Archive - Jun 2011 - Story

June 14th is a national day of resistance against economic tyranny. We all need to do our part. The good folks at AmpedStatus.org have hosted this site: Acts of Resistance: What Are You Going To Do On June 14th to Rebel Against Economic Tyranny? Demonstrations and public actions are being planned in a number of cities.If you cannot attend the public events, then consider taking direct action against Wall Street and the "too big to fail" banks. Direct action boils down to this simple act: remove your money from their grasp. Your money fuels their exploitation, their fraud, their skimming, their lobbying and thus their sabotage of democracy. If we all take our money out of their grasp, then they will shrink or expire. If you haven't already, move your IRA and other accounts out of Wall Street and "too big to fail" banks. Move the accounts to online firms, local credit unions or local banks. Yes, there are still locally owned and controlled banks. Moving your money to them is a direct-action statement against financial tyranny.

Despite near record corporate earnings, the S&P has continued to trend lower for 6 weeks: the longest drop since 2002 as reported yesterday. But have no fear: Goldman's David Kostin summarizes the upside/downside potential of the market (1450/1210 on the S&P), and the key bullish and bearish factors that help determine the current outlook. "Discussions with clients this week focused on the risk/reward balance for US equities. Our forecasts reflect a 2:1 upside/downside return profile through year-end 2011. S&P 500 has declined by 5% from its April 29th closing high of 1364. Our year-end 2011 index target remains 1450 representing 12% upside from current levels. A downside scenario suggests an index value of approximately 1210 or roughly 6% below current levels." Also, Kostin is confident the current sell off is overdue to reverse "During the pull-backs the median length time for the market to reach bottom equaled 27 days. Six of the episodes took 20-40 days and on four occasions the decline occurred in less than two weeks. The current sell-off has lasted 41 days and counting. The historical episodes we analyzed had a median time to recover of 41 days. Recoveries during 2003-07 typically took longer than the speedy rebounds since 2009." Needless to say comparing the current centrally planned regime to any other time is futile, and we completely disagree with his assessment.

I'm working on the backend.

Unrestricted in its growth by any constitutionally mandated limits on its ability to create and manipulate money – the official currency now being nothing more than IOUs redeemable in nothing more tangible than coins made out of base metal alloys with inflated face values – and supported by a Supreme Court that has unequivocally demonstrated a willingness to ignore or sign off on egregious tramplings of the Constitution, the stage is set for the U.S. government to evolve into something far more dangerous on the domestic front. All it requires now is a triggering event, and it would be naïve to think that such an event won’t occur. Maybe not tomorrow, maybe not this decade – but when it inevitably does, the federal government already has all the precedents it needs to do “whatever it takes.” This absence of legal restrictions on its actions is the very foundation of fascism.

Many have asked for it, so here it is: the full list of gentlemen (and ladies) attending this year's Bilderberg conference. Some wonder if like in previous years, when following the group's 2009 and 2010 meetings in Greece and Spain, the host countries have subsequently had to deal with some sad episodes of sovereign insolvency, if 2011 host Switzerland, despite its ironclad Swiss National Bank (except for all those dollars on the balance sheet of course) may be next...

This week's truly market moving headlines, courtesy of Bloomberg (these are real)

RANsquawk Market Wrap Up - Stocks, Bonds, FX etc. – 10/06/11

As the superimposed chart below demonstrates, the current 6 week drop, which is the longest in the last 9 years, or since 2002, may just be the beginning. And while our prediction that 2011 is a replica of 2010 is now confirmed, the far scarier possibility is that the next comparison to 2011 is 2002 - if that year is any indication, the SPX will drop to ~1000 before rebounding: obviously at that point the Fed will have no choice but to proceed with QE3, or the downward momentum will accelerate in what may then become a repeat of October 2008, and all those predictions for an S&P 400 would promptly be validated.

The most recent CFTC Commitment of Traders report is out. As usual the most interesting data can be found in the FX spec update which does not disappoint. Just as we predicted, as the EUR surged over the past 14 days so did non-commercial net specs. The number which is through Tuesday, probably increased even as the EUR got hammered over the past 24 hours, dropping 250 pips in two days. Expect the usual piling out through the front door as specs bail once again. At that point the time to buy the EUR will come. Of the other two major pairs, the USD and the JPY, the Yen increased in long exposure while the Dollar saw the first decline in 8 weeks: just in time for the USD to jump once again.

The Fed just released the final POMO schedule which completes QE2: the total amount of bonds to be monetized will be $60 billion (at the upper end of the range) and with that the QE2 portion of monetary stimulus is over. Notably, there will be two POMOs on June 20. What is interesting, is that the Fed will continue the QE Lite portion as expected, with what appears to be a modest weekly POMO to the tune of $3.5 billion on July 6 and July 11, meant to replenish the bonds that mature and prepaid MBS. Alas, as the total notional shows, and as Zero Hedge expected, the $7 billion in two weeks is woefully inadequate to provide the Shadow QE that many have expected. It is interesting that as part of QE Lite the Fed will focus on what appears to be the 4-5 years part of the Curve.

Frankly, we couldn't care less about the content of Sarah Palin's emails. But some do. And since Alaska office has made it prohibitively difficult for most to access this collection in non-electronic format, requiring up to $750 in physical content fees, below we provide a link to the only resource that currently provides the most comprehensive selection of the just disclosed Palin email archive. The redacted emails can be found here.

Nothing like the Criminal Reserve announcing at 2pm on Friday, just as the market was about to flush all stops to the bottom that the already laughable 3% capital charge buffer (initially expected to be 9%) required by Basel may be reduced even more (according to NY Fed mouthpiece Steve Liesman, a hypothetical which will likely be refuted before long), probably down to 2-2.5%. This number is woefully inadequate to protect financial companies from the the material capital infusion that will be needed post the onboarding of $200+ trillion in OTC derivatives to exchanges as we reported previosuly, but who the hell cares: must kick the can down the road one more day.

XLF's knee jerk reaction.

It is somewhat ironic that the only thing that can undo the Tepper "Balls to the Wall" effect is.... Tepper.

The topic of Americans living mortgage-free in foreclosed homes on which banks do not have proper titles is nothing new - in fact we are surprised that there isn't a robosignature app for that...yet. Neither is the fact that this ongoing reverse capital transfer provides as much as $50 billion in "rental" income for those same squatters. And while the ethical arguments for strategically defaulting on one's mortgage can get very heated on both sides, one thing is certain: the ongoing foreclosure crisis is creating a new subclass of "entitled" people, who certainly enjoy living on the back of the banks, while not paying one cent, and not vacating the premises. According to a new article by CNNMoney, some of the excesses observed within this latest demonstration of unearned entitlement are truly staggering. To wit: "Charles and Jill Segal have not made a mortgage payment in nearly five years -- but they continue to live in their five-bedroom West Palm Beach, Fla. home....Lynn, from St. Petersburg, Fla., has been living without paying for three years....In Thousand Oaks, Calif., an actor has missed 30 payments, and still, he has not lost his home...." In other words, what were once isolated incidents are becoming an epidemic, and like it or not, are creating a massive capital shortfall in bank balance sheets (after all "assets" are supposed to generate cash in most cases), which will likely involve yet another broad taxpayer bailout of these same banks that now have no recourse to do much if anything to evict these same squatters who instead of paying their mortgage (or rent), prefer to purchase trinkets and gizmos. "Some 4.2 million mortgage borrowers are either seriously delinquent or
have had their cases referred to lawyers to pursue foreclosure auctions,
according to LPS Applied Analytics. Of those, two-thirds have made no
payments at all for at least a year, and nearly one-third have gone more
than two years."

A snapshot of the US Afternoon Briefing covering Stocks, Bonds, FX, etc.

Market Recaps to help improve your Trading and Global knowledge
Weakness in CAD evident after mixed Canadian economic data