Archive - Jul 2011 - Story

When Deutsche Bank's Joey perma-LaWronga finally gives up on his call that has been wrong for about 3 years now, it may be time to i) panic or ii) buy everything with three hands (thank you Fukushima). We are leaning to the former, especially after the upcoming downgrade forces the Fed to launch QE3 in about a month.

Once again, straight out of Morgan Stanley's rate deks (or what's left of it after the whole TIPS implosion).

The soap opera has resumed in Congress. Feels a little deja vu'ish? So it should. The expectation is that Congress will pass the "amended amended" Boehner Bill around 6 pm. The same as yesterday. Will it pass? Who knows. If not, expect overnight GC to surge on Monday, yields on Bills and CMB maturing after August 2 to surge, even as the 30 Year plunges to zero, making a mockery of UST curve "market efficiency." On the other hand, Obama will likely just end up invoking the 14th amendment, and then we will have a constitutional crisis to go along with all the other drama.

As we look back on the horrors of the dictatorships and autocracies of the past, one particular question consistently arises; how was it possible for the common men of these eras to NOT notice what was happening around them? How could they have stood as statues unaware or uncaring as their cultures were overrun by fascism, communism, collectivism, and elitism? Of course, we have the advantage of hindsight, and are able to research and examine the misdeeds of the past at our leisure. Unfortunately, such hindsight does not necessarily shield us from the long cast shadow of tyranny in our own day. For that, the increasingly uncommon gift of foresight is required…The prevalence of apathy and ignorance sets the stage for the slow and highly deliberate process of centralization. Once dishonest governments accomplish an atmosphere of inaction and condition a sense of frailty within the citizenry, the sky is truly the limit. However, a murderous power-monger’s day is never quite done. In my recent article ‘The Essential Rules of Liberty’ we explored the fundamentally unassailable actions and mental preparations required to ensure the continuance of a free society. In this article, let’s examine the frequently wielded tools of tyrants in their invariably insane quests for total control…

The latest headlines as they flash by:

• Carney Says Obama Would Consider ‘Couple of Days’ Extension
• Says short-term deal would give time to finish debate.
• Carney Says Treasury Could Give Update ‘This Weekend’ on Plans

It is unclear what a few day extension would achieve, aside from a rating adowngrade but it is enough to get the headline scanning robots ramping higher again.

From RBS' O'Donnell:

• NY Fed Meeting Over
• No Contingency Plan For Aug 2 Discussed
• No Decision On Next Week Treasury Auctions
• Talks Focused On 'Market Conditions'
• Primary dealers at NY Fed agreed Congress should act quickly to raise debt ceiling

Translation: Tiny Tim has absolutely no idea what he will do on Wednesday, aside from telling CTRL P-dawg to sell the gold-painted Tungsten in Fort Knox of course. At $460/ounce MTU that's not bad good: still about $100 billion $341 million based on today's market prices. Or something. In retrospect, maybe not the best idea.

This the final final version of the Boehner bill which is "supposed" to pass Congress. We haven't read it yet. We doubt anyone else will either.

This is what America has devolved to. Pretty much sums it up.

This is perfectly bullish. As is Tullet Prebon's market of 0.30 bid and 0.21 offer. The whole market has now officially ODed on crazy pills.

Just to make things a little more interesting, and better for Greece, we have learned of a shocking mass resignation by virtually all of Turkey's armed forces. According to Reuters: "The head of the Turkish armed forces General Isik Kosaner along with the heads of the ground, naval and air forces have resigned, broadcaster CNN Turk reported on Friday. The reason for their resignations was not immediately clear. Tensions between the military and the government of Prime Minister Tayyip Erdogan have been high in recent years and the Supreme Military Council was due to hold a major meeting next week."  We have also learned that the Turkish AKP government is planning to hand over its struggle against the PKK to local police forces. In essence, Turkey is now effectiely defenseless. This is the perfect time for Greece to invade Turkey, and promptly flip it to the Fourth Reich in exchange for some debt forgiveness. There you go: we can spin idiotic things like the best of CNBC too.

The final collapse of our credit expansion boom approaches. We have a choice over the next week. We could voluntarily abandon further credit expansion by voting for a Balanced Budget Amendment to the Constitution or we can raise the debt ceiling, pretend to cut spending far in the future, and allow our currency system to experience a catastrophic final collapse. We’ll take what’s behind door #2 Johnny. The vested interests in Washington DC and Wall Street only care about power and wealth. They will never abandon credit expansion. It’s their drug. They must have it. They are addicted to it. They will keep injecting it into our system until they overdose America.

Update 2: Cantor says has votes to pass bill

Update: Sure enough: Boehner tells reported "I am smiling"

As expected earlier, the news of America's economic tumble are completely ignored now and the S&P is well above the levels before the GDP announcement. In fact, following a headline earlier that the GOP is preparing to amend its bill the computers went out in full rampage mode as the quote stuffing chart below demonstrates so vividly, the headline scanners did their job and robot after robot rushed to outrun each other for every available offer. We give this rally a few minutes before some republican says that the Boehner plan will in fact pass in current form, and the robotic buying spree turn into a dumpathon.

Bernanke and the Fed have to re-evaluate the grade they gave to QE2. How we have such a massive revision in Q1 GDP is hard for me to understand. Seriously, we need to find a way to get better data, but with a 0.4% quarter right in the heart of QE2, it is clear it did nothing to help the real economy. And yes, it is getting old, but I will say it again, the market is not the economy. I am now cutting all my short. I had cut some coming into this week, as I was scared of the rally, but kept enough on that I can't complain too much. I am flat and tempted to go long. We've had a big move, and government resolution is likely to come, but it feels like that is a crowded trade. No one seems really afraid, and everyone seems to expect a bounce. Just because everyone expects it, doesn't make it wrong, but I'm concerned that all the longs will pop out of their holes the second a deal is announced. They will look around for someone to panic and take them out of their positions on the debt ceiling news. Then they will look some more, and then realize that no one is caught short or surprised and they will scurry to get out of their positions. Well, I just convinced myself to go back to putting on a small short.

It's time for your daily teleprompted brainwashing. Frontal lobes: out.

The adverse data onslaught continues with both the Chicago PMI and the UMichigan Consumer Confidence numbers coming in weaker than expected. Chicago printed at 58.8 on expectations of 60.0, down from 61.1, while consumer confidence was quantified with laser-like precision by UMichigan at 63.7, below expectations of 64.0, and the lowest since March 2009. The data behind the headlines was even uglier, as the Employment index in the PMI printed far lower, from 58.7 to 51.5, even as priced paid increased (yes, inflation) from 70.5 to 71.7, while new orders declined from 61.2 to 59.4. At the same time long-term inflation expectations are getting anchored ever higher, as the 5 year inflation rose from 2.8% to 2.9%, while the condition index plunged to 75.8, the lowest since November 2009. At least people's outlook on the future was unchanged at 56.0. Then again, all economic data is now irrelevant as everyone is preparing to listen to the republicans, the teleprompter and the democrats in that order imminently.