Archive - Sep 14, 2010 - Story

The FX fund manager, whose EUR/USD insights in 2010 have been spot on, is capitalizing on his calls: his fund, FX Concepts is the 6th best performing CTA/managed futures fund in 2010, with a return of 13.99%. We wish Mr. Taylor continued success, and to continue calling it like it is.

US retirees better pray that their Schwab accounts will rise forever and ever, because if they rely on defined benefit pension plans, they are fucked. According to actuarial and consulting firm Miliman, in August 2010, the funded status of the 100 largest defined benefit
pension plans sponsored by U.S. companies dropped by $108 billion to a
10-year low of 70.1%. Yes, that's a $100 billion + deterioration in one month! The culprit - Ben Bernanke - financial market performance was poor in August, but the main
reason for the decline in funded status was a large decrease in
corporate bond interest rates. Who would have thought that pushing all markets so far from equilibrium could possibly have an adverse side effect. Soon, once pension funds like the Illinois TRS and others fold, and tens of millions of people who have diligently saved all their lives only to wake up one day and find they have no money left at all, their anger may finally rise and be rightfully directed at its just source: the corrupt slaveocratic inhabitants of the Marriner Eccles building. Expect to hear much, much more about this worst side effect of the Fed's flawed Keynesian solution to all of life's problems.

Remember those days when the dollar plunging (and the yen surging) meant a daily unwind in the carry trade, and a plunge in stocks? Neither do wo. Stocks are valiantly trying to confirm they are the most useless instrument ever, with bonds surging, gold skyrocketting, and stocks... about to go green (which is only due to increased speculation by MS as we pointed out yesterday, that the Fed will announce QE2 in one week). In the meantime, implied correlation in FX is starting to follow that of stock, as global capital flows are now one.

Everyone's favorite N-11 expert is shifting to a new position as head of Goldman Sachs Asset Management. Alas, according to Absolute Return + Alpha, the man who pretty much coined the term decoupling has a substantial uphill climb. Based on the AR+A hedge fund score sheet, GSAM ranks almost dead last in the categories of Alignment of Interests and Alpha Generation (in the last category only beaten by quants AQR and RenTec, where Jim Simons praises the HFT role in the Flash Crash. We wonder if he will change his (swan) song once the SEC finally discovers that it was the HFT's fault all along... some time in 100 years).

UBS came out with a report expecting a hike by the SNB at their Thursday meeting by 25 bps to 50 bps. While most other banks expect no action from Phillip Hildebrand (who was last heard screaming in abject futility at his FX trading desk) one would think the Swiss bank has a better sense than most of what is happening in its home country. The result is an immediate collapse in the USDCHF pair to below parity. The flight to quality is on in full mode as stocks continue to be decoupled from everything. With nobody trading equities, this is to be expected.

Congratulations to longs. Also, small caps in the gold space have exploded.

John Williams, arguably one of the best trackers of real, unmanipulated government data via his Shadow Stats blog, has just released a note to clients in which he warns that hyperinflation may hit as soon as 6 to 9 months from today. With so many established economists and pundits seeing nothing but deflation as far as the eye can see, and the Fed doing all in its power to halt the deleveraging cycle, both in the open and shadow economies, what is Williams' argument? Read on. Incidentally, even if some fellow bloggers disagree with Mr. Williams' assesment, we believe it is in our readers' best interest to have them make up their own mind on this most critical economic development.

Expect a new record high in gold today: "October Gold settled at $1245.60 per 100 troy ounces on Monday, a net gain of of $.60 for the day. October gold was up an eye-brow raising $14 to $1259.60 per 100 troy ounces as of 9:00 AM EST, this morning. The September U.S. dollar index was up .044 to 82.23. October platinum was up $21.70 to $1571.60 per 50 troy ounces. December silver was up 19.4 cents to $20.07."

• 'Goldman Conspiracy' helps China defeat U.S. - China must be quietly cheering as America's "bloodsucking vampire squid" sucks the life out of our capitalism and democracy, as the Goldman Conspiracy's insatiable greed aggressively sabotages America from within. (MarketWatch)
• SEC Questions Trading Crusade as Market Makers Disappear (Bloomberg)
• Japan PM wins party leadership battle (FT)
• China to Introduce Credit-Default Swaps by Year-End (Bloomberg) - Goldman can not be very please about this
• The 1099 Insurrection - The White House fights an effort to ease a burden on small business (WSJ)
• Bankers Fear Race to Surpass Basel III (FT)
• Goldman Sachs: Bullies on the Block (Huffington Post)
• The Future Ain't What it Used to Be, So Borrow Now (Barrons)

US Retail Sales came essentially in line with consensus at 0.4% versus expectations of 0.3%. As usual, the downward prior revision game continues, as the previous number was revised from 0.4% to 0.3%. And once the latest number is revised lower again next month the impact on the market will be actually positive as the next month once again come better then "prior." Retails sales came in at 0.6% on expectations of 0.3%, with the previous also getting revised lower to 0.1% from 0.2%. And auto sales dropped both M/M and Y/Y. And not surprisingly, this number completely disagrees with Gallup polling, which showed August declines of 5.9% and 7.2% on the 14 Day and 3 Day rolling averages, compared to July.

Goldman refuses to turn optimistic, and once again chief equity strategist David Kostin follows in the footsteps of Jan Hatzius, this time telling clients to shift to a defensive mix of stocks after recently downgrading his 2010 S&P target to 1,200. "We shift to a more defensive sector allocation in anticipation of slowing economic growth indicators and downward revisions to consensus earnings and real GDP forecasts." Just as all Wall Street economists followed Hatzius in lockstep, so all equity strategists will now begin dropping their S&P targets, especially since from this point on corporate margins can only go down.

• Japanese PM wins party vote; will stay in power.
• Asian commodity stocks rise on growth hopes; Japanese shares fall on Yen.
• China's currency advances to a fresh high against the U.S. dollar; CB sets the yuan-dollar parity rate at 6.7378.
• China plans to introduce credit-default swaps by year-end, Official says.
• Euro rises against dollar in morning European trading to $1.2877.
• European industrial production stagnant in July.
• EU raises 2010 growth forecasts; warns growth likely to slow in H2.
• German investor confidence may decline to 18-month low as economy cools.
• Bank of America should repurchase $20B in mortgages, Insurers say.

Retail sales are the key focus, with data also on small business sentiment, business inventories, and the weekly confidence report….

RANsquawk European Morning Briefing - Stocks, Bonds, FX etc. – 14/09/10

What are Gold Wars? Gold Wars are between governments and gold. This ultimately restricts the constitutional rights of the people. Gold is the vital barometer of the health of a nation’s currency. The suppression of gold by government allows them to mask the mismanagement of their currency. - Hinde Capital