Ahead of today's presidential and congressional elections, Goldman provides some brief thoughts on various election-night (and beyond) events. From a viewer's guide to the poll-closing times to a discussion of the apparent 'closeness' of the race and post-election market performance, they note that equity performance post 'tight' races has been better than in elections where the winner is more clear-cut. This election has a twist though in that it will be immediately followed by debate on the fiscal cliff, and thus resolution of the election will reduce, but not eliminate policy uncertainty.
Just when you thought the Star Wars sexalogy had three horrifying episodes too much, here comes Mickey Mouse to buy the HoldCo (for $4 billion) and make sure that even more atrocious dancing takes place on the grave of the science fiction movie that defined a generation. That, and a whole lot more Lando Calrissian action figures. Because how does one know Hollywood has officially run out of ideas? Like this: "Star Wars Episode 7 is targeted for release in 2015, with more feature films expected to continue the Star Wars saga and grow the franchise well into the future." Surely Star Wars 7 will have a Retina Display, but if young Skywalker relies on Apple maps to get to Tatooine we will just wait for part 9 (not to be confused with how many inches the maxiPad will be). What we are most excited about, however, is Indiana Jones 7 - Raiders of the Lost Wheelchair. And the renaming of Star Wars IV, of course, to "A New Hope and Change."
With less than 20 days to go to the election, the Presidential race has tightened following Romney's performances in the debates, as the Republican challenger has overtaken the president in the national averages for the first time this year (and RealClearPolitics has him with an edge in the electoral college also). But ever the fair-and-balance bank, Citi believes that Obama's advantages remain substantial, as an incumbent president in an improving economic environment. In this broad discussion, the Pandit-less bank addresses 'the data' driving their Obama call, what would have to happen for a Romney win, the Senate and House split, The Tea Party (and other unusual events), and the 'bungee jump'-causing headline risk of the pending Fiscal Cliff debate. Everything you need to know about the election-critical states, players, and events (and who would win in a fist-fight), but were afraid to ask Wolf Blitzer.
Factory output has shrunk for 14 consecutive months and businesses must continue to trim the fat of their organizations during these recessionary times. The report showed that 18.2 million people were jobless in September; this is an increase of 34,000 people versus the previous month. As living standards fall and livelihoods are being wretched voter anger is becoming increasingly palpable, especially in countries such as Spain and France. History provides countless lessons as to the political consequences of detached economic policies and their real effects. Northern Europe’s gamesmanship in rewriting previously agreed banking debt support may set a dangerous precedent and tear apart the tenuous ties of trust between governments - who after all must act together if they are ever to forge a solution to their current economic plight.
This is an important update on the U.S. drought of 2012, the combined record-setting July land temperatures, and their impact on food prices, water availability, energy, and even U.S. GDP. Even though the mainstream media seems to have lost some interest in the drought, we should keep it front and center in our minds, as it has already led to sharply higher grain prices, increased gasoline costs (via the pass-through of higher ethanol costs), impeded oil and gas drilling activity in some areas (due to a lack of water), caused the shutdown of a few operating electricity plants, temporarily reduced red meat prices (but will also make them climb sharply later) as cattle are dumped in response to feed- and pasture-management concerns, and blocked and/or reduced shipping on the Mississippi River. All this and there's also a strong chance that today's drought will negatively impact next year's Winter wheat harvest, unless a lot of rain starts falling soon.
Back in 2009 when the world wasn't filled with HFT 'experts', we deconstructed the topic of High Frequency Trading on a daily basis, and predicted not only the flash crash, not only debacles such as the Knight trading fiasco, not only the death of capital markets as a fund raising vehicle for companies who wish to go public (i.e. the FaceBook IPO fiasco), but much more (all of which has yet to pass before the stock market, as it was once known, is no more). The reason why little if anything can and will be done to fix the persistent threat to capital markets that is HFT is two fold: i) none of the current regulators understand anything about modern market topology, and ii) HFT is so embedded in markets that unrooting it would result in a complete reboot of "fair" stock valuation: imagine what would happen to stock prices if Knight and its "buy everything" algos were no longer present. Mass hysteria as the realization that vacauum tubes are now TBTF. That said it is always amusing to observe as more and more people get in on the scam that is the "equity market", now completely dominated by robots which do nothing but accelerate and perpetuate momentum moves - after all it is all they can do in lieu of being able to read financials, or anticipate events. Remember: it is always the market that makes the news, never the other way around. So it was entertaining and informative to read the latest recap of all events HFT-related as narrated by Wired's Jerry Adler, whose write up "Raging Bulls: How Wall Street Got Addicted to Light-Speed Trading" does an admirable job of showing how not only nothing has changed since those days in 2009 full of warning, but how in fact things are moving ever faster to what will one day be a trading singularity, limited strictly by the speed of light (and maybe even surpassing that). Of all the things in the article, the one we found most curious is that since 2009, the round trip from the biggest quant trading hub in Chicago to the exchange hubs in NY and NJ, has been cut by over 50%, or from over 13 milliseconds to just about 9 milliseconds, courtesy of Microwaves.
A panel of the Swiss parliament is discussing the introduction of the parallel ‘Gold franc’ currency. Bloomberg has picked up on the news which was reported by Neue Luzerner Zeitung. The Swiss parliament panel will discuss a proposal aimed at introducing a new currency, or a so-called gold franc. Under the proposal, which will be debated in the lower house’s economic panel in Bern today, one coin in gold would be worth about 5 Swiss francs ($5.30), the Swiss newspaper reported. The Swiss franc would remain the official currency, the paper said. The proposal may lead to a wider debate about the Swiss franc and the role gold might again play to protect the Swiss franc from currency debasement. The initiative is part of the “Healthy Currency” campaign which is being promoted by the country’s biggest party – the conservative Swiss People’s Party (SVP).
By mainstream media accounts, the presidential election in France and parliamentary elections in Greece on May 6 were overwhelming verdicts against “austerity” measures being implemented in Europe. There is only one problem. It is a lie. First off, austerity was never really tried. Not really. In France for example, according to Eurostat, annual expenditures have actually increased from €1.095 trillion to €1.118 trillion in 2011. In fact spending has increased every single year for the past decade. The debt there increased too from €1.932 trillion €1.987 trillion last year, just as it did every year before. Real “austere”. The French spent more, and they borrowed more. The deficit in France did decrease by about €34 billion in 2011, but that was largely because of a €56.6 billion surge in tax revenues. Again, there were no spending cuts. Zero. Yet incoming socialist president François Hollande claimed after his victory over Nicolas Sarkozy that he would bring an end to this mythical austerity: “We will bring back Europe on a track for jobs, growth and the future… We’re no longer doomed to austerity.” This is just a willful, purposeful distortion. What the heck is he talking about? Certainly not France.
While the naive public has been inundated with stories that the foreclosure pipeline has been finally unclogged following the robo-settlement (see here and here) and as a result the home "price discovery" process is well on its way, reality is just a tad different. Make that totally different. As usual, the only foreclosure report that matters, and that is even remotely close to reality, comes from RealtyTrac, and we are sad to say, it brings no good news. Quite the contrary. According to the real estate specialists, March 2012 foreclosures plunged from 206,900 in February to 198,853 in March, the first time the total number of foreclosures (either Default Notices, Foreclosure Auctions, or REOs) has dropped under 200,000 since July 2007! Which sadly means that the foreclosure dam wall has yet to crack. Of course, when it does, well "The Second Foreclosure Tsunami Is Coming, And Is About To Kill Any Hopes Of A "Housing Bottom."
Some of these 15 swans are blacker than others....
Remember that one keyword that oddly enough never made it's way into the president's largely recycled SOTU address - "Solyndra"? It is about to make a double or nothing repeat appearance, now that Ener1, another company that was backed by Obama, this time a electric car battery-maker, has filed for bankruptcy. Net result: taxpayers lose $118.5 million. The irony is that while Solyndra may have been missing from the SOTU, Ener1 made an indirect appearance: "In three years, our partnership with the private sector has already positioned America to be the world’s leading manufacturer of high-tech batteries." Uh, no. Actually, the correct phrasing is: "...positioned America to be the world's leading manufacturer of insolvent, bloated subsidized entities that are proof central planning at any level does not work but we can keep doing the same idiocy over and over hoping the final result will actually be different eventually." We can't wait to find out just which of Obama's handlers was may have been responsible for this latest gross capital misallocation. In the meantime, the 1,700 jobs "created" with the fake creation of Ener1, have just been lost. Yet nothing, nothing, compares to the irony from the statement issued by the CEO when the company proudly received taxpayer funding on its merry way to insolvency: " "These government incentives will provide a powerful stimulus to a vital industry and help ensure that the batteries eventually powering millions of cars around the world carry the stamp 'Made in the USA'." Brilliant - and no, they are laughing with us, not at us.
Only in a banana republic would Congress be "forced" to hold hearings on whether to ban itself from illegal (for everyone else) insider trading. Which explains why below readers can watch precisely that, live from the house Committee on Financial Services.The legislation in question relates to bill H.R. 1148, the "Stop Trading on Congressional Knowledge Act." We wonder how long until Congress manages to scuttle this latest effort to keep the playing field between the muppets and everyone else. After all, someone has to leak critical rating agency information (such as the FT's break of a key S&P leak yesterday, or Nancy Pelosi knowing weeks in advance that Moody's would not downgrade the US) to the media and/or trading entities.
While the general media may be ignoring the latest peculiar twist on the "Occupy" theme, or in this case the "occupyourhomes.org", Bank of America is taking it quote seriously. As a reminder, "Tuesday, December 6th is the National Day of Action to stop and reverse foreclosures. The Occupy Homes movement is holding actions around the country in support of homeowners and people fighting to have a home. Find an event near you and join in our day of action tomorrow!. There are actions happening in over 20 cities nationwide. Events are taking place in Brooklyn, Buffalo and Rochester New York; Los Angeles, Oakland, San Francisco, San Diego, San Jose, Petaluma, Sacramento, Paradise and Contra Costa California; Lake Worth, Florida; Atlanta, Fayetteville, and DeKalb Georgia; Chicago, Illinois; Bloomington, Indiana; Minneapolis, Minnesota; Cleveland, Ohio; Denver, Colorado; Detroit and Southgate Michigan; St. Louis, Missouri; Portland, Oregon; and Seattle, Washington." And if you have not heard about today's protest on the conventional media that is understandable: as BAC says internally, this event "could impact our industry." Here are the specific warnings to BAC "field services" agents: i) Your safety is our primary concern, so do not engage with the protesters; ii) While in neighborhoods, please take notice of vacant BAC Field Services managed homes and ensure they are secured; iii) Remind all parties of the bank’s media policy and report any media incidents. Aside from the superficial implications, what is more important is that the big banks are showing precisely what the weakest links in the system are, and what makes them the most nervous: it is not protesters living in tents in a major metropolitan city: it is protesters disrupting the lifeblood of the broken banking system - the home selling/repossession pathway. Expect many more such protests now that Bank of America has tipped its hand.
Today's adjustment to the government's HARP program to get anything with a pulse as close to the discount window as possible was not the only proposal to revive the moribund US housing market. According to a new proposal by HUD, beginning this month and continuing for a year, anyone with a just $100 will be allowed to buy a HUD-owned REO home. In essence: the new buyer is merely taking over the mortgage payments in a repeat of what happened in 1970s New York along the Central Park West corridor. Granted for now it is stricly limited to only... 28 states! But it gets better: "HUD’s $100 down payment incentive program can also be applied to an FHA 203k loan, which can be used to fund repairs and renovations on the home. The 203k program allows buyers to finance both the mortgage and additional money for rehabilitation needs with a single government-insured loan." Said otherwise, a $100 downpayment gives one unlimited degrees of freedom how to spend non-recourse, massively levered capital, and courtesy of money's fungibility, to even fund, shhh, the occasional iPhone. "Matt Martin, CEO of Matt Martin Real Estate Management (MMREM), says this is one of the most exciting features of the new incentive program and should drive a lot of exposure to FHA’s 203k offering." Why of course it is: it will only take enterprising Americans a few weeks to realize that the latest HUD program is basically an EFSF in sheep's clothing, which provides US consumers with a Benjamin in their pocket, the ability to lever up by a factor of about two thousand (or more) and use the proceeds for pretty much anything (but make sure to call it "home repairs"). And when the HUD is stuck with hundreds of billions of non-performing, delinquent loans, what then? Why the same that will happen to the EFSF: another wholesale taxpayer funded bailout... of those who were tricky enough to figure out this latest subsidy of the global retailer base.