On one hand, one has professional stock bubble top-tickers (of the variety that would benefit from some error-checking)-cum-amateur precious metal pundits claiming that the gold bubble is unmistakable. On the other, there are those who have made hundreds of millions of dollars for their investors actually investing in precious metals, such as in this case Sprott's John Embry, who states that there is no bubble in either gold or silver. "Jim Rogers, who is one of the world's leading authorities on commodities, dealt with the bubble issue recently by recounting an interesting anecdote. While addressing a group of high-end money managers, he inquired as to how many of them held gold or silver in their accounts, and remarkably, 75% replied they had never owned either precious metal. When gold is trading at several multiples of the current price at some point in the future, you can be assured that every single person at a similar gathering would be long and then discussion of a bubble might be legitimate. In my considered, opinion we are many years and thousands of dollars away in price from that debate." Whom does one believe? That's obviously rhetorical. Amusingly, Embry takes a stab at the Financial Times, which he dubs a conduit for the establishment: "The FT has been speaking much less disparagingly about gold recently. The paper consistently denigrated gold and its change in tone might be instructive." Of course, a variety of second-rate media outlets are more than happy to step in and fill the "goldbug" bashing void in the FT's absence.
Treasury futures' behavior was a bit peculiar today. After going vertical off of the the H&S neckline/support, the market reversed quite abruptly in the afternoon following the TIPS auction which was the first ever negative yield print. While I really like the idea of owning TIPS in case the Fed cannot manage the impossible task of successfully creating inflation without it being hyper, one thing occurred to me: the coupons are based on CPI which is the most manipulated data series out there or close enough to a tie with NFP. According to shadow stats reading were north of 6.5% during the last Fed hiking cycle if one used the definition prevalent in the 80s (stated from memory, facts might not be absolutely accurate but definitely the idea is there, apologies for the slight lack of precision). However your coupon would have paid you based on the much lower official reading of the CPI. While in the case of hyperinflation it would be hard to use enough gimmicks to mask the extent of the robbery taking place, you're still getting robbed of a solid 4% on your coupons... And to believe the Fed and the Treasury have input as to how the CPI is calculated when it precisely impacts the interest paying burden of the country or the credibility of its policies is of course a wild assumption made by ill-advised conspiracy paranoids... or is it? Food for thought. Even though you will probably get robbed owning TIPS, it could turn out to be a lesser evil if the dollar starts moving below the key 74.90 support and if anything today's auction's results might have made the longs of Fixed coupons a bit more uneasy at these yields levels. - Nic Lenoir
Adding more fuel to the fire of SIGTARP's criticism of Tim Geithner is today's announcement that in September the UST started on a mere 27,840 permanent mortgage mods under HAMP: the lowest amount since November 2009, and a 17% decline from the 33,342 in August. It is rather obvious that HAMP bank mods peaked in April at 68,291 and have been trending lower back ever since. And with banks having the ability to foreclose upon and engage in who knows what shady dealings, now that it is all too clear that nobody really owns mortgage titles, and thus allowing banks to double, triple, etc-pledge the underlying collateral making far more money on a foreclosure action than a HAMP mod, it is time to declare HAMP a failure and relegate it to the mountain of failed economic policies pursued by the Obama administration, which have done nothing but result in yet another record bonus year for Wall Street.
With just two months until the end of the year, the one most important issue facing the US economy, which incidentally is not how many trillions in new, never to be used (or used only upon the case of hyperinflation) dollar bills Ben Bernanke will issue on November 3, but what the fate of the Bush tax cuts will be, and especially that of capital gains tax, remains still unresolved, Bloomberg has done a good analysis that frames the dilemma for the crippled administration: insolvent states or a market sell off. One would hope that with Geithner's track record vis-a-vis taxes, the former would take precedence, although as Blankfein has been rumored to seek the capital to expand his 15 CPW duplex into a triplex, the final outcome is pretty much clear, and it likely means little if no change to cap gains taxes, and thus no sell off in stocks. The problem is, however, that California, the state with the biggest economy, projects taxpayers’ capital gains will grow 40 percent this year while New York, the third-most-populous state, forecasts a 59 percent increase, or roughly 24% from the current 15%: an event which would have rather dramatic implications on investors desire to close out positions well before January 1. Should these states not be able to recoup revenues from actual capital gains receipts, then a federal bailout is virtually assured.
Top CFTC Official Chilton Blasts Computer-Generated Algorithms Run Amok, Blames Flash Crashes On HFT RobotsSubmitted by Tyler Durden on 10/25/2010 - 14:42
Now even the CFTC is blasting High Frequency Pirates: Bart Chilton, a commissioner with the futures regulator, said "mini-flash crashes occur all too often" following a surge in high-frequency trading. Please someone finally wake up the Rip Van Widiots at the SEC and hold them accountable for not only scapegoating innocent parties, but perpetuating what is essentially a criminal market in which front-running by computers is not only allowed, but encouraged. More from Chilton: "They don't cause as much of a disruption as that of May 6, but more than once this year, runaway algos have disrupted markets. By that I mean, cost people money." So if even the CFTC is all too aware of who is responsible for what has now become a daily stock crashing farce, when will Mary Schapiro and her 9 million pieces of silver finally get the memo?
SIGTARP Calls Out Tim Geithner On Various Violations Including Data Manipulation, Lack Of Transparency, "Cruel" Cynicism, And Gross...Submitted by Tyler Durden on 10/25/2010 - 13:53
SigTarp Neil Barofsky has just released the most scathing critique of all the idiots in the administration, with a particular soft spot for Tim Geithner. If after all this disclosure Geithner does not resign, well, America truly will have the Treasury Secretary, not to mention administration, it deserves.
Here is an example of how the blogosphere is destructive to the cataclysm that is the US economy: we present the truth. To wit: Fitch Ratings has placed the 'F1+sf' ratings on three Bank of America N.A.-sponsored ABCP conduits on Rating Watch Negative. Next up: all of BofA's MBS conduits to be downgraded on complete legalese vacuum on pervasive fraud.
Some headlines out of a freshly striking Greece, which is doing all it can to remind the world, suddenly, that things in Europe may go full circle back to the conditions from May:
- PAPANDREOU SAYS CONCERNED ABOUT GREECE GOING FORWARD
- GREECE IS STILL IN A STATE OF ALARM, PAPANDREOU SAYS
And here is G-Pap reprising in his role as the US president:
- PAPANDREOU ASKS GREEKS TO CAST A VOTE OF HOPE, CHANGE
- PAPANDREOU ASKS GREEKS TO REJECT CASTING VOTE OF PROTEST
Still confused by the whole concept of currency wars? Wondering why every day some new nation is said to have entered into the 21st century digital equivalent of good old fashioned dive bombing, when the only thing diving is the dollar? Then the following interactive infographic from the FT is for you. The data after the jump (free registration may be required) allows readers to explore the background and actions in the so-called currency wars, looking at the economic and political basis of the key countries’ actions.
As we reported some time ago, the weird stuff in TIPS land continues, and was brought to the surface during today's 4 Year 6 Month TIPS auction, which closed at, drumroll, -0.55%. That's right, a yield of negative 0.55%. This compares to +0.55% in April. TIPS Investors better hope that the CPI eventually captures all the fun that is happening in the Rare Minerals space.
As all financial service companies are making ritual sacrifices of lambs, goats, or virigns, whatever is cheaper to procure these days with rampant asset price explosions, to assorted gods that stock volumes finally pick up, the next chart demonstrates the very vivid Catch 22 that markets now find themselves in. To wit: every single pick up in volume, which means more than just the upward biased churn of the High Frequency Pirates, is immediately followed by a complete obliteration of the bidside order books, and a consecutive plunge in prevailing stock prices, especially in such ETFs (courtesy of record stock correlations) as the SPY and (synthetically) ES. Which is why the daily action since the beginning of September on less than miserable volumes is not an indication of any sort of buying interest, but a complete lack of trading interest. And any actual trading volume is always from a better seller. We hope that the brokers are positioned appropriately for that inevitable volume pick up, which however, will result in the market trading down quite promptly to late August levels, and, who knows how much lower.
BofA Takes Out Lows As Sheila Bair Says Servicers' Issues Could Be "Very Damaging", "More Problems" To Arise In Mortgage...Submitted by Tyler Durden on 10/25/2010 - 11:25
Finally the FDIC acknowledges the shitshow:
- BAIR: LITIGATION FROM SERVICER ISSUES COULD BE `VERY DAMAGING'
- BAIR SAYS FORECLOSURE PROBLEMS WILL REQUIRE `GLOBAL SOLUTION'
- BAIR: CRISIS REQUIRES `DECISIVE' ACTION FOR MORTGAGE SYSTEM
- BAIR: FDIC SECURITIZATION RULES `CONSISTENT' WITH DODD-FRANK
And the kicker:
- BAIR SAYS CRISIS REVEALED `CRITICAL FLAWS' IN MORTGAGE FINANCE
Oh, so there are flaws??? As a result, Bank of America takes out 10/20 lows
Below is the full text of Berkshire's "disagreement" letter with the SEC over the recognition of long-term impairments. The letter was sent out in July 1. Good thing Berkshire only took so much temporal liberty with determining what filing is material. Had it waited a mere decade longer, it is more than likely this whole matter would have been completely irrelevant, as its 2020 release would have coincided with TARP/QE 666, geared exclusively to bailing out Berkshire's 99.9% holdings in Goldman and all the other insolvent TBTFs.
A token amount for a test of what the US apparently does not have the guts to do: note maturity - November 1, 2060. Price talk on the $250 million issuance at 6.25%. Use of proceeds: General Corporate Purposes, also known as bonuses for the janitors. Oddly enough, the par on the notes is just $25. Is Goldman now trying to appeal to retail direct? Are pension and mutual funds tapped out, courtesy of endless redemptions and lack of cash for ponzi perpetuation purposes? Either way, if this is successful, and it will be in the broader drash for yield, look for most TBTF banks to start issuing 100 year bonds that will never be repaid.
Some earth-shattering insider buying in the past week (a fact not seen in months), courtesy of a large block of stock purchased in Monstanto (for $1 MM), Intel ($384K), and GE ($334K), has done miracles to the general insider selling to buying ratio, and almost managed to offset the $114 million sold in Google, $100 million in Oracle, and $30 million or less sold in Safeway, Discovery Communications, Costco and a total of 61 other names. In the week ended October 22, S&P 500 insiders sold 229 times more stock than they bought, per Bloomberg. To be sure, this is a vast improvement from last week's 2,000+ plus ratio, yet still the rolling insider average selling to buying over the past 8 weeks is about 1,000 to 1. At least insiders continue to benefit from ever more irrational prices in stocks from which they can bail at increasingly loftier levels.