Archive - Mar 2013 - Story

If anyone is confused why European stocks just hit their highest levels in nearly 5 years (if not all time highs - there America with its 48 million foodstamp recipients has it beat), the chart below should provide some lack of color. According to Eurostat, in Q4 the number of persons employed in Europe compared to Q4 declined by 0.3% in the Euroarea, and 0.2% in the Eu27. The decline was -0.8% and -0.4% for the EA17 and EU27 compared to a year ago. Of course, if the Fed and ECB keeps pushing stocks higher, monetary illogic dictates that eventually this number will rise because somehow having more diluted claims on money floating around is good for jobs. Just not yet.

• Dimon’s ‘Harpooned’ Whale Resurfaces With Senate Findings (BBG)
• Greece and lenders fall out over firings (FT) - as predicted 48 hours ago
• Dallas Fed Cap Seen Shrinking U.S. Banking Units by Half (BBG) - which is why it will never happen
• Xi elected Chinese president (Xinhua)
• Russia Bond Auction Bombs as ING Awaits Central Bank Clarity (BBG)
• U.S. and U.K. in Tussle Over Libor-manipulating Trader (WSJ)
• Chinese firm puts millions into U.S. natural gas stations (Reuters)
• In Rare Move, Apple Goes on the Defensive Against Samsung (WSJ)
• Berlin Airport Fiasco Shows Chinks in German Engineering Armor (BBG)
• Ex-PIMCO executive sues firm, says was fired for reporting misdeeds (Reuters)
• Bank of Italy Tells Banks in the Red Not to Pay Bonuses, Dividends (Reuters)

If the last three days were spared an overnight ramp in US futures, today this has not been the case as the new carry pairs of choice, the USDJPY and EURJPY, have seen constant gradual levitation overnight, pushing the correlated US OTC markets higher and setting the stage for the tenth consecutive, and perfectly artificial, Dow Jones increase. It is notable just how broken the old direct EURUSD-ES correlation is in times when correlation desks can offset selling pressure by shorting Yen and obtain local funding. That said, even the USDJPY appears to have stalled out in the low/mid 96 range - it is unclear what the catalyst pushing the Yen much lower will be, as virtually all rhetorical ammunition used by the BOJ and its affiliates, has by now been well and truly used up, and the daily talkdown sessions are merely a regurgitation of previous talking points.

While chart analogs provide optically pleasing (and often far too shockingly correct) indications of the human herd tendencies towards fear and greed, a glance through the headlines and reporting of prior periods can provide just as much of a concerning 'analog' as any chart. In this case, while a picture can paint a thousand words; a thousand words may also paint the biggest picture of all. It seems, socially and empirically, it is never different this time as these 1936 Wall Street Journal archives read only too well... from devaluations lifting stocks to inflationary side-effects of money flow and from short-covering, money-on-the-sidelines, Jobs, Europe, low-volume ramps, BTFD, and profit-taking, to brokers advising stocks for the long-run before a 40% decline.

Despite around $135 million in bailouts, the UK government's Insolvency Service disputes its own insolvency. The FT reports that one British MP summed it up - "it is fair to say that if this was a company it would be in deep trouble." The group, which polices bankrupt companies, liquidates failed businesses and disqualifies unfit directors, would be bankrupt were it not for the government's cash injection. Dependent on fees and recoveries from bankrupt companies, the agency over-estimated its ability to recover assets from collapsed businesses. It dismisses the insolvency claims against itself however, noting the service is "living within its means" and expects to be deficit-free by 2015 (though it is unclear how unless they expect recoveries to rise dramatically or bankruptcies to increase significantly) as it is forced to provide services even when there is no prospect of recovering fees from bankrupt people or companies. Their rate of prosecution has dropped from 40% to 21% and even the creditor community has lost faith arguing that the agency's model was "unreliable in the current economic climate" and required urgent reform.

In August 2011, while undergoing cancer treatments that ultimately failed him, Venezuela’s President Hugo Chávez began withdrawing 160 tons of gold from U.S., European and Canadian banks. “It’s coming to the place it never should have left. ... The vaults of the central bank of Venezuela, not the bank of London or the bank of the United States. It’s our gold,” he said on national television as crowds cheered armored trucks carrying an initial bullion shipment to the central bank. The Caracas hoard would today be valued at around $9 billion, were it not for the fact that Venezuela has been selling it — about $550 million worth in the first eight months of 2012, according to the IMF. Did further sales follow over the past six months, with proceeds partly paying for the public largesse that helped fuel Chávez’s victorious up-from-the-sickbed presidential run? Thus, there is something less than $8.5 billion in untraceable gold bullion stashed in an extremely politicized city that’s simmering with grudges and dreams. Physical gold is modestly short of priceless to a criminal. What mala gente or dissident generals wouldn’t want some of Chávez’s rich legacy?

We can only imagine the lines around the block in readiness for this Chicago Booth lecture "Career Advice From Hank Paulson" urging students not to obsess about positioning themselves for the top job - or perhaps, as we might sub-title it, "Don't obsess - your efforts to make $478m tax-free like me are completely futile."

Over the weekend we learned that the most indebted nation in the world (net of unfunded liabilities), that would be the US, just hit an all time high in foodstamp recipients, which when added to record disability recipients, and various other programs providing for free benefits and entitlements, means that just as the US hit a record Dow Jones (and total Federal debt) print, it at least had a record amount of welfare recipients to show for it. In this context it is probably to be expected then, that that other hyperdebtflationary Keynesian basket case, Japan, just reported that the number of people receiving entitlement benefits just hit an all time high as well. Because the one thing insolvent misery certainly loves is company. Preferably globalized company, just so when the global statist syndicate needs to threaten a record number of people with pulling their welfare privileges should it not get its now periodic taxpayer-funded bailout every several years, it gets a very enthusiastic and prompt global response.

The markets have begun to wonder whether the Fed (and other central banks) will ever be able to exit from its Quantitative Easing policy. We believe there is only one reasonable exit the Fed can take. Rather than sell its portfolio of bonds or allow them to mature naturally, we believe the Fed’s only practical exit will be to increase the size of all other balance sheets in relation to its own. This “exit” will be part of a larger three-part strategy for resetting the over-leveraged global economy, already underway...

Here we go again. As we reported yesterday, Greece was due to present to the Troika "how to cut a massive 150,000 public sector jobs: a move which will result in an immediate surge in public unrest, and an exponential jump in strike activity.... Greece is locked in talks with international creditors in Athens about shrinking the government workforce by enough to keep bailout payments flowing. Identifying redundant positions and putting in place a system that will lead to mandatory exits for about 150,000 civil servants by 2015 is a so-called milestone that will determine whether the country gets a 2.8 billion-euro ($3.6 billion) aid installment due this month. More than a week of talks on that has so far failed to clinch an agreement." Fast forward to today when we learn that any hopes a last minute solution would materialize, allowing the monetary spice to flow and the €2.4 billion loan to be paid, were just dashed following a breakdown in talks between Greece and the Troika. Deja vu all over again.

President Cristina Fernandez has a stranglehold over what's left of the Argentine economy. Inflation is rampant, corruption is incorrigible, and freedom is waning. Price controls, media controls... they're all part of the same tired playbook that morally bankrupt politicians in financially bankrupt countries have routinely fallen back on for centuries. Fernandez's most insidious move has been to FORCE Argentines to hold the rapidly depreciating Argentine peso. She has restricted her people from changing pesos into other currencies, including gold, as well as created obstacles to move funds abroad. Many Argentines have reached their breaking points and are doing something about it - no more evidenced than by a local tour operator and rental car agency there has started accepting Bitcoins.

Years after the CFTC, under the leadership of Goldman's Gary Gensler, theatrically agreed to investigate whether the price of precious metals was manipulated during trading - whether systematically or ad hoc - only to let that inquiry fizzle and drop the whole idea proclaiming there is manipulation, the commodity futures regulators are once again taking a look at shady activities originating at London. Or rather, it is "discussing internally" whether the daily London gold and silver price fixing is open to manipulation.

Gasoline prices in the U.S. Midwest have pulled back from the seasonal highs reported in February. Motor group AAA reported Monday that U.S. commuters paid, on average, $3.69 for a gallon of regular unleaded gasoline, just over 1 percent less than they paid last week. For some markets, that's the first time gasoline prices have declined this year. A series of refinery issues, coupled with higher oil prices, left some motorists in February paying the highest they've ever paid seasonally for a gallon of regular unleaded gasoline. By the end of February, some drivers in the Midwest were paying nearly $4 per gallon on average, sparking congressional debate over the impact of speculation in the energy market. Given concerns over costs associated with healthcare, insurance and other issues not related directly to energy, it's curious why there aren't hearings when prices begin to fall.

The Dow managed its ninth green close in a row - its best in 16 years - and obviously closed at all-time new highs. The Trannies were the real winner though as they are now up over 4% in March (considerably outperforming the rest of the major indices), and up 29% since mid-November (a 120% annualized return) with no more than a 2.5% retracement in that period. Four stocks dominated TRAN today JB Hunt, Alaska Air, CH Robinson, and Ryder accounting for half the index's gains. Volume was its lowest of the year (ex President's Day). Average trade size was low. On the week, financials and energy are the underperformers. Treasury yields spiked on retail sales, dropped on the auction and go out very modestly higher on the day but not confirming the equity exuberance again. FX markets also pointed to a less sanguine view of the world as the USD rallied and EURJPY (carry) provided little support. VIX held up for most of the day but collapsed into the close back under 12%. Commodities gave back earlier (weaker USD) gains to close at the lows of the day.