Archive - Nov 16, 2010 - Story

CNBC is parading the fact that its chief eCONomist Steve Liesman, who by now has learned that there is a difference between EUC and Extended Claims, and that when Tim Geithner tells him that the US will not monetize debt, he is lying, has managed to get a 20 minutes interview with former Goldman Sachs managing director and current FRBNY president Bill Dudley. Alas, having gone through the transcript, this interview is complete garbage, with nothing new or relevant, and we are looking far more to the upcoming official statement by Bob Corker's disclosure of how he intends to clip Blackhawk Ben's dual mandate main rotor (it was oddly enough the same Bob Corker who just last year was bashing everyone who wanted to audit the Fed. Go figure - then again it was the same Bob Corker who did his best to kill the Volcker Rule, so a pattern did emerge...). As for confirming the idiocy of the Fed, the only relevant section from Liesman's interview is the following excerpt...

Today's POMO, which is getting absolutely no coverage on CNBC, now that the new POMO regime has no bearing on equities and thus can not be sold as bullish development, has closed. Brian Sack bought back $5.4 billion in debt, at a whopping 6.2 submitted to accepted ratio, implying the PDs are once again positioned weakly. Of course, one look at the ES is sufficient to see this. What is most relevant is that the bond monetized the most to the tune of $1.6 billion, was the 2 year PH7 due 8/31/2012 which was auctioned off by the US Treasury... 2 months ago.

Today at 2:30pm the US public will get its first and certainly not last spectacle orchestrated by the banker's lame duck pet, Chris Dodd, and his Senate Banking Committee (as in bought and purchased by the banks) over fraudclosure. The hearing is titled "Problems in Mortgage Servicing From Modification to Foreclosure" and will be broadcast it on Zero Hedge. Mark your calendars: as the star witness is Bank of America President of Home Loans, Barbara Dosoer, the level of bullshit will be one for the history books.

Earlier we reported rumors that Austria may withold a major upcoming payment to fund the Greek rescue package that could set the Eurozone on fire once again, as countries pull out of their rescue commitments to the insolvent nation. We have now gotten confirmation.

Yesterday, while reporting on Michael Pense's interview with CNBC, we asked: "Are Republicans Preparing For A Push To Eliminate The "Maximum Employment" Part Of The Fed's Dual Mandate?" The answer, it appears, is yes. Bob Corker has just come out with a statement urging a change to the Fed's mandate, removing the entire "maximum employment" clause. This is possibly the biggest news for the Fed since 1977, and would effectively end the Fed's supreme reign over the US economy, as Bernanke will no longer have the fall back of keeping rates at zero just to get unemployment back to some imaginary number.

While we await for the Treasury Department to actually update its complete September TIC LT flow data tables, here is some of the data we can compile with what has been released so far. China is now once again solidly ahead of the Fed in terms of total Treasury holdings, owning $883.5 billion USTs in September, a $15 billion increase from August, of which $10 billion came from an increase in non-Bill holdings, and the balance from Short Term, which at $21 billion have risen to the highest since... April 2010. This is peanuts. The Fed will surpass this total by Thursday. The bigger surprise came from Japan, which added $28.4 billion in Treasury debt to a total of $865 billion, of which just $3.5 billion was from ST holdings. The broke UK moderated its torrid pace of gobbling up US debt and added just $10.7 billion in US paper to bring its new total to $459 billion. Notably, in September hedge funds (Carribean Banking Centers) sold $14 billion of Treasuries as they took the proceeds and invested it all in Apple to force the biggest short squeeze in history (note the number of HF adding Apple as of Sept. 30, shares which they have almost certainly disposed of since). The biggest surprise by far in today's TIC update had little to do with Treasury holdings but instead had everything to do with Agencies, the security most in peril courtesy of the massive fraud perpetuated by MERS and the robosigners. To wit: foreign official institutions (primary central banks) dumped a massive $31.4 billion in Agencies: a record number since the TIC data has been reported in 1978. This was offset marginally by Agency purchases by other foreigners of $23 billion, although the dump by central bankers what everyone will be focused on. This is certainly news that PIMCO and all the other RMBS investment funds did not need to see today.

After Greek CDS went offerless, and is about to pass 1,000 bps following news of Austria's defection from the EU rescue fund over Greece's endless lies, now we get the next defector: Finland, who it appears is opposing an Irish rescue. This is not too odd, since Finland actually has a viable banking system whose viability does not depend on the generosity of Irish and European taxpayers. What this means, however, is that European unity is finally coming apart at the seams.

The EU's finely tuned (and well-greased by assorted bankers) Nash Equilibrium is about to become history. Austria is the first major country to say enough to Greece's endless lies. Why? Who knows - Austrian banks will be first on the firing squad line when, not if, Greece implodes. Perhaps even Europe is getting sick of this charade. Next up - every man for themselves, but only those who defect first win.

Deflation in all the non-core items continues, even as your cotton-based and coffee purchases are about to go up by 30%. The November PPI increased by 0.4% on expectations of 0.8% (and previous 0.4%). More importantly, the PPI ex the things one actually needs, food and energy, actually went down by 0.6%, despite expectations of an unchanged print of 0.1% from September, confirming that all semi-leverage requiring purchases are getting trounced. Also, how the BLS got a -0.1% read in the food PPI is a secret the Department of Truth will take with it to the grave. At least there was some trace of honesty in energy price reporting, which jumped by 3.7% - the highest since January.

• Meet the new reserve currency: Global Power, Influence Shifting From US To China (WSJ)
• IMF Lowers Dollar, Yen Weights in Its SDR Valuation Basket, Increases Euro (Bloomberg)
• Liesman with another hilarious interview: Fed Easing Is Not Aimed at Weakening US Dollar says ex-Goldmanite and current New York Fed president Dudley (CNBC)
• China May Raise Interest Rates Several More Times, Fidelity's Bolton Says (Bloomberg)
• China Selling Stockpiled Pork, Sugar to Cut Prices (BusinessWeek)
• Revaluation pressures on emerging markets (FT)
• Eurozone Members Pressed on Debt Plans (FT)
• Ireland's Cowen to Weigh EU Steps to Shore Up Banking System (Bloomberg)

From Reuters:

IRELAND SAID TO BE IN TALKS TO GET FUNDS FOR GOVERNMENT, BANKS

Also noted that negotiations are continuing and no decision has been reached yet, according to sources. European finance ministers are meeting in Brussels today at 5pm local time. EURUSD jumps 25 pips on the headline but nothing firm yet. After all, could merely be wishful thinking on behalf of the bankers-kleptocrat politician complex, but it appears Ireland may crack soon.

If at first you don't succeed at killing the higher beta stock short hedge, try again. The CME has just raised its margin requirement on silver again, bringing maintenance margins up from $6,500 to $7,250, after hiking it less than a week ago for the first time and preventing silver from surpassing $30. Of course, why the CME is raising it more after the spot price of silver is now far lower than where it was at the first raise is a good question, but is most certainly due to the exchange's "risk mitigation" concerns, and has nothing to do at all with the intent to continue killing PM prices. Far more importantly, the CME has finally relented and also raised gold margins, as we had expected. The new maintenance margin is up from $4,251 to $4,500, a minimal increase just to allow the CME to have the option (and making speculators well aware of this) of hiking rates again at any point it so chooses. All in all, all is now fair in fighting excess record liquidity. Look for a second round of imminent margin hikes in cotton, sugar, coffee and wheat, as the exchanges are suddenly very concerned about what retail margin collapses may mean for the non-existent wealth effect.

• Asian stocks drop on signs regional governments acting to combat inflation.
• China October FDI up 7.86% at $7.663B vs. September's $8.4B.
• China's stocks decline to one-month low on inflation, property concerns.
• Crude oil falls for a third day on signs fuel demand recovery may falter.
• South Korea raises interest rate by 25 bps - for second time in 2010.
• US retail sales rose 1.2% to $373.1B in October, compared with September.
• Aeropostale announces $300M increase to its existing share repurchase program.

When the president of the EU says that the fate of the second worst experiment of the last century (the worst being monetarist-Keynesian-central banking fundamentalism) is on the ropes, people listen. Perhaps people will also finally listen to those who are warning that no matter the words of encouragement, said experiment is doomed: the latest confirmation coming from Greece which has been now caught lying not once, not twice, but five times in a row just to preserve its EU backstops, and allow it insolvent banking system to exist for a few more days. In the meantime, the fate of Europe's bankers lies in the hands of a few good Irishmen, who can precipitate the mark to market (aka zero) catch 22 should the country finally force senior creditors to be impaired. Then not even the Fed will be able to backstop the continent's $50 or so trillion in interlinked assets, which also happen to be the continent's liabilities. In the meantime, here is Herman Van Rompuy doing what bureaucrats and bankers in power are so good at doing when they have no other choice: threatening with global assured destruction if they don't get their way.

Data on producer prices, international capital flows, industrial production, builder sentiment, and one Fed speech. Also, throughout the morning CNBC will be airing portions of an interview with New York Fed President William Dudley. $4-6 billion POMO will close at the usual time.