Archive - 2011 - Story

From Russ Certo of Gleacher: "Why today would gold reverse by $40? And silver down 4$ and the entire complex go for sale. Why is the Swiss Franc off near 2% in a loss of quality flight? Why are all things risk correlated? Is it that UK surprised with largest manufacturing increase since early 90s and we, therefore, don’t need simulative central bank policies? Is it a significant risk reduction in front of the FOMC minutes at 2pm today? I dunno."

RANsquawk US Afternoon Briefing - Stocks, Bonds, FX etc. – 04/01/11

GM just reported its December sales numbers to a reaction that led all women in Phil LeBeau's presence to order what he is having. The uberbullish take home message from the report: "General Motors dealers reported 223,932 total sales in December, a
16-percent increase from a year ago for the company’s four brands. The
gain was driven by solid retail sales which were 27 percent higher than a
strong December a year ago. For the calendar year, total sales for GM’s
four brands increased 21 percent to 2,202,927, while retail sales rose
16 percent for the year. GM’s four brands sold 118,435 more vehicles
this year than the company did with eight brands in 2009, and will gain
total and retail market share for the year." And on the surface this is pretty: after all the comparison is between a number of 193,824 from a year ago, and 223,932 as of December. But shouldn't the comparison actually be between 385,000 and 511,000? These are the numbers that show what GM's dealer inventory was for the months of December 2009 and 2010. In other words, there was an increase of 30k in sales... accompanied by a 125k increase in "stuffed" vehicles held at dealers. Does anyone still have that AOL case study handy somewhere?

After a few hours ago we highlighted that on Friday the put to call ratio surged to a three month high, it was only natural, in this hollow sham of a market which is now entirely dominated by two or three traders, for us to get confirmation that not only did the Put to call ratio plunge on Monday but it did so with gusto: falling to a fresh three month low, an event which according to Sentiment Trader has never occurred before. Welcome to market schizophrenia you can believe in.

"The fact that we are here today to debate raising America’s debt limit is a sign of leadership failure. It is a sign that the U.S. Government can’t pay its own bills. It is a sign that we now depend on ongoing financial assistance from foreign countries to finance our Government’s reckless fiscal policies. … Increasing America’s debt weakens us domestically and internationally. Leadership means that ‘the buck stops here. Instead, Washington is shifting the burden of bad choices today onto the backs of our children and grandchildren. America has a debt problem and a failure of leadership. Americans deserve better."

When we first heard news about the partial settlement between Fannie and Bank of America, we assumed, naturally, that the current Fannie General Counsel Tim Mayopoulos, and former spurned Bank of America General Counsel, would have been front and center in such discussions. After all he is the damn general counsel, who just happens to know all the dirt there is about Bank of America. We also assumed that any non-disparagement, and/or related trade secrets clauses would be obviously very much irrelevant. We were wrong. It appears that the man who more than anyone should have been able to put two and two together and actually derive some benefits to his bosses, the American taxpayers, and generate a better settlement.... decided to recuse himself from the negotiations! We wonder then just on what grounds this man, who it seems Ken Lewis may very well have had a justifiable reason for getting rid of, was awarded $3 million in compensation for doing nothing to protect taxpayer interests in America's most (openly) insolvent company.

After the equity-only put to call ratio for most of December had been at very suppressed levels for most of the month, it suddenly jumped rather notably on Friday, pushing to a level not seen in well over three months. Courtesy of Sentiment Trader we have some historical observations of what happens when the S&P trades within 1% of a 52 week high concurrently with the Put to Call ratio jumping to a multi-month high: for those who still care about technicals, here is the verdict: "there was only 3 other days when the S&P 500 was trading within 1% of a 52-week high and the put/call ratio surged to at least a 3-month high. Those dates were 2/24/05, 4/26/06 and 10/3/06. After the first two, the S&P jumped a little less than +2% over the next 7 days, then slumped -7% over the next 30 days. The two were remarkably similar. Not so the last instance, which also rose about +2% over the first 7 days...and then just kept right on going."

The annualized three-month rate of change gave an early warning sign went it went into negative territory in June 2006, while both the 10-city and 20-city only showed declining house prices in January of 2007. Equally, the three-month rate of change signaled a trend reversal in April, May and June of 2009, while the overall index did not turn positive until February 2010. Investors would have been wise to heed these signals – both on the way down and on the way up. As declining house prices were the trigger[4] for the biggest financial crisis since the Great Depression it is only a matter of time until financial markets react to the new realities of house prices: a double-dip.

When we noted last night that there was a Baltic fat finger index, we thought we were joking. Appears not. The BDIY has plunged by 4.5% overnight from 1,773 to 1,693, easily the biggest one day drop in a long time. And, more importantly, the index has just taken out the 2010 lows hit on July 15, when the BDIY last traded at 1,700. So in a normal world, one could argue, the fact that there no demand for shipping may actually indicate something. However, in this bizarro "5 year plan" politburo reality, this will likely result in futures once again surging as QE4.5 starts getting priced in.

The key events from around the world shaping today's Swiss watch melt up.

• Goldman Investment in Facebook May Draw SEC Scrutiny (Bloomberg) ...but won't
• Currency Carry Trade Losses May Bolster U.S. Dollar (Bloomberg)
• Brown Says Calif. Budget He Proposes Next Week Will Be "Painful" (Bloomberg)
• Special Report: California or bust (Reuters)
• When States Default: 2011, Meet 1841 (WSJ)
• Setup and Resolution (Hussman)
• China Promises to Buy Spanish Bonds (FT)
• Moynihan Fights Fires at Bank of America Amid Book-Value Doubts (Bloomberg)
• Italian Banks Wage `War on Cash' as Consumers Pass on Plastic (Bloomberg)
• Curbs On Realty Buys To Remain In 2011 (China Daily)
• Beijing Residents Rush to Register Cars on New Quota (Bloomberg)
• Obama urges Republicans to help him revive economy (Reuters), because $14 trillion in debt is for amateurs

Factory orders, auto sales, and the FOMC minutes…There is a POMO today, and each day henceforth until next Wednesday when the new POMO schedule is announced.

After last week the ECB experienced a rare event: a failed SMP sterilization tender, when only E60.8 billion of bids from 41 banks appeared to compete for E73.5 billion in recycle monetized peripheral bonds, this week it is back to smooth sailing, after JC Trichet mobilized the infantry and got every single bank to submit a bid: the number of banks participating in today's "liquidity absorbing" operation surged from 41 to 68, and the total amount of bids increased by a whopping 50% from E60 to E92 billion, a 1.4x bid to cover. And lastly while the marginal rate in the last auction of 2010 was 1% with full allotment, this time it was cut by more than half, at 0.45%, with 93.04% of the bids allotted at the marginal rate. Just what changed so drastically in the past week to justify such a huge surge in liquidity and confidence is just slightly baffling.

To all those who penned lengthy essays and activist missives to various law enforcement and judicial organizations in 2010 over the fraudclosure fiasco, we have one word: condolences. According to Bloomberg, which cited Iowa Attorney General Tom Miller, "The five largest mortgage loan servicers, including Bank of America Corp and JPMorgan Chase & Co may be the first to settle with 50 state attorneys general who are investigating foreclosure practices." It appears these attorneys general were all sequestered and advised of the now-traditional M.A.D. apocalypse that would follow if this latest iteration of Wall Street's corner cutting was pursued by the full extent of the law. In other words what many have claimed is the biggest fraud in MBS history is about to be swept under the rug in exchange for 30 pieces of silver wrtistslaps. In the meantime, disclosure such as that revealed by Allstate, which virtually proves that Bank of America was lying outright to investors about its portfolio quality, will be made irrelevant, and yet one more aspect of TBTF fraud will be institutionalized.

RANsquawk European Morning Briefing - Stocks, Bonds, FX etc. – 04/01/11