Archive - May 2010 - Story

• Foreign investment in China up 25% in April amid growing interest in rebounding economy.
• Euro breaks 14-month low as debt-cutting steps may hurt growth.
• Hong Kong economy expands 2.4 percent in 1Q, fourth straight quarter of growth.
• India inflation eases to 9.6 percent in April, but food and fuel costs remain troublesome.
• Oil prices fell below $74/bbl amid expectations a slower economic recovery in Europe.
• Sales at U.S. retailers probably rose in April for a seventh straight month: Survey.

"Last year we awarded Dylan Ratigan one of our First Amendment Awards for Outstanding Journalism for his job calling out the scammers who were bringing down the economy. Dylan and I were chatting about how things have played out since then, and what we need to do to continue fixing the broken infrastructure of capitalism …" Wall St Cheat Sheet

If you want to avoid all the red ink in the futures this morning, and dig your head deep in the sand of denial, here is Goldman Sachs to the rescue. As we pointed out a few days ago, Jim O'Neill, who is likely more devastated by Man U's loss of this year's Premiership title than the daily accumulating of new and improved criminal charges against his firm (his response to that, and to anything else: "BRIC"), earlier led a call titled 'Why the World is better than you think.' We have decided to pass, but to avoid being branded non-objective pessimists, we provide our readers with the means to listen to the replay - this way you can get all your 100% RDA Vitamin H1 and Joseph Cohen hot flash..backs all at once.

As of early this morning, all of Europe is plunging, not just the euro but all non EMU currencies as well: the EURUSD was in the mid 1.24 range, the GBPUSD is about to breach 1.45, while the Polish Zloty and Hungarian Forint are tumbling. Guess who is up: Gold, surging by over 1.2%, and at $1,245 at last check. The LBMA attempt to contain gold has failed and the market is preparing for a second assault on the $1,250 big resistance, whose take out will next take gold to $1,500. And while Greece is striking again, now the European core is accelerating the squeeze of the periphery: Romania is slashing its government budgets by 25%, and its pensions by 15%, which has resulted in immediate protests. We expect to see many more signs that the Greek contagion is only now spilling over into the social sphere.

On the 5th of March in 1946, in Fulton Missouri, at Westminster College, Winston Churchill delivered an address (since christened the "Sinews of Peace") lamenting the burgeoning power and influence being slowly but surely gathered up by the Soviet Union.  Perhaps the address will be familiar to some of you owing to its most famous passage....

RANsquawk European Morning Briefing - Stocks, Bonds, FX etc. – 14/05/10

I am Ex CEO of mid sized Wall Street Firm. Known for equity research; reasonably good trading; acceptable Investment Banking. Now retired
Equity Block Trader early in career. May have traded more 1,000,000 share blocks than anyone over 10 year period.

Executed 1st program trade that I am aware of. Manually handled blocks of stock vs options on the XMI for expiration October of 1983.
Oversaw global equity trading, for top 5 firm. Was senior trader and oversaw hedge book during 87 crash. Still have time and sales from that day for all trades on NYSE.

Can read the tape as well as most.

I cannot come up with any explanation for market activity for last 15 months other than treasury intervention. Probability of other explanation is nonexistent.

But if that is the case…and I was Tim, how would I work it…starting in March 09.

First the euro, now the cable. Europe is openly capitulating. And as the flush in the GBP is what caused the late day sell off, watch for active central bank currency purchases tonight, or else a very unpleasant market open tomorrow. The only question now is which PM dealer still has anyinventory left (incidentally that is a legitimate question - if readers can recommend European PM retailers, please note them).

We view gold as potentially the best currency; an ongoing portfolio theme based on the probability that central bankers in the U.S., Europe and Japan will continue their efforts to stimulate their economies with excessive monetary easing (printing money), while ignoring for the time being the dangerous fiscal ramifications. While deflation is the current problem, these policies increase the risk of a sudden turn to inflation. Without the return of significant global growth it is possible that we get the worst outcome in the form of stagflation. For example, oil and other commodity producers may start to demand higher prices in debasing currencies even though unemployment remains high and wages are stagnant or falling. Our analysis of commodities markets indicates that this effect has already begun. James Melcher, Balestra Capital

Now that legislation to spin off swap trading desk from commercial banks is picking up steam it is time to roll in the big money printers. In a letter to one of his lame duck minions, i.e., Chris Dodd, Bernanke said that daring to change the status quo in any way would like destabilize the system and who knows what would result. In other words: not only in swap-related legislation, but in any proposed rule, such as that long forgotten thing which Barack Obama was parading on national TV 24/7 for about a month known as the Volcker Rule, which seeks to take away from bank revenues, Bernanke will step in and say that even though the proposed rule will make the system safer it will really make it that much more prone to "weakness" (don't think about it too hard - it's so complicated only the Fed and Goldman Sachs understand the vast implications of that statement). Of course, weakness, is simply another word for less than record taxpayer funded annual bonuses. As Bloomberg reports, in his letter, Bernanke says the proposed law “would weaken both financial stability and strong prudential regulation of derivative activities.” In other words: make sure my banking buddies can continue to rob the middle class blind, or else. Expect another market crash just so Bernanke can prove his point.

Set aside the stupidity about Taleb causing last week's sell off for a minute and you have 14 minutes of very relevant insight not only into last week's crash, but into the real events that precipitated it: namely market structure, European contagion and the precarious US economic situation. In a Bloomberg TV interview a thousand times more informative than Taleb's CNBC appearance (presumably it has to do with the absence of the Power "I love to hear my voice" Lunch brigade), the Black Swan author discusses what keeps him up at night: a failed auction. Once again, we differ in a slight nuance that not even a failed auction, but the impression that the auction status quo is changing will be sufficient to set off the treasury avalanche. Whether that means a dramatic change in the Direct Bidder regime, the Primary Dealer hit ratio, or some other metric, we don't know, which is why we log each and every auction to keep track of any potential outliers and aberrations. Taleb's advice: stay away from Treasuries (especially long-term), avoid both the euro and the dollar, have a collection of metals and agricultural land exposure, and "use the stock market as something for entertainment not investment." And definitely stay away from school and equations.

RANsquawk Market Wrap Up - Stocks, Bonds, FX etc. – 13/05/10

The first bill to US taxpayers for volunteering to bail out Europe is in. It appears in the past week the New York Fed executed an FX swap with the ECB for $9.2 billion notional of FX swaps. As we reported earlier by demonstrating the lack of bids for the BOE's dollar repo operation, only the ECB is (currently) in need of dollars. Yes America, in addition to the IMF contribution of ~$50 billion, with each passing week you will see more and more billions of dollars collateralized by a rapidly devaluing foreign currency serve as the backstop for your currency.

Just when you thought things in Greece could not get any stranger:

There was a large explosion outside the main prison in Athens on Thursday, Greek police said, but there were no immediate reports of injuries or damage.

"It was a really strong explosion that was heard kilometres away," said a police official, who requested anonymity.

The top security Athens prison is in the Korydallos suburb, west of Athens.

 

...Yep, you guessed it: a 10 handle drop in the ES in 5 minutes. The second someone lobs a big sell block everyone immediately follows. The Dow is still shy to repeat its performance from a week ago. And yes, everyone expecting it only adds to the stage fright. Note that we are now at the VWAP from Sunday night.