Archive - Oct 25, 2010 - Story

Despite renewed USD weakness, the pair failed to post substantial gains and after moving above 1.4000 level yet again, edged back towards the mid-1.3900's in the closing hours of trade on Monday. Still, the pair remains in a bullish trend and there is plenty of economic data from both sides of the pond on tap on Tuesday which, given the looming Fed meeting will result in high volatility by the USD and should the data disappoint, would lead to another attempt by the pair to surpass the 1.4100 mark. In terms of technical levels, to the upside 1.4100 remains a crucial psychological level and below, resistance levels are seen at 1.4005 and 1.4050. To the downside, supports levels are seen at the 10DMA at 1.3942, followed by the 21DMA at 1.3843. There is also an intraday option expiry at 1.3800 which is due to expire on Tuesday at 1500BST NY cut.

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By now everybody has heard about today's most recent butchering of Obama's farcical campaign promise of transparency, as exhibited by his superior: the Federal Reserve, which replied to a FOIA request submitted by the late Mark Pittman with 560 pages of blacked out lack of disclosure, all of which highly irrelevant, and a typical demonstration of the Fed's modus operandi of criminal opacity. Since there is little we could add to this narrative, we thought long and hard how to most poetically give justice to the ongoing saga between the late Mark and the soon to be late Fed. We couldn't come up with anything profound. So we decided to fall back on the simplicity of truth. And the truth is that in this most recent attempt to foul the memory of a great journalist and greater man, the Fed once again merely digs the grave of its own demise ever deeper. Even from beyond, Pittman reminds us that one simple man can continue to challenge the multi-headed hydra that is the Fed, and win. The truth is that the Fed's response is simply another acknowledgment that it only has lies, deceit, cowardice and secrets to protect it from a hundred years of accumulated crimes against the public of the United States. The truth is that Pittman's memory will live longer and have a far greater impact than that of all the Fed's pathetic chairmen combined, the most recent iteration of whom are finally realizing they are fighting a losing war to preserve their institution, now in its terminal phase, after which their legacy will be at best forgotten, and at worst a sorrowful reminder of what happens when a nation allows itself to fall under the tyranny of a few corrupt and worthless men.

Bill Black, who will soon, together with Neil Barofsky, be a guaranteed shoe-in for the POTUS/VP position (both as independents, of course), was on the Ratigan show today, following on his op-ed from last week (here and here) calling for the long-overdue nationalization of Bank of America, and discussing the rampant fraud at the heart of mortgage gate. And contrary to ongoing lowball estimates from the like of JPM and Goldman, Black provides numbers about the bank liability that are simply stunning: "Credit Suisse says that by 2006 49% of all mortgage originations were liars loans. When independent folks study fraud, it is in the 80-90% fraud range. That means there were millions of acts of fraud. Those loan frauds occurred because the banks created incentive structure for the loan brokers to bring them the absolute worst of the worst loans, and to lie on the application forms... These frauds came from the banks, and they propagated through the system through a series of echo epidemics...This fraud spread through the system and that's why we have a crisis in foreclosures. This stems from the underlying fraud by the lenders in mortgage loans to the tune of well over a million cases a year by 2005."

On one hand, one has professional stock bubble top-tickers (of the variety that would benefit from some error-checking)-cum-amateur precious metal pundits claiming that the gold bubble is unmistakable. On the other, there are those who have made hundreds of millions of dollars for their investors actually investing in precious metals, such as in this case Sprott's John Embry, who states that there is no bubble in either gold or silver. "Jim Rogers, who is one of the world's leading authorities on commodities, dealt with the bubble issue recently by recounting an interesting anecdote. While addressing a group of high-end money managers, he inquired as to how many of them held gold or silver in their accounts, and remarkably, 75% replied they had never owned either precious metal. When gold is trading at several multiples of the current price at some point in the future, you can be assured that every single person at a similar gathering would be long and then discussion of a bubble might be legitimate. In my considered, opinion we are many years and thousands of dollars away in price from that debate." Whom does one believe? That's obviously rhetorical. Amusingly, Embry takes a stab at the Financial Times, which he dubs a conduit for the establishment: "The FT has been speaking much less disparagingly about gold recently. The paper consistently denigrated gold and its change in tone might be instructive." Of course, a variety of second-rate media outlets are more than happy to step in and fill the "goldbug" bashing void in the FT's absence.

Treasury futures' behavior was a bit peculiar today. After going vertical off of the the H&S neckline/support, the market reversed quite abruptly in the afternoon following the TIPS auction which was the first ever negative yield print. While I really like the idea of owning TIPS in case the Fed cannot manage the impossible task of successfully creating inflation without it being hyper, one thing occurred to me: the coupons are based on CPI which is the most manipulated data series out there or close enough to a tie with NFP. According to shadow stats reading were north of 6.5% during the last Fed hiking cycle if one used the definition prevalent in the 80s (stated from memory, facts might not be absolutely accurate but definitely the idea is there, apologies for the slight lack of precision). However your coupon would have paid you based on the much lower official reading of the CPI. While in the case of hyperinflation it would be hard to use enough gimmicks to mask the extent of the robbery taking place, you're still getting robbed of a solid 4% on your coupons... And to believe the Fed and the Treasury have input as to how the CPI is calculated when it precisely impacts the interest paying burden of the country or the credibility of its policies is of course a wild assumption made by ill-advised conspiracy paranoids... or is it? Food for thought. Even though you will probably get robbed owning TIPS, it could turn out to be a lesser evil if the dollar starts moving below the key 74.90 support and if anything today's auction's results might have made the longs of Fixed coupons a bit more uneasy at these yields levels. - Nic Lenoir

Adding more fuel to the fire of SIGTARP's criticism of Tim Geithner is today's announcement that in September the UST started on a mere 27,840 permanent mortgage mods under HAMP: the lowest amount since November 2009, and a 17% decline from the 33,342 in August. It is rather obvious that HAMP bank mods peaked in April at 68,291 and have been trending lower back ever since. And with banks having the ability to foreclose upon and engage in who knows what shady dealings, now that it is all too clear that nobody really owns mortgage titles, and thus allowing banks to double, triple, etc-pledge the underlying collateral making far more money on a foreclosure action than a HAMP mod, it is time to declare HAMP a failure and relegate it to the mountain of failed economic policies pursued by the Obama administration, which have done nothing but result in yet another record bonus year for Wall Street.

RANsquawk Market Wrap Up - Stocks, Bonds, FX etc. – 25/10/10

With just two months until the end of the year, the one most important issue facing the US economy, which incidentally is not how many trillions in new, never to be used (or used only upon the case of hyperinflation) dollar bills Ben Bernanke will issue on November 3, but what the fate of the Bush tax cuts will be, and especially that of capital gains tax, remains still unresolved, Bloomberg has done a good analysis that frames the dilemma for the crippled administration: insolvent states or a market sell off. One would hope that with Geithner's track record vis-a-vis taxes, the former would take precedence, although as Blankfein has been rumored to seek the capital to expand his 15 CPW duplex into a triplex, the final outcome is pretty much clear, and it likely means little if no change to cap gains taxes, and thus no sell off in stocks. The problem is, however, that California, the state with the biggest economy, projects taxpayers’ capital gains will grow 40 percent this year while New York, the third-most-populous state, forecasts a 59 percent increase, or roughly 24% from the current 15%: an event which would have rather dramatic implications on investors desire to close out positions well before January 1. Should these states not be able to recoup revenues from actual capital gains receipts, then a federal bailout is virtually assured.

Now even the CFTC is blasting High Frequency Pirates: Bart Chilton, a commissioner with the futures regulator, said "mini-flash crashes occur all too often" following a surge in high-frequency trading. Please someone finally wake up the Rip Van Widiots at the SEC and hold them accountable for not only scapegoating innocent parties, but perpetuating what is essentially a criminal market in which front-running by computers is not only allowed, but encouraged. More from Chilton: "They don't cause as much of a disruption as that of May 6, but more than once this year, runaway algos have disrupted markets. By that I mean, cost people money." So if even the CFTC is all too aware of who is responsible for what has now become a daily stock crashing farce, when will Mary Schapiro and her 9 million pieces of silver finally get the memo?

SigTarp Neil Barofsky has just released the most scathing critique of all the idiots in the administration, with a particular soft spot for Tim Geithner. If after all this disclosure Geithner does not resign, well, America truly will have the Treasury Secretary, not to mention administration, it deserves.

Here is an example of how the blogosphere is destructive to the cataclysm that is the US economy: we present the truth. To wit: Fitch Ratings has placed the 'F1+sf' ratings on three Bank of America N.A.-sponsored ABCP conduits on Rating Watch Negative. Next up: all of BofA's MBS conduits to be downgraded on complete legalese  vacuum on pervasive fraud.

Some headlines out of a freshly striking Greece, which is doing all it can to remind the world, suddenly, that things in Europe may go full circle back to the conditions from May:

• PAPANDREOU SAYS CONCERNED ABOUT GREECE GOING FORWARD
• GREECE IS STILL IN A STATE OF ALARM, PAPANDREOU SAYS

And here is G-Pap reprising in his role as the US president:

• PAPANDREOU ASKS GREEKS TO CAST A VOTE OF HOPE, CHANGE
• PAPANDREOU ASKS GREEKS TO REJECT CASTING VOTE OF PROTEST

Still confused by the whole concept of currency wars? Wondering why every day some new nation is said to have entered into the 21st century digital equivalent of good old fashioned dive bombing, when the only thing diving is the dollar? Then the following interactive infographic from the FT is for you. The data after the jump (free registration may be required) allows readers to explore the background and actions in the so-called currency wars, looking at the economic and political basis of the key countries’ actions.

As we reported some time ago, the weird stuff in TIPS land continues, and was brought to the surface during today's 4 Year 6 Month TIPS auction, which closed at, drumroll, -0.55%. That's right, a yield of negative 0.55%. This compares to +0.55% in April. TIPS Investors better hope that the CPI eventually captures all the fun that is happening in the Rare Minerals space.