Archive - Jul 11, 2012 - Story

Who knew the next black swan would be deep fried? The biggest piece of imminent food inflation news over the past months, coupled with what is shaping up to be another record hot summer (for the best tracking of real-time electricity consumption primarily for cooling news we recommend the following PJM RT tracker of power load), has been the collapse in the corn harvest due to the worst drought since 1988 as 56% of America is in drought conditions. Today, the US just added some burning oil to the popcorn by cutting the corn-crop forecast by 12% to 13 billion bushels on expectations of a 13.5 billion harvest. Then again, who needs corn, when you can have cake?

Prepare to have your minds blown courtesy of what is easily the most astounding chart we have seen in a long, long time, prepared by the economists at the, drumroll, New York Fed, which finds that absent what the Fed calls "Pre-FOMC Announcement Drift", or the move in the S&P in the 24 hours preceding FOMC announcements, the S&P 500 would be at or below 600 points, compared to its current level over 1300. The reason for the divergence: the combined impact of cumulative returns of in the S&P on days before, of, and after FOMC announcements. But, but, fundamental, technical, coffee grinds, Finance 101, Oprah Winfrey, Jim Cramer and Econ 101 analysis (in declining order of relevance and increasing order of voodoo) all tell us this is im-po-ssible? Because if the Fed is right about the Fed induced drift, it is all about, you guessed it, easy money. 

The Labor Department released a report Tuesday investigating possible leaks of economic data and raised concerns about self-identified new organizations that primarily serve high-speed stock traders. These 'news' agencies - enabling profits to be made from the millisecond early data release include (and have since had access revoked) 'Need To Know News' and RTTNews. But the most telling insight from the report, noted by USAToday, is the following: The room where news organizations, including The Associated Press, receive early copies of the employment report is supposed to be secure. Before the data were released, reporters gave up their cell phones and temporarily lost Internet access. But the system still suffered from security flaws, according to the report conducted by Sandia National Laboratories on behalf of the Labor Department. So, it seems that BLS has consistently been leaked 'early' as the report outlined 'ways that technology could be used to bypass security and prematurely leak the data... including hidden transmitters in computer equipment and compromised phone or data lines," and proposes access be granted to 'the room' based on "whether a news outlet produces original reporting and distributes it to a wide audience".

A lack of transparency, a lack of enforcement of law and a compliant media which failed to ask the hard questions and do basic investigative journalism led to the price fixing continuing and the manipulation continuing unchecked on such a wide scale for so long - until it was exposed recently. Similarly, the gold market has the appearance of a market that is a victim of “financial repression”. Given the degree of risk in the world – it is arguable that gold prices should have surged in recent months and should be at much higher levels today. The gold market has all the hallmarks of Libor manipulation but as usual all evidence is ignored until official sources acknowlege the truth. However, like LIBOR the gold manipulation 'conspiracy theory' is likely to soon become conspiracy fact.  It will then – belatedly - become accepted wisdom among 'experts.'  Experts who had never acknowledged it, failed to research and comment on it or had simply dismissed it as a “goldbug accusation.”  Financial repression means that most markets are manipulated today - especially bond and foreign exchange markets.

It is the ring of the auction house; “Going, Going Gone” as the final bang of the auctioneer’s gavel is about to fall. It is the awful sound of the whoosh of the guillotine manned by the Lord High Executioner that will fall upon ears and eyes wide open. It will be the final night of a failed play and the melodrama of the Operatic tragedy that will be documented in history books and perhaps recorded in some literary masterpiece that is yet to be written. The economic conditions in Europe are deteriorating with an alarming speed and the affects, coming to the United States in this quarter, will be worse for the balance of the year. It is to be recession there, recession here and some measly cup of porridge for all. Those expecting Prime Rib for dinner are about to be disappointed as it will be gruel and the Petrus wine of last year will be Annie Greensprings poured from a plastic box.

If anyone still actually cares, or trades, we just saw the third California muni bankruptcy in two weeks, German bonds priced at record low yields, and Spanish 2 year nominal yields just hit all time lows of -0.37%. Abroad Spain promised to crush its middle class even more by impairing retail held sub debt and hybrids, while forcing them to pay more taxes, a move which will lead to some spectacular Syntagma Square riotcam moments, yet which has sent Spanish bonds slightly higher. As for US equity futures, they continue the headless chicken dance higher even as company after company now rushes to preannounce horrifying Q2 earnings. And that's it in a nutshell.

• San Bernadino: Another Calif. city goes bankrupt (247)... It appears Hell's Angels don't pay municipal taxes after all
• Rajoy announces 65 Billion Euros Of Cuts To Fight Crisis (Bloomberg)... And Spaniards prepare to not pay taxes
• Spain pressed to inflict losses on savers (FT)... And Spaniards prepare to sue
• Spain to Cede Bank Control (WSJ)... And Spaniards prepare to protest
• Rate Scandal Stirs Scramble for Damages (NYT)... but who do you sue: the Fed?
• Paulson Ex-Lieutenant Caught in Fund's Slide (WSJ)
• ILO warns 4.5m jobs at risk in eurozone (FT)
• Global economic crunch confirmed every day: Airbus Scraps Target of 30 A380 Sales as Demand Dwindles (BBG)
• Same old: Finland says requires collateral from Spain for bank aid (Reuters)
• Cameron and Hollande clash on tax (FT)
• Wen Says Boosting Investment Now Key to Stabilizing China Growth (Bloomberg)

Back in November 2011, when Silvio was forced out of his PM position with a combination of plunging Italian bonds and strong globalist pressure in an attempt to restore confidence in the Italian economy and administration, and was replaced with a Goldman-affiliated technocrat, we said that it is only a matter of time before Monti fails in his task of turning the Italian economy around, and revisionist power vacuum forces put Silvio right back in his throne. Sure enough, Corriere writes that the man whoe made the term Bunga Bunga legendary may run for premier next year. Specifically, the ex-prime minister may seek top job in a “ticket” together with his party’s current leader Angelino Alfano, quoting him as saying that this is "A choice that I didn’t want to make." Berlusconi’s PDL party could garner 30% of vote in next election if the ex-premier seeks top job, Corriere says, without elaborating. Of course, what guaranteed that he would run was his statement last year that he would not run in the next election, making this outcome a foregone conclusion. And the funny thing is that he just may win.