Archive - Apr 23, 2013

Another word for locked (or where the bid and ask are the same; the only condition which is worse - crossed, where the bid is higher than the ask)? Broken.

A Banzai7 exclusive...

260,000 S&P 500 e-mini contracts traded in the three minutes following the fake AP Tweet. That is ~$20.4 Billion notional value 'changed hands'. For those with trailing stops, our condolences...

When sales reps, Easter, and the sequester get blamed for worldwide sales declines

Presented with little comment aside to note that based on a tweet, the 'deeply liquid' US equity market collapsed instantaneously as all those liquidity-providing 'algos' jumped ship. The good news, if indeed this was merely a test for "the big one", is that everyone managed to sell ahead of everyone else. Right?

Despite a very positive starting point for European citizens' view of the EU; over time, this support and optimism evaporated. Massive central bureaucracy, European arrogance and lack of respect for the independence, history and culture of the national states slowly destroyed confidence in the project. When we look back, we must admit that it took too long to recognise what the European project really was. But we also have to state that this recognition came much later to many others and some of our career politicians obviously still do not get it. The big question is really whether the EU is more the problem than the solution in the current crisis. The euro has shown its true colours and anyone with a rational view of the world sees the currency collaboration as a historic failure that can lead to even further fatal consequences for Europe and the continent’s competitiveness vis-à-vis the rest of the world. There is one thing, and only one thing, that can rescue the euro. That is a much more far-reaching integration between the euro countries; a common financial policy, joint debt issuing, a willingness to pay enormous transfers from the rich to the poor countries or, more specifically, from Germany to all the other member states. That is a possible route, but not a desirable one. The time has come to do everything to ensure that Europeans understand what the future perspectives of this choice are and that Europeans understand the importance of this choice.

All in all, the markets are falling for the same ploy they’ve fallen for dozens of times in the last few months: more political promises from those who cannot and will not do what is needed to solve the region’s problems.

Confused about the latest disconnect between reality and propaganda, this time affecting the (foreclosure-stuffed) housing "recovery" which has become the only upside that the bulls can point to when demonstrating the effectiveness of QE now that the latest attempt at economic recovery has failed miserably both in the US and globally? Gluskin Sheff's David Rosenberg is here to clear any confusion.

In what seems like a bow to his overlords in Berlin, Spanish Prime Minister Mariano Rajoy has unleashed a somewhat remarkable torrent of terrible realization and truthiness:

• *SPAIN PM SAYS EUROPE ECONOMY WORST THAN FORECAST THIS YEAR
• *SPAIN PM SAYS ALL EU COUNTRIES ARE REVIEWING GROWTH FORECASTS
• *SPAIN PM SAYS MUST TAKE DIFFICULT DECISIONS FOR COUNTRY'S GOOD
• *SPAIN PM SAYS EU COUNTRIES MUST ACCEPT TO GIVE UP SOVEREIGNTY
• *EU countries’ giving up sovereignty to the bloc is crucial for its future

In other words, handing over your liberty to Germany is for your own good. It seems the German perspective (as we noted here) is winning out.

Despite dismal data on German PMIs, Italian and Spanish equity markets have had their best 4-day run in 7 months to push back to two-month highs as the exuberance around the world reaches fever pitch once again. The Eurostoxx 600 (broad European stock index) jumped a tremendous 2.4% for its biggest rise in 8 months. EURUSD plunged and perhaps gives the hint that the ECB will be forced to act next week - so what are they going to do? Rate cut? (maybe) Another all-encumbering LTRO? (bank spreads didn't weaken) More direct bond-purchases? (failed abysmally last time - though this shift could be the front-run of that) Doesn't matter... nothing matters. Spanish and Italian bond yields and spreads smashed lower to near pre-crisis spread levels even as Rajoy says things are worse, much worse, than expected. Bad is good, but terrible is way better... but if it's all so 'good' why did investors seek Swiss short-dated debt as a safe haven once again? (hovering at 3-month low rates).

That Congress has had aspirations on collecting sales tax on online purchases, which comprise an increasingly bigger portion of all retail sales in the US, in the past is nothing new. However, following last night's passage of the Marketplace Fairness Act in the Senate with a cloture busting 74 votes for (and 20 against), the US may be very close to finally adopting a uniform standard taxing all online transactions, regardless of physical jurisdiction or any other geographic boundaries. As Ars Technica reported last night, "your tax-free days of online shopping are numbered. If S743, also known as the Marketplace Fairness Act, becomes law, the millions of Americans who have been able to avoid sales tax online will have to start paying it. Given the broad support shown by today's US Senate vote, some version of it is likely to come to fruition."

In his increasingly ubiquitous manner, the bond king has reduced his thesis to 140 characters, summed up in just two words... Sell Euros

Gross: Expect an ECB cut soon but will it lead to real growth? Doubtful. Euro needs to go down. Sell Euro.

— PIMCO (@PIMCO) April 23, 2013

It seems sometimes there is no need for a 300-page Powerpoint presentation.

A key goal of propaganda is to mystify and obscure the Power Elites' real quandary and agenda. For example: we're just trying to help you out here, folks, by inflating another "wealth effect" bubble that will make you feel more prosperous. You're gonna love the warm fuzzy feeling of a return to the good times, even if you own zip-zero-nada in the way of productive assets. Or: we're raising your taxes and expropriating your money via inflation to stabilize the system that benefits you. (And yes, you may kneel and kiss Janet Yellen's ring.) The current level of mystification is truly extraordinary. But fortunately, we own a demystification device that scrubs out the mystification, leaving only stark, unforgiving reality. The global Status Quo--the U.S., the E.U., China, Japan, Cyprus, Greece, Italy, Spain, et al.--has only one choice: do more of what has failed spectacularly.

It is only logical that after last month's New Home Sales miss (exp. 420, printed 411K), which sent the market higher, today's tiniest of beats in New Home Sales, which printed at 417K, on expectations of 416K, would also send the market higher. The total months of supply indicated was 4.4, the same as February, and well above the 4.0 from January. Unnoticed in the release was that the January housing data was revised higher from 431K to 445K, meaning last month's drop would have been even more acute (-7.6% instead of -4.6%), but who cares about such things as data chronology now that the headline effect is long gone.  All that matters is that the trend is the mainstream media's friend, which can report new home sales have grown once more... if only back to levels last seen in April of 2010 when the same number was 422K. Was the data actually meaningful on a long-term basis? We will let readers decide on their own after one look at the chart below. Finally, and this will not be mentioned anywhere, the average New Home price plunged from $310,000 to $279,900 -  the lowest since June of 2012. One can only imagine the step down in quality that was required to make up in volume what was "lost" in price.