• Monetary Metals
    01/28/2015 - 00:28
    It’s terrifying how fast the whole Swiss yield curve sank under the waterline of zero. Now even the 15-year bond has negative interest. The franc has reached the end.

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Friday Humor: Don't Drink And Trade

On June the 30th 2009 oil mysteriously jumped by more than $1.50 a barrel during the night, to reach its highest price in eight months, the kind of swing that is caused by a major geopolitical event. The amazing, true cause of this price spike has now been released by a Financial Services Authority investigation (FSA). (Hint: 'Drunken Blackout')



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All Your Private Data Are Belong To Obama

When it comes to spying, eavesdropping on its citizens as well as the complete invasion of American privacy, the first thing that comes to mind is the Patriot ACT and Dubya. And with good reason: because while the rest of the world may "hate us for our freedoms", they certainly love us for the fact that the NSA usually can autocomplete sentences before they are written in any electronic medium (recall: NSA Whistleblower Speaks Live: "The Government Is Lying To You"). However, as it turns out that the first thing that should be coming to mind is none other than the current administration and Barack Obama. Here are the facts: as the ACLU reveals using documents released by the Justice Department following months of litigation, "federal law enforcement agencies are increasingly monitoring Americans’ electronic communications, and doing so without warrants, sufficient oversight, or meaningful accountability." How "increasingly"? Look at the chart below and decide. From the ACLU: Between 20909 and 2011 "the number of people whose telephones were the subject of pen register and trap and trace surveillance more than tripled. In fact, more people were subjected to pen register and trap and trace surveillance in the past two years than in the entire previous decade."



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Fitch Warns UK Likelihood It Loses AAA Rating Has Increased

One-by-one, the highest quality collateral in the world (according to ratings that is) is disappearing. To wit, Fitch warns that a downgrade of the UK's AAA rating is increasingly likely: "weaker than expected growth and fiscal outturns in 2012 have increased pressure on the UK's 'AAA' rating, which has been on Negative Outlook since March 2012." The Negative Outlook on the UK rating reflects the very limited fiscal space, at the 'AAA' level, to absorb further adverse economic shocks in light of the UK's elevated debt levels and uncertain growth outlook. Global economic headwinds, including those emanating from the on-going eurozone crisis, have compounded the drag on UK growth from private sector deleveraging and fiscal consolidation as well as from depressed business and consumer confidence, weak investment, and constrained credit growth. But no mention of unlimited QE? Fitch expects only a weak recovery beginning in 2013 and output is not expected to surpass its 2007 pre-crisis peak until 2014.



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Why A Soft-Landing Is Bad For China

Counter-cyclical measures cannot solve structural problems. If the market is counting on monetary easing or fiscal stimulus to lift the Chinese economy out of the current slump, we believe they will be disappointed (as we have discussed a number of times recently). Without major structural reforms, we believe, like Credit Suisse, that China will be growing around 7-8% in the coming years, rather than the coming quarters. The core problem is the sudden disappearance of investment interest from the private sector. The market, it would appear, is factoring in a global growth slowdown (which will be quickly recovered from thanks to Central Bank largesse). As Credit Suisse notes, though, in the case of China as a growth engine via stimulus, the market is not quite prepared for a prolonged slowdown and its repercussions on corporate cash flows. What ultimately matters is not how far economic growth will fall, but how long it will fall. When the business environment deteriorates, pricing power diminishes and account receivables surge, the debt chain tends to break down at the weakest link. Until the structural issues have been addressed, we expect mediocre growth to be the new norm in China.



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Spanish Bank Capital Shortfall As "Good" As Expected: Live Press Conference Webcast

Spanish stress test results are out. Surprise - Oliver Wyman's audit finds that Spanish banks have an approximate EUR60bn shortfall - as expected - see below for pass/fails.

  • *SPAIN SAYS 7 BANKS HAVE NO CAPITAL NEEDS       :SAN SM, BBVA SM
  • *SPAIN STRESS TESTS SHOW CAPITAL SHORTFALL OF EU59.3 BLN :SAN SM
  • *SPAIN BANKS HAVE EU53.7 B CAPITAL SHORTFALL AFTER TAX IMPACT
  • *BANKIA STRESS TEST SHORTFALL AFTER TAX EFFECT IS EU24.74 BLN
  • *SANTANDER, BBVA, CAIXABANK, KUTXA PASS STRESS TEST      :SAN SM
  • *SABADELL, BANKINTER, UNICAJA PASS STRESS TEST  :SAN SM, BBVA SM

The discrete needs are: Bankia: 24.7; Catalunya Caixa: 10.8; Novagalicia 7.2; Banco de Valencia: 3.5; Banco Popular 3.2; Banco Mare Nostrum: 2.2



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RANsquawk Weekly Wrap - 28th September 2012



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Winners and Losers Since QE3

As we end the month and quarter, we remind ourselves that a massive amount of the recent 'strength' in risk markets occurred on just two days - ECB and Fed statements. Reflecting on the post-euphoria 'sell-the-news' or BTFD meme, we look at how various asset classes and securities have performed post-QEternity. Two lessons are clear: Front-Run The Fed (every time) and Buy Precious Metals.



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Charting The Death Of Europe's Bond Markets

From the financial repression and encumbrance of the central banker to the wild speculators and their angry 'fast-money' flows, we continue to hang on every tick in Europe's bond markets (for both validation of a political leader's view or confirmation of his asininity). The sadder truth is that Europe's secondary bond trading market has shriveled. Spain's Treasury just released August's daily average Spanish government bond trading volumes and they have plunged over 40% YoY - now at levels (under EUR40bn per day) not seen since 1996 (pre-Euro-zone). It strikes us that once they lose the secondary market then the primary market will be very close behind (thanks to liquidity concerns among other things) - unless of course the ECB really does soak up all future issuance and hold-to-maturity.



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Goldman Cuts Q3 GDP Forecast To Stall Speed 1.9%

There was a time when Goldman, which recently went full retard with its bull thesis, seeing only upside in everything from stocks (and a once in a lifetime opportunity to sell bonds... just like in March, and then back in the summer of last year, and so on), to EURUSD, to housing, just like it did in December 2010, only to be humiliated a few short months later, had its Q3 GDP forecast at 2.3%. In fact the latest Q3 annualized forecast of 2.3% economic growth as recently as September 11. How much has changed in two short weeks. Apparently, out of leftfield, so many things have gotten worse that a whopping 0.4% or 20% of the growth in the quarter has bee eliminated in under three weeks. Just out from Goldman: "While nominal personal spending and core PCE prices rose in line with expectations in August, real spending gains were modest and income grew less than expected. We reduced our Q3 tracking estimate for real GDP growth from 2% to 1.9%." And that's why Jan Hatzius gets paid the big bucks. Only problem is now that Goldman has gotten the QEternity it lobbied for so long and hard, where will the upside growth come from?



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Fed Buys $20 Billion In QE3 Mortgages; Jobs Created: Zero

Yesterday, the Fed reported the first $20.1 billion in net, non-rolling purchases of MBS eligible under QE3 (consisting of FHLMC, FNMA, GNMA and GNMA2, most likely the bulk of them coming out of a certain office in Newport Beach which has decided to start locking in its monster profits for the year after getting QEternity spot on). End result: jobs created or saved zero. But at least we got the first recessionary PMI print, and an employment component that was the lowest since March 2010. When in doubt who can destroy the economy the best, just leave it to Benver.



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The Student Loan Bubble In 19 Simple Charts

A picture paints a thousand words but in the case of the world of college education (and its surrounding income, unemployment, debt burden, and pricing implications), we decided 19 charts was the simplest way to explain the path to debt servitude that an increasing share of the US population is taking - despite record delinquencies, falling real incomes for graduates, stagnant graduate employment, and rising college costs. As BofAML notes, the cost of higher education has continued to climb, fueled by debt and government aid. Over the past twenty years, tuition growth exceeded the average rate of inflation by nearly 3% annually, while both grant aid and Federal loans per full-time undergraduate exceeded by about 5% annually. This trend is not sustainable, in our view. The challenging labor market, which has left the youth population underemployed and underpaid, has put the spotlight on the burden of student debt. We expect a correction in the price of tuition and reduction in debt. There will likely be lasting effects on the economy from the high cost of education and large debt burden. Graduating during a recession leads to permanently lower earnings growth, making it that much harder to service the debt burden.



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Cue Stagflationary Recession: Chicago PMI Huge Sub-50 Miss, Back To September 2009 Levels; Prices Paid Spikes

QE1, QE2, Operation Twist 1, Operation Twist 2, a Fed balance sheet that is now expected to be $5 trillion in 2 years, and all we get is a lousy manufacturing economy that according to the Chicago PMI just dipped into contraction, or for all intents and purposes, recession, printing its first sub-50 print, 49.7 specifically, on expectations of a 52.8, and down from 53. This was the lowest since September 2009 and the biggest miss in 4 months. Specifically, the employment index came at a two and a half year low, New Orders, Backlogs and Deliveries had their 3 month moving averages at the lowest since Mid 2009, and Capital Equipment printed at a 17 month low. But not all hope is lost: at least prices paid soared for the third consecutive month to 63.2 from 57. Cue not just recession, but stagflationary recession. It also means that both the Manufacturing ISM and Q3 GDP will be a total disaster. Time to start pricing in QE X to be followed 24 hours later by QE X+1. The central bank cartel is starting to lose



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40 Deutsche Bank Employees Injured After Inhaling "Dangerous" Substance In Schkeuditz, Germany

It appears banker popularity is low to quite low not only in the US but virtually everywhere. According to Lepizig-Fernsehen, a toxin alert has been issued at a Deutsche Bank branch in Schkeuditz, a suburb town of Leipzig, where 40 people have been "injured" after inhaling a white powdery substance delivered hours before, and which spread via the building's air conditioning system.



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Guest Post: Netanyahu’s Red Line

Iran is not blameless, and continues to provoke Israel through its support for Hamas and Hezbollah and through eliminationist rhetoric. But given the level of provocation from the Israeli and American side, it is astonishing that Iran remains free of nuclear weapons. Yet it is a fact that Iran is not armed with nuclear weapons, and it remains a fact that Iran has not attacked nor occupied any foreign lands since World War 2. Iran is not an expansionistic country. As neocon provocateur Patrick Clawson essentially admitted in advocating for a false flag attack to get America to war, Iran is not likely to attack either the United States or Israel. So when it comes to drawing red lines, we in the West would do well to draw a red line around our behaviour — because right now, we in the West are the ones who are stirring up trouble by threatening to strike first.



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Chart Of The Day: The Misery In Spain Is Everywhere... And Has Never Been Higher

We, just like everyone else, have grown quite tired of all phrases containing some variant of "Pain in Spain." Which is why instead we are focusing on its Misery. As in Misery Index, defined as the combination of inflation and unemployment. Following today's announcement of a surge in Spanish inflation which soared from 2.7% to 3.5%, trouncing expectations of a modest rise to 2.8%, it is clear to see that the Misery in Spain has never been higher.



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