Archive - Sep 9, 2010 - Story

It is no secret that money paid to Primary Dealers via the Fed's POMO monetization tends to immediately find its way in risky assets, most notably stocks. Yet one of the major complaints against the Fed's QE Lite by the permabull brigade, is that the amount of weekly monetization is just far too low to make much of a dent on stocks, even assuming massive leverage and the deranged computerized feedback loop algos that take the smallest move and make a tsunami out of it. Well, according to Morgan Stanley, the Fed will make sure that over the next three weeks hedge fund LPs are happy, that redemption requests are sparse, and that September wil be an up month for all those levered to the hilt and chasing beta: for September/October the Fed is now expected to monetize double the amount of bonds in Aug/Sept. In other words, the Primary Dealers, aka Fed Lites, will be using tens of billions of brand new Fed printed money to chase the highest beta stocks they can find. And they will most certainly be using made up government data to facilitate this pursuit.

The BLS has announced that as a result of the Labor Day weekend, 9 states (among which the biggest one California) did not report initial claims data to the bean counters, so instead the government had to "estimate" what the data would have been: yep, estimate, what the data was in these nine states. From Bloomberg: "For the latest reporting week, nine states didn’t file claims data to the Labor Department in Washington because of the Labor Day holiday earlier this week, a department official told reporters. California and Virginia estimated their figures and the U.S. government estimated the other seven." Official data is now made up on the fly. This US economic data reporting has just entered the twilight zone. Also, when the data is officially made up, it is not that difficult to get data that is "better than expected." The full list of states is: DC, Illinois, Idaho, Hawaii, Oklahoma, Michigan, and Washington. California and Virginia estimated themselves.

Futures surge as the US economy continues to hemorrhage jobs: a 451K print in initial jobless claims merely means that ever more people are being shifted over to extended benefits, which increased by 64.7K. One can be sure that at least 20K of this number is those hitting the 6 month ceiling on claim applicability. And yes, anything over 400K means no job creation (private or census), contrary to whatever the DOL may want everyone to believe. Elsewhere, the US trade deficit for July came out at "only" $42.8 billion on expectations of $47 billion, with the previous print slightly revised to $49.8 billion. We are looking forward to the Chinese release over the weekend of their version of the story, which will show more updated August data, and allow to read into how the China-US trade balance is developing.

• Norway Buys Greek Debt as Sovereign Wealth Fund Sees No Default (Bloomberg), and in two years those responsible for the decision will be sued for criminal negligence; In other news ECB funding to Greek banks stays within €0.3 billion of all time high at €95.9 billion. Perhaps Norway meant buying ECB bonds?
• Funniest self-serving statement of the year: Greece Says Bonds Now an 'Opportunity' as Budget Deficit Falls (Bloomberg)... as opposed to yesterday when they were a catastrophic investment. Also not mentioned was the austerity is really working as Greek industrial production plunges far below expectations
• And guess what - more QE coming to a broke Europe near you: BOE Mulls ‘Second Wave’ of Bond Buying as Rebound Ebbs (Bloomberg)
• Base metals overnight flash crash in China (Reuters)
• OECD Says Slowdown `More Pronounced' Than Anticipated (Bloomberg)
• European Crisis Flares Up in Ireland (WSJ)
• A recent uptick in insider buying is normally considered a positive for the stock market, but it may be misleading for investors (Reuters)
• Japan Plans to Seek Discussions With China on Bond Purchases (Bloomberg)

On one hand you have the Greek finance minister uttering the most self-serving statement of the year, saying Greek bonds are no longer something to fear (even as Greek industrial production falls 8.6% on expectations of -5.7%), on the other you have John Taylor saying that "unless a miracle takes place, the Greek situation will deteriorate and other countries will follow in the next few years." That's fine: G-Pap is currently taking advanced transmogrification lessons as the local alchemy university - even miracle workers have to start somewhere.

• Afghan president's brother made $800K in Dubai using loan tied to Kabul Bank.
• Asia stocks up, SKorea unexpectedly leaves key rate at 2.25% as recovery slows.
• Australian employers' hiring for August exceeds estimates; Currency gains.
• BOE mulls 'second wave' of bond buying as rebound ebbs.
• China trade surplus may top $20B, stoking tension over yuan policy.
• China's stocks decline most in 2 weeks on concern about new property curbs.
• Euro slides to $1.2693.
• Norway buys Greek debt as sovereign wealth fund sees no default.

The trade balance, jobless claims, and the Fed’s balance sheet….

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