Archive - Aug 23, 2011 - Story

When some evil fund,
Is out there shorting you
Who you gonna call?
Why, Rothschild!

Minutes ago we saw the following headlines flash, describing Japan's latest attempt to kill the Yen, following the earlier already failed attempt by Moody's which while probably being paid well for its downgrade of Japan, did not achieve its true purpose - to weaken the Yen:

• MOF: Will Require Banks To Report FX Trading Positions - a nice little appetized to FX capital controls...
• Fin Min Noda: Will Set Up Maximum $100B Facility To Deal With Yen Rise - yet another attempt at central planning of FX crosses
• MOF: Will Strengthen Monitoring Of Currency Markets - Noda will be watching... even more

What is highly entertaining, is that as Bloomberg's Michael McDonough, going forward we will need to measure the halflife of Japanese intervention not in days, not in hours, not even in minutes, but in actual ticks.

The number of insured banks declined from 7,574 to 7,513.  So the number of banks covered by the report declined.  And that makes sense since 22 failed and 39 were absorbed via mergers.  So the number of problem banks declined by 23, and 22 banks failed.  I assume once a bank fails it goes of the "problem" list since it is not covered by this report?  So at best, 1 bank moved off?

Two and a half years after consistently and methodically exposing one conspiracy after another (and by the way, once it is proven to be a fact, it is no longer a conspiracy), we were stunned to find that the biggest conspiracy theory is none other than... Zero Hedge. "Zero Hedge, for example, is one that lots of hedge funds look at, lots of money managers look at, and the guy that runs it has their ear. Now I'm not saying that he is not doing his own proprietary work, but, people like to plant stories in there. [cue ominous silence]." TA DUN DUN. Gee - one does learn something new every day. Also, to anyone who still doesn't get it, please send your dodecatuple secret "plant" stories to plant@zerohedge[.]com along with your non-refundable payment made in physical gold Zimbabwean dollars, to be delivered to our paper street headquarters. We certainly would prefer it if the drop man is Bank of America's James Mahoney.

What was that word Freud used when you are a weak, pathetic, corrupt, powerless, piece of anacrhonistic filth and instead of doing the right thing (for fear of losing your job or worse), you lash out at a weaker and irrelevant substitute? Oh yes, projection.

If your last name starts with 'Paul' and ends in 'son', we suggest you skip the post. For everyone else, we may as well call this latest HSBC hedge fund weekly update the schadenfreude yellow pages. Who would have thought that with all the traditional lowers, that Rentec's RIEF B would be taking names at up 20% YTD.

Marc Faber was on Bloomberg TV dispensing his traditional sarcastic and sardonic wit in copious quantities. Among the traditional topics touched upon are stocks and specifically trading ranges, "I think a lot of people will say the markets formed a double low and we have some technical indicators that are going to turn positive, so we could rally around 1,250, but as I said before, for me, we reached a high on May 2, 2011. 1,370 on the S&P--that we will not go through", on Operation Twist part 1 (already announced) and part 2 (coming): "To some extent we are in midst of QE3 already, because by announcing the Fed will keep zero interest rates until the middle of 2013, they basically encourage financial institutions to borrow short-term and to buy 10-year Treasuries" on a contrarian outlook on stocks: "I am the greatest bear on earth, but if you compare Treasury bond yields and equities, equities look reasonably attractive", on why Insider "buying" just as we have said repeatedly, is far too much ado about nothing: "Compared to all the selling in the last six months the buying is relatively muted" and lastly, like a gracious loser, Faber admits he was wrong and Rosenberg was right "David Rosenberg was right and I was wrong. The 30-Year has not made a new low.  The low in December 2008 was 2.53%.  Now we're around 3.4%"... although with a caveat: "Basically we have an artificial market." Alas, no strategic observations on what particular precious metal one's girlfriend would appreciate the most in the current gold-platinum parity environment.

Doug Casey writes in: "I’m not sure that many people really ever believed there was a recovery under way. Wall Street acted like there was – but only somewhat, since banks never started lending again. But unemployment has remained high; it’d actually be about twice the official 9% level, if it was calculated the same way it was 30 years ago. And outside of the price collapse of certain asset classes – like real estate – the cost of living has increased greatly for most people; the calculation of the government’s CPI is as corrupt as its unemployment numbers. I think it’s a mistake to talk about a double dip in the economy; we entered the Greater depression in 2007 and are still in it. A “jobless recovery” is not a recovery. The only thing that’s recovered is the stock market, to some degree. Aside from government hocus-pocus, the mirage of corporate earnings, and foolish investors wanting to believe it was safe to get back in the water, things have not gotten better. And they are about to get much worse."

Wondering why gold dropped by almost $100 today? Wonder no more: today the Shanghai Gold Exchange lifted gold margins for forward contracts the second time this month to 12% beginning on Friday, in a move that is starting to resemble the CME's vendetta with silver back from May. Should we expect 3 more SGE margin hikes in the next 2 weeks? Or will the CME rightfully accept the baton and do everything in its power to dent the parabolic rise in the alternative reserve currency? We are cautiously looking at what the CME will do today and will advise readers. In the meantime, here is what else happened in Shanghai: "China’s main precious metals exchange will also widen daily trading limits for those gold contracts to 9 percent, up from 7 percent, the SGE said on its website on Tuesday. The contracts to be affected include Au(T+D), Au(T+N1) and Au(T+N2). This is the second time the exchange has raised collateral requirements on gold forward contracts this year — both times in August — as international gold prices hit a series of record highs over the past few weeks, boosted by a flight to safety on worries over a stalling U.S. recovery and crippling sovereign debt in the euro zone. Shanghai Gold T+D contract lost half a percent to 387.8 yuan per gram, or $1,884.47 an ounce, down from an intraday high of 391.9 yuan when the market opened."

RANsquawk Market Wrap Up - Stocks, Bonds, FX etc. – 23/08/11

The Virginia earthquake may have been memorable but it will have absolutely no impact on the economy. As for Hurricane Irene, that is another matter: if indeed it impacts the eastern seaboard as heavily as some expect, we would not want to be long insurance companies. For those who want an unorthodox perspective of the Hurricane, NASA will be conducting a flyover at 4:05 pm EDT/8:05 pm GMT, with the Space Station. The live stream can be seen here.

Following Obama's departure for a much needed vacation the day the market had its most recent 400+ point drop, it was somewhat expected that that the general public will not be too happy with the president. Sure enough, according to Gallup which traditionally has the most representative polls (in this case 1500 random strangers, +/- 3% margin of error) the president's approval rating has just taken out last week's record low of 39% and was at 38% in the past few days. Obviously those disapproving hit an all time high of 54%. We are confident that Obama is well aware of this disturbing trend in popular opinion. What we have no clue about is what he will do to reverse it.

The Keynesians had their chance. They controlled the Presidency and both houses of Congress. A Keynesian runs the Federal Reserve. They implemented everything they proposed. The $862 billion porkulus program, the $700 billion TARP program, home buyer tax credits, energy efficiency credits, loan modification programs, zero interest rates, QE1 and QE2. They increased social welfare transfers for Social Security, Unemployment Compensation, food stamps, Medicare, Medicaid, and Veterans by $600 billion since 2007, a 35% increase in four years. No one has foiled their plans. The Tea Party didn’t really exist until 2010. They didn’t lose the House until November 2010. They cannot blame the Tea Party extremists, but they do. The Keynesians have successfully increased Federal spending by $1.1 trillion, or 41% since 2007, and are running deficits exceeding 10% of GDP, but they call the Tea Party extremists. Domestic investment is still 9% below 2008 levels as the Federal government has crowded out the small businesses that create the jobs in this country. And now the Keynesians declare we need more stimulus, more programs, more debt, more quantitative easing and lower interest rates. It just wasn’t enough the first time. None of the Keynesian solutions worked during this crisis, just as they didn’t work during the Great Depression. The solution was simple, yet painful. The banking system needed to be saved, not the banks. The bad debt needed to be purged from the system. Wall Street criminals needed to be prosecuted. Bondholders and stockholders needed bear the losses from their foolish investments. Saving and investment in the country needed to be encouraged, while borrowing and consuming needed to be discouraged. Our leaders have failed to lead.

Who knew: all it takes to get some semblance of volume in the market is for a quake shaking the entire Eastern seaboard and pervasive evacuations of New York skyscrapers (incidentally, the NYMEX was evacuated).

And so even the ground in Manhattan is shaking. Now... who is the lucky one to pull the short straw and check up on Indian Point? In other news, we are now long continental plates and short granite bedrock.