Market Reaction? 30 Year Just Hit 3.99% As Stock Selloff Accelerates, Gold At All Time Record, Swiss Franc Flash SmashesSubmitted by Tyler Durden on 08/02/2011 - 12:44
To see what the market thinks of the economic prospects for the economy look no farther than the 30 Year which just dropped below 4.00% and is trading at 3.99% right now. The market is effectively pricing in a major economic contraction, with long-end deflation now expected. Which means that Bernanke just got yet another carte blanche to proceed with the only thing he know. And validating it is the equity market which at last check not only did not react favorably to the Senate vote, but has been fading all the news all day, and is now trading at the lows, with the S&P, Nasdaq and Dow all down more than 1% now and plunging. Next up, even as Obama prepares to talk, everyone is once again looking at an imploding Europe which will need its second bailout in a month (and third overall) shortly... or else.
Did we say debt ceiling? We meant debt target. The important thing is that the soap opera is over! Market reaction? None. And now back to your regularly scheduled economic collapse, only this time with 120% debt/GDP.
The circus has been let completely loose, with the president now expected to address the nation following the Senate vote on the debt ceiling which by implication is expected to pass without a hitch. Naturally should the Senate vote by some miracle fail, Obama may be forced to scramble as his prepared and teleprompted remarks end up being completely useless. Watch what is hopefully the very last chapter of the farce (at least for another year) live here.
The farce is ending. Watch the Senate vote on the debt ceiling live below. The vote is expected to pass comfortably.
Is "The Ultimate Indicator Of Easy Money Access" Rolling Over, And Absent More QE, Is This It For The Market?Submitted by Tyler Durden on 08/02/2011 - 11:51
Two weeks ago courtesy of Sean Corrigan, we presented what many consider the "ultimate shorthand indicator of easy money and speculative access" - the stock price of auction house Sotheby's. Well, the easy money may be about to end, and with it the latest bout of irrational market exuberance. As the chart shows, Sotheby's has timed the three previous armageddon with uncanny precision, with the red vertical lines marking the market tops almost perfectly. These occur when the i) RSI hits overbought, a condition that has been realized now; ii) when the stock price has a monthly closing below its 12 month Moving Average, also realized and iii) when the MACD crosses below its Signal line - this is about to occur any minute. We expect the 4th red vertical line to mark the end of this particular period of uber easy money any minute, and absent another monetary stimulus, to begin the at first slow, then very fast collapse to another market secular low.
With everyone and their mother now expecting the BOJ to do absolutely nothing courtesy of Noda's now hourly announcements that he is watching the JPY like a hawk, or simply a confirmation that the Japanese central bank is as toothless as the SNB (EURCHF at 1.0952 at last check) to do much if anything, here is Citi's Osamu Takashima, who writes that the BOJ will intervene at a level of 76 on the USDJPY or about 9500 on the Nikkei. Bloomberg All News summarizes the highlights of his note.
This week's interview is one of the most important discussions we've had to-date on energy, its supply/demand dynamics, and the tremendous impact it has on our economic and social identity. It is clear now that we are staring at a future of declining output at a time the world is demanding an ever-increasing amount. Nate Hagens, former editor of the respected energy blog, The Oil Drum, gives a fact-packed update on where we are on the peak oil timeline. But interestingly, he explains how he sees the core issue as less about the actual amount of energy available to the world, and more about our assumptions about how much we really need: "We’re not really facing a shortage of energy, we’re facing a longage of expectations. And the sooner that we as individuals or a nation recognize that the future is going to see much lower consumption than today and prepare for that, psychological resilience is going to be really important; because if no one is psychologically prepared, people are going to freak out when some of these freedoms start to go away.
Eric Sprott On The Real Banking Crisis: Global Depositor Bank Runs And Why Gold Is Going Much Higher As A ResultSubmitted by Tyler Durden on 08/02/2011 - 10:43
Eric Sprott writes: "We believe a growing number of European depositors are transferring their money out of EU banks, and many of them are reinvesting their capital into gold and silver for safety. It does not surprise us to see gold hitting all-time highs in euros and dollars. It’s worthwhile to acknowledge that those investors in Iceland and Ireland who had the foresight to convert their cash to gold before their countries’ respective bank runs have all fared extremely well in both nominal and real terms. We believe that gold and silver are the ultimate alternative for a chequing account in a vulnerable banking jurisdiction, and whether the ECB prints more euros or eventually defaults, both outcomes will continue to support a robust demand for precious metals as an alternative currency."
Goldman FX, whose core thesis over the past quarter has been an increase in USD weakness, and which has so far proven correct against most pairs (and certainly gold) except for the EUR, which is in the same boat as the dollar (and both are sinking fast after hitting an iceberg), looks at the risk of upside dangers to the USD, which would likely materialize in the event of a global Risk Off event, and finds that the currencies most exposed to a surge in the USD are the Yen, once upon a time the carry funding currency and now the opposite, the AUD and the NZD. That said, Goldman concludes "beyond the risk of a short squeeze near term, our expectation is for USD to continue weakening on a broad basis." Naturally, Goldman's thesis will be very facilitated should Bernanke go ahead and make QE3, in some form, a reality as soon as the end of August.... just like last year.
The SEC's Co-Chief Counsel On Derivatives (Such As Abacus), Worked As Outside Counsel For Paulson & Co, And Signed Off... On AbacusSubmitted by Tyler Durden on 08/02/2011 - 09:57
The surprises of SEC's infinite revolving door conflicts of interest never cease to amaze (or, for that matter end). Andrew Ross Sorkin has taken some time from his busy media whirlwind tour schedule and conducted some actual investigative reporting for a change, discovering that the SEC's co-chief counsel in charge of helping write derivative rules, Adam Glass, who previously testified about Goldman's Abacus, the culprit for the biggest SEC settlement in history against a Wall Street firm, had some very specific inside knowledge vis-a-vis Abacus. He signed off on it. Writes Sorkin: "Before working on the financial crisis cleanup, he helped create the opaque securities that contributed to the mess...For many years, Mr. Glass served as the outside counsel to Paulson & Company...And yes, Mr. Glass, in that role, signed off on Abacus, which was created specifically for the hedge fund to short subprime mortgages. Mr. Paulson handpicked some of the underlying investments in the derivative...The government, in its complaint, claimed that Goldman had "misstated and omitted key facts regarding" Abacus, including disclosing Mr. Paulson's role in its creation. The firm paid $550 million to settle the case, without admitting or denying guilt...his role once again raises questions about the revolving door between Washington and Wall Street at a time when public distrust about the agency and its lack of enforcement action against the culprits of the crisis is running high..."If he was involved in Abacus, how is he supposed to police it?" We are not sure if we are more confused by the fact that Sorkin has actually done some actual research or that yet another SEC crony is exposed to be in the pocket of Wall Street's rich and powerful. Actually, the former. Certainly the former.
Glaucus Brings The Latest Chinese Reverse Merger Fraudcap Du Jour - L&L Energy (Nasdaq:LLEN): PT < $1.00Submitted by Tyler Durden on 08/02/2011 - 09:35
It has been a while since we have presented Chinese fraudcap candidates. Today, courtesy of Glaucus Research we bring you the latest entrant to the alleged reverse merger fraudcap group: L&L Energy, Inc, (Nasdaq: LLEN). Is this company nothing but yet another Chinese fraud and poised to plunge by over 75%? Read the full report (Price Target <$1.00) and find out.
The H2 economic grwoth hockeystick is rapidly becoming Kansas. To wit from Jan Hatzius: "While quarterly results for consumer spending were already known-they were published in last Friday's GDP report-the monthly pattern means that consumption heads into Q3 on a weak trend. The report therefore points to additional downside risks to our 2.5% forecast for Q3 GDP growth." As we predicted last Friday, Goldman will cut Q3 GDP to sub-2% within a few weeks and the QE3 onslaught avalanche will commence.
In his latest letter, Kings of the Wild Frontier, crushes the optimism of all those, roughly 4 altogether in the entire world whose combined IQ barely breaks into triple digit territory, who believe that the debt ceiling "compromise" does anything at all for US spending patterns, weather it is for total marketable debt, or the $66 trillion in NPV of future liabilities. Gross, however, does show us the 5 ways (well, 4 plus default) that the "debt man walking", aka Uncle Sam and his tens of trillions of future liabilities, plans to rob from you: dear taxpayer, in order to minimize the present value of these unmanageable future liabilities. To wit:
- Balance the budget and/or grow out of it
- Unexpected inflation
- Currency depreciation
- Financial repression via low/negative real interest rates
All of these guarantee that investor pocketbooks will be dramatically affected... Adversely. Let's dig in...