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China Goes To TradeCon 2, Warns Currency Bill Will "Inevitably Lead To Serious Damage In China-US Trade Relations"

Update: the PBOC gets involved now too discussing the bill " It won't solve the U.S. economy and employment problems and will only seriously disturb Sino-U.S. economic and trade relations and will also disturb the efforts of the two countries and global community's joint efforts to promote the world economic recovery and growth."

Save this press release for the archives: it may well be the formal counter announcement of a trade war from China, which now realizes it has a batshit schizo trading partner, one who critically needs China to recycle its mercantilist dollars into buying America's one ply toilet Treasurys, yet one which is now blasting China for doing just that...

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Watch The WaPo/Bloomberg Republican Presidential Candidate Debate Live

For all those who can't seem to ever get enough of beltway theater, and enjoy listening to republicans do what they do best when they open their mouths, er, lips are moving, you are in luck: Charlie Rose is hosting a presidential round table with all the usual suspects live from the last resort backup Ivy, Dartmouth college.

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Bill Gross Goes Massively Short Cash As He Bets The Newport Farm On Uber Duration

Two things stand out in the just released September holdings update of Pimco's flagship Total Return Fund: first, what appears to be a record cash short of 19% of the fund's total unchanged AUM of $245 billion, doubling the previous short of -9%. The incremental cash was used almost entirely to purchase Mortgage Backed Securities, which jumped to 38% of total from 32%, even as the fund kept its government exposure virtually flat at 22%( 21% previously). Yet where it gets downright surreal is the duration and maturity exposure of the fund. Duration has gone from a record low 3.6 in March to 4.56 in July to 6.27 in August to... well, just look at the black line on the chart below.

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Senate Votes To Block Obama Jobs Plan

The Senate is busy tonight: on one they have just started a currency war with China, on the other, they are about to force every bank to cut its GDP forecast now that the prospect of incremental future fiscal stimulus has just been kneecapped, following a widely expected failure to vote through Obama's job plan a move that immediately forcedthat pathological of pathologies, the US Treasury Secretary to announce that "the action by Republicans to block the full plan would likely result in weaker U.S. growth." Somehow, it will all be Bush's fault.

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Senate Passes China Currency Legislation Bill 63-35

So while the US is setting the stage for a possible retaliation against Iranians hiring Mexicans to kill for them, because they obviously can't do it on their own, the US Senate has just passed the China currency legislation bill in a 63 to 35 vote, which in turn will do miracles for Sino-US foreign relations. According to the legislation, it would let companies seek duties to compensate for a weak Chinese yuan. However, as Goldman indicated first thing this morning, the probability of this bill actually being enacted in its current form, or any, is slim to nil: while the Bill is under review by Obama administration, John Boehner, has called it "dangerous." If only he had an idea... Full Goldman take can be found here.

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The Evolution Of The EFSF, And Its €726 Billion In Max Losses

Now we have a new plan. EFSF would take first loss on the full guarantee amount of 726 billion. Given everything that EFSF can now invest in, and the fact that it is taking first loss risk, the potential loss is 726 billion. So in a little over a year, the risk of loss transfer from private companies to sovereign nations has increased from 120 billion, to 270 billion, to 360 billion, to the possibility of 726 billion! That seems bad enough, but the situation is worse than that. At each turn, Greece has underperformed and been found to have bigger needs than previously thought, but the latest IMF decision to go ahead with the next tranche anyways, sends a clear signal to Greece that they are in the drivers seat. Why do more now when IMF will keep picking up the tab until you finally decide that drachma's suit you better. Portugal cannot be blind. It sees where Greece has failed but still gotten money, and that Italy barely goes through the motions of pretending to try, so why should they?

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And Now Back To The Real News: Saudi Arabia Blasts Iran, Verbally For Now

Ignore Slovakia: everyone has a price. This is the real news:


And logically:


Take home: Talk is cheap but Brent here is even cheaper... Either way, it is a win win for Saudi which needs crude to go up in price.

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Slovakia Rejects Plan To Expand EFSF, Government Falls

From Reuters:


Insert clip about the Spanish inquisition.


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And Back To Slovakia, Where EFSF Vote Is Imminent

Refuting the previous update from the WSJ of a vote delay, is the latest rumor-cum-pseudo confirmation that the Slovak EFSF vote is due at 10pm local time or 4pm EDT. In Gasparino's immortal words the situation is fluid. That said, here is a live feed from Slovakia where it can be watch in case it does take place.

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PrimeX Selling Accelerates

Update: Jeff Gundlach just said on his conference call that PrimeX is 6-8 points overvalued vis a vis the cash prime-backed RMBS

It only took a little over an hour...

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Casus Belli? US Accuses Iran Of Plotting Assassination, Attempt To Blow Up Saudi, Israel Embassies

The war watchers (such as Marc Faber and everyone else who knows what follows an episode of epic Keynesian failure) have just lowered DefCon to level 2 after in a very surprising development the US accused Iran of backing a plot to assassinate the Saudi ambassador to the US and to blow up the Saudi and Israel embassies in Washington. "The plot was part of a $1.5m “international murder-for-hire scheme” that was directly linked to Iran’s Islamic Revolutionary Guard Corps, said Eric Holder, attorney-general." Now, any press report that details Eric Holder being active in any capacity is almost certainly a confirmation of a false flag, although we will gladly reserve judgment for now. However, if this is indeed the precursor to war, at least CVN 74 and CVN 77 will be quite busy in the next few months. Also, the price chart of Brent will surely to quite surely point from the lower left to the parabolic up.

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Marc Faber To America: "Listen You Lazy Bugger, You Need To Tighten Your Belts, You Need To Work More For Lower Salaries"

Once again, the latest fire and brimstone sermon by Marc Faber is absolutely spot on, starting and ending with his "policy" recommendation for what the US needs: "I will tell you what the US needs.  The US needs a Lee Kwan Yew who stands in front of the US  and tells them, listen you lazy bugger, now you have to tighten your belts, you have to save more, work more for lower salaries and only through that will we get out of the current dilemma that essentially prevents the economy from growing." No money printing, no extensive protests, no excuses. Of course, this would have to accompany a global overhaul of the system, something Zero Hedge has been advocating since day one, as it is impossible to reform this broken system from within: "The problem i have with the investment universe is that i find it difficult to envision how the US and western Europe can return to healthy sustainable growth without a complete purge of the financial system and some type of catalyst. Something that restores some measure of social cohesion among people;  it could be hyperinflation, a complete credit market collapse, widespread sovereign defaults, civil strife, major military confrontation.”   Alas, in that he is also correct, and as we said back in early 2010, when the current episode of extend and pretend ends and the can kicking exercise finally fails, next up is war.

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The Latest Incarnation Of The European CDO Cubed Bailout "Swiss Army Knife": A Multi-Trillion Insurance Policy

A few weeks ago Steve Liesman ramped stocks higher for the day after he released a subsequently disproven rumor that the EFSF would become a CDO square, recycling private investments into sovereign debt. Well that rumor is now dead and buried, so it is time for the next one involving that uber multi-functional Swiss Army Knife which is the EFSF, and apparently has an infinite+1 number of applications, none of which involve actual cash funding. The source of this latest brilliant idea is Pimco parent, Allianz, which has trillions in fixed income exposure all over the world, so it is no wonder it is pushing hard for the world's taxpayers to bail it out. Only instead of a recycling cash, this time the EFSF will become Fed-Lite, "insuring" trillions in debt.

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PrimeX Update: It's On Like Donkey Kong

On Friday, Zero Hedge broke the story of the "next ABX", in the form of PrimeX, or the game of jumbo prime whack-a-mole. It appears that was indeed the beginning. Here is today's update from Morgan Stanley in a market which had gone suspiciously silent since our post, and has now gotten quite vocal again with a vengeance. From MS: "On a day where most macro indices point to bullish sentiment, PRIMEX is getting clobbered again.  Last week, it felt like px action was driven by dealers hedging cash inventory/unwinding index longs, with retail providing a bit of a short-covering bid.  Today, however, it seems that the short-covering bid has gone silent, and the marginal buyer can't be located under his desk."

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