Layoff Plans Soar By 126% In September To 115,730, 212% Higher Than Year Ago, Highest Since April 2009Submitted by Tyler Durden on 10/05/2011 - 07:42
Still bullish on the Friday NFP number? According to Challenger we just went through a "sea-change" event as "Employers announced plans to shed 115,730 workers from their payrolls in September, making it the worst jobcut month in over two years. Heavy reductions planned by the military accounted for a large portion of September job cuts, signaling what may lie ahead as the federal government seeks across-the-board cuts in spending. September job cuts were 126 percent higher than the 51,114 announced in August, according to the latest Challenger report. They were 212 percent higher than September 2010, when employers announced just 37,151 job cuts. Last month’s total is the highest since April 2009, when 132,590 job cuts were announced." Yet this is good news, considering that the biggest source of cuts was the bloated government and the insolvent Bank of America: "One-third of the layoffs announced this year came from government employers. It is, by far, the largest job-cutting sector, with 159,588 announced job cuts to date. This figure includes 54,182 government-sector cuts in September, 50,000 of which are the result of a five-year troop reduction plan announced by the United States Army. The second largest job-cutting sector to date is the financial sector, which announced 54,013 planned layoffs between January 1 and the end of September. That is up 177 percent from the 19,474 job cuts recorded over the first three quarters of 2010. Of the 54,013 financial job cuts this year, 31,167 occurred in September, with 30,000 resulting from Bank of America’s multi-year workforce reduction plan aimed at saving the struggling bank $5 billion per year." That said, while there is no correlation to coincident NFP data, this will be very ugly news down the line.
- Merkel Says Euro Bonds no Endgame for EU Woes (Bloomberg)
- China on Course to Squeeze Property Bubble (China Daily)
- Moody’s Sees More European Downgrades (Bloomberg)
- Athens Able to Pay Public Sector Wages (FT)
- Ireland Still Faces Bailout Challenges (WSJ)
- Death of Euro Seen Exaggerated Amid Non-Pimco Political Will (Bloomberg)
- Buchanan: With High-Speed Trading, Market Cannot Hold (Bloomberg)
- China to Subsidize Sales of Building Materials (China Daily)
Remember when yesterday we ridiculed the FT's third attempt at resuscitating the euro and the f(l)ailing continent (attempts one and two crashed and burned previously) and the stock market's lemming-like pursuit of this innuendo once again? Looks like we were correct. According to flashing Bloomberg headlines, "EU Says No Concrete Bank Recapitalization Plan Right Now" and continues: "EU Economic and Monetary Commissioner Olli Rehn “doesn’t speak of a concrete plan in hand,” his spokesman, Amadeu Altafaj, told reporters in Brussels today. "He speaks of an initiative, of discussions in progress and he pleads for a European approach." In other words, when the IMF rumor wears out in a few minutes, expect Liesman to be true to his name some time around EOD when markets are desperate for a lie. Any lie.
You didn't think Athens would take to government plans to fire 120% of the working population quietly. As BLoomberg reports, Greeks walked off their jobs and as many as 20,000 marched through Athens’ central square to protest Prime Minister George Papandreou’s EU6.6b austerity plan. "They are blaming us, firing us with the result that we won’t be able to live," said Katerina Anastasopoulos, 53, who has worked at the Greek Transport Ministry for 28 years and joined the march on parliament. "They are taking away our livelihood, our life. We are all scared." The response, according to Reuters, was prompt: "Greek riot police fired teargas at a small group of rock-throwing youths on the central Syntagma Square in Athens, where thousands of striking workers marched to the parliament to protest against austerity measures on Wednesday."
Euro Jumps As US Taxpayers Are Latest Source Of European Bailout According To Freshest Set Of Bailout RumorsSubmitted by Tyler Durden on 10/05/2011 - 06:42
FT, Liesman and now the IMF (aka US Taxpayer). Rinse repeat. The program for the spin cycle to keep the EUR afloat, and Europe bailed out on any given day ending in -day is now clear as day. After last night's FT rumor for yet another comprehensive bank bailout program was promptly digested and rejected by the market with the EURUSD recouping all losses, it is now the IMF's duty du jour to protect the doomed currency, naturally with other people's money, in this case America's middle class. And in a flurry of headlines, we find that the person tasked with destroying his credibility, after the market no longer trusts anything Lagarde says, is IMF European Department Director Antonio Borges who according to Reuters, said that Europe needs between 100 billion and 200 billion euros to recapitalize its banks to win back investor confidence and should carry out the plan across the continent, not in a staggered process. He also confirmed that other European bureaucrats lied yesterday when they said no recap plan was being considered after saying that, well, "EU officials are working on a European bank-recapitalization plan." Said otherwise, US taxpayers to the European rescue because the EUcrats can not get their imploding house in order. But, but, whatever happened to China?
There is only one word to describe the opinion that the U.S. dollar is in a multi-year uptrend: heresy. Understanding why this is so may well be critical to understanding market action in the 2011-2016 timeframe. Embracing the contrarian viewpoint offers little joy, because heretics are constantly being hounded by devotees of orthodoxy seeking their conversion to the one true faith or their crucifixion as mortal threats to the orthodoxy. Why is this so? For two simple but profound reasons. The human mind strongly prefers certainty to uncertainty and simple, fixed explanations over complex, contingent explanations. The human mind has a second, superglue-like quality: Once a viewpoint has been plucked from the swirling chaos of beliefs and explanations, then the mind quickly solidifies that view, resisting any future modification. Very little energy is devoted to questioning the position, while enormous energy is devoted to defending it.
Zero Hedge Kindly Requests The Immediate Resignation Of Mary Schapiro For Gross Breach Of Professional ResponsibilitiesSubmitted by Tyler Durden on 10/04/2011 - 21:51
Ever wonder why the final SEC report on the flash crash doesn't match up to the forensic evidence found by Nanex? It seems the SEC/CFTC failed to disclose they didn't get around to interviewing the traders that actually executed the algorithm blamed for dumping 75,000 emini contracts on the market "without regard to price or time" until 2 weeks after publishing their final report on the flash crash! Apparently, they were making a lot of things up to fit a foregone conclusion. According to the media, it was Waddell & Reed who executed those trades right? Well, no. Barclays executed the contracts using their time tested algorithm called Participation. You simply can't crash a market with the Participation algorithm. This is an algorithm that in fact has sophisticated price and time components. This is an algorithm that would only sell at the offer -- and never at the bid. This was discovered and pointed out by Nanex after just one day reviewing the actual 6,438 eMini contract trades (75,000 contracts) which ZeroHedge helped obtain. But the media was happy to hang the guilt on an out of town mid-west Mutual Fund company, and besides all this stuff was getting way too complicated. After all, when it comes to such complexities, it is only economy PhDs who are fit to opine at will. Only the SEC/CFTC wasn't counting on anyone double checking their work..
At its very core, to price something complicated, you lay the most similar liquid asset you can find next to it that has a liquid price. You deconstruct the liquid one by its risk premia, and then you reconstruct the one you are trying to price by applying suitable risk premia to it. The output is fair value. All the talk of “Japanification” is just a variation on this theme at a pretty remarkable order of complexity. Call it modeling, call it storytelling, whatever: one compares an economy going through a multi-year banking crisis with one that is just a few years into a banking crisis. Compare trajectories, similarities, and differences. Then figure out what matters and what doesn’t in a macro-sense. One has either past observation to understand reality, or rely on dumb luck to understand future events.
Anyone tearing their hair out trying to answer how it is that this great Keynesian experiment of a nation managed to sneek by with so little new incremental debt over the past month can now relax. As Zero Hedge reported yesterday, the US closed out Fiscal 2010-2011 with a $95 billion surge in debt in one day brining the total to just under $14.8 trillion. That, however was not nearly enough to settle all outstanding debt, and on the first day of the next fiscal year, Timmy G added another $47 billion in debt, to have a closing balance of $14.837 trillion on the first day of the 2011-2012 fiscal year. In other words, in just the past two work days, America has technically settled a whopping $142 billion in debt. There was a time when a year was needed to issue this much debt. Then, a month. Now, we are officialy down to two days. What is ironic is that the recently expanded debt ceiling of $15.194 trillion has just $400 billion of additional dry powder. At this rate, it won't last the US until the end of the calendar year.
Because while soaring volatility in gold and copper, not to mention silver, results in one after another margin hike to "cool off the speculators", when it comes to financial stocks, especially in the "tail wag the dog" variety where the synthetic drives the stock price, a surge in vol means a cut in margins, or 33% to be precise. As of minutes ago, the biggest futures exchange just cut XAF margins by a whopping 33%, exploding vol be damned, or actually, because of it. The CME would be even more delighted if clients were to pledge their gold as collateral, especially following yesterday's expansion of gold's marginability from $200 to $500 million. So just in case anyone missed the message from today, when fins plunged then soared on a rumor, the CME would be delighted if you could repeat all of that but this time with 23% more margin. Expect more margins cuts, this time in ES offset by margins hike in all other instruments, especially of the public enemy #1 variety such as precious metals and crude.
Ignoring the knee-jerk reaction of stocks to rally 4% on the headlines that Dexia will be save and other banks will be recapitalized, it is worth thinking about what this really means and the next logical steps. For now I will not even focus on the fact that this was from a meeting of Finance Ministers and not heads of state. I left my "EU Leadership" trading cards at the office, but so far, not many of the big names, who can actually close the deal, have spoken. I won't even focus on the fact that Dexia has been on the fringe of "contagion" discussion. Look at articles about "contagion" or "debt crisis" and PIIGS and French Banks and German Banks and Italian Banks show up in nearly every article. Dexia is discussed less frequently, though ZeroHedge has been on top of it for awhile. So stocks rose 4% on a plan of a plan to plan a plan for a bank they hadn't heard of until this morning. Hmmm.
UPDATE: Moody's ITA downgrade took some shine off as EUR drops 60 pips and ES now 13pts off its highs. TSYs are 3-4bps lower in yields. Gold/Silver not moving much on it.
On the basis of old news, more promises, lack of any clarity, and Dexia's dump on the Belgian government, the equity markets staged a 4% rally in the last 45 minutes to end an incredible day. Our assumption is that this was simply the bounce that everyone expected as we seemed to have squeezed shorts into lunch and were limping back lower on AAPL disappointment. Quite clearly, there were a few uncomfortable equity shorts who were squeezed out rapidly and incessantly as the S&P massively outperformed credit as well as the broad basket of risk assets - even TSYs only managed to sell back to earlier day's high yields (as opposed to extending). Gold/Silver rallied (though well off week highs) as the USD dumped back near the week's lows and copper and oil rallied but again no where near as ebullient as stocks. Evidently, the equity move is exuberant at best but these squeezes seem able to maintain longer than anyone expects.
And here we go again. Ironically, this is nothing. Wait until S&P, which just telegraphed very loudly the next steps earlier, puts France on downgrade review...
Here are the key selected sections from the FT story that sent the Dow Jones soaring 400 points from its intraday lows: "Although the details of the plan are still under discussion, officials said EU ministers meeting in Luxembourg had concluded that they had not done enough to convince financial markets that Europe’s banks could withstand the current debt crisis... “There is an increasingly shared view that we need a concerted, co-ordinated approach in Europe while many of the elements are done in the member states,” Olli Rehn, European commissioner for economic affairs, told the Financial Times. “There is a sense of urgency among ministers and we need to move on.” Mr Rehn cautioned that while there was “no formal decision” to begin a Europe-wide effort, co-ordination among EU’s institutions – including the European Central Bank, European Banking Authority and the European Commission – on necessary measures had intensified." So, there is .... nothing definite, just more speculation, more rumors, and more innuendo. But hey, it worked last week with the Liesman rumor. It obviously would work for the FT which has become the End of Day rumor source du jour, first with China bailout rumors (since denied), then with recapitalization rumors (denied), and now with this joke. Pathetic.