Archive - Oct 15, 2013 - Story

Harry Reid on Monday, or when he was long stocks: SENATE'S REID SAYS `TREMENDOUS PROGRESS' MADE ON DEBT ACCORD; REID SAYS HE'S `VERY OPTIMISTIC' AGREEMENT WILL BE REACHED

Harry Reid on Tuesday, when he apparently sold and went short: REID ANNOUNCED TO SENATORS THERE'S `NO DEAL': COONS;REID TOLD SENATORS MCCONNELL `STEPPED AWAY' FROM DEAL: COONS

It would appear the sad reality priced into T-Bills and USA CDS is starting to creep into stocks...

U.S. SENATE FISCAL NEGOTIATIONS SUSPENDED UNTIL HOUSE REPUBLICANS WORK OUT PLAN TO PROCEED ON DEBT LIMIT, GOVT FUNDING-SEN. DURBIN

SEN. FEINSTEIN SAYS `IT'S ALL FALLEN APART' ON BUDGET TALKS

Bills are being sold (bonds now snapping lower in yield), the USD and stocks are offered (at lows of the day) and gold and silver are well bid (at highs of day).

As was widely reported last week in both the alternative media and the mainstream presstitute media, former senior bank examiner at the New York Federal Reserve, Carmen Segarra, has filed a lawsuit against her former employer accusing them of wrongful termination after she determined that Goldman Sachs had insufficient conflict-of-interest policies. As usual, anything that threatens to shed some light on the criminality at the most powerful institutions in America is immediately labeled “top secret” or “classified” and hidden from the public. Just as you would expect in a Banana Republic.

If we look at the foundations of retirement--Social Security, stocks, bonds and real estate--it seems we may have reached Peak Retirement.

Understanding the complexities of the sovereign CDS market is tricky... so we are constantly bemused by the mainstream media's constant comment on it as if they have a clue. The fact is that the USA CDS market is indicating a higher risk of imminent technical default now than in 2011. As we explained in painful detail previously, you cannot compare a 71bps (+8 today) 1Y USA CDS spread to a 1200bps JCPenney CDS spread - they are apples and unicorns. Having got that off our chest, the fact that the cost of 1Y protection is at 2011 extremes (implying around a 6.5% probaility fo default) and has been higher (inverted) relative to 5Y now for 3 weeks is a clear indication that investor anxiety is very high this time (just look at T-Bills!).

Reid has told us the US will be downgraded as soon as tonight (Red FD?); Pelosi says this is all Bush's debt anyway; and now Rubio is ranting... never a dull moment on the Senate Floor...

So much for all the "priced in" hope. At this point a delay past October 17 looks inevitable. But it's ok - despite what all the fearmongers have been saying, the world will not end on October 18, or 19, or later  (which as we said earlier would only embolden the GOP to demand much more, until such time as the market really does crash), because as Goldman admits: 'missing the deadline by a few days would probably be manageable." In short, it seems that no deal by October 17 is now a, well, done deal.

As equities continue to press back towards all-time highs, the Treasury Bill market is growing increasingly uncomrtable that these "people" in DC will find a solution before the 10/17/13 bill matures (10/17/13 Bill +15 at 35bps now!). Dec VIX is continuing to diverge higher against stock exuberance as at least someone is hedging. Following the dismal tail in the 3- and 6-month bill auctions, it seems the US equity market's dissonance is remarkable... It's not just the short-dated Bills, Feb Bills are now 8-9bps higher in yield (triple the levels they started the day at!)

Just as we predicted.

• WHITE HOUSE SAYS LATEST FISCAL PROPOSAL FROM HOUSE REPUBLICANS IS "PARTISAN ATTEMPT TO APPEASE A SMALL GROUP OF TEA PARTY REPUBLICANS
• WHITE HOUSE SAYS DEMOCRATS, REPUBLICANS IN SENATE HAVE BEEN WORKING IN GOOD FAITH ON FISCAL IMPASSE, AND TIME FOR HOUSE TO DO SAME
• WHITE HOUSE REJECTS HOUSE GOP PROPOSAL TO RAISE DEBT LIMIT AND REOPEN GOVERNMENT

Between Boehner's "Senate bill is hand grenade" and Van Hollen's "House Bill is reckless" comments, how anyone can argue we are getting closer to deal is beyond us... Obama is at least consistent - "unconditional surrender of default" remains the only play for now...

Unlike on the two prior occasions when the "mysterious" (coughBIScough) gold seller sold so much gold he briefly broke the gold market not once but twice, this morning's concerted gold selling episodes, which briefly took gold to a three month low, were unable to obliterate the entire bid stack (at least for now) and crush enough liquidity to force the CME to announce another "stop logic" 10-20 second trading halt. However, there were some other peculiarities surrounding today's now recurring morning gold battering (which as we noted in a market where the CME no longer supervises any and all manipulation, were and are certain to continue). Specifically, what is curious is that starting at 3:48 am Eastern Time, Nanex found "six instances (there may be more) of 1 second periods in Gold futures with a high number of trades (700 or more)." As those who have been covering our coverage of HFT manipulation will note, these are precisely the kinds of momentum ignition, and not rational price discovery, events that seek to manipulate prevailing prices lower (or higher). The good news is that as everyone knows, aside from equity, electricity, FX, libor, aluminum, and credit derivative markets (in just the case of JPM) gold is never manipulated: Blythe Masters promised. So there's that.

When we first reported to the world the incredible SNAFU that was the Obamacare Helpline number, the reaction was one of disbelief by most until they checked the details and realized that indeed 1-800-F U-CKYO was real. The question was raised, did the US government do any due diligence on anything realted to Obamacare at all? Well, now the Japanese are at it. Meet the newest mascot for Fukushima Industries... as Japan Today reports, this cute winged egg whose name is FUKUPPY. In Japanese, pronounced "foo-koo-pii", unfortunately the english-speaking world may not see it that way... Does it not feel a little like the governments of the US and Japan are now openly mocking its people? Perhaps this should become the new mascot for Washington DC?

The market is rapidly adjusting from imminent default to pricing in the risk of a debt ceiling debacle in February. 10/17 Bills are unchanged, Oct/Nov Bills are improving, but Feb 2014 Bills are now slamming higher in yield +5bps to 9bps for now... How much longer can the powers that be keep the ever inflating balloon under water?

With the only thing that matters the level of the S&P 500, we can only wonder at what effect the GOP's discussion (and hopefully Q&A) of their new new bill (with Obamacare issue) will have on the world's key metric... However, it seems the divide is only getting wider (despite the hope/hype) as Boehner comments:

*BOEHNER SAID TO CALL SENATE PROPOSAL A HAND GRENADE

Does it seem like that is the kind of talk that indicates whatever the House priceeds with will be approved by the Senate.