Archive - Aug 10, 2011 - Story

Abe Gulkowitz has released the latest edition of his always delightful and informative newsletter (for lack of a better word) "The Punch Line": the best aggregation of ad hoc charts, factoids, and data points available anywhere. While by now even Deutsche Bank realizes that the US economy has entered a recession, here is the blow by blow of how we got there, where we may be headed next and 1001 other facts about the US economy and the world that you probably did not know...

Just after hitting a new all time high of above $1815 in spot gold, the CME immediately sent out a notice to members advising that gold margins for Tier 1 members were increasing by 22% for both initial and maintenance positions, from $4,500 to $5,500. Unfortunately for the CME, this predetermined move was telegraphed to the market weeks ago, and with rumor 57 out of 22 finally turning out correct, this latest move only managed to push gold down modestly, and at last check was once again trading above $1,800. Just like all central bank interventions, which now have a half life between 1 hour and 4 days max, so this latest exchange attempt to subdue prices will fail spectacularly. Naturally, just like in the case of silver, this will merely embolden the CME to proceed with hike after hike, which in turn will kill speculative elements while merely reinforcing the strong hands. End result: in one month gold will be above $2,000 with almost 100% certainty.

Since this morning’s rant or comment, I have been informed of several other similarities...

More very bad news for mutual funds (which as we disclosed last week have an all time record low cash level ergo once the liquidations begin it is game over): as of the week ended August 3, redemptions from domestic equity mutual funds surged to a near all time high $13 billion, matched only by the $13.4 billion on May 26, 2010. The problem however is that back then we had a dramatic snapback. This time, considering that the market has dropped by almost 10% since August 3, we are fairly confident next week we are due to see an all time record outflow from equity funds. To all those who incorrectly assumed that retail sentiment as expressed by redemption is a contrarian sentiment, best of luck rummaging through the gutter for those McDonalds leftovers. And just is scary is that for the second week in a row, there were outflows from every single security tracked by ICI, nothing was spared: not taxable bonds, not foreign stocks, not munis. Retail has had it with this joke of a market and is investing in ZZ and nothing else. Net result: $67 billion in cash outflows from equity mutual funds in 2011 (and $98 billion in 2010): so... does the SEC still not think there is a confidence problem vis-a-vis the churnathon known as the stock market?

Bank of America is doing all it can to delay the inevitable equity issuance. Reuters has just broken the news that the bank is in active negotiations with Kuwait and Qatar sovereign wealth funds to sell its $17 billion China Construction Bank stake. There are several problems with this approach: first, the petrodollar sovereign wealth funds just lost over 20% of their AUM courtesy of the global equity rout and of the plunge in oil by more than 20% in less than 2 weeks; Second: everyone recalls what happened to Alwaleed when he bought his "Blue Light" citi stake; third: if BAC does indeed sell its CCB stake, it will leave it with zero disposable assets and will have no choice but to approach the equity market. Fourth, the fact that it needs this cash is validation of all the rumors that the bank's capitalization may be urgently strapped very soon, and that today's Berkowitz call was nothing but lies (in typical BAC style); last, since the final cash need when all is said and done, when all the litigation is over and when the NY AG is done with the bank, BAC will need far, far more cash than $17 billion. Which is why any BAC bounce in the AH session should be viewed very skeptically.

For all those wondering what may force the "GREAT RESET", we now know. According to the below email from the Nasdaq sent out 24 minutes before close, we were just 10% away from the Nasdaq essentially DKing all trades on one of its UTP channels, and "restarting the outbound message count. If the count is restarted, the UTP SIP will be unable to process any UQDF retransmission requests for the affected data channel..." All we need now are the HFT quote churners to put the empty churn knob on max tomorrow, and the market, well, breaks.

RANsquawk Market Wrap Up - Stocks, Bonds, FX etc. – 10/08/11

Remember when the Chairsatan announced that the US entered a recession yesterday and nobody noticed, even when Zero Hedge said it would take the market a day for the "sophisticated market players" to figure what just happened. No? We have one word... well, and one number: DOW(N): 521.

We bring you this special announcement courtesy of the White House which has informed that American plebs that following a fantastic job well done, in which the market is now back to pre-QE2 levels, unemployment is near record highs, delays for presidential press meetings compare with Newark airplane take offs, pessimism is at record highs, America's credit rating has just been downgraded, the country was nearly bankrupted, and sales of end of the world provisions are through the roof (not to mention ammunition), president Obama is taking a well-deserved vacation at Martha's Vineyard at the end of the month. From Bloomberg: "President Barack Obama will vacation with his family in Martha's Vineyard at the end of this month as he's done in years past, the White House said Wednesday, despite the weak economy and negotiations on the nation's debt problem. Press secretary Jay Carney defended Obama's plans to take a break even as he's pledged urgent action on those issues. "I don't think Americans out there would begrudge that notion that the president would spend some time with his family," Carney said." Spot on, Jay, spot on.

As the market dips to intraday lows, quote stuffing spikes as if on demand. Now the only question is did the market drop because of the spike in empty packets, or vice versa... We have an idea or two. So does Nanex. But not the SEC. Definitely not the SEC.

Update: aaaaand it's up. DJIA must be down only 300 now...

Without looking at the ticker we will assume that market selling has accelerated since the BAC call ended and the DJIA is down 400... Were we right?

Perhaps someone should staple the following latest poll from Reuters/Ipsos to the office door of the Fed chairman in the Marriner Eccles building, according to which a record number of people or 73% of all Americans, believe the economy is headed in the wrong direction. This is the highest number measured since the poll started its survey in February of 2009. Only 21% believe the US is on the right track: we assume these are the few people who actually made money in the stock market in the past few months, in other words those long various precious metals [/sarcasm]. Additionally, 47% of respondents believe the worst is yet to come for the economy, the highest since the March 2009 low when the number was 57%. Furthermore, Obama's approval rating dropped from 49% to 45% over the past month. Perhaps it is time to kill Osama for the 3rd (or is that 4th?) time. Bottom line: pessimism is now at or near fresh all time highs. And this is the environment in which the true viceroy of the Americas, Goldman Sachs, has now decreed will proceed with QE3? If the American revolution was deferred back in November when QE2 was enacted, we fail to see how it will be avoided this time around when people realize that gasoline is headed for $9/gallon. Or roughly what Europeans pay today.

... then it's not a very big net worth, we are sorry to say (and it will get even smaller).

Oversold rallies notwithstanding, the Debt-Junkie Market just stumbled into the pool and was barely saved from drowning. The stock market party isn't over for strictly technical reasons, though the technical damage is severe. The party's over for a much deeper reason: faith that the Fed can fix the economy has faded, and participants no longer believe Wall Street's self-serving hype about the recovery and rising markets. Oh sure, people go through the motions of expressing faith in the market, in corporate profits rising forever, in official pronouncements of the Fed's omnipotence, and in whatever snapback rally is in play at the moment, but it's all for show; nobody really believes any of it, they just don't want to be the odd man out by confessing their loss of faith in the false idols. The financial Status Quo has an unsolvable problem: reality isn't swayed by propaganda. Does anyone really believe another couple years of low interest rates and a snapback rally or two will fix what's broken in the U.S. and global economies?

After previously testing its mettle in such markets as Natural Gas and Crude Oil, the fractal algo, just like the StuxNet virus, is now ready to progress to its real test: equity products, and specifically ETFs. Courtesy of Nanex' sharp eyes (and extremely complicated market scanners), today we have the first official spotting of the fractal algo moving away from commodities and into extremely popular ETFs, in this case the bearish bond synthetic CDS better known as the TBT. The pattern below is quite unmistakeable. It is quite amazing that just one algorithm can override the entire market and determine the trading pattern of some as hugely popular as an ETF which most hold. We expect that very shortly, we will be observing daily fractal patterns in that most liquid and traded product of all- the SPY, as the market proceeds to become nothing more than a real life version of Nuke-em Duke-em robots.