No, it isn't 2008. It is a pale imitation. At least based on the Columbus Day (yes, bonds were closed then too) rally back in 2008 when the S&P soared by a ginormous 11%. Obviously what happened next was a roughly 40% plunge in stocks over the next several months. Suggesting the same could happen again would be preposterous: after all everyone knows Mars is willing and ready to bail out the world when the time come now that every single central bank is dodecatuple all in on preserving the status quo. Not for nothing, but even Greece recently ran out of ink...
"We look at conservatively estimated earnings yields and compute an equity risk premium of 600 to 700 basis points. That is an extraordinarily high reward for anyone willing to invest in stocks. History shows it is a bargain. We will seize it. Our longer-term target for the S&P is above 2000 by the end of this decade, if not before." -- David Kotok
By now, we know that isolated central bank intervention has a half life of about 24-48 hours. Next, we will find out what the duration of a concerted global central bank intervention will be. The kneejerk reaction so far, at least in the EURUSD is good to quite good. And when the impact of this latest bailout is phased out, as it eventually will, who will step in for the next much needed heroin shot of unlimited liquidity? Mars? Or, more likely, Uranus.
Credit Is From Mars, Stocks Are From Venus, Or Another Reason Why This Market Looks Increasingly Like 2008Submitted by Tyler Durden on 09/14/2011 15:03 -0400
The fact that stocks keep reacting more positively to Greek news, than Greek bonds is scary. It is somewhat reminiscent of 2008 when stocks kept rallying on allegedly good news even when debt struggled to perform on the news that was supposed to impact it most. And for all the talk that Greece is priced in, the reaction after the erroneous headline about Austria approving EFSF shows that is unlikely true. Stocks hit 1163 on that news and the decline only stopped because the correction was printed. That is over 2.5% lower than we are right now, so I don't think Greek default is priced in. Stock futures are up a full 3% from their overnight lows. Crazy and broken moves. The truly scary thing is we haven't even had the full "Eurobonds announced" rally. Where does that take SPX? 1230 again? I just can't convince myself that long is the right trade right now. Ironically, strong stocks may be their own worst enemy, as they give some European politicians the strength to do what they want - and not provide more funds to bailouts. Now I'm clutching at straws, but hey, what else to do as stocks march higher. I have checked the newswire several times while writing this. Expecting to see some new comments or twist on the comments that justifies this push in stocks, and I just can't see it. And I really don't see a strong reaction in the credit markets either. Even BAC cannot seem to rally back to Warren's strike price, let alone where they got in the immediate aftermath of his headline grabbing, stock spiking, investment.
I am not an anti-intellectual...I am an anti-moron of the counter buffoonery school.
What Zero Hedge has been saying for well over half a year has finally hit the mainstream, with pundit after pundit "suddenly" coming out of the closet and making the uber-bold proclamation that "QE3 is here." Yawn. That said, since Goldman's opinion is the only one that matters (see previous posts on this matter, especially those referencing the activities of one Bill Dudley at one "Pound and Pence"), here is Jan Hatzius explaining how the whole world now looks up to Bernanke to pick up the QE torch lit up in the past week by the SNB, the BOJ and the ECB, and take Central PlanningTM to escape velocity (which may well be needed if we hope to get Mars to bail out the Earth shortly). Specifically, when discussing what the Fed will announce on Tuesday, naturally follows Monday, or the day in which risk comes home to roost, Hatzius says the following: "First, we expect them to expand the scope of their “extended period” language to cover not just the exceptionally low funds rate but also the exceptionally large balance sheet. For example, they could rewrite the current forward-looking language in the statement to say that economic conditions “…are likely to warrant exceptionally low levels for the federal funds rate and exceptionally large asset holdings for an extended period” (our suggested change in italics). Indeed, our baseline expectation is that this change will occur at the August 9 FOMC meeting, although it is a relatively close call. Second, we expect the composition of the Fed’s balance sheet to shift toward longer maturities. This could happen via an increase in the average maturity of its reinvestment of MBS paydowns and/or a change in the reinvestment policy for its Treasury portfolio. However, we do not yet expect this for the August 9 meeting, although it is possible." Operation Twist 2 it is then, with unlimited purchases in the 2-7 year range to keep the yield at a sturdy 0%, and the 2s10s to surge record highs (alas, QE3 means inflation, inflation, inflation down the line) in a last ditch attempt to bailout America's financial system, which unfortunately has just entered wind-down mode.
Goldman has kept mostly mum about tomorrow's NFP number for one simple reason: the BLS apparently has not leaked it to anyone, which explains why a rumor leaked by Larry Kudlow of all people has the power to move the EURCHF by 100 pips. Should tomorrow's BLS surprise there is just one conclusion that can be derived: any concerns of data leak from the BLS can be discarded. Which probably means that the NFP will be inline. Or not. As Goldman's Andrew Tilton explains there are just as many potential upside catalysts as downside, namely (to the upside) i) Jobless claims have moved lower since early July, ii) The Institute for Supply Management (ISM) nonmanufacturing employment index has held up, iii) The ADP employment report was reasonably healthy, while on the converse side we have i) Companies have begun to pull job advertising, ii) Manufacturing employment looks shaky, iii) Layoff announcements picked up in July. Taken together one can see why the Fed can push the data in either way, and the conclusion is that if the Fed wishes to pre-announce QE3, the NFP will be a major disappointment to where not even the robots can levitate the market higher, while on the other hand if Bernanke and kleptocratic company wish to extend and pretend for another two weeks in hopes that Mars, Alpha Centauri or Kang and Kodos will descend with an endless Jack in the Box full of Bernankebux, then it will print well over 100k. Alas, since every piece of news lately has been sold off we believe even a sizable beat will result in only a modest upside following by a massive fade, as the market refuses to rally without some evidence of QE3. Either way, for those who care about Goldman's thought, here they are, 5 short hours before the real deal.
The latest meaningless headlines from White House spokesman Jay Carney:
- CARNEY SAYS NO REASON TO REPEAT DEBT DEBATE LATER THIS YEAR Except for retaining Obama's job of course
- CARNEY SAYS AMERICAN PEOPLE WANT COMPROMISE ON DEBT LIMIT Preferably the democrat compromise which saves a few quadrillion by not launching war on Mars?
- And sure enough there it is: CARNEY SAYS REID PROPOSAL REPRESENTS COMPROMISE
- CARNEY SAYS SENATE WILL REJECT BOEHNER DEBT PROPOSAL
- CARNEY SAYS TREASURY WILL EXPLAIN HOW IT WILL MANAGE FINANCES
- CARNEY SAYS BOEHNER PLAN VOTE WILL NOT LEAD TO COMPROMISE
- CARNEY SAYS CONGRESS `CONTROLS OUR FATE' ON DEBT LIMIT
- CARNEY SAYS ONGOING DEBATE HAS HAD NEGATIVE IMPACT ON ECONOMY
- CARNEY SAYS `NO QUESTION' BOEHNER PROPOSAL IS `POLITICAL ACT'
Bottom line: algos now using every appearance of the word "compromise" in a headline as buying trigger.
Gold is marginally higher against most currencies today and is trading at USD 1,614.40, EUR 1,130.50, GBP 990.08 and CHF 1,294.50 per ounce. Gold is flat against the dollar but remains just less than 1% from the record nominal high reached yesterday ($1,628.05/oz). The euro is under pressure again today and gold is 0.7% higher against the euro and is just less than 1.5% away from the record euro high of EUR 1,144.80/oz reached last Monday. Investors were made nervous by comments from chemicals major BASF, which said it saw global economic growth slowing as it posted weaker-than-expected earnings, sending its stock down 4.9%. Siemens AG, Europe's largest engineering conglomerate, warned that global economic risks were increasing and posted below forecast results. Its shares fell 1.3%. The Dow to Gold Ratio has again turned down suggesting gold may continue to outperform U.S. stocks and the DJIA, in particular, in the coming weeks. The long term target of below 2:1 remains viable.
CBO Finds Reid Plan Half A Trillion Short Of $2.7 Trillion Promised; Actual Cuts Are $375 Billion Over Ten YearsSubmitted by Tyler Durden on 07/27/2011 09:26 -0400
Yesterday, we roasted Boehner over his proposed deficit-cutting plan after it was discovered that it cut about $250 billion less than had been promised. Now it is time to do the same to Harry Reid, after the CBO has just released its analysis of his so-called "plan", which has double the credibility, and dollar, hole: per the CBO the plan will only generate $2.2 trillion in savings, half a trillion short of the promised $2.7 trillion. But wait, it gets far, far more idiotic. Per the CBO "The caps on appropriations of new budget authority excluding war-related funding start at $1,045 billion in 2012 and reach $1,228 billion in 2021" - that's right: savings from not fighting future wars - a cool trillion. But why stop there - savings from not declaring war on Mars: $1 quadrillion; savings from not paradropping suitcases full of $1 billion dollar bills for every US citizen: $333 quadrillion, and so forth. But wait: there's more: "The legislation also would impose caps of $127 billion for 2012 and $450 billion over the 2013-2021 period on budget authority for operations in Afghanistan and Iraq and for similar activities." But wait, there' even more: "Savings in discretionary spending would amount to nearly $1.8 trillion, mandatory spending would be reduced by $41 billion, and the savings in interest on the public debt because of the lower deficits would come to $375 billion." Gotta love the circularity: less interest payments are part of the actual deficit cuts! So, here's the math: of the $2.2 trillion in "savings" strip away non-savings from non-authorized "wars" and you get... $750 billion... and take out the $375 billion in, no really, interest savings, and you get... $375 billion. OVER TEN YEARS! Is there a wonder why with idiotic leaders like this the true US rating is CCC at best?
Presenting The ECB's Own Reflections On A Member Country's "Withdrawal And Expulsion From The EU and EMU"Submitted by Tyler Durden on 07/19/2011 11:01 -0400
The trope du jour in Europe now appears to be that Greece will be temporarily expelled from the eurozone following the ECB agreement to allow Greece to default "temporarily" whatever the hell that means. Good luck pushing a freefall (not a prepack) through bankruptcy court (what bankruptcy court: Southern New York? Eastern Santorini? Upper Volta? Mars?) in the 1-2 weeks that the idiot bureaucrats think it would take. And while they can come up with whetever BS to paint the tape as idiot algos once again go berserk on positively emoting headlines at least until tomorrow when everything collapses again, and send the EUR higher, the truth is that the biggest refutation of this approach comes from none other than the ECB, which in a paper titled: "Withdrawal and Expulsion from the EU and EMU - some reflections" tells us that this is pretty much impossible. To wit: "This paper examines the issues of secession and expulsion from the European Union (EU) and Economic and Monetary Union (EMU). It concludes that negotiated withdrawal from the EU would not be legally impossible even prior to the ratification of the Lisbon Treaty, and that unilateral withdrawal would undoubtedly be legally controversial; that, while permissible, a recently enacted exit clause is, prima facie, not in harmony with the rationale of the European unification project and is otherwise problematic, mainly from a legal perspective; that a Member State’s exit from EMU, without a parallel withdrawal from the EU, would be legally inconceivable; and that, while perhaps feasible through indirect means, a Member State’s expulsion from the EU or EMU, would be legally next to impossible." The fact that the paper was written by a Greek back in 2009 is oddly ironic. That said, we assume this is merely yet another observation that will be ignored by the Statusquocrats who continue on irrelevant of facts of reality with their failed plan to preserve the EUR for a few more months no matter the taxpayer cost.
For those of us who are awake, and for those who are on the verge of understanding, certain rules come into play that strengthen our stance and shield us from folly. Liberty is not a self perpetuating social condition. It requires guidelines, and effort, and sacrifice. Liberty will not survive without our willingness to maintain it. If you are not ready and willing to fight for your own independence, then you are not truly free. Let’s examine some of the inherent laws and guidelines of free will and free action that will allow us to not only win back our self determination, but to keep it for generations to come. You want liberty? This is what it takes…
Some fireworks go off.
"What may be the science story of the century is breaking this evening" ... and it provides a window of opportunity for sanity in the climate change debate ... including getting away from the next financial scam ...
At this point it looks bad for the working middle class and it looks
like they aren’t going to make it through the next banker made financial
crisis. The middle class just wants the chance for a new beginning.
They want jobs. They know the country has been hijacked by the banking
corporatocracy, supported by the corrupt political class in D.C. It is
time for the middle class to channel their inner Josey Wales and get
plumb mad-dog mean. It is not time to lose your head and give up. The
middle class are being pursued by Wall Street bounty hunters and
government crooks trying to finish them off. It is time to make a stand
and fight. It is essential that we know our enemies and how they
achieved their power. It all began in 1913 with the creation of the
Federal Reserve and the implementation of the personal income tax. I’ve
previously detailed how the baby boom generation contributed to our
fiscal plight in Part One – For a Few Dollars More,
how the actions of the Federal Reserve’s over the last few decades have
impoverished the middle class and placed the country at the brink of
collapse in Part Two – Fistful of Dollars and addressed the nefarious creation of a central bank in Part Three – The Good, the Bad, and the Ugly.