And just as Citigroup predicted, US imports surge even as US exports jump to a record $172.7 billion. But the story is once again in the GDP reducing imports which jump by a whopping $220.8 billion, a $10.4 billion jump M/M. The total deficit of $48.2 billion is the highest since the June 2010 spike which hit $49.9 billion. From the release: "Exports increased to $172.7 billion in March from $165.0 billion in February. Goods were $124.9 billion in March, up from $117.8 billion in February, and services were $47.7 billion in March, up from $47.2 billion in February. Imports increased to $220.8 billion in March from $210.4 billion in February. Goods were $187.0 billion in March, up from $176.9 billion in February, and services were $33.8 billion in March, up from $33.5 billion in February. For goods, the deficit was $62.1 billion in March, up from $59.1 billion in February. For services, the surplus was $13.9 billion, up from $13.7 billion in February." Ah, financial innovation being exported as per usual. Look for another round of Q1 GDP downgrades as this number takes out a few basis points in growth. As we know from China that April exports to the US jumped even more, this import surge will likely carry over into Q2 and result in more GDP cuts.
- U.S. post has $2.2 billion loss, warns of Sept insolvency (Reuters)
- Partisan Divides Harden on Debt Accord as Options Are Rejected (Bloomberg)
- EU Slows Drive for More Greek Aid as Merkel Seeks ‘Proven’ Steps (Bloomberg)
- AIG sets $9 billion stock offer, half of expected (Reuters)
- China Inflation Signals More Tightening to Come (Bloomberg)
- Japan Aims for Tepco Compensation Scheme this Week (Reuters)
- U.N.Chief BanCalls forCeasefire in Libya (Reuters)
- Syria Extends Armed Push; EU Sanctions Begin (WSJ)
Game Over RAB Capital: London's Once Star Fund Delists Following Terminal Deluge In Redemption RequestsSubmitted by Tyler Durden on 05/11/2011 - 08:04
RAB Capital, once the poster child of the London credit bubble, whose assets peaked at $7 billion in 2007, has seen its shares tumble over 30% in afternoon trading, following an announcement that the firm will delist after a terminal surge in redemption requests. From the FT: "RAB, which at the beginning of the year oversaw assets of just over $1bn – a far cry from its peak of $7bn in 2007 – has seen its remaining assets evaporate in recent weeks. Investors pulled $370m from RAB’s flagship $470m Special Situations fund last month when a three-year moratorium on withdrawals finally expired....Since then, clients – fearful of the RAB’s viability – have abandoned the company’s other strategies. The firm’s $120m Cross Europe fund has been swamped by redemption requests, say people familiar with the company. In addition, one of RAB’s remaining star money managers, Gavin Wilson, is to retire from the firm. Mr Wilson’s $250m Energy fund has been one of RAB’s best performing offerings of late." Well, if other, much better managed hedge funds are any indication, Mr. Wilson's Energy Fund likely got annihilated last week, putting the final nail in the 4 year public stint of this vehicle to bring leverage to leverage.
Today, we get the March trade balance and JOLTS reports. Also, the Treasury continues its exercises in debt ceiling breach by issuing another $24 billion in 10 Year notes, while the Fed explains its monetization intentions for the next month as it releases the latest POMO schedule at 2 pm EDT.
Greece Stages Another 24 Hour Strike (Complete With Teargas) As European Officials Arrive To Enhance Austerity: Live Webcam From Constitution SquareSubmitted by Tyler Durden on 05/11/2011 - 07:33
On the one year anniversary of its first bailout, things in Europe's basket case are getting much worse once again. Even as senior EU and IMF inspectors arrived in Athens on Wednesday to press Greece to shore up its finances, workers walked off the job to protest against austerity-induced recession, culminating in a 24 hour strike which sees both airports and journalists taking a break from hard work. Oddly ironic this: the "bankers" arrive to make austerity even more aggressive (so there is more value left over to senior bondholders when the bankruptcy commences), just as the country experiences a deja vu moment of strikers on one side and teargas lobbing policemen on the other. Those who wish to follow the protests live, which so far the mainstream media has refused to show, can do so here.
Gold and silver have extended their recovery and may be headed for the fourth day of gains due to the continuing European sovereign debt crisis, Chinese inflation (+5.3%) and the real risk that rising oil and commodity prices are leading to an inflation spiral internationally and stagflation. German inflation data this morning was worse than expected jumping to 2.7% from 2.3% due to surging energy costs and despite recent strength in the euro. This has led to the euro falling against all currencies and especially against gold. The precious metals are likely to be supported later today when US trade deficit data is expected to be poor with still high oil prices leading to a very large expected deficit of $47.7 billion. This should see the dollar come under pressure and support gold. Stagflation or low economic growth, high unemployment and rising inflation is a clear and present danger to the UK, EU and U.S. economies and other economies internationally. This is especially the case in the UK where house prices have begun to fall again and may be set for sharp falls. Internationally, we are seeing significant debt deflation where the value of goods and assets bought with debt are falling (cars, property etc) while the value of finite, essential goods such as food and energy are rising. Safe haven and inflation hedging diversification into gold is likely to continue as inflation is deepening and there is a distinct whiff of stagflation in the air. It is too early to tell whether the recent sell off is over and a further correction is possible however global macroeconomic conditions suggest that gold and silver bull markets are very much intact. This is especially the case due to continuing Asian demand with gold again being bought on all dips in China, India and the rest of Asia.
Summary of takeaways:
- Activity growth was weak though there are some uncertainties in terms of how weak it is.
- The moderation in M2 and power shortages were the likely drivers of the slowdown.
- CPI came in slightly above our and market consensus forecasts, but it nevertheless represented a sequential moderation.
A snapshot of the European Morning Briefing covering Stocks, Bonds, FX, etc.
Market Recaps to help improve your Trading and Global knowledge
So much for the world's largest economy no longer overheating. CPI came ahead of expectations yet most other key economic indicators confirmed a slow down in the economy, even as borrowing appears to be picking up once again. Could China be exhibiting the very first symptoms of our very own stagflationary squeeze?
- CPI at 5.3%, Consensus at 5.2%, previous 5.40%
- PPI at 6.8%, Consensus at 7.0%, previous 7.3%
- Industrial Production up 13.4%, Consensus of 14.7%, previous at 14.8%
- Retail Sales 17.1%, Consensus of 18.0%, previous 17.40%
What kind of goddamned bubble pops and then goes right back up? Oh wait, did the Central Banks retract the 8-K where they all promised they are done printing for ever and ever (granted, countersigned by Linda Green and Jean Claude Junker, and edited by the WSJ)? That must be it! Oh, and gold at $1,521, back to those lofty, long ago levels from April 27. Cue CNBC on precious metals popping. And yes, that giant sucking sound is the CME preparing silver margin hike 6 through 666.
Banks Offer Paltry $5 Billion In Exchange For Full Expungement Of Robogate Charges And Complete Release Of Any Future ClaimsSubmitted by Tyler Durden on 05/10/2011 - 20:59
And there were those who thought that the $20 billion demanded by state and federal officials of banks caught in various acts of robosigning fornication was a joke. According to the WSJ, "The nation's biggest banks are willing to pay as much as $5 billion to settle claims by federal and state officials of improper mortgage-servicing practices." Needless to say this is a sham of a farce of a "settlement", and amounts to one quarter in trading perfection for the likes of the afore discussed JPM, BofA or Goldman. Recall that Goldman pays well over three times this amount in bonuses each year. On the other hand, this is merely a counteroffer to the $20 billion preliminary bid. Which means that the final number to put the entire robosigning affair behind us will be about $10 billion give or take. And banks can go back to doing what they do best: post 0 trading losses per quarter, and other such infinite sigma events.
And just like that, the short trap is set: following some sideways movement over the past several months, in which the market grotesquely, mockingly did not proceed in a straight line up, unlike the 8 month "Birinyi Ruler" period from August to March which extrapolated to about S&P 2,800 in 2 years, some (naive) investors speculated that the Fed may be losing control of the market and proceeded to short ridiculously overvalued stocks, that no longer reflect not only the economy on Earth but probably on any other life-supporting planet in the known and unknown universe, in dimensions from 3 through 10 or anything else reasonably allowed by Kaluza-Klein. As a result, just announced short interest on the NYSE for the period ending April 29 has hit a fresh 2011 high, climbing to 13.094 billion shares from 13.05 billion . Alas, this comes just as the Treasury will do everything, and we mean everything, in its power to ram the market from the s to the p orbital, trap all the shorts, force the custodians to pull every share on borrow there is, and generally to make selling stocks illegal, probably coupled with a few thousand margin hikes in everything from precious metals to tetrahydrocannabinol over the next month just to keep traders' eyes focused on the ball, simply so it can divest some of its tens of billions in shares of AIG stock and claim victory over the tin foil clad skeptics. As usual, those hoping that the neo-feudal stock market is fair and/or efficient are about to be KYed.
Remember the other most hyped up re-IPO ever, AIG (after that other Marxist-inspired, union-lubricating, channel-stuffing debacle GM)? The same company that nearly brought down the system, that insured more disaster prone garbage than even Berkshire Hathaway, which is 92% owned by the government because it wouldn't look cool if the government fully nationalized everyone after Lehman was left to die, and was subsequently eagerly attempting to buy back its toxic filth at half off prices from Goldman's Bill Dudley who just so happens works at 33 Liberty now? Well, you can kiss that goodbye: the FT reports that "AIG and the US Treasury are discussing whether to shelve or scale back plans for a large public offering this month because of the lacklustre performance of the insurer’s shares in recent weeks, people close to the situation said." You can also kiss the Treasury's boasts of a break even on its AIG "investment" - this despite 2 years of endless market levitation, forced short squeeze, margin hikes, several wars, $4 trillion in monetary and fiscal stimuli, and most certainly, the kitchen sink. "People involved said the most likely outcome of the deliberations would be for the offering to proceed at a smaller size and closer to the Treasury’s break-even point. This would allow the restructured company to provide a longer record to the market before a larger sale later this year. Shares in AIG have fallen more than 30 per cent since January 20, hitting $29.62 on Tuesday and jeopardising taxpayers’ profits on the share sale. Treasury’s break-even level is $28.73 a share and officials have been reluctant to approve an offering below that price." This likely also means that any follow on equity capital raises by AIG will be relegated to CDO issuance and other "silly paper" that will be bought only with other people's money.
And so the Bill Gross juggernaut begins rolling. Reuters reports that "Influential investment veteran Jim Rogers said on Tuesday he plans to short U.S. Treasuries as soon as this afternoon as he expects the end of quantitative easing to pressure government bonds." Odd. Where have we written/heard that before. But of course, who listens to Bill Gross (the largest bond manager in the world) and Jim Rogers (the co-founder of Quantum) - surely they are no-nothing fools (who just happen to agree with our initial assessment that in the absence of QE2 all bets will be off). Reuters adds: "Rogers said he expects the U.S. dollar to rally when the Federal Reserve's unconventional monetary measure ends in June. "I'm not short bonds yet but I plan to short bonds - maybe this afternoon if I get around to it," Rogers told Reuters Insider television." Recently Jim Rogers correctly pointed out that silver is not in a bubble (a finding confirmed yesterday by Zero Hedge when we demonstrated that non-commercial spec longs in silver are at 2 year low) and continues to be long precious metals until such time as silver really hits the parabolic phase, well north of $100 (by which point the dollar will likely be confetti anyway). So as ever more influential asset managers turn outright hostile on rates, just how much longer will the Fed's vol selling yield suppression scheme work for?
We have a quick question for the Treasury Secretary: according to today's DTS, as of close yesterday, the Treasury had $14.274 trillion in debt subject to the ceiling of $14.294 trillion, or a $20 billion "buffer." To the best of our knowledge there were no redemptions today, and certainly none in the non-Bill pipeline this week. So, uh, how exactly did Tim Geithner auction off $32 billion today? (and plans to auction off another $40 billion tomorrow and Thursday)