We apologize for pointing out the inevitable, but gold is now breaking out and the usual LBMA gimmicks to slam it down are no longer working. Is the price suppression regime over? And that worthless atavism of a bygone era, stocks, continue to surge on increasingly bad news, confirming that all trading is now driven on expectations of what the Fed will do next Tuesday. If Morgan Stanley is right, expect gold to hit $1,350 in under 7 days. Additionally, should this occur, it will merely confirm that the double dip is accelerating at an uncontrollable pace, and that without the Fed's intervention the economy will tumble. Time to end all this "is there or isn't there" a double dip bullshit already.
Roubini's latest media appearance, and now that the spectre of a double dip has fully arisen there are quite a few of them, is with the FT's James Blitz in which the NYU professor does a quick 5 minute summary of what he sees as the main threats to the US economy, among which are a 40%+ chance of a double dip, a sub 1% GDP growth in H2 2010, the disappearance of all stimulus pushes (and the conversion of the fiscal stimulus from a tailwind to a headwind), an awful job market, bigger bank losses, declining home prices, a drop in the stock market, widening spreads, a feedback loop from stock markets into the economy, and much more. We are happy the professor has revised his call from a few months back seeing virtually no chance of a double dip. As to policy, Roubini thinks the US has run out of policy bullets on both the monetary and fiscal side: he is sure the Fed will do more QE, but it will be impotent as there is already over $1 trillion in excess reserves (of course, it simply means excess reserves will be $2 trillion, $3 trillion... etc. And IF the economy picks up, this money will hit broad money. But no, aside from that, there is no threat of inflation. Because the Fed is fully prepared to absorb $3 trillion in excess money....). As to Europe, Roubini thinks austerity will also result in a disaster, first for the periphery and then for Germany, so basically damned if you do and damned if you don't vis-a-vis stimulating, which is precisely what we have been saying for over a year: the central banks have boxed themselves in a corner from which there is no escaping, regardless of what they do. Lastly, on Asia, and specifically China, Roubini notes the obvious that even the world's most overheating economy is faced with so many problems that it can only do what the US has been doing so well to date: kick the can down the road.
Going into today I considered that there were two possible scenarios for equities in terms of EW count. The first according to which we were in wave 2 consolidating after the initial impulse down to 1,106 before eventually going lower, and the second in which we would have been in wave 3 already, in which case we should have topped around 1,094/1,098 and reversed lower aggressively. I think the first scenario is the one we are currently experiencing. I have only one ounce of doubt left and that is that AUDJPY has rejected quite hard today's highs approaching the key resistance triangle. - Nic Lenoir
The ECRI Leading Indicator Index just came at -10.1%, a drop from last week's -9.9%, once again inflecting into double dip territory. One can only imagine what the spin proffered by the index creators will be this time: it was suddenly very credible last week, hopefully that credibility persists as it reaffirms a definitive double dip yet again.
A week ago TCW's chief economist announced he would hold a presentation for clients explaining why the Double Dip has arrived. Here is the powerpoint used by Komal Sri-Kumar on the call.
Is The Double Dip The Statistical Equivalent Of A Traffic Ticket? And Guess Which Sole Asset Class' Implied Vol Declined In The Past MonthSubmitted by Tyler Durden on 08/29/2010 22:54 -0400
A few days ago, BNY's Nicholas Colas was kind enough to share his perspectives on why traffic congestion and market structure are comparable, especially in the context of record high cross-asset correlations. Continuing on this series of roadside analogies, today the BNY analyst compares the economic double dip to a traffic violation, and specifically the probability of getting two speeding tickets in the span of one day. "What are the odds of being caught speeding twice in one day? One in five? One in ten? Pretty remote, one would think, given that the ratio of police to motorists on most roads is 1,000:1 or greater. I can tell you from direct and personal experience, however, that the odds of that event are much, much higher than you think. I had my driver’s license suspended for 30 days in 1997 for two tickets, issued on the same day and only a few miles apart. Here’s the thing: most people, after receiving one ticket, will drive more carefully immediately thereafter. But I, working through the math I referenced above, thought “No… The odds are actually in my favor now. I can, in fact, speed with impunity.” This proved to be an error. As it turns out, going substantially faster than the general flow of traffic will gather the attention of the law. This offsets the theoretical odds against discovery, and then some. Oh, and driving a bright yellow car. I should have mentioned that, too." And once again, the specter of market uncertainty raises its ugly head, this time in the form of spiking implied volatility, which has jumped for every asset class in the past month... except gold.
In this week's Big Interview, the WSJ's Simon Constable interviews Robert Shiller who flat out says that an economic double dip may be "imminent." This compares to his earlier warning that he saw the chances of a double dip at over 50%. Guess that probability has now doubled. Notably, Shiller also believes that when the NBER looks back at the data, Q3 of this year will mark the beginning of the second dip of the recession. Ironically, since up to now the previous recession has never actually officially ended, very soon the NBER will merely confirm that the recession which started in December 2007, will have continued for three years, in what is possibly the longest recession on record. Furthermore, those looking to sell houses are advised not to listen to the interview, as the co-creator of the Case-Shiller Home Price Index also added that he is worried housing prices could decline for another five years. He noted that Japan saw land prices decline for 15 consecutive years up to 2006. Following up on this week's weakest new home sales data in history this should probably not come as a big surprise to most. Also for bond fans, Shiller confirmed Rosenberg's view that bonds are not in a bubble. Hopefully Mr. Shiller bond prophecying skills in bonds are better than in houses, where it was mostly in hindsight in early 2007 when the bubble had already popped.
Guy Who Explained How We "Ended The Great Recession" A Month Ago, Now Sees 1 In 3 Chance Of Double Dip, Calls For QE2Submitted by Tyler Durden on 08/26/2010 18:52 -0400
Arguably the one most definitive market top ticking activity of the past month, in addition of course to Tim Geithner's absolutely disastrous "Welcome to the Recovery Pamphlet" issued literally hours before the wave of economic downgrades of US GDP by Wall Street began in earnest, was Mark Zandi and Alan Blinder's even more laughable administrative job cover letter titled "How We Ended The Great Recession" (yes, gentlemen, we remember). Which is why we read with great fascination that not even a month after the paper was released, Alan Blinder told Bloomberg that "Things seem to be losing momentum. The lending part of the financial system doesn’t seem to be curing itself." Actually, Alan, if that is your justification for why the momentum is being lost, you are an idiot - the lending part, or the supply side, is perfectly cured: it is the demand aspect which proud Ph.D.-bearing economists such as yourself always ignore - yes, people, the medium and small businesses, and virtually everyone else, who makes the economy tick (not Wall Street), don't need the bank's steenking money - not at 20%, not at 0.002%, if they don't know whether they will have a job tomorrow, or if upon waking up their stocks and 401(k) won't be worth 50% what they were the night before. And not to be left alone, Mark Zandi, the other member of the permaclown duo, told Bloomberg TV that he now puts the chance of a double-dip recession at 1 in 3. "If you’d ask me 4-8 weeks ago, I would have said 1 in 4, 12 weeks ago, 1 in 5. So it is rising uncomfortably high." How about 15.8 weeks ago: was the chance 1 in 69? What is it with these economists who need to scientificate every bullshit concept of their worthless occupation? Why quantify the merely abstract? Do economists have such a great mathematician penis envy, that they have to cloak their infinite lack of understanding in irrelevant numbers? The fact that this man a month ago said things are all good, and never realized that America had never emerged from the recession, is all you need to know just how much credibility any and every person working for Moody's has. But we knew that already. And just because a Moody's economist sees the only hope left before the country as even more QE, it merely shows that when QE finally does strike (which it will) it will be the end game for America, and its currency. At least we now know that in the meantime Zandi has blown any chance he may have had getting a job with the administration.
In case you missed it...
With endless lies bombarding the average American from all sides seeking to instill a false sense of calm that all is good (but, but, the market is up and GM is IPOing today), it is wise to step back and consider the common sense signals that a double dip is if not here, then arriving on the next much delayed flight.
No, there will be no double dip. It will be a lot worse. The world economy will soon go into an accelerated and precipitous decline which will make the 2007 to early 2009 downturn seem like a walk in the park. The world financial system has temporarily been on life support by trillions of printed dollars that governments call money. But the effect of this massive money printing is ephemeral since it is not possible to save a world economy built on worthless paper by creating more of the same. Nevertheless, governments will continue to print since this is the only remedy they know. Therefore, we are soon likely to enter a phase of money printing of a magnitude that the world has never experienced. But his will not save the Western World which is likely to go in to a decline lasting at least 20 years but most probably a lot longer. - Egon von Greyerz, Matterhorn Asset Management
Rosenberg Interview: "If You Don't Believe In A Double Dip, It's Because The First Recession Never Ended"Submitted by Tyler Durden on 08/13/2010 12:32 -0400
Sick and tired of CNBC "interviews" in which the speaker is given 15 seconds inbetween commercials to explain why the economy is in the toilet, before another talking head from the dodecabox appears and starts spouting painfully ridiculous things? So are we. Which is why we refuse to link to David Rosenberg's earlier presence on CNBC, and instead we present Rosie's following 26 minute interview with the WSJ which is a must watch for all who want to listen to exiled Merrill Lyncher express a coherent realistic thought before some CNBC associate producer screams "cut to commercial for incontinence pills." And, true to form, Rosie starts off in style: "If you don't believe there's going to be a double dip, it's because the first recession never ended. If there is going to be a double dip, the odds are certainly higher than 50-50." For those who follow Rosie's daily letters via Gluskin Sheff (which would be all of our readers), the insights won't be particularly new, but it is always great to hear a rational and sensible human discuss things as he sees them, not as his trading book demands he sees them.
And to think Friday 13th almost started off on a favorable footing. After JPM and even Deutsche Bank's Lavorgnia whacked their Q2 GDP revision estimates to the low 1% range, Goldman joins in the realistic crowd, stating that based on retail sales data, "The report is not far enough off expectations to move the dial on revisions to Q2 (currently pointing to GDP growth in the 1% to 1 ½% range from the preliminary 2.4% rate) or to expectations for Q3." Additionally, the firm now sees a 25-30% change of a double dip.
To all the bulls out there, we have a Wien-er just for you. In an essay that is basically a sequel to last week's job application in a second-tier position in the administration by a Moody's strategist and a Princeton economist (yes, yes, we know... oxymorons), the BlackStone head of something, Byron Wien, says the fututre for the market, the economy, and pretty much everything else is brighter than a nuclear bomb (incidentally one going off today would likely send the market into the greatest melt up in history). Lest there be any confuction what Byron's view is: "My view is that the economy is going through a temporary lull and business conditions will improve later this year and in 2011." At least Wien is honest: "In preparing this essay I used research from Goldman Sachs, Lord Abbett, Credit Suisse and International Strategy and Investments for arguments on both sides of the double-dip issue." Mmhmm - that some serious "both sides" source list. And the piece de resistance: "The factors that argue against a resumption of the recession are the strong liquidity position of corporations which have 6% of their assets in cash, a level not seen since the 1960s, and the fact that both housing and autos are at low levels of production and not likely to drop further." Over the weekend we will present an extended analysis finally putting to rest the inane argument that corporations are flush with cash: while true on a gross basis, the net level of cash vs debt, and especially vs equity, is at one of the worst levels in history. This ongoing childish avoidances of the liability side of the corporate balance sheet must stop and someone has to finally shut up these so called sophisticated economists and their endless lies. Feel free to print out two copies of the attached Wien essay: we hear his work "product" is much better in two ply format.
Consumption And Spending Both Miss Estimates As Double Dip Fears Push Savings Rate To Highest Since June 2009Submitted by Tyler Durden on 08/03/2010 08:53 -0400
While economists were looking for Personal Income to come at a 0.2% growth in June, the actual number was an unchanged print from May (and a drop from the 0.3% revised rise in May). One wonders just where the Chairman gets the temerity to say that US consumers will spend more with time, despite the just confirmed (for the nth time) contraction in actual incomes, not to mention that the second drop in Payrolls in as many months will once again confirm the double dip.Further confirming the Goblin-in-Chief's delusion was that personal expenditures also printed below expectations, coming in at 0.0%, on expectations of 0.1%, down from a revised 0.1%. In other words the savings rate in June was unchanged. Yes, that means consumer did not spend more than in May, and goes against the whole "economic expansion" propaganda. And putting the last nail in the spending coffin, was the personal savings rate, which at a revised 6.4% came at the highest reading since June 2009. The US consumer is done (there are only so many iPads a bankrupt mortgage holder can buy), and no matter how fast the Dow hits 36,000, nothing will change this.