Archive - 2010 - Story

Goldman sees the silver lining in an economy padded by $2.4 trillion ($3.2 trillion pro forma) in monetary stimuli and now over $2 trillion in various fiscal injections (of which the tax extension has yet to pass). Of course, in keeping with the tradition of seeing what one wants to see, Goldman percevies this reports as a "modest upgrade" despite the notably bearish extension on housing weakness from merely "Housing Starts", to the entire "Housing Sector", as Zero Hedge noted previously.

Most notable in this relatively unchanged statement is the change in language on housing weakness from one of "housing starts" (as of November 3) to "housing sector" which is substantially broader...

The ES futures curve is now at inverted term levels that have been unseen for months. For all who claim that by next summer the economy will be coasting well on its way to 3.5% growth or whatever imaginary number the crowd of lemming sell-side analysts pulls out of their pocket in their imitation of Goldman's upgrade, there sure is no actual conviction in this call. The differential between the Dec and the June ES contracts is a notable 10 points: December is at 1,246 while June is at 1,236. This is reminiscent of the curve last December, when those who bet that the market would be substantially lower half a year forward ended up being right on the money. For those who still believe in logic, a compression trade where one sells the Dec and buys the Jun contract may make sense, although with the only variable these days being what side of the bed Brian Sack wakes up on, we would be very cautious. As a reminder, the last time the VIX curve had a normal contango curve structure, was back in 2008, when the Bernanke Put was still being digested.

Just Reuters headlines for now stating that following up yesterday's announcement by a Virginia Judge who finds sections of the healthcare ruling unconstitutional, that the Justice department (where Eric Holder was just taken out of the fridge precisely for this occasion) would appeal the decision to a higher, presumably far more captured, and more corrupt court.

It was less than 24 hours ago that we presented the latest 2011 outlook from Deutsche Bank's highly credible Fixed Income group, which had one of the bleakest economic outlooks for 2011, and we quote: "there are so many headwinds to work through, that recovery
is not consistent with premature monetary tightening by either the Fed
or the markets. Fiscal stimulus buys time in 2011 but little else.
Ironically the stronger growth looks, the more likely fiscal tightening
will come into play sooner keeping the recovery on a backfoot. However, in our view, at best this buys some time for recovery. The deficit is huge and meaningful fiscal tightening is not far behind. Even if we dodge the Ricardian bullet of equivalence in 2011, there is at least 1 if not 2 percent of fiscal tightening slated for 2012. If underlying economic  growth remains in the 2-3 percent range, there is a sharp slowing implied for 2012." Yet this very rational view does not prevent that other DBer, Binky Chadha, who completely refuses to even cross check memos from other groups in the firm, and who in making even Joe LaVorgna sound credible, comes out with a report which can only be classified as going uberfull retard: "The strategic and tactical cases for US equities should come together to generate strong market returns in 2011 The S&P 500 YE 2011 target remains unchanged at 1550.We estimate $96 in EPS and a fair value multiple of 16.4x. These may look ambitious, but viewed against a Q4 2010 annualized $91.5 our estimate looks modest; a 16.5 multiple was the average in the 1930s. 25% price appreciation would not be atypical for a post-midterm election year, historically the strongest in the election cycle." All we can say is that when clowns take over the insane asylum, the end result is so much better than a hostile take over by lunatics: at least the consequences are so infinitely funnier. To all who believe that EPS can remain at projected levels once margins collapse across the board courtesy of an explosion in input costs should this prediction be even partially correct, all we can suggest is to buy every Cramer stock recommendation without question.

As we reported last weekend, in addition to the now indirect admission from JP Morgan (and to all those who are expecting an official 8K from the firm which opens it up to market manipulation litigation, we can only hope they manage to grow out of their childish naivete soon) that it did in fact have a major silver short position, it has been recently speculated that JPM's monopolistic tentacles have reached out to the copper market, of which JPM is now rumored to control 50% to 80%. Today, we get an official non-admission admission from JP Morgan that it does not in fact own over 90% of the silver market. Well, that's not really useful, as that "admission" says nothing about owning up to a whopping 89.9% of the copper market: a stake which would make JPM the biggest one-man cartel in the history of the industrial metal. Per Reuters: "U.S. investment bank
JPMorgan said it does not hold more than 90 percent of copper stock
warrants in London Metal Exchange warehouses, but declined on Tuesday to
comment on whether it had a smaller position." It also appears that per the LME the position is now no longer "only" 50-80 but has grown to 90%: "A single holder, recently controlling 50-80
percent of copper stocks and cash contracts in London Metal Exchange
warehouses, appears to have raised the position to above 90 percent,
latest data from the world's biggest metals market showed." And for those who wonder why one entity controlling the entire market is not good here is the explanation: "some say it is one of the reasons why copper hit a record high of $9,267.50 a tone on Tuesday." Oddly enough, JP Morgan did comment on the firm's holdings in copper, which it so far has refused to do vis-a-vis its silver position: "A spokesman for JPMorgan, asked by Reuters to
comment on the market talk, said the company did not hold more than 90
percent but declined to comment further." And this is the environment in which the CFTC still obstinately refuses to impose position limits lest it derail the massive profit scheme that one-time or recurring monopoly holdings represent for the big banks.

RANsquawk US Afternoon Briefing - Stocks, Bonds, FX etc. – 14/12/10

A number of readers have asked me to comment on WikiLeaks and the release of "secret" diplomatic/government cables and documents. (How "secret" were they if up to 3 million people had access to them?) I am going to connect a number of issues here by identifying the core contexts of the WikiLeaks controversy. That every nation requires diplomacy and a diplomatic corps is not in question, nor is the need for confidentiality in pursuing diplomacy. The need for Armed Forces to defend the nation against aggression is also not in question. What is in question is whether the American Empire is acting in the best interests of the U.S. and its citizenry. - Charles Hugh Smith

Not much to say here: QE3 is in the works, as once the equity rally fizzles, mortgages are at 5.5%, and Americans realize that home prices just dropped by 15%, there will be a lot of very confused stares.

The man who has become an embarrassment to clowns everywhere was out on Friday literally screaming his usual schtick. That said, the good thing about clowns is they don't give you advice that will make you broke. Unlike Jim Cramer. In his December 10th segment, Cramer says: "I would be willing to risk a small amount of money December $44 call options, they expire on Friday." Oops. Total loss on that small amount of money. And what is even funnier: "Best buy gives us a window into what people are buying for the holidays, so we hear what products are selling." Er, none? As always, trademark Jim Cramer entertainment that will leave you broke.

Yet another confirmation that there is nothing left in this market for sensible stock pickers, courtesy of Lehman's head of quant strategy, Matt Rothman: "In summary, the lower the quality of the company the more they are helped by an easy monetary regime. In these situations, true fundamental investors who focus on such banalities as valuations, free cash flow generation, the repeatability of earnings and the return on shareholder equity find themselves struggling to generate returns." What is sad is that Fed's tinkering with the stock market has now eliminated even that old-time staple trade: the Flight to Safety. Why be worried when the Chairman will not let anything fail? "Bluntly, if you had laid out for us the headlines at the beginning of the month, given them to us in full detail, and asked us to predict how our Quantitative Factors would have performed, well, we would have been wrong. Embarrassingly wrong.... There was simply no flight to quality among investors...Aside from the Euro/Dollar trade, there wasn’t much of a quality trade really anywhere in the market." And with QE3 planning already in process, this inverse flight to safety trend, where increased risk means an even faster scramble for the shittiest assets imaginable, will only get more pronounced. Welcome to the true new normal.

As part of his £200,000 bail, Assange has a 10pm curfew, passport surrender and an electronic tag. Unclear if he is allowed to use a computer. So how about that AES 256 key already?

The man who probably more so than anyone else can be singled out as the person (behind the scenes) responsible for the destruction of America, first with his successful drubbing of every vestige of regulation, then his isolation of Brooksley Born and her all too prescient concerns on structured products and derivatives, and finally, with carrying over his debilitating management practices from Harvard over to the US in general for the past two years, just had his farewell speech, which in typical fashion can be summarized as follows: "I am smarter than you peasants, go to hell." For a more official summary of his valedictory, here is WaPo's Dana Milbank: "Summers's final performance was very much in character. He arrived 10
minutes late for the speech, his suit jacket open, his shirt pulling
tightly at the buttons, his suitpants stained on one of the knees. His
hair showed signs of bedhead, but it could have been mussed by Summers
during one of his morning meetings. He jiggled his legs while listening
to the introduction by EPI President Larry Mishel, who had some edgy
words for his guest. Although both men grew up in Philly, Mishel said,
"when he moved to Boston, he adopted the Boston Red Sox as his baseball
team. Me? I'm still a fan of the Fightin' Phils." Summers rushed to rebut this point - by insulting the home team. "If I
lived in Washington, I might still be a Phillies fan, too." There were
groans in the audience." And of course, it is not like it was Summers fault for doing anything to bring unemployment down even as total US debt under his watch increased by over $2 trillion: "On Monday morning, he went to the Economic Policy Institute, a liberal
think tank, to give his "perspectives on the past two years." But in his
remarks, he spoke of not a single wrong decision he made." So now that the disastrous, and hopefully final, reign of this distant Tatooine descendant is over, here are the three finalist to fill his extra wide chair, two of whom promise to do absolutely nothing to break Wall Street's stranglehold over the White House, and thus increase the odds for a widespread populist mutiny with each passing day.

November Business Inventories print at 0.7%, slightly below expectations of 1.0%, and a reduction from the previous month's 1.3%. That said, there is no change to the ongoing trend of increasing inventories being the primary, and according to many, only boost to economic output, which is ironic because inventories really have no impact on output except when they are being liquidated at below cost as Best Buy shareholders found out the hard way despite our repeated warnings of a top line and margin collapse. And yes, the fact the retail sales declined as inventories increased is a sure sign of an ongoing Golden Age.

With Best Buy stock now down almost 15% for the day, it is not a good day for holders of the name, starting at the very top with Chairman Richard Schulze, whose 67.5 million shares in stock are now worth $400 million less than they were about two hours ago. And of course, with holdings of 22.5 million shares, expect Black Rock's Bob Doll to make 5 surprise appearances on CNBC explaining to the infidels one last time (expect for the next "last" time) how he expects the S&P to print at 10,000 in the next 12 months. That said, it is a little surprising to find none other than Hussman in spot 34 with 1.5 million shares.