The overnight global scramble to buy stocks, any stocks, anywhere, continued, with the Nikkei soaring higher by 2% as the USDJPY rose firmly over 100, to levels not seen since May as the previously reported speculation that more QE from the BOJ is just around the corner takes a firm hold. Sentiment that the liquidity bonanza would accelerate around the world (with possibly more QE from the ECB) was undented by news of a surge in Chinese short-term money market rates or the Moody's one-notch downgrade of four TBTF banks on Federal support review. The release of more market-friendly promises from China only added fuel to the fire and as a result S&P futures are now just shy of 1800, a level which will almost certainly be taken out today as the multiple expansion ramp continues unabated. At this point absolutely nobody is even remotely considering standing in front of the centrally-planned liquidity juggernaut that has made "market" down days a thing of the past.
The soon-to-be-confirmed Mr. Chairwoman had plenty to say - none of which came as a great surprise. Overall we scored her comments 32 Dovish to 18 Hawkish (which fits with all pre-conceved ideas about the size of her index-finger in relation to the 'print' button). A few cherubs include:
- *YELLEN SAYS BENEFITS OF QE STILL EXCEED THE COSTS
- *YELLEN SAYS QE `CANNOT CONTINUE FOREVER'
- *YELLEN DOESN'T SEE ASSET BUBBLE IN HOUSING PRICES
- *YELLEN SAYS QE IS NOT AIMED AT HELPING TO FINANCE U.S. DEFICIT
- *YELLEN: NO ONE HAS A GOOD MODEL ON WHAT INFLUENCES GOLD PRICES
She covered fiscal policy, regulation, gold, income inequality, and bubbles; but it was her admission late in the Q&A that "real" unemployment is around 10% that perhaps leaves the most room for moar...
Following our earlier preview, we expect the Q&A to have some potential fireworks as the politicians demand she "get to work" as soon as possible. If you are playing buzzword bingo at home - drink if she says "bubble", "depression", "data-dependent", "fiscal", or "screw you Schumer."
Hunting season is off to a good start this week, and I’m not just talking about deer hunting. It seems that former Fed officials declared open season on their ex-colleagues. First, Andrew Huszar, who once ran the Fed’s mortgage buying operation, let loose in yesterday’s Wall Street Journal. Huszar apologized to all Americans for his role in the toxic QE programs. And then today, the WSJ struck again, this time with an op-ed by former FOMC Governor Kevin Warsh. Warsh is a former Morgan Stanley investment banker whose 2006 to 2011 stint on the FOMC spanned the end of the housing boom and the first few years of “unconventional” policy measures. After such a solid grounding in the ways of the Fed and Wall Street, he recently morphed into a critic of the status quo. His criticisms are welcome and we believe accurate, but they’re also oh so carefully expressed. They’re written with the polite wording and between-the-lines meanings that you might expect from such an establishment figure. He seems to be holding back. So, what does he really want to say?
Self-directed retirement schemes with a gold and/or precious metals allocation are a powerful retirement planning tool and considering the continuing financial malaise affecting the U.S., they will continue to offer a genuine long-term savings option.
With Kill-Bill body-double Chilton fading poetically into the dark, and Gensler gone, President Obama is set to nominate Timothy Massad to the Chairmanship of the CFTC. We can't wait to hear how the man who was responsible for bailing out the banks at any cost, will now make sure these same banks don't do anything bad again. And he will also, somehow, "supervise" America's $234 trillion in derivatives and make sure nothing bad ever happens there too?
With better US labor market data, the key event in the upcoming week could well be the Yellen nomination hearing in the Senate Banking Committee. Yellen will likely deliver brief prepared remarks followed by questions from members of the committee. Yellen is expected to be relatively circumspect in discussing potential future Federal Reserve policy decisions in the hearings. Nonetheless, the testimony may help clarify her views on monetary policy and the current state of the economy. Yellen has not spoken publicly on either of these topics since the spring of this year. In addition to the nomination hearing, there will be a series of Fed speeches again, including one by Chairman Bernanke.
- Fed Anxiety Rises as QE Raises Risk of Loss With Political Cost (BBG)
- Iran Nuclear Deal Expected as Early as Friday (WSJ)
- Israel rejects mooted interim Iran nuclear deal, Kerry heads to talks (Reuters)
- JPMorgan Banker Backed $200 Million Madoff Loan in 2008 (BBG)
- Unleashing the food nazis - FDA Says Trans Fats Aren't Safe in Food (WSJ)
- Draghi Aggression Shows Pledges Backed by Rate Surprise (BBG)
- S&P Cuts France's Credit Rating by One Notch to Double-A (WSJ)
- S&P criticises France’s high tax rates for stifling growth (FT)
- Payroll Gains in U.S. Probably Cooled Amid Government Shutdown (BBG)
- China premier warns against loose money policies (Reuters)
- Brussels forecasts tepid Eurozone growth (FT)
- SAC Case Began With Informant’s Tips on Cohen, Rajaratnam (BBG)
- Dirty Munich Home’s Nazi Loot Estimated at $1.35 Billion (BBG)
- Mortar hits Vatican embassy in Damascus, no casualties (Reuters)
- India Launches Mars Mission (WSJ)
- Lael Brainard to leave Treasury, heading to Fed (FT)
- U.S. Takes Aim at 'Forced' Insurance (WSJ)
- Wife of Jeff Bezos attacks book about Amazon (FT)
- Fall of Brazil’s Batista embarrasses President Dilma Rousseff (FT)
- The One Thing People Still Really Like About BlackBerry (BusinessWeek)
Blackberry Craters After Report Company Abandons Sale, To Replace CEO, To Issue 19.2% Dilutive Convert InsteadSubmitted by Tyler Durden on 11/04/2013 08:21 -0500
Just over a month ago, when we shared our cynical view on the "hopium" inspired LBO of Blackberry, we commented as follows: "In other words an LBO, one which however has not only one but many outs: "There can be no assurance that due diligence will be satisfactory, that financing will be obtained, that a definitive agreement will be entered into or that the transaction will be consummated." Which means that once the buyers figure out the potential disaster on the books, expect the final price (if any) to be revised lower as one after another MAC clause is triggered." Not even we were right: as it turns out moments ago, the Globe & Mail reported that having looked at the BBRY, not only will the price be revised lower, but the "purchase" price will be eliminated altogether as any deal is now dead, the company will do a convert offering instead and deadpan CEO Torsten Heins is history.
Just as Friday ended with a last minute meltup, there continues to be nothing that can stop Bernanke's runaway liquidity train, and the overnight trading session has been one of a continuing slow melt up in risk assets, which as expected merely ape the Fed's balance sheet to their implied fair year end target of roughly 1900. The data in the past 48 hours was hot but not too hot, with China Non-mfg PMI rising from 55.4 to 56.3 a 14 month high (and entirely made up as all other China data) - hot but not too hot to concern the PBOC additionally over cutting additional liquidity - while the Eurozone Mfg PMI came as expected at 51.3 up from 51.1 prior driven by rising German PMI (up from 51.1 to 51.7 on 51.5 expected), declining French PMI (from 49.8 to 49.1, exp. 49.4), declining Italian PMI (from 50.8 to 50.7, exp. 51.0), Spain up (from 50.7 to 50.9, vs 51.0 expected), and finally the UK construction PMI up from 58.9 to 59.4.
The philosophical roots of Janet Yellen's economics voodoo, it seems, are in many ways even more appalling than the Bernanke paradigm (which in turn is based on Bernanke's erroneous interpretation of what caused the Great Depression, which he obtained in essence from Milton Friedman). The following excerpt perfectly encapsulates her philosophy (which is thoroughly Keynesian and downright scary): Fed Vice Chairman Yellen laid out what she called the 'Yale macroeconomics paradigm' in a speech to a reunion of the economics department in April 1999. "Will capitalist economies operate at full employment in the absence of routine intervention? Certainly not," said Yellen, then chairman of President Bill Clinton's Council of Economic Advisers. "Do policy makers have the knowledge and ability to improve macroeconomic outcomes rather than make matters worse? Yes," although there is "uncertainty with which to contend." She couldn't be more wrong if she tried. We cannot even call someone like that an 'economist', because the above is in our opinion an example of utter economic illiteracy.
There are three dimensions to the broader investment climate: the trajectory of Fed tapering, the ECB's response to the draining of excess liquidity and threat of deflation, and Chinese reforms to be unveiled at the Third Plenary session of the Central Committee of the Communist Party.
After a blistering October for stocks, drunk on yet another month of record liquidity by the cental planners, November's first overnight trading session has been quiet so far, with the highlight being the release of both official and HSBC China PMI data. The official manufacturing PMI rose to 51.4 in October from 51.1 in September. It managed to beat expectations of 51.2 and was also the highest reading in 18 months - since April 2012. October’s PMIs are historically lower than those for September, so the MoM uptick is considered a bit more impressive. The uptrend in October was also confirmed by the final HSBC manufacturing PMI which printed at 50.9 which is higher than the preliminary reading of 50.7 and September’s reading of 50.9. The Chinese data has helped put a floor on Asian equities overnight and S&P 500 futures are nudging higher (+0.15%). The key laggard are Japanese equities where the TOPIX (-1.1%) is weaker pressured by a number of industrials, ahead of a three day weekend. Electronics-maker Sony is down 12% after surprising the market with a profit downgrade with this impacting sentiment in Japanese equities.
In what is merely the latest humiliating blow to Obama, moments ago, in a 42 to 56 vote, Senate Republicans blocked President Barack Obama's nominee to oversee the FHFA - the administration in charge of mortgage finance giants Fannie Mae and Freddie Mac, which in turn are so instrumental to restoring housing as the primary source of "High Quality Collateral" (and its securitization), which in turn is critical to allow the Fed to eventually step away from QE. The defeat on a procedural vote for the nominee, Democratic Representative Mel Watt of North Carolina, came despite an aggressive White House push in the past few days to round up support. The vote against limiting debate on Watt's nomination was 56-42, four short of the needed 60 votes to move ahead in the Senate. Whether this means that Moody's ADP's Mark Zandi is back on the table as a potential nominee is unclear as of this writing.