Archive - Sep 19, 2011 - Story

In an emailed statement from the Greek finance ministry, we are told not to expect to hear anything from anyone about anything. Sounds like they have it all under control then...*GREECE SAYS NO OFFICIAL ANNOUNCEMENT EXPECTED AFTER TROIKA CALL. The market's initial reaction is to sell-off on this no news as ES moves towards the day's lows and EUR inches lower.

UPDATE:

• GREEK CALL WITH TROIKA MAY CONTINUE TOMORROW OR LATER: MINISTRY :-Are they all on hold for Bernanke?
• GREEK FINANCE MINISTRY SAYS NO CABINET MEETING PLANNED SEPT. 20 :-  Deny, Deny, Deny, or simply Lie, because this contrasts with earlier reports that G-Pap would convene a cabinet meeting after the call.

The Fed/Treasury is an evil axis defunding you and me: the debt is $14.5 trillion; this is our debt, not the government’s debt. The government does not generally earn money; we do. Therefore every criminal debt certificate (Treasury bond) the Treasury exchanges for cash is a debt on you and me--a promise to pay for which citizens are responsible to pay, IOUs in simple terms. If the government printed the money instead of the criminal Fed, there would be no debt. Uncle Sam borrows bucks and you become automatically indentured to pay back the bond and pay the vig! How is this not a criminal enterprise? If you go to a loan shark, at least you get to have the money in your hand and can spend it before you have to repay the loan and pay the vig!

Looks like the Silvercorp story is not going away any time soon. Just released by Rui Feng, SVM's CEO and Chairman, is the latest hastily written (with some glaring typos) refutation of today's allegations by Alfred Little (and the "short industry" in general apparently) that the Chinese company is merely another fraud. This is hardly the last word in this ongoing fiasco, and we fully expect Muddy Waters to get involved as well.

“Pitting one group of Americans against another is not leadership. The Joint Select Committee is engaged in serious work to tackle a serious problem: the debt crisis that is making it harder to get our economy growing and create more American jobs.  Unfortunately, the President has not made a serious contribution to its work today.  This administration’s insistence on raising taxes on job creators and its reluctance to take the steps necessary to strengthen our entitlement programs are the reasons the president and I were not able to reach an agreement previously, and it is evident today that these barriers remain.”

Even though Europe is closed, and the requisite ES ramp appeared on cue just as expected, Reuters has released some news which will put the Risk Off trade solidly back on the books, after it announced that "Italy will shortly cut its growth forecasts for this year and 2012 to bring them more into line with those of independent bodies, but the prospects for public finances have improved due to an increase in value added tax, government sources told Reuters on Monday." It continues: "A government forecasting document to be published in the next few days following the austerity plan approved by parliament last week will cut the 2011 growth forecast to 0.7 percent from 1.1 percent and lower the 2012 forecast to "1 percent or below" from 1.3 percent, the sources said." Someone who will certainly be very unhappy with this news is Moody's which is already delaying cutting Italy (and said last week it will have to do something within the month), but this will make any additional delays impossible, as well as push the rating agency to trim the country's credit rating by more than just one notch.

S&P futures drifted gently back up to VWAP as we approached the European close for the now ubiquitous post-Europe-close rally. European sovereign spreads to Bunds are all wider in both 2Y and 10Y with the biggest movers on a risk-adjusted basis shifting from the periphery to the core. Financials are not lifting with the other sectors as ES ramps here and while EUR strengthens very modestly relative to the USD, it seems hand-cuffed to US equities as opposed to leading for now. Volume and average trade size is picking up as we rally here - looking suspiciously like professionals selling into strength given deltas - but it is certainly a decent ramp in the context of the last few days. European financial stocks and spreads sold off into the close - closing near the lows.

The only surprise in the speech so far is that he hasn't told Transatlantic Holding Inc., that they should accept Buffett's offer. Now we can get back to trying to figure out what new plan Greece and the Troika come up with to justify repeating the process again a few weeks from now.  And just how much QE is going to be announced Wednesday.

Just out from Alfred Little: "SilverCorp Metals (NYSE and TSE: SVM) is a $1.2B market cap silver mining company deriving all its sales and income from mining assets located in China. Following the publication of our initial findings we are today publishing our complete report with substantial new findings..." Judging by the immediate stock price reaction (down 8%), the latest alleged Chinese fraudcap may have just been exposed.

Hide your millionaires and get your popcorn ready. This will be good.

It has been a while since we heard anything about everyone's favorite contrarian and most outspoken hedge fund manager, Hugh Hendry, and probably for a good reason. As everyone else was complaining about their performance (and P&L) collapsing, blaming it on everything from the weather, to Bernanke's diet, to fundmanetals and technicals, Hugh Hendry was raking it in and is now up 38.65% YTD, with a stunning +22.5% in August alone (or pretty much mirroring the collapse at Paulson & Co) and another 11% in September! As the FT reports, Hugh Hendry's Eclectica fund has "has soared in value over the past two months as global markets have plummeted and industry peers have suffered damaging losses." Hendry's opinion on China is no secret, with an indicative snippet being that he anticipates a 1920's Japan-like crash in China. And as was reported previously, based on his recent trade of buying up lost of Japan CDS of companies exposed to China, his outperformance is no suprise. Expect to hear much more about Hendry as the media gets tired of paraphrasing sob stories and actually focuses on the (very few) winners from the most recent market blow out, confirming that contrarian, non-lemming approaches to investing still do pay off.

No surprise in the only economic indicator of the day: The September National Association of Home Builders/Wells Fargo Housing Market Index declined from 15 to 14, missing expectations of an unchanged print, and at a 3 month low, although as the chart below shows, it is really just humming along the generational bottom with no threat of increasing any time in the near future. As the report demonstrates, sentiment was worse in 3 out of 4 regions, in Northeast at 15 vs August’s 17, in the West at 12 vs 15, and in the South at 15 vs 17; in Midwest 11 vs 10. That said, we are confident this will surge shortly, as soon as the President announces details of his plan to tax millionaires, which assuming we have hyperinflation shortly (remember: that debt won't inflate itself) means pretty much everyone.

The ECB just announced its bond purchases in the prior week, which came at €9.793 billion, a notable drop to the €13-14 billion purchased in the past two weeks. And while the cumulative total has now hit €154 billion (and we wish the ECB all the best as it seeks to sterilize an ever greater amount of bond purchases without a major operational failure), it appears that the ECB may be losing its appetite for transactions of this kind, which as is now known was the reason for Stark's departure from the ECB, and an indication of the growing chasm between Trichet and Merkel.The EURUSD, which just took out session lows, and is down 200 pips since the Friday close as it prepares to break 1.36 sure seems to think so.

As S&P futures head back towards their lows, they remain notably above commensurate credit-inferred levels as the credit and TSY complex is showing stresses far more than equities so far (and we know how that has ended recently). Europe is very ugly again with the major credit indices all significantly wider. Financials are losing grip on any hope as we now start to see not just PIIGS spreads widening but the core spreads crack as risk transfer is priced into the overall euro-area balance sheet. Non-financial European corps are also notably weaker as transmission mechanisms drag the real economy down and that is implicitly crossing the pond to drag IG and HY spreads wider over here.

As usual, UBS' Art Cashin, who may suffer the occasional pint but never outright idiocy, cuts right to the chase. His bottom line: "According to the Tax Foundation, after the 1929 crash, Congress proceeded to raise the top marginal tax rate from 25% to 63% by the end of Hoover’s term.... As you may recall, hiking those rates may have made folks feel that rates were more equitable but it sure didn’t help the economy."