For those wondering why the market leaked higher in the last hour, it is because someone got an advance copy of the transcript (or advance notice) that in this Sunday's latest attempt at faux transparency on 60 Minutes, the bearded mutant-cum-supreme genocidal overlord says that more QE is coming. From Reuters: "The euro rose to a session peak against the dollar in late afternoon New York trade on Friday after a report on the CBS website that Federal Reserve Chairman Ben Bernanke did not rule out buying more than $600 billion of bonds in further quantitative easing." It also explains why the euro is back to 1.34, and is right in line with our expectations that the EURUSD is only weak so long as the market realizes that much, much more QE is coming. How much? See the chart below for our ongoing expectation of what the Fed's balance sheet will look like soon. And yes, the $7 dollar jump in gold late in the day may be multiplied 10-20x on Monday after the world realizes that the US economy is as fucked as always.
Angela Merkel Threatened To Walk On Euro In Late October, Likely To Do So Again Any Time She Does Not Get Her WaySubmitted by Tyler Durden on 12/03/2010 - 16:53
Yet another datapoint that has been completely ignored by a market that not only does not discount future events, but is blind to current ones as well, is that, as the Guardian reported late in the day, Merkel threatened to abandon the euro during the EU summit in late October. Per the Guardian: "The German chancellor, Angela Merkel, has warned for the first time that her country could abandon the euro if she fails in her contested campaign to establish a new regime for the single currency." The paper goes on to further say that, "Merkel's central aim, which she achieved, was to win agreement on re-opening the Lisbon treaty so a permanent system of bailout funding and investor losses could be established to deal with debt crises that have laid Greece and Ireland low and are threatening Portugal and Spain. The Germans also called for bailed-out countries to lose voting rights in EU councils." And while this certainly means that Ireland will soon be left without a voice in any European discussions, much as we have expected, and under the thumb of one very corpulent and pathologically mendacious Olli Rehn, it also means the the Emerald Isle got the shortest end of the stick as it appears that future bailout will likely involve senior haircuts. But not so much in the Irish case, which may have been the last ditch effort by the multi-trillion impaired asset banking hydra in which as we showed first long ago, one's impaired assets, are another's leveraged extra-impaired liabilities.
For those seeking a perfect explanation of what is happening in United Banana States of America right now, then look no further: the just released September Supplemental Nutrition Assistance program data is out and we are happy to report that the number of poor Americans has never been higher - SNAP recipients just hit a fresh all time high of 42.9 million. Naturally, the market celebrates the record number of poor Americans by closing at 2010 highs. No long-winded, somnolent essays, no rants, just observations. These two facts explain everything that is happening in this unrecognizable banana republic. Now that is a five year banana plan you can believe in.
Today's actual NFP result, which was at 111,000 jobs below the economist estimate of 150,000, was the worst miss in over two and a half years... And the market is about to close at fresh 2010 highs. Will the last algo left churning with itself please turn off the lights. As to what this ridiculous price action means shortly, we present the following quotes from the BIS which explains absolutely everything: "If the market is dominated by mechanistic traders, who react to microscopic directional changes in 9 prices rather than to market fundamentals, market prices may deviate further and further from the fundamentals once a demand-supply gap emerges. The Flash Crash is a perfect example of this, where the end result was just the contrary to the supposed stabilization."
Spanish Skies Shut Down After 90% Of Air Traffic Controllers "Call In Sick" In Protest Over AusteritySubmitted by Tyler Durden on 12/03/2010 - 15:13
Update from the AP: Spain orders its air traffic controllers to resume work or military will take over control of airspace.
If you are reading this from an airplane, we can only hope your final destination is not Spain. Sky News has just broken that virtually all Spanish air traffic is shut down after 90% of air traffic controllers have decided not to work due to "illness" but mostly in protest of austerity. Those with a memory that stretches beyond the last Dancing with the Stars episode will recall that this is what happened in Greece just days before the people died in riots and Waddell and Reed experimented with the whole sell concept.
Now that his relentless skepticism, following today's abysmal data release (orchestrated or not), has been fully validated, much to the chagrin of top ticking flippers such as Goldman and other sundry blog sites, Rosenberg comes out with a must read essay on the state of the economy now versus later, entitled very appropriately "Hope-Based Rally Now, Shock Therapy Later." This is certainly one Rosie's better pieces out there and a must read for those who refuse to be led by the propaganda machine into believing lies and manipulation: "This has become such a hope-based market that the Dow jumped over 100 points earlier this week on a Reuters news story in Brussels, which reported that the U.S.A. would back an even greater financial commitment to Europe! Quick — get Sarah Palin on the line." Incidentally, if there is any confusion where Zero Hedge stands, we suggest rereading our post from last night which made it all too clear that we still refuse to drink the hopium (and self-aggrandizement) that seems to have gotten straight to the head of such a broad (literally and metaphorically) cross-section of the financial punditry.
Earlier today, record interest in what could be Julian Assange's last live chat crashed the Guardian's entire website (which is the 16th top ranked site in Britain on a regular day getting tens of millions of hits). To be sure, the Guardian's exhaustive coverage of Assange's travails have paid off in droves, and as the Alexa chart below shows, the site's rank has surged as ad revenues have exploded. We hope the Guardian is keeping at least some of the proceeds in escrow for the soon to be created "Free Julian" fund. And while a boredom-intolerant world awaits news of the Wikileaks creator's arrest, below is a complete transcript of what could be his last live interview before captivity.
And once again we are back to discussing just how the Fed does "not" print money... Or does it? If the data from the just released M2 is to be believed (which is becoming near impossible now that even critical economic data is gamed merely to achieve policy goals - today's NFP number was nothing more than Obama's way to get his desired UI extension; look for a surge in the December NFP numbers as the spin machine picks up back on the economic recovery trope), the $1 trillion in Fed excess reserves continues to trickle into broader currency aggregates. To wit: last week M2 grow by $10.3 billion, which is a fresh all time high of $8,809.2 billion (this was at $4.6 trillion at the beginning of the decade). This more cheap money that is increasingly making its way into commodities and risky assets. For now it is a trickle. Soon, it will be a flood.
Goldman, which continues its near-revolutionary overhaul of its economic and market outlook, after suddenly and very embarrassingly hiking its economic outlook ahead of today's NFP number which confirmed that all those calling for an end to the recession were merely misled by the government (as Albert Edwards once again predicted spot on), was overdue for a change in its bond targets: after all there is no way the 10 Year can remain at 2.50% (the firm's old 10 Year target) if GDP is supposed to somehow grow to 2.7%. Sure enough, FUG (Franc Garzarelli, the man behind the firm's often very disappointing "Top Trade" recommendations) has just released the firm's new bond forecasts. And unfortunately, we get merely yet another indication that instead of being ahead of the curve, Goldman is now firmly behind it, and chasing either momentum or wrong conventional wisdom: the firm now sees the 10 Year going from its current 10 Year spot to 3.75% by the end of 2011, based on an "environment of strong growth, low inflation and a bond-friendly policy set-up." In other words: everyone pile into the reflation trade. We can't wait for two things: i) Rosenberg's retort, and ii) the over/under on how long before this latest flawed recommendation by Goldman is not only revised, but once again starts calling for a few trillion in QE (which just a month ago was supposed to be an addition $4 trillion - how quickly views change after a brief "closed door" meeting).
A few days ago we provided a brief overview of Italian insurance company Assicurazioni Generali (whose corporate ticker appropriately is ASSGEN) and shared our view of why its CDS will shortly continue pushing far wider. To be sure, once the brief respite provided by Trichet's drunken sailor-style purchasing of sovereign bonds anywhere and everywhere ends today, we will once again see drifting in Europe (two days of about a billion in notional purchases does exactly nothing about resolving the underlying issues). Although as we noted, betting on a failure of the next batch of distressed countries, among which Italy sticks out like a sore thumb may be short sighted: after all Trichet will merely change the rules once again, the failure of such sovereign risk derivatives as re/insurance companies is far more questionable. Over the weekend, we will provide more on shy we believe ASSGEN is due for a major beatdown, and in the meantime we wanted to provide this teaser courtesy of BNP.
From the exquisite stream of consciousness of Nomura's recent addition: Bob Janjuah, who luckily discovered he was far too smart to be held back by the D-grade bailed out banker-clowns at RBS (we can only hope Bob will next discover the carriage return button): "If you are wondering why the title "Bulls in a China shop", I hope that after reading the [below], it makes sense: financial markets are very fragile right now, and any bullish risk-on phase seems to be based on very hopeful assumptions (“don't fight the Fed”; “beware animal spirits in the US”; “don't position against the US consumer”; “Germany owes us”; and lastly, “China will always grow at 10%”). We prefer to rely less on hope and more on hard reality and sensible and credible policies – even if they may mean more pain in the short term."
Zero Hedge is delighted to have officially gotten on Brian Sack's nerves: after everyone's favorite Fed offer lifter bought another $6.81 billion in bonds due 2013-2014 (at a Submitted to Accepted ratio of 3.2x) the week's last POMO is now over. However, to our delight, after highlighting repeatedly that over the past two weeks the issue monetized most by the Fed was the most recently issued bond in any given bracket, today, for the second day in a row, CUSIP PU8, the November 3 year auction, was once again put on the exclusion list, making life for flipping Primary Dealers just that bit more difficult. But don't worry: with November excluded, the biggest issue monetized by far, with $4.3 billion in purchases was the 3 year issued in... October (PB0). The net result is that instead of pocketing a ~$100 million bonus this year, the RBS/JPM/DB/GS/Jef/etc bond monetization team leader, will instead collect just $99 million of taxpayer money. We will continue tracking the exclusion list and hope to have finally put an end to at least this small farce in the Fed's monetization arsenal. In the meantime: may the farce be with you Brian Sack: please be advised that unless you close the market green we will all lose faith in your market manipulative skills (granted, the Obama mandated UI extension pass at all costs may explain a slightly red close).
According to Reuters, the US deficit panel's recommendation to cut the budget fails to win 14 votes of support from the teleprompter's commission. This means no deficit vote will go to congress. And so the bullshit continues: America will never adopt austerity until the revolt or the Fed's overthrow arrives.
Bart Chilton Urges Corrupt CFTC Colleagues To Actually Act On Behalf Of Investor Protection For Once, Move On Position LimitsSubmitted by Tyler Durden on 12/03/2010 - 10:38
Even as the CFTC is doing its best to postpone indefinitely (and hopefully infinitely) a review of limit speculative positions held by commodity traders (read JPM), commissioner Bart Chilton, who really should shut up if he knows what is good for him, told the CFTC to instead act quickly and actually do something right for investor protection for once (not necessarily in those words). From Reuters: "The regulator, which has a mid-January deadline, has been pushing back
the date to propose new speculative limits in energy and metals markets,
and so far has not given a time for when it will be introduced. This proposal should be discussed on December 9th at the commission's
next meeting; a proposal should be put out for public comment as soon as
possible; and we should commit to meeting the statutory deadline," said
Bart Chilton, a CFTC commissioner. "We can always find excuses, justifications, or pretexts for inaction --
this rule is too important to let any of those get in the way of
fulfilling our statutory responsibilities, and keeping our promise." The problem is that none of "those" are standing in the way of fulfilling statutory responsibilities: there are only two things that are standing in the way, and they are called Jamie Dimon and Blythe Masters.