Archive - Nov 2012 - Story

Following their brief interruption for calculations, the Eurogrouop is back hard at work and a few absolutely meaningless and ridiculous headlines are being spewed:

• *ECB SAID POISED TO RE-ACCEPT GREEK GOVT BONDS AS COLLATERAL (IF AID TRANCHE APPROVED)
• *ECB SAID TO REOPEN ISSUE OF PORTFOLIO PROFITS ON GREEK BONDS
• *ECB SAID TO ALSO LOOK AT OPTIONS OF BOND ROLLOVER, BUYBACK

The market, for reasons we note below, completely ignored this idiocy as anything of relevance as they continue to try to find a way to enable the Greeks to appear to pay their next principal via pure accounting shenanigans as opposed to the transfer of any real money. We wait with baited breath for how they are going to wriggle out of this one and remind readers of the buyback 'boondoggle' Q&A from the weekend, as it is the write-down that is what the market is focused on.

Absolutely remarkable... and in Texas to boot!  As we have said for years, pretty soon anyone that disagrees with Washington D.C., Federal Reserve policies and rule by TBTF Wall Street criminal banks will be labeled a" terrorist."  That is where all this is headed. 1984 has arrived folks.

With REO-to-Rent now yesterday's trade, the Baltic Dry Index stumbling along near its lows (along with a glut of containers), and a 'recovery' in US housing, what better than to leverage all of these themes; to wit, as ABC News reports, the first U.S. multi-family condo built of used shipping containers is slated to break ground in Detroit early next year. So forget Trailer Parks, now the increasingly mothballed ports of America will be wonderful waterfront property courtesy of your very own (slightly used) cargo container. One proponent of this 'cargotecture' warns that although containers can be bought for as little as $2,500, they should not be thought of as a low-cost housing solution. Tempted? We are sure; below are several current developments.

There are so many "meta" things going on in here, we wouldn't even know where to start, so we will simply present Goldman's just released analysis of the implications of Carney's "surprise" appointment to the head of the BOE as is, in all its faux "shock" glory.

It is truly amazing to what lengths the mainstream media will go to avoid talking about what really got Goldman's former head of the Canadian Central Bank the role of Goldman's current head of the Bank of England. But it could be worse: a word search for Goldman in the BBC's just released profile of Mark Carney shows one instance of said word, and as a parenthetical at that. Hey, it could have been zero...

We warned on Thursday and Friday of last week that the rally in European risk assets had begun to disperse (with stocks continuing to the final bell on Friday while credit markets were far less excited). Today saw stocks roll over modestly (less than 1% drops in general today) and credit markets continue to slide. Sovereigns leaked modestly wider once again (except for Portugal which weakened considerably - given a good chunk of last week's gains back in its illiquid way). EURUSD is practically unchanged from Friday with cable (GBPUSD) the most active as Carney is named the new BoE head. German 2Y remains at 0%, Swiss 2Y drifts lower (more negative), 3-month EUR-USD basis swaps dropped their most in 2 weeks, LTRO-encumbered bank spreads continue to underperform, and Europe's VIX jumped its most in 3 weeks.

Moments after Goldman completed the trifecta of controlling every major developed world central bank, with its tentacles now in charge of the Fed, the ECB and now the BOE, Obama announced his designee for the new head of the SEC. The name of Mary Schapiro's replacement: Elisse B. Walter, and no, she did not most recently work for Goldman. Yes. Shocking (for Gary Gensler). Oh, and don't worry Mary Schapiro. Nobody will shed any tears over your departure: perhaps if someone had known you were there even one day over the past 4 years this would be different.

The two day rally, wrapped around Thanksgiving, is hardly a surprise to UBS' Art Cashin. It’s an old pattern that he discussed on CNBC on Tuesday. What was a surprise to him was the magnitude of Friday’s move. "A bit unusual" he notes, adding that "the markets then began to buy into the Black Friday hype that filled TV screens. Mobs of people clutching all manner of electronic devices. That seemed to inspire interest and short covering in the recently depressed tech sector. That allowed the market, led by the techs to close the abbreviated session with a full flourish," but Cashin warns that this new week often starts with a rethink - as he advises a "solid skepticism about early reports... Other years, we learn that Black Friday success just cannibalized other sales. We’ll see what happens this year." Also, with over 400 microphone hunting legislators returning to Washington, the cone of silence on the fiscal cliff is probably just a memory.

We can only imagine the HP-12C buttons being ripped from their almost-extinct cases as we are faced with this beauty of a Bloomberg headline:

• *EUROGROUP PAUSES FOR AN HOUR FOR CALCULATIONS, EU OFFICIAL SAYS

No matter how many times you divide by zero haircuts or zero growth - the number still comes out the same - 'unsustainable'.

We know many will be devastated by the loss of such a leading figure in the oversight and prosecution of fraud throughout our financial system...

• *SEC CHAIRMAN MARY SCHAPIRO TO STEP DOWN DECEMBER 14

In the interest of openness and fairness, please use this open forum to leave your farewell wishes for Ms. Schapiro as she heads into what we can only imagine is some influential position in compliance at a major sell-side financial institution.

Back on July 3, we made an explicit and very simple prediction: "now that the natural succession path at the BOE has been terminally derailed, it brings up those two other gentlemen already brought up previously as potential future heads of the BOE, both of whom just happened to work, or still do, at... Goldman Sachs:  Canada's Mark Carney or Goldman's Jim O'Neil. Granted both have denied press speculation they will replace Mervyn King, but it's not like it would be the first time a banker lied to anyone now, would it (and makes one wonder if this whole affair was not merely orchestrated by the Squid from the get go... but no, that would be a 'conspiracy theory'.)" We are, once again, 100% correct, and have beaten all the bookie odds which had Tucker as a favorite and Mark Carney as along odds outsider. Pity: all one needs to realize and remember how the events in the world play out is to remember one simple thing: GOLDMAN SACHS RUNS IT. Everything else is secondary.

UPDATE: Release shows a plunge in Capacity Utilization and Production to their lowest in a year, Inventories surged to 3 month highs, Shipments dropped, Capex fell and Finished Goods dropped to its lowest in two years!

It seems the Thanksgiving week has wreaked havoc with governmental timepieces. The Dallas Fed manufacturing headline data was just released 15 minutes early and has dropped back into negative territory with the largest miss in four months, due we are sure to Sandy in some way.

The wunder-farce continues as hope remains that an accord on Greece can be reached this evening. German Finance Minister Steffen Kampeter believes "Greece has delivered" as pledged on reforms but, unlike the rest of the rational mathematics-capable free-world, believes that Greece can bridge its fiscal gap without a writedown, adding that:

• *KAMPETER SAYS GREEK OSI WOULD MARK `END OF GERMAN SOLIDARITY'
• *KAMPETER SAYS 16 [of 17!] EURO STATES REJECT GREEK OSI WRITEDOWN

Will beggars become choosers once again this evening?

We are in a “different moment” now than in the past several years and that is the point of my commentary today. Promises have come and gone, the central banks have supported the fiscal system as political decision making waned with indecision and the difficulties of the choices. Complacency took hold as a kind of “everything will be fine” mentality inundated the market places. Soon, in my opinion, everything will not be quite so fine as the politicians in America and Europe have to earn their salaries and the ramifications of many decisions are going to be unpleasant as they are released. If we regard America’s fiscal cliff or the pending decisions about Greece or the separatist movement in Spain or the lack of a budget for the European Union; it is all politically centered and the battlefields are rife with perhaps surprising decisions. In each of these four arenas the easy answers have now come and gone. The “can kicking” if you will is over.

The ongoing debacle surrounding Argentina's holdout over holdouts appears to be escalating (in rhetoric at least) once again. As Reuters notes, negotiations or voluntary payment by Fernandez's government appear almost impossible. Economy Minister Hernan Lorenzino called Griesa's ruling "a kind of judicial colonialism". "The only thing left is for Griesa to order them to send in the (U.S. Navy's) Fifth Fleet," Lorenzino told reporters, outlining Argentina's plans to file an appeal against Griesa's ruling with the 2nd Circuit Court of Appeals in New York on Monday. Many specialists think it unlikely that the appeals court will reinstate the stay. "It may be an issue of process, but Argentina will struggle to justify why it refuses to pay the $1.3 billion," Eurasia Group analyst Daniel Kerner wrote last week. "Argentina has the resources to meet the payment, so in the end it will be a political decision (and) there does not seem to be any political support for paying the holdouts at all." The Argentina case surely brings into clear view the murkiness of investing in sovereign debt and the increasing difference between ability-to-pay and willingness-to-pay.