Archive - Jun 6, 2011 - Story

In a double whammy of bad news from the mainstream media blackouted Fukushima (or perhaps the general population just doesn't care any more) today we learn that not only did The Nuclear and Industrial Safety Agency (NISA) double its estimate of the radiation leak in the early days of the Fukushima catastrophe, something we had predicted would happen eventually courtesy of the secretive Japanese government, but that Plutonium from Fukushima has now been found in the town of Okuma, over 1 mile away from the stricken Nuclear Power Plant.

The media has been replete lately with a variety of different government officials saying that there will not be a third round of Quantitative Easing. Even the great Ben Bernanke himself on April 27th spoke against the possibility of QE 3. This isn't surprising, of course, because in order for something like QE to have the most effect it needs to be, well, a surprise. However, I am throwing down the gauntlet and making the call - there will be Quantitative Easing, and a big one most likely, by the end of summer. There I said it; of course, I have actually been saying this for the last couple of months and it doesn't take much of a real genius to figure it out considering that we are heading into a presidential election year. However, it most likely won't be called QE 3 since the term QE is now politically and socially almost taboo.

When we first started paying attention to the physical ("Registered") silver held in COMEX warehouses on April 20 following the explosion in the silver price, the total amounted to just over 41 million ounces. As of today, a short 6 weeks later, the total physical silver held throughout the entire Comex complex, has dropped by 30% over that period. As of close today, the total amount of Registered silver is now 28,773,375 ounces, a decline of 2.9% overnight from 29,636,513. This is due to a withdrawal of physical from both Brinks and Scotia Mocatta, as well as the ongoing reclassification of 438,708 ounces of Registered into Eligible silver over at HSBC (but wait, it will revert back to Registered any moment... we promise). At this rate of withdrawal and "adjustment", there will be no physical silver left in the entire Comex in about 5 months. At that point, even one delivery intention will send the price of silver to previously unseen levels.

First we had the bread (or some other Oscar Meyer product)...Now comes the circus. Politico reports that Pelosi has just called for a "Weiner Ethics Inquiry." Um... What is there to inquire: the guy sent out pictures of his wiener in clear abuse of his political position (leaving his family drama aside) from a Twitter account that was obviously that of an elected official. It's unethical - period (to spare various other adjectives that come to mind). He should resign immediately. Then again, New Yorkers once again get precisely the representatives that they deserve. A far better inquiry (and thus use of taxpayer capital) would be to discover who else among the political elite does just the same on a daily basis (Weiner is certainly not alone), and has merely not been caught yet.

Last Thursday we attempted a rough estimation of how much the Treasury has been dipping, or as it is also known "disinvesting", into the G-fund and the Civil Service Retirement and Disability Fund (CSRDF). Courtesy of Stone Mountain, we now have a definitive number. Even we did not realize how bad it is: in a nutshell, since the debt ceiling breach in mid May, Tim Geithner has replaced one IOU (that of the Fed) with another (that of the Treasury) in the G Fund to the tune of $57 billion, and in the CSRDF of about $22 billion. In other words, retirement funds have seen a "disinvestment" of nearly $80 billion in the past 3 weeks just to make space for further funding of bloated government, defense spending, and healthcare benefits. But don't worry: Tim promises it shall all be well.

Panama is an example of how I see governments moving in the future– like Singapore, Chile, Hong Kong, and may others, Panama is the kind of place that seeks to attract foreigners, to compete for them by providing a number of incentives. Panama does this most pointedly with its retirement ‘pensionado’ program, but there are a number of other such programs. In fact, the country’s immigration law has so many different categories, it’s possible for just about everyone to find a way to move here. In other places, immigration is unfortunately a four letter word. The borderless Schengen area in Europe is on the verge of disintegration as a number of countries in the region begin to put up border checkpoints to restrict the free movement of people (and capital). In the United States, the government has been eager to show that it’s not slacking on the illegal immigration issue. The result has been an increase in the size and scope of its persecution against “undocumented workers” as well as the businesses which hire them. I can just imagine the conversations within the hallowed halls of government: “those who break the law must be punished accordingly…”

RANsquawk Market Wrap Up - Stocks, Bonds, FX etc. – 06/06/11

Watch the pathetic confession from the congressman live here. Nonetheless, a very "regretful" Wiener refuses to step down.

It seems that Europe once again shot its last bullet a few days too early (to use a more polite phrasing than the alternative) with the announcement from last week that the Greek bailout was a done deal. As we speculated, various complications will soon emerge for anyone who cares to read the fine print in the bond indentures which preclude the imposition of Collective Action Clauses, thereby making an enforcement of a "voluntary" maturity extension problematic if anything. Below we present an article that appeared in Handelsblatt in the last hour, which indicates that opposition to the rescue has emerged not only from Slovakia, but from the UK as well. The English is about as garbled as possible thanks to Google translate, but oddly enough far more understandable than the periodic soundbites of outright lies from the pathological troica of Rehn-Junker-Trichet.

Comparing ES to the broader RISK basket discussed extensively previously, it appears that following several days of decoupling of the S&P contract to broader risk, today we saw the opposite, when around 1 pm the two series diverged and never looked back. The selling pressure was certainly focused on stocks, led by financials and energy stocks. The shift to defensives is becoming palpable: following our pair trade advice to retrench into consumer staples and utilities while shorting discretionary and industrials (better known as the QE Unwind trade) would have returned almost 4% since inception on May 16.

Now that both the early April swing support of 1283.75, which also happens to be the 150 DMA, have been taken out, the next support in the market is the 200 DMA, which is also the post-Fukushima March lows. A breach of that level would mean the market goes negative for the year. As a reminder: the next 30 minutes are NYSE circuit breaker coffee break time.

It appears Jean-Claude Jun(c)ker has been sniffing hallucinogenic Spanish cucumbers again:

• JUNCKER SAYS EURO OVERVALUED VS OTHER MAJOR CURRENCIES
• JUNCKER SAYS EURO AREA SHOULD HAVE EXCHANGE-RATE POLICY

The tautological question of whether he is lying we leave to the logicians. What is apparent is that Europe is finally getting pissed they are dead last in the FX race to the bottom. Cue Tim Geithner's strong dollar policy.

And in far more important news, Greece's G-Pap says that he is willing to consider a referendum on the Greek bailout measures. If so, it's goodbye EUR: a referendum has a snowball's chance in a Comcast business channel in passing.

Presented without commentary (well, we'll say one thing: for QE3 to work, it would have to be a surprise... so much for that).

Nearly three weeks ago, on May 17, Zero Hedge, when analyzing the complete collapse in car and thus Industrial production made the following observations: "The immediate impact: the drop in the industrial production already
seen, but the bulk of it due to delayed aftereffects will likely impact
the May number, as the follow through from the Japanese supply chain
halt starts ringing a loud alarm bell across Wall Street. Of course,
this is another thing that all those calling for a 4% H2 GDP could have
absolutely not foreseen (and in fact it was originally supposed to be
positive for the economy, eh Deutsche Bank?). Expect to see drastic
downward cuts to May Industrial Production and next, to Q2 GDP." Fast forward to today, when, in an example of poetic irony, none other than Deutsche Bank's grossly overpaid economists also known as Shaman witchdoctors in less than polite circles, have just come out with a note titled: "Quantifying the impact of autos on Q2 real GDP" in which they, gasp, discover that "a near 30% decline in motor vehicle production is consistent with roughly a two full percentage point drag on Q2 real GDP. In our forecast, we are assuming a decline of around 1.5% because we think that we might see a small bounce in June production that will push the quarterly decline in motor vehicle production to something closer to -20%." Well, better late and always cluelessly wrong, than never... and still cluelessly wrong.

Amid the usual meandering propaganda, Tim Geithner finally catches up to Zero Hedge from February 2010: "The three largest U.S. banks account for 32 percent of total banking assets in the United States, in comparison to 46 percent for the three largest in Japan, 58 percent in Canada, 63 percent in the UK, 65 percent in France, 70 percent in Germany, 71 percent in Italy, and 76 percent in Switzerland. And total banking assets are 461 percent of GDP in the UK, 178 percent in Germany, and 820 percent in Switzerland." Supposedly this is intended to indicate just how much less concentrated the US banking system is compared to other nations: "Some argue that the U.S. financial system is too concentrated, which could promote systemic risks.  But the U.S. banking system today is less concentrated than that of any other major economy.  And
total banking assets in the United States today are only about the size
of U.S. GDP – much lower than in other developed economies." So just because the entire system is broken beyond repair, it makes sense to tout that the US is broken just a little bit less than everyone else? Also, where is the mention of the fact that the bulk of these balance sheets are chock full of toxic US securitized detritus and that without the US selling its worthless crap around the world, we would not be in the predicament we are in now. In the meantime, here is what Zero Hedge presented in February of last year...