Archive - Jan 2011 - Story

While many will say I am a perma bear and just see everything as half full, I cannot wait until the day that I can sell all of my precious metals and commodity exposure and start to invest in non-mining and commodity businesses and equities generally. I have no doubt that this day will come but this is all a process and we are very, very far away from that day from a price perspective. A large part of my intent in writing these notes is to catalyze the change so that it happens as quickly as possible. The quicker we can change the guard within the elite class on Wall Street and Washington the quicker we can get on with human ingenuity. Very early on I noticed that what Aldous Huxley and others have called the “power elite” have almost total political and economic control of the system. Remember the quote attributed to Mayer Rothschild over two hundred years ago that perfectly and simply states: “Give me control of a nation's money and I care not who makes the laws.” Combine this quote with Lord Acton’s: “Power tends to corrupt, and absolute power corrupts absolutely. Great men are almost always bad men” and you can start to really put all the pieces together on how money power works and how it has taken the entire world hostage to its selfish ends. - Mike Krieger

We were only partially serious when we predicted that following the just released FAO data confirming food prices have just hit an all time high, we were expecting food riots to ensue imminently. Alas, as all too often happens these days, we were right. 2011 first and certainly not last rioting comes out of Algeria, where Bernanke's genocidal policies are first to take root. From the Associated Press: "Riots over rising food prices and chronic unemployment spiraled out from Algeria's capital on Thursday, with youths torching government buildings and shouting "Bring us Sugar!" Police helicopters circled over Algiers, and stores closed early. Security officers blocked off streets in the tense working-class neighborhood of Bab el-Oued, near the capital's ancient Casbah, and areas outside the city were swept up in the rampages. The U.S. Embassy issued a warning to Americans in Algeria to "remain vigilant" and avoid crowds. Riots on Wednesday night in the neighborhood saw a police station, a Renault car dealership and other buildings set ablaze. Police with tear gas fired back at stone-throwing youths through the night." Algeria's violence is unfortunately just the start. The big to keep an eye out on is rice. If the liquidity makes its way there, the Chinese soft landing may just become much, much harder.

RANsquawk US Afternoon Briefing - Stocks, Bonds, FX etc. – 06/01/11

Though the complexities may appear endless, the global economy's coming implosion is really fairly easy to understand: here are four charts which do the heavy lifting.

Keep Waddell And Reed far from the sell button...

Paging JC Trichet: time for the spanking of the wolfpack. The reason for the anal prolapse in the Portuguese 10 year is that it is now expected that the country will issue new debt on the 12th... and that the auction will be less than stellar. And not helping matters is that elsewhere, the EUR just got taken to the woodshed following the release of the EU's consultation paper "which aims to abolish the excuse that a bank is too big to fail" and "asks whether bank bond holders should share in paying for future bailouts and seeks to give greater authority to national regulators over bank leadership and business strategies when a country's economic stability is at risk." If this thing passes, watch out below SovX and iTraxx Fins. The FAQ and the actual release can be found here. Those who wish to avoid the 100 pages, can read the Dow Jones summary below.

Yup. Gozer must be coming, cause the Stay Puft marshmallow man recently quit the Obama administration.

While the slide in the ES following today's POMO is not to surprising (there are almost no economic data catalysts that can by fudged by either the BLS, Census Bureay or the Commerce Department today so POMO on meant buy, and POMO off means sell), is not surprising, what is shocking is the brazen arrogance of the Primary Dealers to flip what is pretty much an asston of the just issued 5 Year PM6 5 Year, which was auctioned off a week ago, and of which the primary dealers are flipping like deranged homeowners at the top of the housing bubble, without even a pretense of keeping the bond for at least a week or two! This is the purest definition of monetization: of today's $6.8 billion POMO, more than half, or $3.5 billion consisted merely of flipping precisely this CUSIP. Nobody, not even primary dealers, want to hold any recently issued government paper anymore. If even the PDs are expecting a total collapse in the Treasury market, does that means stock are a buy?

As we predicted in September, the US, which is issuing debt at a clip of about $125-150 billion per month (in line with the Fed's monetization of every single newly printed dollar of debt), will likely hit its debt ceiling as soon as March. We finally get confirmation from none other than tax expert Tim Geithner, who in continuing his tirade of scaring the bejesus out of anyone dumb enough to listen to him , has just confirmed our concerns. Not only that, but he has also written a letter to Dear Mr. Leader Harry Reid in which he uses big and scary words to make it clear just how fucked this country is if it can not issue about $2 trillion in debt each and every year. Because the only way to avoid bankruptcy is, as Joe Biden once said, to issue way more debt.

Just out on Reuters, which notes that Tiny "TurboTax" Tim Geither says hitting the debt limit could have catastrophic economic consequences, potentially worse than impact of 2008-09 financial crisis. Bold/underline ours. Expect much more threats of total and complete annihilation unless the dumbest guys in the room get what they want.

... That's what some model (quite possibly from Ford or Wilhelmina) in Barclay's FX department predicts tomorrow's NFP number will be. And just in case the first number is wrong, basedon what can only be attributed to Barcap borrowing Birinyi's ruler, the firm says there is a 95% confidence interval that the actual number will come at 450,000. And there's your whisper number. .

It is a good thing that America has a functioning, objective and analytical media, as otherwise we might need David Rosenberg to point out that one of the key factors for the avoidance of the technical double dip was a completely unexpected number fudge courtesy of the Commerce Department which, at the most crucial stage in the economy's conversion into a re-recession, miraculously "found" $46.3 billion in personal income that "the consumer thought wasn't there before." In other words, the government literally pulled a number out of thin air which created a relative sequential boost to the economy, even though it was just a non-recurring accounting adjustment to continuous numbers and should have been completely ignored! By then it was too late (very much in the same way that the BLS has had 44 out of 52 adverse data revisions after the data has been reported, when it is too late for its to impact asset prices): it set off a chain of events which resulted in a jump in ISM, diffusion and various other indices (not to mention the BLS endless data adjustment) which caused a last second avoidance of the double dip becoming official. Oh and the Fed's QE2 did not hurt either...

Either someone in China is pumping out 100 capesize ships every single day, and doing their best to push charter rates to just below zero, or, gasp, transpacific trade is really falling off a cliff (i.e., Chinese inventory accumulation has been put on hold). Of course, if it is the second, we will know in February when China reports its January trade surplus (and the US respectively reports its trade deficit). Should the gross imports and exports number plunge, it may confirm that the BDIY which is only mentioned by the MSM when rising, and ignored when plunging, may actually be relevant. And speaking of plunging, today it dropped for the third consecutive day by more than 4%, hitting 1,544, a 4.8% drop overnight, and the lowest number since April 2009.

The seasonal adjustment in the last week's sub 400k initial claims is starting to water out, and the resulting jump in initial claims from 388K to 409K was to be expected. Of course, last week's 388K was revised as always to a worse reading of 391K. More importantly, as we have been noticing for the past 3-4 weeks, the Unadjusted claims continue to surge, and in the last week jumped by 52k to 577,279, nearly 170k more than the Seasonally Adjusted number. Those on continuing claims declined from 4,150,000 to 4,103,000 even as the NSA number again surged from 4,116,779 to 4,390,661. Lastly, those on extended claims were a wash as those on EUCs dropped by 134K while those on extended claims jumped by 110K.

• Foreclosures May Be Undone by State Ruling on Mortgage Transfer (Bloomberg)
• As expected, retail sales miss blamed on snow, although how icy conditions are preventing web surfing is beyond us: December retail sales dented by blizzard, frugality (Reuters)
• Boehner Vows to Cut Size of Government (FT)
• If at first you don't succeed... Obama renominates MIT economist Diamond for Fed Board (Reuters)
• PBOC Extending Biggest Cash Crunch Since Lehman (Bloomberg)
• Just a little more inflation: Coking Coal Contract Price May Rise 33% on Australian Floods (Bloomberg)
• Andy Xie: This year may start out looking like the last, dipping down later and then resurfacing with hope. (MarketWatch)
• Yes, banks really are doing everything they can to restore shadow banking: JP Morgan Markets Its Latest Doomsday Machine (or Why Repo May Blow Up the Financial System Again) (Naked Capitalism)
• BofA Introduces Fees to Replace Debit-Card, Overdraft Charges (Bloomberg) - we are confident Elizabeth Warren will have a lot to say about this...hopefully she has something to do as well
• Fed Should Stop Buying Bonds; It Is Falling Far Behind the Economy (David Malpass)