Archive - Jan 2011 - Story

The CFTC webcast on position limits and how to best preserve the status quo in precious metal market manipulation is starting. Readers can watch it at the following link.

Gold and silver have fallen by less than 1% in all major currencies today. Asian equities were mixed with strong selling seen in India and European equities and US index futures are tentatively higher. Eurozone periphery bonds yields have fallen as have those in Germany (10 year) after rising above 3% in recent days.

Just out from Goldman's FX group: another "tactical" top tick call extraordinaire: "From an FX point of view we would go long EUR/$ at current levels of 1.3180 for an initial target of 1.37 with a 1-day stop on a close below 1.2850." Of course, that Goldman had a "strategic" 1.55 EURUSD target as the pair plunged by 1,500 pips is irrelevant. Time to take the other side of the trade (i.e., the same as Goldman's 50% margin prop desk).

Those looking for vol in stocks really should shut down their E-Trade account and get some forex terminal. As we have been stating for well over 6 months now, with the Fed artificially ramping stocks, and making stock vol extinct, daytraders continue to be forced to find other avenues to day trade volatility. And the FX is just that market. The EURUSD has just done its daily 200 pip song and dance, putting yet another several hundred Japanese housewives using 50x leverage underwater by 10 times their capital amount. But at least China is happy. Oh and yes, with $4 trillion in FX turnover per day in 2010, this kind of mindblowing volatility is sure to end well.

So much for that amazing beat in the last 2010 number in initial claims, which is now proven to have been purely a figment of the BLS' imagination and a whole load of guesstimations. Today's initial claims number throws cold water to all those who expected the trend in claims to be improving. At 445K, this was a huge miss to expectations of 410K, and a major deterioration from last week's (upwardly revised of course) 410K (was 409K before). Elsewhere, continuing claims came at 3,879K on expectations of 4,088K (with the previous naturally revised higher as well from 4,103K to 4,127K). And the kicker: in NSA terms initial claims were a mammoth 770,413, a 191,686 increase in just one week, and the highest NSA number in one year! The result: the spread between SA (3.1%) and NSA (3.8%) unemployment rate jumps to year highs. Of course, the BLS blames the huge disappointment on "paperwork delays", yet blamed nobody for the amazing beats in the end of 2010 which brought the market to a complete frenzy.

• Prices Soar on Crop Woes (WSJ)
• S&P, Moody’s Warn on US Credit Rating (WSJ)
• How Oil Affects the Price of Peas in China (FT)
• The banks' ongoing accounting gimmick: JPMorgan Reserve `Bleeds' Distort Record 2010 Earnings (Bloomberg)
• Geithner Urges New Start for U.S.-China Relations (NYT)
• Swiss Franc Slumps After SNB Says Currency Threatens Growth (Bloomberg)
• U.S. Foreclosure Filings May Jump 20% This Year as Crisis Peaks (Bloomberg)... or not
• South Korea raised rates unexpectedly from 2.5% to 2.75% (BBC)
• World Bank Shocker: China To Drive Asian Growth (AP)
• Brisbane Wakes to Devastation, Death as Flood Peaks (Bloomberg)

Something interesting happened on the way to China's bailout of Europe. After recently China stepped up its Eurosupport rhetoric, and even put a token amount of money where it mouth is, €1.1 billion in directly placed Portuguese bonds specifically, and who knows how much in secondary market purchases, many of the clouds over Europe, and specifically the Euro, have been lifted temporarily, resulting in a modest jump in the EURUSD from just under 1.29 last week to nearly 1.32 today. Which makes sense: after all the EU is China's second biggest trade partner, and as a habitual importer, China needs the EU's currency as strong as possible to preserve its imports. Yet what is odd, is that over the past 24 hours we have received numerous notifications that it is none other than Chinese banks that have been selling the EURUSD! Which makes one wonder: is China's European "rescue" just one big bait and switch distraction?

The market tone is mixed today as the onslaught of sovereign headlines has expanded from Europe to the broader market. Moody’s issued commentary on the US, UK, France and Germany that illustrates concerns on the countries’ debt ratings, while reiterating the current AAA status for now. Following a mutedly optimistic Beige Book yesterday, today will feature weekly jobs data as well as PPI for December. The weekly data are likely still in their holiday downdraft, but we should see some return to normal trends over the next two weeks.

Trade, PPI, claims, Chairman Bernanke on small business lending, and the Fed’s balance sheet…First POMO of new schedule starts with Frost Sack buying $7-9 billion in 07/31/2016 – 12/31/2017 bonds.

RealtyTrac has reported its December foreclosure data: at a total of 257,747 default notices, foreclosure auctions and bank repossessions, total foreclosure activity dropped by 1.8% in December and 26.3% from a year earlier, "the biggest annual drop in foreclosure activity since RealtyTrac began publishing its foreclosure report in January 2005 and giving December the lowest monthly total since June 2008." Specifically, December Default notices (NOD, LIS) decreased 4 percent from the previous month and were down 35 percent from December 2009; Scheduled foreclosure auctions (NTS, NFS) decreased 3 percent from the previous month and were down 20 percent from December 2009; and bank repossessions (REO) increased nearly 4 percent from the previous month — thanks in part to substantial month-over-month increases in some states such as Nevada (71 percent increase), Arizona (52 percent increase) and California (47 percent increase) — but were still down 24 percent from December 2009. As a result total Q4 foreclosure activity was 2,871,891: an increase of 2% from 2009 and 23% from 2008.

After literally the entire world came together to prevent the collapse of the Eurozone by purchasing Portuguese and Spanish bonds, the Portuguese bond auction yesterday, and Spanish today, were a "smashing success." After three days of direct bond purchasing by the ECB, a direct placement of Portuguese bonds to China, and Japanese purchasing of billions of bonds as well, the market is stunned by the fact that Portugal and Spain did not have bond auction failures. From Bloomberg: "Spain sold 3 billion euros ($3.9 billion) of five-year bonds, meeting its target, at an average yield of 4.542 percent, lower than secondary-market yields of 4.630 percent. Italy, the euro region’s second-most indebted nation, aims to issue as much as 6 billion euros of debt due in 2015 and 2026 today." Specifically, the bid to cover of 2.1 was a little higher than the 1.6 previously, while the yield surged sequentially from 3.576% to 4.542%, which was followed by the requisite lie by the Spanish finance minister that Spain "definitely" does not need a bailout. The fact that it is being bailed out by three (plus one) central banks is irrelevant. In other words: can has been kicked down for another week or two, and the cost to the global central banking cartel was just a few billion pieces of freshly printed linen.

RANsquawk European Morning Briefing - Stocks, Bonds, FX – 13/01/11

Noisy day today as Portugal issues €1.25b in 5yr & 10yr paper, although higher-range allotment did require a bit of low bidding. 5yr BTC worsens from 2.8x prior to 2.6x, while the 10yr sees a step-up from 2.1x to 3.2x bid-to-cover. Although the 2020 paper saw a decline in 10yr auction yield from 681bps to 672bps, the lower-duration notes jumped from 404bps prior to 540bps. Despite initial weakness, encouraging comments from EU officials and rumors of further EFSF expansion sparked a squeeze in euro assets and contributed to a pervasive risk-wide bid. Meanwhile, November Eurozone IP jumps to 1.2% MoM vs 0.5% consensus vs 0.7% prior, and a constructive Beige Book and bullish supply/demand figures from crude inventories and the WASDE report contribute to an overall risk-on/USD-off day.

Is there a VIX index of climatic and/or geologic activity? Cause in 2011 it is off the charts. Breaking News shares pictures showing that the Etna volcano has just erupted. As of now, it is unclear if millions of birds, crabs, or fish have fallen out of the sky surrounding Vesuvius. Conveniently this occurs hours after we presented Nigel Farage rather glass half emptyish outlook on Italy's prospects.

It must be that 0% Chile unemployment leading to zero economic slack, and resulting in surging inflation that is the reason for the most recent deadly escalation borne from surging prices. Because otherwise it would mean that the chairman was either blatantly lying when he said he was 100% confident global inflation would not run out of control, or, as usual, the Princeton academic with no real world experience had absolutely no idea what he was talking about. From Business Week: " Protests over gas price increases of 17 percent are intensifying in
far southern Chile. Already, two women protesters have been killed and a
baby was among those injured when a truck smashed into a barricade and
knocked them into a bonfire. About 21 people have been arrested. Police say the trucker fled the scene in Punta Arenas early Wednesday. He had been driving without lights on. The protests are the first major political challenge to face
Chilean President Sebastian Pinera this year. He made a campaign promise
that gas prices wouldn't rise, but the state-owned petroleum company
has had trouble maintaining supplies. Chile imports 93 percent of its
gas."