Archive - Jul 9, 2013

As reported yesterday when we showed the very special rate that the 3 Year was trading in repo (-1.45%, same as today), many were looking to today's 3 Year auction to relieve some of the collateral shortage issues that have developed across various asset classes. And sure enough, following last month's abysmal 3 Year auction, today's pricing of $32 billion in 3 Year paper was like night and day compared to a month ago.

As of last Friday, gold has now fallen as much 35.4% (based on London PM fix prices) over 96 weeks. But if you're like us, you still recognize that the core reasons for investing in gold haven't changed. People who sold their gold recently made a shortsighted decision. Before too long precious metals will rebound - and probably in a big way. But when? Does history have any clues about how long we'll have to wait for that rebound?

Russia to United States (et al): "you are lying."

• MOSCOW'S U.N. ENVOY SAYS RUSSIAN ANALYSIS INDICATES SYRIAN REBELS, NOT ARMY, CARRIED OUT ALEPPO CHEMICAL ATTACK ON MARCH 19

The ball is now in the free world's court.

While we have already extensively deconstructed the quality components of jobs in the US, showing first that in June 240K full time jobs were lost, even as 360K part-time jobs were "gained", and second that so far in 2013 only 130K full time jobs have been added offset by 557K part-time jobs, we had sinking suspicions that there was something off with the quantity component as well: after all, at an average monthly gain of precisely 201.8K jobs in the past six months (or in 2013), this number seemed just a little too perfect considering the Fed's implicit target of generating just over 200K jobs in a half year period before it begins tapering, which in light of declining gross issuance and less monetizable instruments, has been the Fed's goal all along. Today, courtesy of the monthly JOLTS survey we got just the confirmation we needed that, indeed, the official non-farm payroll number as per the Establishment Survey has been substantially off to the tune of a whopping 40% above what is quantitatively happening in reality.

And the Temple of Asylums...

Surging shale oil production has exposed the lag in the U.S. infrastructure to transport the new domestic energy source in a safe and the most cost-efficient timely manner to the end users. 

The Washington Examiner reports, that the second largest employer in America is Kelly Services - a temporary work provider. The company, started in 1946, serves 99% of the Fortune 100 and had revenues of $5.5bn in 2012. As The Examiner concludes, echoing our and Mr. Stockman's previous thoughts, it's a sad state of affairs for our country that the recovery, or lack thereof, is being fueled by a shift from full-time to part-time work.

Did Edward Snowden just accept a Venezuela asylum offer? He did for a few minutes following a tweet by Russian politician Alexey Pushkov, but subsequently did not after the tweet was deleted. Welcome to the New Normal age of twitter diplomacy...

Moments ago ECB's Asmussen had some less than jovial words for EURUSD longs. To wit via Reuters: ASMUSSEN SAYS THERE WAS UNANIMITY ON ALL DECISIONS LAST THURSDAY INCLUDING THE RATE DECISION; ASMUSSEN SAYS ECB FORWARD GUIDANCE GOES BEYOND 12 MONTHS; ECB'S ASMUSSEN SAYS IF NEEDED WE HAVE A RANGE OF STANDARD AND NON-STANDARD MEASURES WE CAN DEPLOY. And the punchline: ASMUSSEN, ASKED ON NEW LTRO, SAYS I WOULD NOT RULE OUT THIS. The intention, of course, was to crush the EURUSD now that redenomination risk is, supposedly, gone. We can't wait until said risk returns and Mario Draghi comes back urging everyone to buy, buy, buy the EURUSD. Of course, end result for those who listened to us a week ago and faded Stolper's latest EURUSD long at 1.3060, a 260 pip gain with which we close the latest Stolper fade reco.

The overthrow of President Mohamad Morsi by popular demand and supported by the army inaugurates yet another volatile episode in Egypt’s long and turbulent transition. Macro stabilisation in Egypt hinges on a swift and cohesive transition, and given the current bloodshed, that appears unlikely - which leaves Barclays 'muddle-through scenario' - where political/religious divides delay formation of civilian government - as the most likely; postponing fiscal reforms indefinitely, and undermining further the fiscal and debt sustainability of the already-troubled nation. This is a major problem, since, after all; among the main reasons behind the mass protests of 30 June were the continued deterioration in most socioeconomic indicators, faltering public services (notably provisions of fuel and electricity), rising risks of macroeconomic instability and slow progress in implementing socioeconomic and fiscal reforms over the past year.

Here are the IMF's latest, and prior, forecasts presented without commentary. None is needed.

In case you missed the late announcement, Ben Bernanke is scheduled to deliver a speech on Wednesday afternoon, covering the Federal Reserve Bank’s track record through its 100 year history. Presumably, he’ll also spend time defending current policies, in both prepared remarks and the question-and-answer session to follow.

In advance of what could be a market-moving talk, it seems appropriate to consider what’s been said in the past about the Fed’s policy record. I suggest seeing if you can name the source of each of the following excerpts...

When it comes to changing the "measurement" rules in the middle of the game, nobody does it quite like Japan: in the aftermath of the Fukushima nuclear explosion, when radiation was soaring (and still is with Tritium levels just hitting a record high but who cares - Goldman partners have to earn record bonuses on the back of the irradiated island) Japan's solution was simple: double the maximum safe irradiation dosage. Done and done. Now, it is time to do the same to that other just as pesky, if somewhat less lethal indicator: inflation. Reuters reports that the Japanese government plans to adopt a different measure of inflation to the central bank's.

It can't happen... It can't happen...It can't happen...  It just happened.

China’s biggest private shipbuilder, China Rongsheng Heavy Industries Group, last week filed for a profit warning as it expects a loss in the first half of 2013. That was the good news. The bad news is that Rongsheng appealed for government aid last Friday and said it was cutting staff as it was delaying payments to suppliers to deal with tightened cash flows. It also called on its shareholders for financial help and said it was in talks with banks and other financial institutions to renew existing credit lines. In other words a complete liquidity collapse.