No 4:00 AM morning session this time, as the general revulsion to even pretending to work on behalf of a totally destroyed country is tangible:
- EURO ZONE MINISTERS, IMF REACH DEAL TO CUT GREEK DEBT TO 124 PCT/GDP IN 2020 THROUGH PACKAGE OF EXTRA STEPS TOTALLING 20 PCT/GDP -OFFICIAL
Phew - great, Greece is fixed or something. The only problem, of course, as we explained earlier, is that Greece has to magically grow its GDP by EUR 50 billion from EUR 184 billion to EUR235 billion by 2020 for this 124% debt/GDP to be hit (and another EUR 20 billion in the next two years). No, really.
Many economists are suggesting that the second estimate of Q3 GDP, which showed an initial estimate of 2.0% annualized growth, will be revised sharply upward to 2.8%. The problem is that the surge in demand isn't materializing at the manufacturing level. The month-over-month data has begun to show signs of deterioration as of late which doesn't support the idea of a sharp rebound in economic activity in recent months. The headwinds to economic growth are gaining strength as the tailwinds from stimulus related support programs fade. This has been witnessed not only in the manufacturing reports, such as the CFNAI and Dallas Fed Region surveys where forward expectations were sharply reduced, but also in many of the corporate earnings and guidance's this quarter.
Broadly speaking, risk markets seemed stuck in tryptophan-mode today but as always it was stocks that used a mediocre volume day to squeeze the odd name here or there. Facebook and Apple were the wunder-kind once again (with the latter now up almost 17% from its swing lows at its 30DMA and a 38.2% retrace of the high-to-low move). The Apple gain moved the Nasdaq into the green (for the sixth day in a row) but the S&P 500 (despite its best efforts into the close) was unable to reach green after overnight weakness. S&P 500 futures did managed to cross into the green (fill the gap) as the day-session closed but Treasury yields were lower all day and signaled considerably less exuberance. FX markets oscillated in ever-decreasing ranges as everyone waits for the next eurogroup bullgasm. Commodities wondered aimlessly with Oil down and Copper up and gold/silver either here nor there. VIX rose modestly to 15.5% by the close as credit markets overall underperformed stocks.
An article by David Weiner on the MarketWatch site reminded me of just how weak the economic arguments against the gold standard are. Its title: "A Fool's Gold Standard." We examine this article here. The issue that divides the anti-gold bugs from the gold bugs is simple to state. The gold-coin standard places monetary authority in the hands of millions of economic participants who own gold. The gold bugs favor this. The anti-gold bugs oppose it. The rival camps are divided by rival systems of economic sovereignty. The gold bugs favor the sovereignty of the free market. The anti-gold bugs favor the sovereignty of the banking cartel, which is the joint creation of the federal government (Federal Reserve) and the states (state bank licensing). This is a replay of the arguments of Adam Smith against the arguments of the mercantilists. It is the logic of widespread, decentralized private ownership and voluntary contract versus the logic of government licensing, barriers to entry, and the legal right to counterfeit money. The anti-gold bugs do not want to put it this way. This is why gold bugs should always put it this way. Ultimately, this debate is between the logic of the free market as a social organization versus the logic of central planning. The battlefield is monetary theory and monetary policy.
Many people complain about their jobs on a regular basis - but, remember, it could be worse - far worse. While the hands-dirty role of central bank head or SEC chair are taken, the following infographic highlights jobs and salaries that really resonate with the phrase "there are dirty jobs but somebody’s got to do it." From garbage collector to crime scene cleanup technician and from proctologists to parents -- which stomach-turning jobs will have you running for the shower the minute you get home?
Since September, the Currency Wars have escalated. It isn't just because of the seminal monetary events of the Federal Reserve's QE III "unlimited" and the ECB's OMT "Uncapped". It is more likely about the fact that China announced its eleventh agreement that effectively bypasses using the US dollar with China's strategic trading partners. The latest agreement with Russia places trading oil, in non-US dollars, into the spotlight. The infamous petrodollar has had its destructive profile raised. The Petrodollar has long been the cornerstone that solidified the US dollar as the key currency reserve holding. The Petrodollar strategy is arguably more important that the Bretton Woods agreement which officially made the US dollar the world's reserve currency at the end of WW II. This is now being called into question. Minimally, it suggests a weakened requirement for holdings of the current levels of US dollars in sovereign reserve accounts.
Following the almost total lack of movement on the ECB 'savior' rumors, now we have IMF 'pain' rumors:
IMF WANTS EURO ZONE TO CUT GREEK DEBT BY 20 PCT OF GDP UP FRONT, COMMIT TO FURTHER REDUCTION LATER - Source
*IMF MAY WANT 40B EURO CUT IN GREEK DEBT, MORE LATER: REUTERS
EURUSD is just coiling and coiling here - but of the two rumors, t's EUR40bn write-down makes the most sense in a rational world of trying to help Greece (and therefore must be discounted as 100% not what will happen). We can only imagine that the EU tactic is now to throw each strawman to the rumor-mill to see what reaction is generated by the market - so far - #FAIL.
Following their brief interruption for calculations, the Eurogrouop is back hard at work and a few absolutely meaningless and ridiculous headlines are being spewed:
- *ECB SAID POISED TO RE-ACCEPT GREEK GOVT BONDS AS COLLATERAL (IF AID TRANCHE APPROVED)
- *ECB SAID TO REOPEN ISSUE OF PORTFOLIO PROFITS ON GREEK BONDS
- *ECB SAID TO ALSO LOOK AT OPTIONS OF BOND ROLLOVER, BUYBACK
The market, for reasons we note below, completely ignored this idiocy as anything of relevance as they continue to try to find a way to enable the Greeks to appear to pay their next principal via pure accounting shenanigans as opposed to the transfer of any real money. We wait with baited breath for how they are going to wriggle out of this one and remind readers of the buyback 'boondoggle' Q&A from the weekend, as it is the write-down that is what the market is focused on.
Absolutely remarkable... and in Texas to boot! As we have said for years, pretty soon anyone that disagrees with Washington D.C., Federal Reserve policies and rule by TBTF Wall Street criminal banks will be labeled a" terrorist." That is where all this is headed. 1984 has arrived folks.
With REO-to-Rent now yesterday's trade, the Baltic Dry Index stumbling along near its lows (along with a glut of containers), and a 'recovery' in US housing, what better than to leverage all of these themes; to wit, as ABC News reports, the first U.S. multi-family condo built of used shipping containers is slated to break ground in Detroit early next year. So forget Trailer Parks, now the increasingly mothballed ports of America will be wonderful waterfront property courtesy of your very own (slightly used) cargo container. One proponent of this 'cargotecture' warns that although containers can be bought for as little as $2,500, they should not be thought of as a low-cost housing solution. Tempted? We are sure; below are several current developments.
There are so many "meta" things going on in here, we wouldn't even know where to start, so we will simply present Goldman's just released analysis of the implications of Carney's "surprise" appointment to the head of the BOE as is, in all its faux "shock" glory.
It is truly amazing to what lengths the mainstream media will go to avoid talking about what really got Goldman's former head of the Canadian Central Bank the role of Goldman's current head of the Bank of England. But it could be worse: a word search for Goldman in the BBC's just released profile of Mark Carney shows one instance of said word, and as a parenthetical at that. Hey, it could have been zero...
We warned on Thursday and Friday of last week that the rally in European risk assets had begun to disperse (with stocks continuing to the final bell on Friday while credit markets were far less excited). Today saw stocks roll over modestly (less than 1% drops in general today) and credit markets continue to slide. Sovereigns leaked modestly wider once again (except for Portugal which weakened considerably - given a good chunk of last week's gains back in its illiquid way). EURUSD is practically unchanged from Friday with cable (GBPUSD) the most active as Carney is named the new BoE head. German 2Y remains at 0%, Swiss 2Y drifts lower (more negative), 3-month EUR-USD basis swaps dropped their most in 2 weeks, LTRO-encumbered bank spreads continue to underperform, and Europe's VIX jumped its most in 3 weeks.
Moments after Goldman completed the trifecta of controlling every major developed world central bank, with its tentacles now in charge of the Fed, the ECB and now the BOE, Obama announced his designee for the new head of the SEC. The name of Mary Schapiro's replacement: Elisse B. Walter, and no, she did not most recently work for Goldman. Yes. Shocking (for Gary Gensler). Oh, and don't worry Mary Schapiro. Nobody will shed any tears over your departure: perhaps if someone had known you were there even one day over the past 4 years this would be different.