Feels like people are waiting for Europe to go home so that we can rally? That has worked in the past, but I don't think it will this time. This was not just European selling. It is not just the problems in Europe. In fact, the news seems to be getting worse out of there. Merkel and Sarkozy announce they have a candidate for the new head of something or other and that is somehow useful and positive? Finland, and potentially others demanding collateral from Greece to provide more funding is far more important in my opinion. At the same time, our data was awful. Brutal, yet most people seem to want to trade in anticipation of the next rally. That conviction that we will bounce doesn't seem to have disappeared. The Europe gone home rally is just another example of that. Yet how many times have rallies failed to materialize because everyone is anticipating them?
A snapshot of the US Afternoon Briefing covering Stocks, Bonds, FX, etc.
Speaking of gold, have a quick read of the article about Hugo Chavez nationalizing Venezuela’s gold industry and more importantly, repatriating his physical gold from storage sites abroad back to Caracas. The worry here is two-fold: 1) that his demands for physical delivery could stress the market given the estimates of somewhere between 30 and 45 paper ounces of gold issued for every 1 ounce of physical. 2) that this action starts a trend amongst countries that aren’t particularly US-friendly to repatriate and even potentially price sensitive commodities in gold. How much longer will Chavez continue to sell his extremely useful, much needed petroleum products and in exchange accept increasingly worthless pieces of paper, ie USD? Some might respond that if he did that, the US would instantly label him a terrorist and take him out. Perhaps. But what if Russia did it? What if Iran did it? If the commodity rich enemies of the US want to cause problems in this country they don’t need to fire a single shot, all they have to do is start selling their products priced in gold. The end of the reign of the USD as reserve currency will follow quickly.
Last Thursday, Donald Trump appeared on CNBC, and in an attempt to generate PR publicity almost as bad as A&F's idiotic campaign to pay The Situation money not to wear their clothing, sad the following: '"You wouldn't believe it. I bought Bank of America, I bought Citi, I bought, you know, two troubled companies that I think have an upside, lets see what happens. Caterpillar, Intel, Johnson and Johnson, Proctor and Gamble." We were curious to see how Trump's latest foray into picking securities (as opposed to bankruptcy advisors - he truly excels there) turned out. Here is the result of what listening to the former (and/or future) presidential candidate has yielded in a few short days.
Sorry to interrupt the panic, but this may be important:
- FURTHER DISCUSSION ON COLLATERAL WOULD CANCEL SECOND GREEK BAILOUT- GOVT SOURCE - RTRS
This follows on the heels of news overnight that Finland, Holland and now Slovenia are all pushing to get collateral (aka a DIP out of Greece). And naturally, no Greek bailout means game over for a united Europe, and its disjointed banks.
The market is now at a very simple crossroads: bonds are pricing in the hyperdeflation that the resumption of the global depression brings in, while gold is pricing in the central planning policy response to that hyperdeflation, which is nothing but print, print, print. Anyone who feels like arbing the spread on the trade (which has a very unpleasant end in either case), should go ahead and do it now.
Panic mode is fully back with stock plunging to Friday lows, while both gold and bonds are at records, 10 Year touching a record low 2.03%, the S&P plunging to Friday's lows and gold as is well known, back at all time highs. The catalyst: the same thing Zero Hedge reported yesterday, namely that one bank in Europe has a dire dollar squeeze (note not EUR) to the tune of $500 MM. The real market is thus now pricing in both hyperinflation and hyperdeflation at the same time, while the Fed's policy instrument, stocks, is now pricing in Lehman part deux (but don't nobody mention SocGen or the black choppers will come after you). As for those who followed Doug Kass' advice and bought XLF yesterday, we have four words: iShares Inverse Kass ETF.
The president, after a whirlwind media tour, has begun his much deserved vacation at Martha's Vineyard. We wonder what is the market bloodbath threshold for Obama to announce he is cancelling it, and is rolling up his sleeves to get stocks higher -3%? -5%? Here is the president's complete daily schedule:
- 10:30 am - Meets with senior economic advisers
- 11:50 am - Meets with national security team
- 3:30 pm - Departs White House
- 5:15 pm - Arrives Martha’s Vineyard
By then the market should be, thankfully, closed.
More Jobless Stagflation: CPI +0.5% On Expectations Of 0.2%, Jobless Claims Back Comfortably In +400K TerritorySubmitted by Tyler Durden on 08/18/2011 - 08:41
Following yesterday's upside surprise in the PPI, it was only logical that CPI would come higher than expected. However, printing at a 0.7% swing M/M, or the highest in years, was not expected. Broad CPI came at 0.5% in July after dropping -0.2% in June, or 3.6% Y/Y. This was far more than consensus which expected 0.2%. Core CPI however was in line with expectations at 0.2%. The reason for the surge? Gas, food and clothes. "The gasoline index rebounded from previous declines and rose sharply in July, accounting for about half of the seasonally adjusted increase in the all items index. The food at home index accelerated in July and also contributed to the increase, as dairy and fruit indexes posted notable increases and five of the six major grocery store food groups rose...The apparel index continued to rise sharply, increasing 1.2 percent in July; it has increased 3.9 percent over the past three months....The index for nonalcoholic beverages increased 0.9 percent in July as the coffee index continued to rise sharply." Elsewhere confirming that as expected the unemployment situation is deterorating, with 408K initial claims printing, on expectations of 400K, and making sure we dont have a revised 19 out of19 week of consecutive 400K+ prints was last week's revised 395K claims to, hold on to your seats, 399K. That's right: a 1K in jobs breaks the trend, huzzah! Just as importantly, those on EUCs and Extended benefits continued to plunge, dropping by 43K in the last week. And most frightening, the one year change in Americans receiving Emergency Compensation (EUC) has plunged from 4.7 Million to 3.1 Million. That's 1.6 million Americans who no longer even collect any benefits from the government.