Archive - Sep 12, 2013 - Story

As opposed to the "pixie dust tout of fairy tales forever" that is trotted out by the herd every day, the fllowing brief look at Taper realities, 'manufactured' numbers unreality, systemic Muni bonds concerns, and of course, political risk provide color for what was described this morning on CNBC as a market bereft of 'bear market theses. As Tartakower once wrote, "The winner of the game is the player who makes the next-to-last mistake;" until then ts all foreplay.

Speaking on Russian TV, President Bashar al-Assad has - perhaps unsurprisingly - proclaimed that his decision to place Syria's chemical weapons arsenal under international control was the result of Russia's proposal... and not US military threats. As Russia Today reports, Assad stated

"Syria is handing over its chemical weapons under international supervision because of Russia, the US threats did not influence the decision."

Rossiya 24 is also reporting that Syria is to send documents to the UN for the Chemical Arms Pact. We are sure Israel will be pleased.

Poor Greece: the country that just reported yet another all time record high unemployment rate, this time for the month of June when the jobless rose from 27.6% to 27.9%, apparently does not know that all it had to do to see its unemployment plunge to 0% or thereabouts, was to upgrade from abacus to solar-powered calculator, as the US BLS just proudly announced it did when it reported the latest batch of absolutely garbage "data".

A few days ago we showed what happens when the Bureau of Labor Statistics is caught in a blatant lie. And while we exposed the difference between the NFP and the JOLTS data series, which in some ways are the "stock" effect of labor, it meant that the BLS also had to adjust its "flow" component: the initial weekly claims. Lo and behold, moments ago the DOL just reported last week's initial claims, which printed at a ridiculous 292K, 38K below expectations and the lowest level since April 2006, down from last week's 323K. On the surface great news. The problem once again is that this was a bold faced lie. Only this time even the BLS admitted as much:

• LABOR SAYS CLAIMS DROP DUE TO COMPUTER UPGRADES IN TWO STATES
• LABOR SAYS FAULTY REPORTING BY STATES RESPONSIBLE FOR DROP

Specifically, a larger state and a smaller one that retooled their computer networks still provided the Labor Department with applications counts. Furthermore, the BLS also said that the decrease in filings probably didn’t signal a change in labor-market conditions. In other words, the number is garbage, and the BLS knows the reporting is faulty, but let's go ahead and report it anyway.

Yesterday's record Verizon bond offering, which to some had an eerie sense of deja vu to the TXU 2007 mega-LBO just before the market blew up, caught many by surprise: not only did the underwriters have no problem obtaining over $100 billion in orders to oversubscribe demand for the $49 billion offering, but following the break the bond immediately proceeded to trade a whopping 40-70 bps tighter implying yield pricing could have been done well lower, but the CDS also ripped 11bps tighter. Because nothing says less default risk like $49 billion more in debt. But where did all this demand come from? Did accounts simply have $100 billion in cash lying around? The answer is no, and as the following breakdown of the post-break action in VZ from Deutsche demonstrates, what happened yesterday was a great rotation into the NSA-favorite company and the Telecom space in general, and out of virtually every other credit in the market.

There was a time when, if selling a sizable amount of a security, one tried to get the best execution price and not alert the buyers comprising the bid stack that there is (substantial) volume for sale. Of course, there was and always has been a time when one tried to manipulate prices by slamming the bid until it was fully taken out, usually just before close of trading, an illegal practice known as "banging the close." It appears that when it comes to gold, the former is long gone history, and the latter is perfectly legal. As the two charts below from Nanex demonstrate, overnight just before 3 am Eastern, a block of just 2000 GC gold futures contracts slammed the price of gold, on no news as usual, sending it lower by $10/oz. However, that is not new: such slamdowns happen every day in the gold market, and the CFTC constantly turns a blind eye. What was different about last night's slam however, is that this time whoever was doing the forced, manipulation selling, just happened to also break the market. Indeed: following the hit, the entire gold market was NASDARKed for 20 seconds after a circuit breaker halted trading!

• Syrian Rebels Hurt by Delay (WSJ), U.S. seeks quick proof Syria ready to abandon chemical weapons (Reuters)
• Lavrov Brings Acerbic Pragmatism to Syria Meet With Kerry (BBG)
• Five years after Lehman, risk moves into the shadows (Reuters)
• U.S. shares raw intelligence data with Israel, leaked document shows  (LA Times)
• Japan to raise sales tax, launch $50 bln stimulus (AFP) - so 1) lower debt by sales tax, then 2) raise debt through stimulus.
• Blackstone’s Hilton Files for $1.25 Billion U.S. Initial Offer (BBG)
• Second Life Bankers Thrive in Dubai as Boutiques Boost Fees (BBG)
• Brussels probes multinationals’ tax deals (FT)
• Wall Street's Top Cop: SEC Tries to Rebuild Its Reputation (WSJ) ... and fails
• Tablet sales set to overtake PCs (FT)
• The end of angst? Prosperous Germans in no mood for change (Reuters)

Jitters from Syria still abound, as confirmed by reports from the Israeli army that two shells had hit the Southern Golan region. Despite the reports that the shelling appeared to be errant, WTI remains near session highs as markets remain sensitive ahead of the meeting between US Secretary of State Kerry and Russian Foreign Minister Lavrov in Geneva over the next two days. Buying of the 10Y is also prevalent and the yield on the benchmark bond was has dropped below 2.90%, or at 2.88% at last check. Today's key economic news in the US session will be the weekly claims report, the Fed buying 10 Year bonds at 11 am followed by the Treasury selling 30 Year bonds at 1 pm (this follows the Fed buying 30 Year bond yesterday: yes ironic).