The dirty little secret that everyone (and we mean everyone) wants to act as if it no longer exists is: These prices are only representative of anything worth value if they can be sold. We are now at heights where even the so-called “Uber Bulls” are beginning to get a little nervous in the hoof. For just who is going to buy when the first major dip goes stampeding past? There’s no true true economic recovery picture to be bought.
In what was practically a carbon copy of yesterday's 10 Year auction, moments ago the Treasury sold $13 billion in 30 Year paper which priced at 3.369%, the lowest yield since June of 2013 when it hit 3.355, even if it meant a modest 0.9% bps bps tail to the 3.360% When Issued. The internals were both good and bad: bad in that the Bid To Cover came at 2.40, modestly lower than last month's 2.69 but better than the TTM average of 2.38. Good in that the Indirect takedown of 53.25 was the highest since we began keeping records in 2008, and continues the trend seen last month in which Indirects bought more than half of the auction. This strength, however, was offset by a drop in the Direct bid by nearly half from last month's 21.8% to 11.1%, leaving a modest 35.7% to the Dealers to promptly flip back to the monetizing Fed.
Earlier this summer, IMF bureaucrats went to Sofia, Bulgaria to study the country’s economic progress; and roughly a month ago, they released an official report which stated, among other things, that Bulgarian banks are “stable and liquid.” Then 2 weeks later, there was a run on two of the nation’s largest banks (as we discussed at length here). But it's not just the IMF...the EU Commission soothingly announced that "the Bulgarian banking system is well-capitalized and has high levels of liquidity compared to its peers in other member states." The lesson here is clear: The people in charge of regulating the system and making these proclamations about bank safety are totally clueless. Clearly, Bulgaria (and Portugal) shows that the entire system can really be a bunch of smoke and mirrors.
For the past several weeks it felt as if Bank of America's chief technician, MacNeill Curry (or at least his clients) had an infinite balance sheet to fund relentless P&L losses, resulting from his daily recommendation to short the 10 Year, which contrary to the best wishes of the Fed and the sellside penguins constantly refused to go lower and validate the "economy is getting better" thesis. Today, even his TBTF balance sheet finally ran out, and moments ago he finally capitulated, and was stopped out on his TYU4 short.
Pure Madness: Revenueless, Assetless CYNK Soars Over $5Bn; Bigger Than GameStop, Cablevision, Jabil CircuitSubmitted by Tyler Durden on 07/10/2014 - 12:10
Well that escalated quickly... CYNK Technologies - which we first exposed to the world here - has gone from dumb to dumber. "Traders" just bid CYNK at $18.50 $20.32 this morning (on less than 100,000 shares) meaning this asset-less, revenue-less shell of exuberance now has a market cap over $5.4 $5.9 billion. That leaves CYNK more "valuable" than all of the following companies...
- PORTUGAL'S BANKS MORE CAPITALIZED, MORE TRANSPARENT NOW: COSTA
- PORTUGAL TO OUTPERFORM ITALIAN BONDS ON MACRO OUTLOOK, MS SAYS
- BARROSO SAYS FOREIGN INVESTOR CONFIDENCE IN PORTUGAL INCREASING
- PORTUGAL OUTLOOK REVISED TO STABLE AT S&P
Broad European stocks are down over 4% in the last few days but that hides the carnage among the most exuberantly excited names on the way up. Portugal, Spain, and Italy have been battered in the last few days (despite everyone explaining how Portugal is so small, contained etc..). Portuguese bond spreads spiked 25bps today as the central-bank-inspired coupling of sovereign-health and banking-system stability drag each other down (Spain and Italy jumped 9bps higher in risk). European bank stocks have cratered and are now negative year-to-date.
On the heels of Wal-Mart's dismissal of the "great" jobs report, The Container Store CEO yesterday explained how Q1 weakness was "not just the weather" but an overall 'funk' in consumer spending. Last night we had a second firm - the much more integrated into the housing recovery, Lumber Liquidators - come out with some heresy about Q2 bounce backs and the weather..."demand strengthened for 30 days beginning in mid-March. But in May demand slowed and further weakened in June. We were somewhat surprised by the magnitude of the continued weakness in the stores designated as impacted by weather in the first quarter." There goes Q2 GDP...
Just when we thought US foreign policy couldn't sink to new lows, it does just that. Recall yesterday's less than veiled threat by China president Xi Jinping Xi called for greater military communication with the U.S., adding that "A conflict between China and United States will definitely be a disaster for the two countries and the world. As long as we uphold mutual respect, maintain strategic patience and remain unperturbed by individual incidents and comments, we’ll be able to keep relations on a firm footing despite ups and downs that may come our way.” So what does the US do? Nothing short of taking a machete and poking the Dragon in the mouth.
Another day, another uncomfortable fact about Q2 not being the epic bounce back that so many had promised. Wholesale Inventories rose only 0.5% in May - following April's +1.1%. This is the slowest growth in 2014 and biggest miss of expectations since Dec 2013. Wholesale sales also fel back, missing expectations at +0.7%, to the slowest since Feb as April hopes fade. Cue, Q2 GDP downgrades in 3...2...1...
The PSI20 - Portugal's "Dow" - is down 22% from its exuberant early-year highs (when Europe was fixed). Who could have guessed that under the surface, nothing was fixed? We are sure the next few days will be full of reassurances from asset-gatherers and TV anchors proclaiming that "Portugal is a small country", "BES is contained", "Draghi's put will protect from any contagion." Now where have we heard that before.. and remember as Juncker told us, "when it gets serious, you have to lie."
You know things are not going your way when a long-time ally and peer in the world's power structure 'shuns' you. On the heels of the exposure of a 2nd "spy case", Germany has had enough...
*GERMANY EXPELS U.S. DIPLOMAT OVER ESPIONAGE AFFAIR
*GERMAN GOVT TAKING ISSUE 'VERY SERIOUSLY,' CHANCELLERY SAYS
*EXPULSION LINKED TO INVESTIGATION OF ALLEGED U.S. SPYING
It appears the US surveillance efforts was crossing Merkel's red line and the 'diplomat' appears to the CIA station chief. Of course, we are sure President Obama knew nothing about this spying...
"Following the release yesterday afternoon of the latest minutes from the FOMC which make it very clear that the Fed’s propensity to tighten monetary policy in the near future is near zero. We may have thought that the market was over-bought and due for a correction, but we are going back to being “pleasantly” long rather than market neutral for the Fed’s wind is at our back." - Dennis Gartman
But... but... the VIX said everything is ok, and European rates were the lowest they have been in centuries... How can something possibly go wrong?
It just did.