Next week is bound to be a doozy. The SPY and NYA are sitting just under their highs, and The Bernank is schedule to give his post-FOMC "King's Speech" on April 27. What are the odds that the market is going to have a significant correction going into this speech? At the same time, thousands of hedge fund managers who stepped aside during the recent correction will be forced to get back in to stocks if they take out new highs. After all, the desperation is reaching March Madness levels to "make your year" so they can temporarily "retire" at The Hamptons for the summer.
Big B tips his hand. What it might mean.
The very same banks that taxpayers bailed out, and saved from going completely belly up, are actually making consumers pay once again in the form of higher Oil prices, and the resultant higher gasoline prices at the pump
Going forward, we’re going to see economic data become even MORE divorced from reality, assertions that the economy is back on track, and that at worst there is the specter of a “double-dip” recession looming. Heck, even these fears are sugar-coated… literally (making an economic nightmare sound like an ice-cream sundae is a GENIUS marketing move).
There is too much cheap money sloshing around markets these days. This is not a good thing for true market based price discovery, and ultimately leads to the creation of market bubbles.
The Fed apparently has more empathy for foreign mad men then the American people ...
Yesterday when we speculated that Kocherlakota may have been leaked the NFP number based on his hawkish tone, we presented an attempt at refutation by Morgan Stanley's David Greenlaw who claimed the following: "I've heard some stories that Kocherlakota has seen tomorrow's employment report and that explains his hawkishness comments. However, there is no way this is true. Only the Fed Chairman gets the report ahead of time (late in afternoon on the day prior to release) and he doesn't even share it with the other governors -- never mind the regional bank Presidents." Let's do a little math exercise. Today at 8:30 am the BLS came out with a step change in the unemployment rate which dropped from 8.9% to 8.8%. So far so good. Then at 10:00 am Dudley released his speech from embargo with the following disclosure: "unemployment rate has fallen sharply over the past four months, dropping to 8.8 percent from 9.8 percent in November." Obviously Dudley was aware of the NFP number at the time of writing the speech. So our question is: did Dudley write the speech in the 1:30 hours between the NFP release (presumably while in Puerto Rico)? Or did he simply leave the unemployment data blank until the last moment and just filled it in after the official number was released? Since an embargoed version of the speech was likely released to various news outlets in advance, that cuts the time he had to pencil in the correction. Or, of course, if the embargoed version went out before 8:30 am that confirms that Dudley was well aware of the NFP number ahead of time, and roundly refutes the "fact" that only Bernanke sees the jobs number before its public release. Which then brings the question: who else sees the NFP number in addition to Bernanke? And just how profitable is the industry of distributing forward looking economic data at time of embargo distribution, especially when it pertains to something as critical as the NFP number.
When we talked about these kind of target prices for silver six years ago, when the metal was still trading below $10 per ounce, people would consider us cowboys. Nowadays, things are looking more realistic, but still investors can't seem to grasp a three-digit silver price.
Well, we've got news for you: our TP of $300 for silver could turn out to be too conservative!
Punchline from Dudley's Puerto Rick speech just hitting the wires: "We must not be overly optimistic about the growth outlook. The coast is not completely clear—the healing process in the aftermath of the crisis takes time and there are still several areas of vulnerability and weakness. In particular, housing activity remains unusually weak and home prices have begun to soften again in many parts of the country. State and local government finances remain under stress, and this is likely to lead to further spending cuts, tax increases, or job losses in this sector that will offset at least a part of the federal fiscal stimulus. To sum up, economic conditions have improved in the past year. Yet, the recovery is still tenuous. And, we are still far from the mark with regard to the Fed's dual mandate. In particular, the unemployment rate is much too high." Word count of iPad: zero.
Tomorrow's NFP number will be one of the most critical releases from the BLS: if on one hand the number is far greater than expected, it will effectively mean that QE3 will not begin immediately after the end of QE2, just like QE1 ended on March 31, 2010 only to see QE Lite implemented 4 months later. That the Fed is not willing to take a political gamble and send oil to $150 is conceivable, which is what would happen should Jon Hilsenrath start leaking QE3 rumors. On the other hand, the economy is once again turning lower as recent diffusion data (not to mention housing) has been indicating. Should the Fed implicitly tighten, by not loosening, the economic contraction will accelerate drastically, and capital markets will follow suit. And since as Hugh Hendry noted earlier, there is no China to pick up the slack, the stakes on the all in gamble in this bet that the virtuous cycle has picked up, will likely cost Bernanke his job if he ends up wrong and QE3 is needed anyway. Of course, as many believe, and as Bernanke himself has said, manipulating the market and stimulating inflation is and continues to be the Fed's only objective. Obviously, the waterfall effects in either direction here are huge. Which is why if tomorrow's NFP number is a beat and not just any beat but a massive one (read well over 250,000), it will be an attempt by the administration to cement the idea that the economy is now recovering. Anything at or below consensus will merely push the decision one month forward, however it will be too late to prepare the political landscape for QE3 in May, just two months ahead of the end of QE2. So tomorrow is likely D-Day on QE3 (or at least a direct continuation of POMO past the June 30 expiration date).
Here's one for the WTF files. While it is neither a secret that back in 2009 America had a thriving relationship with the world's suddenly most hated man Moammar Gaddafi (see "Obama is the first U.S. president to shake Gaddafi's hand") only to turn around and bomb him, nor is it surprising since after all when it comes to oil our administration will do anything and everything to procure it, no matter how many Nobel peace prizes are trampled in the process, it may come as a surprise to some that a bank majority owned by the Libya Central Bank, was the direct recipient of US taxpayer largesse in the form of discount window borrowing. Bloomberg writes that Arab Banking Corp., a lender part- owned by the Central Bank of Libya, used a branch in New York to borrow at least $5 billion from the U.S. Federal Reserve as credit markets seized up in 2008 and 2009. Indeed a quick word search through the compiled daily releases will confirm that the Fed dispersed funds to the Libya-owned venture on well over 30 occasions. And while we have querried in the past how it is possible that various Libyan financial interests managed to get past domestic Anti Money Laundering provisions, when it comes to direct funding from taxpayers would it be too much to ask of Ben Bernanke not to transact with institutions operating on behalf of various so-called tyrants, mutants and, broadly, Antichrists?
A systematic plan to create the illusion of stability and provide no-risk profits to the mega-Wall Street banks was implemented in early 2009 and continues today. The plan was developed by Ben Bernanke, Hank Paulson, Tim Geithner and the CEOs of the criminal Wall Street banking syndicate. The plan has been enabled by the FASB, SEC, IRS, FDIC and corrupt politicians in Washington D.C. This master plan has funneled hundreds of billions from taxpayers to the banks that created the greatest financial collapse in world history. The authorities had a choice. This country has bankruptcy laws. The criminally negligent Wall Street banks could have been liquidated in an orderly bankruptcy. Their good assets could have been sold off to banks that did not take their extreme greed based risks. Bond holders and stockholders would have been wiped out. Today, we would have a balanced banking system, with no Too Big To Fail institutions. Instead, the years of placing their cronies within governmental agencies and buying off politicians paid big dividends for Wall Street. Their return on investment has been fantastic.
Silver Set For All Time Record Quarterly Close - Gold To Silver Ratio On Way To 17 To 1 As Per 1980?Submitted by Tyler Durden on 03/31/2011 06:27 -0500
‘Poor man’s gold’ is set for a record nominal quarterly close which will be bullish technically and set silver up to target psychological resistance at $40/oz and then the nominal high of $50.35/oz . Silver’s record quarterly close was $32.20/oz on December 31st, 1979. While silver is up 22 percent this year and is heading for a ninth straight quarterly advance, its fundamentals remain very sound. With gold above its nominal record of 1980, poor man’s gold continues to be seen as offering better value. To the masses in India, China and Asia, silver is the cheap alternative to gold and an attractive store of value and hedge against inflation and debasement of paper currencies. Increasing global investment and industrial demand in the very small and finite silver bullion market is a recipe for higher prices. Thus, as we have long asserted the gold silver ratio is likely to revert to its long term average of 16 to 1. A return to a ratio of 16 to 1 is likely due to basic supply and demand and the geological fact that there are 16 parts of silver for every one part of gold in the earth’s crust.
Earlier Eurostat released its February European CPI number which was higher than January (2.4%) and consensus (2.4%), coming at 2.6%. That is the fastest inflation growth in more than two years in March as
European Central Bank policy makers prepared to raise interest
rates to fight increasing price pressures.Per Bloomberg: "Inflation in the 17-nation euro region quickened to 2.6 percent from 2.4 percent in February, the European Union’s statistics office in Luxembourg said today in an initial estimate. That’s the fastest since October 2008 and exceeds the ECB’s 2 percent limit for a fourth month. Economists forecast inflation to hold at 2.4 percent, the median of 32 estimates in a Bloomberg News survey showed." The primary reason for the jump in inflation are energy costs, leading to such paradoxes as $9/gallon gasoline, as Europe is far more expose to Brent prices than the US which has spiked this year: "Crude oil prices have surged 15 percent this year as output from Libya slumped. An armed conflict between Libyan leader Muammar Qaddafi’s troops and rebel forces has forced companies including Total SA and ConocoPhillips to suspend operations and evacuate staff. Crude was trading at $105.30 a barrel today." The result of the release was a kneejerk jump in the EURUSD to 1.423 as a modest hike by the ECB seems now virtually assured. Of course, a hike in rates means that the already cooling Economy will deteriorate even more. What that means for a continent that is now harboring increasingly more insolvent nations only Trichet (and Bernanke) knows.
About a year ago, Zero Hedge first floated the then apocryphal idea that the economy is receiving an implicit boost from the money "saved" by squatters: people who no longer pay their mortgage, but due to banks' unwillingness to have a price discovery event on the home (in the form of an auction on REO or foreclosed properties) which would force mark bank assets far lower (due to impairments on the mortgage as opposed to it merely being in "Special Servicing" status), continue to reside in the property. Furthermore we disclosed yesterday, per LPS the average delinquency period is now 573 days meaning the typical deadbeat resides in their home for over a year and a half without paying a single cent. And since there are millions of delinquent mortgages, all this adds up to a lot of money. How much? Well, nobody had been quite able to quantify this huge boost to the economy, which is why the topic never received prominent media notice. Until now. In "Rental income and "Squatter's Rent" JP Morgan's Michael Feroli kills two disinformation birds with one client note: first he debunks all myths that "rental income" is surging, as was reported in glaring headlines in a variety of propaganda media outlets following Monday's personal income report was released. This is patently false. As Feroli explains: "This rise has little to do with landlords getting more from their tenants. In fact, it has very little to do with what speakers of the English language would normally consider "rent." Instead, it mostly reflects mortgage payments of the household sector coming down, in part because of the aggregate decline in household mortgage debt due to net cancellation of mortgages associated with foreclosures." In other words, surging rental income is nothing more than "squatter's rent" saved by not paying one's mortgage. As to quantifying this amount - per Ferroli until recently it was $60 billion a year! This is a stunning 0.5% of GDP. Luckily there is good news: this unethical and artificial "boost" to the economy is finally declining... and is now only $50 billion on an annualized basis.