Archive - Feb 2011 - Story

RANsquawk Market Wrap Up - Stocks, Bonds, FX etc. – 17/02/11

The following chart from a research report by EFG Hermes lays out what Egypt's future would and/or should look like on paper. In flow chart format it presents how the authors' view on the future of the country that recently underwent a military coup for the next 2/3 years. Of course, as flow charts tend to generally misrepresent complex non-linear and chaotic systems, and furthermore is created by an investment bank, the probability of events panning out as expected is minimal. Nonetheless, for those who wonder what the broad economic development pattern of Egypt may look like, or at least how the consensus perceives it, this chart is for you.

The farce over the Wisconsin anti-union vote has just passed into the surreal. According to the AP, democrat lawmakers, who are firmly opposed to voting on the bill which is said to already have majority support, and who have been boycotting the vote by being absent from the state capitol, have now escalated and patriotically left the state. The reason is that while the vote can not take place without at least one Democrat being present, the police had been sent out earlier, with orders to sequester the democrats. The democrat response: run away. As the AP reports: "Senate Republicans can't vote on the bill unless at least one Democrat
is present. Police could be dispatched to retrieve them, but it was
unclear if they would have the authority to cross state lines." So to all who were expecting the latest iteration of members of the executive class to run away (with or without gold) to come from Africa or the Middle East, will be disappointed: it was in America's very own back yard.

The war of words between Muddy Waters and alleged Chinese fraud company, China MediaExpress Holdings escalates as the company that exposed RINO for the fraud it is, issues its latest update on the situation. Bottom line: "We reiterate our Strong Sell rating on CCME, and stand by our conclusion that CCME management is significantly inflating its revenue and earnings in order to generate management earn-outs and inflate the stock price so insiders can sell."

As if the US did not have its hands full with convincing the rest of the world it does not support corrupt dictatorial regimes, not to mention providing trillions in backstop capital to insolvent continents, it has once again decided to offer US taxpayer funds in an attempt to buy the love and admiration of a society in transition. According to AFP, "The United States gave Egypt $150 million in crucial economic assistance on Thursday to help the key US ally transition towards democracy following the overthrow of longtime president Hosni Mubarak." We are not sure if this falls under the definition of throwing good money after bad, especially since nobody knows where the "bad" money (according to some estimates up to $30 trillion of it) that had been collected by the Mubarak regime for three decades is. But it is refreshing that with tens of trillions in our own budget deficits, the US once again harbors an illusion that it is its, or rather its taxpayers', sworn duty to encourage the creation of "open societies" no matter just how insolvent this country itself is.

And so the first European domino, following in the footsteps of Greece and Ireland from 2010, is made known. Per Reuters: "European Union member states are increasingly concerned about Portugal's ability to fund itself in financial markets and believe Lisbon will have to seek a bailout by April, a euro zone source said on Thursday. The EU has a rescue plan ready for Portugal, but it is dependent on Lisbon asking for the aid and making that request to both the EU and the International Monetary Fund. Portugal remains adamantly opposed to asking for assistance. "Portugal is drowning. It's not going to be able to hold on beyond the end of March," the euro zone source said. "That's already understood to be the case in financial markets, but now it's also understood among (EU) finance ministers." Time for that European Stress Test v2 to convince us just how good everything is. As for Birinyi's S&P target, we are firmly convinced that that will be attained within a year: it is hardly a coincidence that a moonlighting Gideon Gono has been seen operating the Fed's POMO desk on those days when the hunogver NYU interns are out on Stabucks runs.

While "hope" has certainly been the primary investment thesis in the stock market for the past twp years, little did we realize that it was the key decision-making input variable at the Federal Reserve. What else is there to say: the central planners are now officially using the f[o|a]rce.

Still wondering why the US (and global) stock market is nothing more than a crime scene, and an imminent catastrophe waiting to happen, supervised and regulated by a bunch of "special" porn addicts? Then read the following comment letter and wonder no more.

One would think that the S&P doubling from the March 2009 lows would be indicative of a mission accomplished for the Fed's market manipulation, aka Open Market Operations, team. No such luck. In fact, while the abominable Dr Chairsatan and Messrs Frost Sack are spouting garbage about economic recovery to anyone retarded enough to listen (oddly they have found a great audience in Congress) behind the scenes they are telling banks to prepare for a stress test recession scenario in which unemployment is 11%. And since current unemployment is about 23%, and we continue to be in a Depression, we assume this means that the Fed is actively preparing to make sure banks will be able to handle the explosion in economic growth and, oh yeah, hyperinflation, when the $1.7 trillion in excess reserves as of June 2011, finally flood the market. Although since this statement may be sufficient to get Zero Hedge to issue "unsolicited" opinions on the state of the Great Ponzi, we will go with the party line here... Which we find confusing: why would the Fed force US banks to undergo another stress test: aren't they all massively overcapitalized? Wasn't that the whole point of the first fraud of a stress test back in 2009 which had he same credibility as the upcoming European one? And why not cut to the chase and conduct a Ponzi unwind stress test? So many questions...So many more lies.

"I remember when McDonald’s first released the “Super Size” promotion. You were supposed to get in line and say to the attendant “super size” me, at which point you would be served an egregiously sized portion of fries and soda. Pretty soon after that American obesity levels starting going through the roof. In any event, we won’t be having this problem much longer. Sizes are about to shrink dramatically and prices will go up at the same time. Food quality will probably decrease as well, which is hard to imagine considering the crap that is sold as food every day. In any event, I have a suggestion for McDonald’s. They should just teach us Americans to accept our indentured servitude to the financial oligarchs and roll out a “Serf Size” menu. People will get to the acceptance stage that much faster as they say, “serf size me!” and then walk away with three fries and a five ounce soda." - Mike Krieger

Yesterday we reported that instead of manipulating home price data, China would simply stop reporting it. Fast forward to today and a few thousand miles west where we get a comparable report, only this time involving an insolvent continent and a comprehension-challenged rating agency. Just released from S&P: "Following new European Union regulations on credit ratings, we are converting our issuer credit ratings on these sovereigns and the ECB to "unsolicited", as we do not have rating agreements with the rated entities. Standard & Poor's  will nonetheless continue to rate the seven sovereigns and the ECB, and classify the ratings as unsolicited, as we believe that we have access to sufficient public information of reliable quality to support our analysis and ongoing surveillance, and because we believe there is significant market interest in these unsolicited ratings. Article 10 of EU Regulation 1060/2009, which addresses matters relating to the disclosure and presentation of credit ratings, requires, among other things, that unsolicited credit ratings be identified as such." In other words, Europe just told S&P, "Go fornicate yourself. We'll continue being broke while pretending to be solvent, and don't need you to spoil the party by being occasionally truthy..."

RANsquawk US Afternoon Briefing - Stocks, Bonds, FX etc. – 17/02/11

All black market "arbitrageurs" listen up: it is time to stop selling bread in Zimbabwe and start importing beemers to Singapore. The reason: a baseline 3 Series BMW sells for $260,000 (US) in Singapore. Yes, that's more than a quarter of a million for a car that in the US leases for a few hundred a month. "Francis Goh sits in a bronze BMW 335i convertible in a Singapore showroom, waggling the wheel and feeling the leather. He isn’t fazed by the S$340,000 ($260,000) price tag, five times what the same car costs in the U.S. “I see the price of a BMW, to me it’s reasonable,” said Goh, adding that he may instead go for a Mercedes-Benz E200 or Audi A5 to replace his Subaru Impreza WRX." However, unlike pretty much everything else (and take a look at Cotton and Corn today to see our broad definition of "everything"), this particular price surge is not due to endless Fed liquidity. Or at least, not so much: buyers have the Chinese trillions in Renminbi loans and the Singapore economic miracle to thank for this one, as well as Singapore's unprecedented hatred of car ownership.

The "correction" is over. The last time silver was here, the 10 Year was at 12.45%, the 2s10s was inverted -210 bps, and gold was $600.

It is good to see that things are back to normal. The now irrelevant, and very soon to be former reserve currency is getting pummeled as stocks go up on 410,000 initial jobless claims nearly 2 years after the end of the recession (and $3 trillion pumped into this hollow scam of an economy), and a guaranteed plunge in margins, but more importantly the Precious Metal complex is back to being a high beta alternative to stocks. Silver just passed $31.10 and is set to close at its post Hunt-Brother highs. In the meantime, the highest intraday price since the early 80's is $31.2375 from January 3: we are less than two dimes away.