The Minneapolis Fed has launched a useful charting service which analyzes not only the Great Recession, which allegedly has ended (must be news to the 1.8 million...and growing...newly uncovered unemployed, but we'll take the NBER's word for it) but the even Greater Recovery that we have presumably been in for the past 6 months or so. At least those Fed critters have a twisted sense of humor. In order to quantify just how funny they are, the Min Fed provides the following preamble "The 2007-2009 recession is widely thought to have ended sometime last summer. How bad was this recession, and how quickly is the economy recovering? How does this recession and recovery compare to previous cycles?"How indeed? Here are the charts which just a cursory perusal will lead the peruser to wonder what on earth the administration is smoking. Recovery indeed.
The G7 meeting this weekend at Iqualit will be busy (one assumes the need for tear gas 10 miles south of true north will be somewhat moderated). Even busier if the so far uncorroborated rumor we have received turns out to be true.
Portugal's 9.3% budget deficit is about to get a whole lot worse. A proposed Law of Regional Finances, which was approved yesterday by a parliamentary committee, which would increase funds sent to Portugal's Madeira and Azores regions by €50 million, and keep rising until it hits €86 million by 2013, was just ratified into law by the Portuguese parliament. This is precisely what the Finance Minister had been dreading.
Brazil's BES Investimento Pulls Bond Deal On"Market Conditions", Company Is Local Unit Of Portuguese BankSubmitted by Tyler Durden on 02/05/2010 - 10:49
This week showed just how jittery the IPO sentiment was, with so many IPOs pulled on "market conditions" even including perpetual cash cows such as porn sites. Now the weakness in the market is shifting to bonds. The latest casualty is Brazil's BES Investimento bank which has postponed a $350 million bond on "market conditions." We are not so sure if the reason is with "market conditions" or whether the true reason has to do with BES being a local unit of Portugues bank Banco Espirito Santo S/A. We anticipate any corporate entities that have a relation with an increasing number of European countries will soon become locked out from the capital markets.
Just flashing headlines for now:
SCHAPIRO:IN COMING WKS,WILL PROPOSE SHRT SELLING RESTRICTIONS
SCHAPIRO:REPEATS CONSIDERING MORE MEASURES ON MONEY MKT FNDS
SCHAPIRO:REPEATS STAFF TO EXAMINE MERITS OF FLOATING NAV
The dead cat bounce in the most shorted names is taking some of the recent peripheral high fliers tighter, at the expense of increased widening at the "risk-free" core. We expect much more of this risk transfer from the zone of perceived risk to the heart of Europein the weeks/months to come. Some key levels: HY 600, IG 101, SovX 110., Greece 415, Portugal 225, UK 99.50
NFP -20,000, Consensus +15,000, Non-Seasonally Adjusted Unemployment Rate (U3 And U6) Surges To Record 10.6% And 18%Submitted by Tyler Durden on 02/05/2010 - 10:09
The January NFP number came in at -20,000, a mere 5k away from Goldman's -25,000 estimate. Consensus was for +15,000. December, as all prior months, saw an expected major downward revision to -150,000 from -85,000. The January Birth/Death adjustment was for -427K from +25K in December. Despite a deterioration in every metric, the unemployment rate dropped from 10.% to 9.7%, even with a consensus at 10.0%. A glitch in the excel model is further corroborated when one considers that the civilian labor force participation rate actually rose in January from 64.6 to 64.7. Yet a number that avoids some of the constant fudging by the BLS, the Non-Seasonally Adjusted number, hit a new recent record: instead of 9.7%, this number was 10.6%, a 0.9% increase from December! The same can be seen in the U-6 data. NSA U-6 is now at a record 18%, even as the seasonally adjusted number declined to 16.5%.
We have speculated that the Federal Reserve or the U.S. Treasury could be allowing a "buyer" to accumulate stock index futures to boost stock prices. Perhaps the "buyer" has stopped buying. We know that the S&P 500 has dropped 6.6% since the close on January 20, the day before President Obama announced a plan to restrict proprietary trading by banks. Moreover, the S&P 500 fell on seven of those 11 trading days.
We saw almost to the tick the downside targets mentioned last night in S&P futures and EURUSD as per the hourly and 3-hour charts. However we see more downside potential on the Dax as we have not yet reached the target at 5,396. Also we do not have much hourly divergence in S&P and EURUSD's RSI low coincides with the lows which would suggest we can push a bit lower while remaining in the downtrend channel. S&P futures should bounce (maybe as high as 1070 here) but a break of 1051 on the downside could take us to 1,038.50 as the last leg started yesterday seems to be missing a 5th wave lower (caveat is that catching wave 5 of 5 is a tricky game as it can sometimes be so protracted you hardly see it on a chart!). - Nic Lenoir, ICAP
- Asian stocks fall most in 10 weeks on US jobless claims.
- Australian central bank raises outlook, sees 3.25%-3.5% growth ahead.
- Bank of England voted against extending its bond buying program.
- China announces anti-dumping steps on US chicken amid trade disputes.
- China's stocks drop for 3rd week on global recovery concern.
- Gold saw its biggest slide in 16 months, joining other metals in a broad sell-off.
- Hong Kong stocks fall, headed for longest run of weekly losses since 2008.
RANsquawk 5th February Morning Briefing - Stocks, Bonds, FX etc.
A few days ago we made some observations on the just-announced nearly $4 trillion 2011 budget. The key point was that while the ugly numbers already looked like a superglued Frankenstein monster without a Kardasian botox treatment, or even simple lipstick, it would have been truly disastrous had the administration done what Peter Orzsag threatened he would do 2 years ago, namely bring the GSEs, Freddie and Fannie, on the government's balance sheet. How this is not the case yet is simply stunning: the GSEs enjoy not only the constant "bid of first refusal" courtesy of the Fed's MBS QE program, but an explicit Treasury guarantee that has no ceiling as of last Christmas eve. Bloomberg's Jonathan Weil today came to the same conclusion, although being a Bloomberg employee he was characteristically much more crass, uncouth and downright cynical than the paragon of respected journalistic patois that is the establishmentarian concept known as Zero Hedge. In an attempt to awake the morts out of their stupor, a pandering Weil uses such cheap tricks as hyperventilating allegory, sarcasm, and hyperbole when saying that "[b]y all outward appearances, it seems
Obama and his budget wizards decided that including the
liabilities at Fannie and Freddie would be too much reality for
the world to handle. So they left the companies out, in a trick
worthy of Enron’s playbook, except not quite so hidden." Obviously, Bloomberg has an uphill struggle if its ever wishes to reach profitability (in the trillions of dollars that is... billions is so fin de pre-bailout siecle). We also fear for Weil's job prospects should he ever wish to find an occupation at such a highly respected place, where not only is there a 4 syllable word minimum but no sentences ever end in prepositions, as the Reuters blogosphere. Ironically, Bloomberg did redeem themselves somewhat later today, when in a Tom Keene interview, Goldman policy advisor Arthur Levitt is caught on tape performing more of the same hyperventilating, and in doing so blasting the administration, using the same Enron-esque analogy, when analyzing the paradox of the GSEs and the sovereign balance sheet.
One of the early year themes we have been discussing on our subscriber site has been our expectation for an increase in market volatility. Probably about three weeks back we wrote, “Unlike the consensus and big Street houses which have been predicting/expecting falling volatility in 2010 after an already accomplished death defying drop in volatility during 2009, we’re not so sure shorting volatility is such a wonderful investment idea right here. Although we could be dead wrong, we believe 2010 will present us with a great opportunity to buy volatility. We could be very close right now.” We’re not reprinting this to proverbially pat ourselves on the back as the year is still very young. Secondly, anyone spending time patting themselves on the back in this business are usually about 15 seconds away from having the proverbial rug pulled out from under them. Anything can happen, so judgment is reserved for now as we’ll just have to see what happens on the financial market front as we move forward. We think an increase in volatility is in store not only for the financial markets, but also in a much broader context we’d like to discuss in this missive. We want to quickly talk about another type of volatility – economic volatility. And we want to take a look at the long term in the hope that perhaps we can “see” the future more clearly. Here’s the question that may indeed morph into an investment theme for 2010 and beyond that we’d like to pose. Looking ahead, will the US economy be more or less volatile than we have experienced over what is close to the last thirty years? Yes or no? If indeed were are anywhere even close to the mark regarding our thoughts that economic volatility will increase, then that has direct and meaningful implications for equity and broader business valuations. Let’s start digging through some facts.
Goldman Keeps Its NFP/Unemployment Estimates Unchanged: -25,000 And 10.1%, Says This Is A U- Not A V-Shaped RecessionSubmitted by Tyler Durden on 02/04/2010 - 20:04
Goldman is known for changing its estimates within 24 hours of an NFP number. Today, there is no change, and it stays at -25,000, coupled with an estimation of the unemployment rate at 10.1%. Additionally, some bearish observations on the US economy via Goldman uber economist Jan Hatzius, who is now convinced this is a U- and not a V-shaped recession, follow.