Goldman's Take On Ben's Remarks: "Probability Of Easing Over Next 6-9 Months Is Higher Than Probability Of Tightening"Submitted by Tyler Durden on 07/13/2011 - 11:21
Fed Chairman Bernanke delivered a balanced assessment of the policy outlook, saying that the economy could evolve in a way that would “warrant a move toward less-accommodative policy”, but that persistent weakness in activity and renewed deflationary risks would “imply a need for additional policy support”. In contrast to our expectations, the prepared remarks included a list of potential easing options—communication changes, changes in the interest paid on reserves, and security purchases. We see this as an upgrade of the seriousness of the easing discussion on the committee, and therefore interpret the speech as a moderate dovish surprise (the easing options were already discussed in the last post-FOMC meeting press conference). We believe the probability of easing over the next 6-9 months is higher than the probability of tightening.
As Bernanke reminds the world that the one and only weapon in his arsenal is stealth inflation through dollar devaluation (yes, some had already forgotten it, especially all those economists, think tanks, and others who claimed there was no QE3 hint in the FOMC minutes), there is one clear winner: gold, which continues to surge to all time highs and will likely cross $1,600 within the week (if not day), from which point it is smooth sailing to $_,000.
Watch live the first of two official monetary policy testimonies by Ben Bernanke, today being before Congress, and thus Ron Paul, tomorrow before the Senate. Among the critical items to be discussed are the role of fiscal policy, whether there will be QE3, and how (and when) the Fed will proceed with future rate hikes. Mostly, it is expected be a whole lot of hot air. Full text of the report can be read here. The reason everything is surging is because, as predicted, the Chairsatan appears to have just ushered in QE3: "The possibility remains that the recent economic weakness may prove more persistent than expected and that deflationary risks might reemerge, implying a need for additional policy support. The Federal Reserve remains prepared to respond should economic developments indicate that an adjustment of monetary policy would be appropriate."
For everyone asking who will be broadly liquidating to compensate for the News Corp-BSKYB merger arb catastrophe, meeting margin calls, and overall trying to prevent a fund blow up, here is the list. The biggest recent accumulators: Odey, Nomura, State Street, Lloyds, Taconic, Perry and PPM. These are the funds, which per CapIq loaded up LSE:BSY shares in the last 1-2 quarters, almost certainly based on merger arb assumptions.
From Sky News: News Corporation has withdrawn its bid for BSkyB, Sky News City editor Mark Kleinman has exclusively revealed.
The year was 2002, and while the majority of Americans were completely obsessed with the so called “War On Terror” and other devices of distraction, something much more real and decidedly prophetic was going on in our southern hemisphere. Argentina was in the midst of total collapse, driven by banker fraud and extreme currency devaluation in tandem with government mismanagement and corruption. First, cities exploded with rioting and violence as Argentinian police and military attempted to crush all dissent. Soon after, displaced refugees from population centers along with roving bands of thieves flooded into the countryside, wiping out isolated farms, murdering families, and hunting down any small group of survivors weaker than themselves and flush with supplies. The authorities (and I use the term loosely) were too busy trying to suppress civil protests to bother protecting those who were caught unprepared. This behavior is part and parcel of economic destabilization, regardless of the time or place in which it occurs.
Goldman FX Desk Back To Its Old Value-Destructive Ways After Stop Out In Latest FX Reco In Just Two WeeksSubmitted by Tyler Durden on 07/13/2011 - 08:57
It is good to see that Thomas Stolper has not lost his value destroying touch. In just the latest iteration of the company's FX team costing clients oodles of money (and making lots of money for its prop traders), we remind readers that on June 19, a full two weeks ago, Goldman advised clients to "Go long AUD/JPY for a target of 90 with a stop at 84." Our jaded Goldman translator kicked in and provided the following interpretation of Stolper's words: "As of tonight Goldman is advising clients that its prop desk has a lot of AUDJPY to sell up until 90, and will buy everything below 84, in other words Thomas Stolper says to go tactically long the AUDJPY until 90, with an 84 stop. Of course, this makes all the sense in the world if China is slowing down." Well, it seems that Goldman is now done offloading it AUDJPY exposure. As for any remaining Goldman clients who bought into the recommendation: Sorry. As of yesterday, AUDJPY traded below 84 on at least two occasions, droppoing as low as sub 83.10, thereby stopping everyone out.
The BLS reported that import prices declined by 0.5% in the month of June, slightly less than the 0.6% predicted by the consensus. This was a substantial drop from the revised 0.1% increase in May and was the biggest monthly drop since June 2010's -1.2% drop. More importantly, on a year over year basis the increase in import prices was 13.6%. The key driver was the drop in Fuel Import prices, which slumped by 1.6%, after a 0.8% drop in May. "Both petroleum and natural gas prices contributed to the June decrease in fuel prices, falling 1.6 percent and 1.4 percent, respectively. Despite the declines over the past two months, fuel prices rose 46.9 percent over the past year. That increase was primarily led by a 49.8 percent jump in petroleum prices." Core import prices were down 0.1%, the first monthly decline for the index since a 0.3% decrease in July 2010. "The June decline was driven by a 0.4 percent decrease in nonfuel industrial supplies and materials prices and a 1.9 percent drop in foods, feeds, and beverages prices, which more than offset higher prices for automotive vehicles and consumer goods. Nonfuel import prices advanced 4.8 percent for the year ended in June." According to Bloomberg economist Joseph Brusuelas lower petroleum, food, industrial supplies “should provide a breather” for cos. facing margin compression. At the same time, rising cost of motor vehicles, parts likely to fuel near-term core inflation rise.
So far, every iteration of the trite, overused and cliched "X is not Y" has meant to generate confidence, when all it really does is inspire laughter. Today we get Nomura's stimulus advocate Richard Koo giving a different spin on the "Greece is not Argentina" perspective.
Despite a sovereign downgrade of Ireland to "junk" by Moody's late last night, risk-appetite was observed in the market, led by out performance in Italian asset-classes after Moody's said that Italy is not in the same situation as Ireland due to its market access. This supported EUR across the board as well as the European equities, which together with comments from PIMCO that it is using the latest sell off in Italian bonds to increase its own holdings, weighed on bunds. Bunds came under further pressure following speculation that official names were checking European bond prices, and the peripheral Eurozone 10-year government bond yield spreads narrowed across the board. Weakness in the USD-Index provided strength to EUR/USD, GBP/USD and commodity-linked currencies, however, some weakness was observed in GBP/USD following the release of jobless claims change data from the UK, which showed the biggest jump in two years in June.
With several economic items on the docket, the key event today is the start of Ben Bernanke's Humphrey Hawkins semi-annual report on the monetary policy to Congress (tomorrow an identical one will be delivered to the corrupt, brain dead zombies in the Senate). Look for select key words such as "QE3", "Ponzi", "Catastrophe", "Pray", and, of course, "Get tu da choppa"
Gold for immediate delivery rose to new record nominal highs of 987.58 British pounds and 1578.8 U.S. dollars in London this morning. New record nominal highs were seen for gold in euros (1,123.50 euros per ounce), pounds and dollars yesterday. Gold rose soon after FOMC minutes showed that the Federal Reserve is considering further quantitative easing or QE3 and after Moody’s downgraded Ireland’s debt to junk status. The very poor trade deficit numbers in the U.S. yesterday ($50.2 billion in May) and the UK this morning (£8.5 billion in May) is also supporting gold today. The Moody’s downgrade of Ireland was expected but the timing was very bad given the increasing turmoil in Eurozone bond markets and deepening risk of contagion due to bond risk in Spain and Italy, the world’s third largest debtor after Japan and the U.S. While Italian and Spanish bond yields have fallen today, the Irish 10 year yield rose to new euro era record highs at 13.74%. While UK inflation figures yesterday were slightly better than expected, today’s unemployment figures were worse than expected. Jobless claims rose at their fastest pace since May 2009, showing the UK recovery is faltering and jobs are being lost as the deepest government budget cuts since World War II take hold.
Market regulators forcing short squeezes? Check. Central banks using mob-style gimmicks to push the price of "assets" around? Check. Market confidence back to 100%? We'll have to get back to you on that. Gold spot just touched on a fresh new intraday all time high of just under $1,579... and is going much, much higher. After all, the most important question - Everyone is broke? Check.