According to the ISM "Economic activity in the manufacturing sector expanded in February for the seventh consecutive month, and the overall economy grew for the 10th consecutive month." Too bad none of this China-driven production is making one iota of impact on the broader unemployment rate. Still, as ISM came in over 50 we are supposed to rejoice as it indicates economic expansion. Notably, the inventory direction as designated by the ISM is one of contraction. What happens if China ever turns off the liquidity spigot is unclear, but we have seen what programs that take from the futures to today do to subsequent demand. Look for a comparable inflection point in the ISM when consistent Chinese GDP "growth "of 12% starts being perceived as just a tad kooky.
Goldman Reports Q4 Revenue Days: $100MM+ Profitable Days Plunge From 36 To 15; Ratio Of $100MM+ Wins/Losses Days In 2009: 131 To 0Submitted by Tyler Durden on 03/01/2010 - 11:02
Is normalization coming back to the stock market? A quick glance at the Goldman daily trading net revenues in Q4 demonstrates that the easy money for the firm may have been already made. While in Q3, Goldman reported just one days of losses in 65 total trading days, as well as 36 days of $100MM+ profits, in Q4 the distribution looks much more normal (if still massively skewed toward profitability). In Q4 the firm announced it lost between $25 and $50 million once, lost under $25 million for 7 days, but most notably made over $100 million on "just" 15 days, a 58% decline from Q3. The Q4 $100MM+ trading days represent just 11% of all 2009 $100MM+ trading days. And here is an observation for you distributions fans: in 2009, Goldman made over $100MM on 131 out of 263 trading days, or 50%. It lost over $100MM on 0 out of 263 trading days, or 0%.
"The Federal Reserve and the country owe a tremendous debt of gratitude to Don Kohn for his invaluable contributions over 40 years of public service. Most recently, he brought his deep knowledge, experience, and wisdom to bear in helping to coordinate the Federal Reserve's response to the economic and financial crisis. In addition, Don helped lead the stress tests of major financial institutions; he directed the Board's ongoing efforts to increase the transparency of the Federal Reserve; and he has been leading an international effort within the Bank for International Settlements to help central banks focus on key issues and responses to the crisis. On a personal note, I would like to express my deep appreciation for Don's friendship and counsel during some very difficult times. He will be greatly missed." - Ben Bernanke
First trading day of the month has a mild bullish bias (new money in IRA’s, pensions, etc.). Overnight, there are, yet again, rumors of a Greek rescue package. That has boosted the Euro and softened the dollar. The Pavlovian response is firmer prices for stock futures, oil, and gold. If there is a deal, and details follow, stocks could benefit further. If the deal disappears, stocks could suffer.
It appears all it takes these days to get invited for some free ouzo and a little sirtaki is to issue a note that one's minions are about to downgrade Greece. This is precisely what has happened to analysts from S&P, which last week announced it was looking at notching Greece closer to junk status (currently BBB+). Market News, quoting Greek officials who apparently have a rumor retention span of about 2 seconds before they blast anything and everything to their entire rolodex, reports that "a team from ratings agency Standard & Poors is on its way to Athens for talks Tuesday with government officials about the country's economy and ongoing efforts to reduce its public sector budget deficit." Not too surprisingly, S&P had no comment by how much it would upgrade Greece following this gift reception ceremony.
Shaking hands with the government was a brilliant strategy in 2009 when it was assumed that governments had an infinite capacity to leverage themselves. But what if they didn’t? What if, as Carmen Reinhart and Kenneth Rogoff have pointed out in their book, “This Time is Different,” our modern era was similar to history over the past several centuries when financial crises led to sovereign defaults or at least uncomfortable economic growth environments where real GDP was subpar based on onerous debt levels – sovereign and private market alike. What if – to put it simply – you couldn’t get out of a debt crisis by creating more debt? - Bill Gross
- Evans-Pritchard: Don't go wobbly on us now, Mr. Bernanke (Telegraph)
- Euro drops, pounds plummets below $1.48 for first time since May (Bloomberg)
- Greece now, U.K. next as Scots ready for pound plunge (Bloomberg)
- Summarizing eurozone's derivative deals, at least those known to date (XE.com)
- Alphaville's 72 hour delayed breaking news on Weimar hyperinflation: about par for the comfortably oxygenated FT blog (FTA, and Zero Hedge)
- RBS paid £1.3 billion to bankers on profit of £1.0 billion in 2009 (Telegraph)
- Buffett sees US housing recovery by 2011, prices below 'bubble' levels.
- Car makers on Tuesday are expected to report disappointing U.S. sales for February, mainly due to snowstorms.
- China's manufacturing growth slows in Feb, PMI falls from 55.6 in Jan to 52.0.
- Copper rises most in 11 months as Chile earthquake cuts power, halts mines.
- Crude near $80 a barrel after 9.3% monthly rise.
- Europe demands Greece cut budget deficit as Bloc crafts $34B rescue.
- Greece loses Kokusai as investors demand 7% on bonds.
RANsquawk 1st March Morning Briefing - Stocks, Bonds, FX etc.
Jim O'Neill Redirects Greek Problems To The Wonderful World Of BRICs, Suggests A German-BRIC Currency Union (For The Sensational Journalists)Submitted by Tyler Durden on 03/01/2010 - 00:09
Read the following from Goldman's Jim O'Neill, take two tablets of hopium, and first thing tomorrow use REDI to buy 10 times your net worth in BRIC stocks - buy indiscriminately - they are all going up, up, up. Also don't forget to buy some Man U leaps. After all with a hundred years of momentum behind you (and billions of dollars spent in lobbying to preserve the status quo) it is not as if something new can ever come out of left field (both literally and metaphorically). At least Goldman's permabullish analyst has had the chance to read the Goldman Monthly FX Analyst report, which substantially dropped its $/BRL 3/6/9 month targets from R$1.60, R$1.65 and R$1.75 to R$1.75, R$1.85 and R$1.90. O'Neill notes: "it does appear [theReal is] overvalued" Needless to say, we were looking forward to this happening for quite some time. And as much as Goldman touts the BRICs, we are confident that our own creation, the STUPIDs, will be getting much more airtime over the next decade.
The bond deal that was so very much rumored was going to get done in mid (and at most late) February, never really took off. The reason: with each passing day, investors (what little is left of them) are demanding a greater and greater premium, as the country now has less than 3 weeks of cash left at the current cash burn rate. And this is before even counting for €16 billion in maturities coming up through May. According to BusinessWeek the most recent expected benchmark pricing is in the 7%+ range: anything below that likely will not price.
Step Aside Greece: How Gustavo Piga Exposed Europe's Enron In 2001 - Focusing On Italy's Libor MINUS 16.77% Swap; Was "Counterpart N...Submitted by Tyler Durden on 02/28/2010 - 15:21
It is not often that one finds smoking gun reports which refute all claims, such as those by EuroStat and Angela Merkel, in which the offended parties plead ignorance of the fiscal inferno raging around them, kindled by lies, deceit, and blatant mutually-endorsed fraud, and instead, now facing themselves in the spotlight of public fury, put the blame solely on related party participants, such as, in a recent case, Greece and Goldman Sachs. Yet a 2001 report prepared by Gustavo Piga, in collaboration with the Council on Foreign Relations and the International Securities Market Association, not only fits that particular smoking gun description, but the report itself was damning enough of another country, a country which used precisely the same off-market swap arrangement to end up with an interest expense of LIBOR minus 16.77% (in essence the counteparty was paying Italy 16.77% of notional each year as a function of the swap mechanics), in that long ago year of 1995. The country - Italy (for confidentiality reasons referred to in the report as Country M), was at the time panned as the Enron of the European Union due to precisely this kind of off-balance sheet arrangement by the Counsel of Foreign Relations. The counterparty bank: unknown (at least in theory, since the swap was highly confidential, and was referred to as Counterpart N), but considering the critical similarities in the structuring of the swap contract to that used by Greece in 2001, and that ISMA cancelled Piga's press conference discussing his findings out of fear for the academic's life, we can easily venture some guesses as to which banks value their recurring counterparty arrangements more than human life.
I would suggest that the long-term interests of the Eurozone are better served by denying Greece a bailout, even if it means that Greece withdraws from the Eurozone and, in the process, weakens the euro significantly, say, from the recent $1.35 – 1.36 level to
$1.20. A weaker euro would actually be quite popular in export-oriented Germany, and be generally welcomed in the entire Eurozone as enhancing the competitiveness of the region. Also, inflation is currently well below the ECB’s preferred level of around 2% allowing room for any inflationary consequences of a euro depreciation to be manageable. Second, absence of a Greek bailout would lower the
risk of moral hazard inherent in Portugal and / or Spain following in the same path if Greece does receive a bailout. Despite the temporary weakening of the euro that might result from, say, Greece’s departure from the Eurozone, the emphasis on fiscal health
would have a beneficial impact on the medium-term course of Eurozone inflation and of the euro itself. - TCW
Those banana-hugging Germans strike back, and by doing so, throw the rotten apple of the imminent Greek collapse straight into America's back yard: in today's edition of Handelsblatt, German politicians have said that only the International Monetary Fund is the right institution to save Greece from going bankrupt. While the increasingly irrelevant Greek rumor-spreader has been very busy over the past few days, getting Greek newspaper Ta Nea to announce that now Caisse des Depots has entered the KfW bailout syndicate, in an interview with German TV station ARD, Merkel said that not only is this yet more gibberish but that there is no legal basis for any of the rumored actions. So what will happen to Greece? Well, if former ECB Chief economist Otmar Issing has his way, Greece's dirty laundry will end up being washed by American taxpayers, because you see Greece is just as much a member of the IMF as it is of the EU, or so the Germans claim.
Mapping The Divergence Of America's Wealth: Median Income In Newport Beach, CA Is $123,958; In Reading, PA: $28,098Submitted by Tyler Durden on 02/27/2010 - 22:09
Portfolio has prepared a useful interactive map highlighting America's increasing split between the haves and the have nots based on city of residence. Case in point: the wealthiest city in the US according to Portfolio, Newport Beach, has more than a quarter of its residents making over $200,000. On the other end of the spectrum is Reading, PA, whose 80,000 residents have an average per capita income of $14,120 (of half the national average), and none makes over $200,000. And a stab at New Yorkers - with a median household income of just $31,245, and "just" 6.9% of households making $200,000, Mike Bloomberg's city ranks a distant 60th in the list of wealthiest cities.