Archive - Oct 2011 - Story

Today's deadly protests in Athens, in which one Greek has died, have been the most violent of the year so far. For footage of the Parliament's garage building as well as numerous dramatic photos of the violents riot, which is continuing over night, see attached.

This is a topic we have touched upon in the past so we won't dwell much on it: last Primary Dealer Bid to Cover in Tuesday's 52-Week Bill  Treasury auction: 6.0x ($15.6 billion allocated to $94.7 billion in tendered bids); Bid to Cover in the just completed reverse POMO in which the Fed sold $8.870 in Bills maturing between August 2012 and March 2013 to $204 billion worth of interest? 23x. The Fed is once again four times more efficient than the Treasury at peddling US paper. Surely that is only to appease Brian Sack and not because there is million in free money to be made on the flip.

Ok, everyone can go on that Starbucks run: the market will be dead for the next hour when German government spokesman Siebert will make an announcement at 7:30 pm. No need for any UK tabloids to even frontrun the lies this time around. That said, we are concerned that the news won't be spinnable in a favorable fashion.

Luckily, we never promised readers to have a quota of only one stupid European story per hour or else we would be worse liars than the European bureaucrats who finally discovered the abacus and punch cards, and have realized that, as we noted, the EFSF is DOA. The WSJ reports that Angela Merkel has cancelled a government statement on the European Union summit this weekend, due Friday, at short-notice, a spokesman for her CDU party said Thursday. The reason for the cancellation was probably a lack of agreement on new guidelines for the euro zone's rescue fund, the European Financial Stability Facility, the spokesman said. But no reason has officially been given for the cancellation, he added. The EU confirmed earlier Thursday that it plans to hold the summit this weekend as planned. Earlier Thursday, reports had suggested the summit might be delayed over disagreement between Germany and France on how to leverage the EFSF. One wonders at this point just why the "make or break" summit is even happening? Is the catering bill so high that nobody thought of enacting a shorter than 48 hour cancellation policy? Then again this is Europe, where as Bob Pisani said, "we see thoughts as they happen in real time." Explains why the EURUSD is where it is right about now.

There are still so many alternatives on the table and each is so confusing it is hard to come up with a decent analysis. In the meantime, here is something to think about. EFSF walks into a meeting with a potential investor. EFSF is looking to raise some additional capacity so needs to borrow some money.The meeting starts off great. The investor is told that EFSF has 780 billion of capital. That is amazing, says the investor, not many people walk through the door with that much capital at launch. The investor is curious as to when the fund will get the funding. For the first time, EFSF looks a bit uncomfortable and has to explain it doesn't really have funding, it just has some guarantees. The investor is a bit confused about this since they would rather have money than guarantees, but decides that if the guarantors are good enough, maybe it's okay. The EFSF instantly replies that the guarantors are great, they are all highly rated. Well, some of them are at least. Well, actually a few are so weak that they won't actually ever provide the guarantees, they just let us include them in the pitchbook so we could have a bigger number. The Investor is getting a little nervous at this time, but still intrigued, so wants to know how much from the good guarantors? They are reasonably happy that the answer is 726 billion. Still very impressive, but at least a little confused why they bother with the 780 billion. Their experience as investors tells them that when someone lies a little, they tend to lie a lot.

For anyone deluding themselves that alpha still exists apart from beta, and can be generated sans "expert networks", we bring you the top stock picks from the Ira Sohn's San Francisco conference hosted last night. We will bring more detail shortly.

We take advantage of this brief lull in the European panic headline blasting for a comic interlude, presented without comment.

Valueinvestorclub.com: the Gotham Capital controlled pseudo-secret portal where hedge fund managers everywhere would sell both their kidneys  to be members of, as pitched ideas tend to move markets on a regular basis, and never to be confused with Whitney Tilson's pale immitation, has just released a new thesis on Bank of America, which is oddly comparable to ideas suggested by Zero Hedge over the years. The thesis summary is rather self-explanatory: "Bank Of America equity is worthless. CFC-related litigation is going from bad to worse, it can lead to violent erosion of shareholders' equity which. Combined with the run on the bank that has slowly begun, the $53 trillion in derivatives, the lack of sustainable competitive advantages and the depleting political influence, I believe this is a terminal short." The rest is rather self-explanatory as well. Now: how many hedge fund managers will use this herd aggregation signal and pile in on the short side?

After intervening for 3 days out of 3, Italian bonds have just taken out all recent lows and threaten to drag the entire Italian, and thus European market with them. We expect an ECB intervention any second or else the bottom is about to fall out of the market. Highlighted are all previous ECB (money losing) interventions.

Headline time:

• German ruling coalition sources say EU summit will not reach a decision on EFSF leveraging
• And since the catering has already been paid for, "German ruling coalition sources says EU summit to go ahead on Sunday" even though no decision will come out of it.

Now...spin? Or another headline in 10 minutes refuting this one. Stay tuned and don't touch that dial while we break for commercial.

We had a feeling it will be a headline driven day... Sure enough, from MNI, "Germany Lawmaker: No Decision On EFSF Guidelines In Parliament Today." And judging by the EURUSD's response, the market is not too happy with this latest delays, this time as the people realize they can actually stall their respective despots fasttracked tyrranical decisions. From Market News: "The budget committee of Germany’s lower house of parliament, the Bundestag, is unlikely to decide on Thursday anymore about the guidelines for the European Financial Stability Facility (EFSF), a senior lawmaker from Chancellor Angela Merkel’s CDU/CSU-FDP coalition said today." Fear not, however, Cramer has certainly not heard of Market News, which means it is time to shoot the messenger.

And the Department of Insanity takes over with today's 6 Sigma event, after the Philly Fed surges from -17.5 to 8.7, the biggest jump since October 1980, and 6 standard deviations above the Wall Street consensus. The index which was at -30 a few months ago, has now retraced back to April 2011 levels to supposedly confirm that Operation Twist is working even despite a massive plunge in Refinancing Applications reported yesterday. And confirming that we are now all supposed to be taking crazy pills, the Shipments index jumped from -22.8 to 13.6: the largest jump ever! Just who is receiving these shipments? From the report: "The survey’s broadest measure of manufacturing conditions, the diffusion index of current activity, increased from ?17.5 in September to 8.7, the first positive reading in three months (see Chart). The current new orders index paralleled the rise in the general activity index, increasing 19 points and returning to positive territory. The shipments index also recorded a positive reading, increasing from ?22.8 in September to 13.6 this month. Labor market conditions improved only slightly this month. Nearly 18 percent of the firms reported an increase in employment, but 17 percent reported a decrease. The current employment index remained slightly positive but decreased 4 points from its reading in September. The average workweek index increased notably from ?13.7 to 3.1. However, the percentage of firms reporting a longer workweek (15 percent) was only slightly greater than  he percentage reporting a shorter one (12 percent)." And needless to say, not one Wall Street analyst expected a number this high. In fact, just one person thought the Philly Fed would print positive.

Someone forgot to tell the US Consumer that "Europe is fixed" and that "nobody has heard of Die Welt" according to Jim Cramer, who incidentally said back in May 2008 "how anyone can think housing will get worse from here is beyond me." Because according to the only non-biased and hence non-market moving consumer confidence poll, that of Bloomberg, October Economic Expectations dropped to -45 after -34. Not much to explain here: this was the lowest print since February 2009. As Bloomberg economist Brusuelas says, "Consumer confidence may be better predictor of direction of economy than spending."

They couldn't wait until 3pm. This was code red.

• Senior EU sources say unaware of any plan to postpone Sunday's EU leaders' summit
• Austria finance minister says dates of weekend EU summit fixed, unaware of any postponement

Since EU sources are usually unaware of the simplest things, such as math 101, we really would not put it past them...