Archive - Mar 2013

Glorious words in many ways. They begin the preamble to the United States Constitution as America threw off the chains of tyranny and became a country. However it must be said that Americans are not the only “We the People” country on the planet. This declaration is to be found in democracies everywhere and should be cherished and praised as citizens of each nation get to make the choices appended to self-determination. I point all of this out this morning because there is change afoot on the Continent and to not take note of it may well be an expensive mistake. Business of late, business as usual, may not be the business of tomorrow as the citizens of various countries, not in open revolt or not in the streets, are beginning to wave a different banner and it is decidedly nationalistic and a potential new definition of just whom “We the People” are; in fact. Recently, in poll after poll, the citizens of Germany, Britain and other countries in Europe are gathering around their own flags and seemingly rejecting the imposed commonality.

Average daily trading combined volumes on the three main gold contracts on the Shanghai Gold Exchange in the first two months of the year jumped 24% on the year, according to Reuter’s calculations.  "The strong physical demand in China is the main reason behind gold's resilience," a Beijing-based trader told Reuters. Physical demand prospects out of China remain positive in the weeks ahead, UBS AG said  according to Bloomberg. China is very vulnerable to a property crash and its own economic crisis. The Chinese stock market has performed very poorly in recent years and Chinese people realise the importance of gold as a store of value.

The eye of the hurricane over Southeast Europe may soon be shifting, exposing Greece to the same 150 mph gale turmoil everyone has grown to love and expect over the past three years as soon as this month, when a new proposal by Greece is due on how to cut a massive 150,000 public sector jobs: a move which will result in an immediate surge in public unrest, and an exponential jump in strike activity. As Bloomberg reports, "Greece is locked in talks with international creditors in Athens about shrinking the government workforce by enough to keep bailout payments flowing. Identifying redundant positions and putting in place a system that will lead to mandatory exits for about 150,000 civil servants by 2015 is a so-called milestone that will determine whether the country gets a 2.8 billion-euro ($3.6 billion) aid installment due this month. More than a week of talks on that has so far failed to clinch an agreement."

• Cardinals head to conclave to elect pope for troubled Church (Reuters)
• Hyperinflation 'Unthinkable' Even With Bold Easing: Abe (Nikkei)
• Ryan Plan Revives '12 Election Issues (WSJ)
• Italy 1-yr debt costs highest since Dec after downgrade (Reuters)
• Republicans to unveil $4.6tn of cuts (FT) - Obama set to dismiss Ryan plan to balance budget within decade
• CIA Ramps Up Role in Iraq (WSJ)
• Hollande Hostility Fuels Charm Offensive to Show He’s No Sarkozy (BBG)
• SEC testing customized punishments (Reuters)
• Judge Cans Soda Ban  (WSJ)
• Hungary Lawmakers Rebuff EU, U.S. (WSJ)
• Even Berlusconi Can’t Slow Bulls Boosting Euro View (BBG) - luckily the consensus is never wrong
• Funding for Lending ‘put on steroids’ (FT)
• Investigators Narrow Focus in Dreamliner Probe (WSJ)
• With new group, Obama team seeks answer to Karl Rove (Reuters)

When we first reported on China's "hogwash" yesterday, the number of floating pigs in Shanghai's water supplying Huangpu River was a "modest" 1200. It has since tripled to 3300. From SCMP: "The agriculture and environmental protection departments in Shanghai's Songjiang district have pulled more than 3,300 dead pigs out of the Huangpu River, which flows through the municipality, in the past week." What is worse is that at least one pig-related virus has been found in a water sample: "Porcine circovirus, a common hog disease that is not known to be infectious to humans, was found in a sample taken from the water, Shanghai's animal disease control department was quoted as saying by eastday.com a major Shanghai news portal." The good news is that tests by the Shanghai Animal Disease Prevention and Control Centre on five sets of internal organs taken from the dead pigs has ruled out five other diseases including foot-and-mouth, hog cholera and blue-ear. Of course, this is China, whose disclosure record is second only to Japan, where as a reminder the government said the radiation level was under control days after the Fukushima explosion, even as the reality was far grimmer.

Just like yesterday, it will be up to the US session to provide the perfectly expected, VIXterminating, volumeless ramp as the rest of the world just did not have it in i to take the S&P to all time highs in overnight trading. To summarize: currency talkfare out of Asia, hope springs eternal out of Europe despite the usual spate of ugly numbers, PIIGS bond auctions backstopped by the ECB and always "that much better" than the expected, a UK economy that is just imploding to provide an alibi for more open-ended QE and a crushed pound, and with the US due to make everything better by sending the SP to its all time high (just 9 points away) on the one week anniversary of the record high DJIA, as the NY Fed clobbers the VIX to a 10 handle or lower on even more ugly, unadjusted economic data.

If you recall, Winston Smith’s job in George Orwell’s classic novel 1984 was to go into historical records and literally change history.  He would alter photographs and text in the archives so that history would always portray “The Party” in a positive light and as omniscient.  Well folks, this behavior has arrived in America and we better nip it in the bud fast before one of these drones is flying right over our heads. "As scrutiny and debate over the use of remotely piloted aircraft (RPA) by the American military increased last month, the Air Force reversed a policy of sharing the number of airstrikes launched from RPAs in Afghanistan and quietly scrubbed those statistics from previous releases kept on their website. On Sunday, U.S. Central Command said in a statement that the decision was made to remove the statistics because the data disproportionately places emphasis on the airstrikes. The majority of the RPA missions are for intelligence, surveillance and reconnaissance, with a small percent involving airstrikes."

U.S. equity markets rallied once again after opening weaker Monday repeating previous performances. There wasn’t much news domestically. The Fed continued modest POMO actions which will grow in scope throughout the week. Stocks were quiet most of the day but got a lift on rumors that Apple (AAPL) will declare a dividend of some kind. If they do this, then the SEC should be monitoring who and what groups were front-running this piece of news.

The topic of Illinois' various insolvent pension systems is not news to regular Zero Hedge readers. One needs but to recall our articles from mid/late 2010: "61% Underfunded Illinois Teachers Pension Fund Goes For Broke, Becomes Next AIG-In-Waiting By Selling Billions In CDS", "Illinois' Pension Fund Death Spiral Revisited: "10 Years Of Money Left" or "Illinois Teachers' Retirement System Enters The Death Spiral: AIG Wannabe's Go-For-Broke Strategy Fails As Pension Fund Begins Liquidations" in which we clearly explained how the state's teachers pension fund was systematically doing everything in its power to mask its massive underfunding, and the fact that it was rapidly running out of money. The retiremnet fund, in turn, took things very personally, prompting Dave Urbanek, Public Information Officer at the Teachers’ Retirement System of the State of Illinois (TRS), to write an impassioned response to Zero Hedge denying all allegations. Today, over two years after the above news, the SEC finally concluded their analysis of one part of the massively underfunded Illinois Pension system and found the Illinois failed to inform investors about the impact of problems with its pension funding schedule as the state offered and sold more than $2.2 billion worth of municipal bonds from 2005 to early 2009. The SEC also said Illinois failed to disclose that it had underfunded the state's pension obligations, increasing the risk to its overall financial condition.

Because having legal authority to buy corporate bonds, ETFs and REITs, in addition to everything else the Fed now buys, is apparently not enough to crush, mangle and suicide its currency, the BOJ is now considering adding yet another "asset" to its cocktail of eligible securities for purchase: those which Buffett once declared weapons of mass financial destruction - derivatives.

Record Dow Jones, record US debt ($16,701,846,937,879.74), and now, once more, record number of Americans on foodstamps. According to the USDA, an all time high of 47,791,966 Americans closed 2012 in possession of the highly desired Electronic Benefits Transfer (EBT) card, managed by who else but JPMorgan. And with a civilian non-institutional population of 244.4 million in December, this means that a record 19.56% of eligible Americans are on Foodstamps.

a/k/a Muammar Bloomberg...

Presenting the VIX. Or rather, highlighting the grotesque and blatant last second "banging the close" of the VIX. Thank you Simon Potter and your protege, Kevin Henry, for providing countless hours of sideline entertainment, and lamentation for what was once a stock market.

When we summarized the overnight session just before 7 am, we titled it appropriately enough, "No Melt Up (Yet) In Boring Overnight Trading." Little did we know, actually scratch that - we knew full well that moments later the ramp would make its now daily reappearance. Because if it weren't for the 7th straight day of no volume, no news levitation, someone, somewhere may have gotten the impression that the market is desperately manipulated and artificial, and that if it weren't for a constant ramp higher, confidence in authoritarian "markets" may disappear, and the retail investor may pull even more than was pulled last week, following a brief inflow in the market in early 2013.