable at pre-FOMC levels. However, a glance at the initial exuberant, nothing can stop us now, Italian (and Spanish) bond and stock markets and it appears the problems of the world have been solved. Spain's 10Y yield is back below 5%, Italian 10Y spreads have collapse 30bps to near multi-year lows, and Italy's equity market is up 3.5%. However, if you pause, take a breath, and look around, the liquidity is plain to see and the initial knee-jerk is beginning to retrace as investors realize that everything they knew was there before - is still there...

The ongoing debacle of Europe's food-chain continues with news from the BBC that IKEA, the venerable do-it-yourself furniture (and food apparently) maker has pulled 1675lbs of Swedish Meatballs off shelves. Horse was found in "beef and pork" meatballs in the Czech Republic and then in 13 other nations including the UK, Holland, and Portugal. Since the first horsemeat was found last month, traces have been found in many places (table below) with UK's FSA having 35 positive tests and Germany's equivalent 67 positives. IKEA's discovery, noted on their facebook page, adds further fuel to the complex food-chain fire but we can only wonder just how many extra pieces of horsemeat were included in the package (and what was missing).

Who says necessity is not the mother of invention in the New Normal. While a tiny fraction of the Japanese population is enjoying the transitory effects of Abe's latest reflating "wealth effect" policy (even as China has made it clear said policy will end quite soon), the bigger problem for Japan is that even sooner, more and more of it will be reliant on hamster wheels to generate electricity, as LNG prices have just hit a record high and are rising at a breakneck pace, and as local nuclear power generation has collapsed to virtually zero. Which means one thing: electricity will soon become so unaffordable only those who are invested in the daily 2% Nikkei surges will be able to electrify their immediate surroundings. So what is Japan's solution? A quite ingenious one: as Geek.com and ASR both report, Japan's Fujifilm has created organic printed sheet that harvests energy from body heat, or in other words, converts body heat to electricity. Finally, at least one key part of the Matrix "reality" is now fully operational - the use of human beings as batteries.

Next week’s calendar is packed with important events and releases, aside of course from the biggest event of the week which are the Italian elections. In fact we already got the first one in the form of China's disappointing HSBC flash PMI which consensus expectations would print stable yet which dropped to a 4 month low. On Friday, the ISM is expected to come out mildly softer vs last month’s strong 53.1 print and consensus at 52.5. Chicago PMI will also be followed by markets on Thursday. On the central bank front markets will be primarily looking for further news on the BOJ leadership succession front. From the perspective of Fed speakers, Chairman Bernanke’s testimony ahead of the Senate Banking Committee will also be followed as markets continue to track the Fed’s assessment of the economic recovery. In the global currency warfare front, the Bank of Israel is expected to cut policy rates by 25bps on Monday, as well as the National Bank of Hungary on Tuesday.

• Risk of instability hangs over Italy poll (FT), Protest votes add to uncertainty in close Italy election (Reuters), and... Risk On
• Czech inspectors find horsemeat in IKEA meatballs (Reuters)
• China’s Slower Manufacturing Casts Shadow Over Recovery (Bloomberg)
• So much for reform: China Prepares for Government Shuffle as Zhou Stays at PBOC (Bloomberg)
• France to pause austerity, cut spending next year instead: Hollande (Reuters)
• Sinopec to buy stake in Chesapeake assets for $1.02 billion (Reuters)
• White House warns states of looming pain from March 1 budget cuts (Reuters)
• China Quietly Invests Reserves in U.K. Properties (WSJ)
• Osborne Keeps Austerity as Investors See Downgrade as Late (BBG)
• South Korea's new president demands North drop nuclear ambitions (Reuters)
• Russia accuses U.S. of double standards over Syria (Reuters)