Archive - Jun 2010 - Story

Today's activity will continue to be influenced by the "risk-on" crowd. Sell bonds, buy stocks, buy oil, sell gold, rinse repeat. But we see less and less people selling what they buy in the gold market. Sell side activity is more dominated by hot money liquidation than ever before. PIMCO's El Arian said their fund cut its gold holdings in half, citing the liquidation deflation drivers at play. That will not help today's activity either. We can only hope he is right. Our order underneath remains unfilled.

• Asian stocks rise, default risk falls on US home, car sales; Yen weakens.
• China warns US over a decision to slap duties on imports of Chinese steel gratings.
• China plans to subsidize purchases of energy-efficient vehicles to help cut emissions.
• Chinese tech stocks rise most on govt plans to increase investment in these industries.
• European stocks climbed, following positive sessions on Wall Street and in Asia.
• May sales at store open a year or more expected to rise 2-2.5% YoY - ICSC.
• ARM, IBM and allies announce plans for software venture.

The ADP May report missed expectations of a 70k increase in private payrolls, coming in at 55k. The number is also a 19k decline from a revised April number which was increased from to 32k to 65k. None of this worries those in the administration who keep leaking the 700,000+ NPF due out tomorrow, based on practically no new hires.

Value added from the rating agencies. We have to still see a CDS run on the name post the news, but it won't be tighter.

The Atlanta Fed's Dennis Lockhart had prepared remarks before the Atlanta Technical College, in which he said "I continue to support the current
stance of interest rate policy. But the time is approaching when it
will be appropriate to consider recalibrating interest rate policy. I
do not believe that time has yet arrived. The conditions that require a
change of policy are not yet at hand. However, as the economy continues
to improve and financial markets find firmer ground, extraordinarily
low policy rates will not be needed to promote recovery and will become
inconsistent with maintaining price stability. The implication is that the policy rate may have to begin to rise
even while unemployment is considerably higher than before the
recession." We don't believe it, but does it mean that with tomorrow's whisper 100 million in NFP additions on 200 million in birth/death and census, that someone will finally force the fed to put its fiat money where its corrupt mouth is? In the meantime, El-Erian's New Normal means tens of millions of previously happily employed people will likely never work in the US ever again.

RANsquawk European Morning Briefing - Stocks, Bonds, FX etc. – 03/06/10

The ECB has released what appears to be a manga-like brainwashing cartoon geared at kindergarteners which in 8 minutes seeks to explain "price stability" within a Keynesian framework (i.e. inflation in the 0-2% range). We assume this is a failsafe precaution, just in case the religious Keynesian teachings during Econ 101 over at Harvard and Cambridge happen to occur at the not so malleable age of 18+. After all, what better way to preempt Hayek's terrorist influence on young and tender minds than to enslave them real early. We wonder if this is not also a post-facto attack at German politicians who are now openly accusing the ECB of pursuing monetization policies which every now and then tend to lead to a Weimar-like conclusion.

Last night's decoupling (albeit subsequent recoupling) between the Euro and risky assets (in our case the ES) was the second time in as many weeks that the European currency has openly decoupled from the rest of the risky market. Granted, last night the decoupling lasted for just 12 hours, and the resultant spread collapse generated some 70 bps in P&L. We were not the only ones who noticed the original schism: here is Bank of America's Hans Mikkelsen discussing this increasingly more frequent decoupling event. To date, the decouplings have been temporary. Which is the case until it isn't: any time a trade looks too good to be true, it is not. Unless one is trading against a retarded army of Dark Avenger-infected 80286s.

Any 93 page David Kostin presentation that begins with those words, has to be devilishly good. The fact this it says that Buy rated Halliburton has 65% upside to Goldman's target price just makes it truly infernal. Goldman's disclosed ravenous "hatred" of AMD probably makes it the buy of the century. All this, egregiously gratuitous use of the word GARP, and many pretty charts await those brave enough to read through.

Today's rating agency hearing was a total farce: the only useful thing that could come out of it is if someone comes out with potentially perjurious information, as there were a few shaky answers provided by the Oracle of Omaha which could easily explain not only his reticence at testifying in Congress but doing so under oath. If that were to happen, the octogenarian would have to respond to both potential criminality and hypocrisy. As it stands, the only item to be covered is the latter, and Charlie Gasparino does a pretty good job at blowing apart Buffett's hypocrisy. "He believes [the rating agencies are] a sleazy business and he's gonna own it. Well that takes Warren Buffett down three notches in my book... If Moody's had a superior product, investors like Warren Buffett, who does not use the ratings, would be buying them one at a time. They do not have an effective product. They have a deformed product, a product that basically was at the forefront of the mess in 2008 and 2007. Warren Buffett who opines about politics all the time, constantly opines about right and wrong, defends wrong because it was a good investment. He is defending the indefensible. Rating agencies are not defensible at this. He is Mr. Do Good, yet he is defending the most corrupt business model in corporate America." At least one mainstream journalist out there is not afraid to call it like it is. Of course, we get the feeling that Becky Quick is no danger of losing her leathery wrinkled seat on the next NetJets trip to China.

Oil prices advanced on Wednesday as traders boosted cvommodities quotes on positive data reports on US homes and autos, generally considered the two “biggest-ticket” items purchased by consumers. The National Association of Realtors reported a 6% jump in its April index of pending home sales. This was more than the 5% generally expected by analysts and realtors. And, American auto sales recorded strong year-on-year sales figures, with Ford reporting a 22% increase in sales in May, while General Motors reported an increase of 32% in May sales. These specifically American numbers helped US oil prices, although traders were quick to remind themselves that oil is a global commodity and weakness in one place needs to be made up or compensated for by strength somewhere else. And Europe, or the “euro-zone” as it is being called these days, is seen as being an anchor on the economic recovery as well as on oil prices.

This Friday the NFP report from the BLS could easily surpass 700,000 people, driven primarily by temporary census hirings and by Birth/Death adjustments. The Census Bureau reported that between the weeks of May 9 and May 15, there were 573,779 employed census workers. In the prior month, for the week ended April 17, there were 156,335 census workers employed, or a differential of 417,444 newly hired census workers between April and May. Keep in mind that in the May NFP report, the benefit from census workers was at 66,000, or 90,335 less than the Census reported number. As a result, due to the BLS' voodoo math and double counting, its is distinctly possible that the Census alone will add up to 507,779 workers (organic hirings of 417k and the plug for the prior period of 90k). Also, recall that the Birth-Death adjustment in April "added" another 188,000 workers. Retaining the same level of statistical adjustment, and the May NFP number will be at 700,000 before even one real full-time person has been added to the economy in the month of May!

Some notable correspondences submitted by David Rosenberg's fans to the Gluskin-Sheff strategist. All are worth a read, although inbetween we get this glimpse of what Rosie really thinks: "We will come out of this cycle with tremendous inflation, but the primary trend for the next 3-5 years, the length of time it will minimally take before this global deleveraging cycle fades, is deflation." We knew Rosie was a long-term hyperinflationist.

Proper planning with your finances is incomplete until you consider the endgame consequences of your investment decisions today. So, what are the tax consequences of selling gold, gold ETFs, and gold stocks?

There’s lots of conflicting and inaccurate tax information on the Internet about this. We know of one site that claims the sale of silver Eagles is exempt from capital gains tax due to some obscure law (not true). So, let’s nail down the current tax rules for selling gold in the U.S.

RANsquawk Market Wrap Up - Stocks, Bonds, FX etc. – 02/06/10