Reuters

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As The Crisis Deepens, Gold Flows East - Epilogue





There is no doubting the massive reserves of fossil fuels still lying close to or just beneath the earth’s surface. One of the key points made in the first edition of Insight back in February is that we must factor in the cost of processing those fossil fuels before they can enter the energy market. The future of energy production is as much as about the economic cost of processing those supplies as it is about the extraction. 

 
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Frontrunning: August 1





  • Headlines only idiots, Schrodinger and Goebbels could love:
    • China Manufacturing Gauge Shows Unexpected Strength (WSJ)
    • China's factory activity shrank for a third straight month in July to its lowest level in nearly a year as new orders fell (Reuters)
  • For nuns and analysts alike, bank commodity earnings are a mystery (Reuters)
  • US spying comes under fresh attack (FT)
  • Summers Backed Yellen for Fed Before Rivals Now Prove More Alike (BBG)
  • Good Luck Leaving Your Wireless Phone Plan (WSJ)
  • Spain's Rajoy says he was wrong to trust treasurer in party funding scandal (Reuters)
  • Shell's Profit Falls on Shale Write-Down (WSJ)
  • Why Rand Paul and Chris Christie went to war  (Politico)
  • Sony Returns to Profit Aided by TV Business (WSJ)
 
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Overnight Levitation Is Back On Hopes Of Draghi Hopium Salvage





Crashing Australian and a miss in South Korean PMIs, following days of weak Japanese data, and a divergence in the official and HSBC Chinese manufacturing indicators to a 15 month high (HSBC PMI sliding to 11 month low) was just the bad news Asian market needed to break out higher from the recent range and thanks to the return of overnight USDJPY levitation as well as a modest reverse repo liquidity injection by the PBOC overnight, not only did the Nikkei and Shanghai rise 3% and 1.8% respectively, but US futures are right back to where they were before yesterday's dramatic turnaround in the market following a strongly dovish FOMC statement and just shy of the 1700 once more. As for Europe, while there a smattering of noise following the release of final PMIs which did not change the preliminary picture much (Spain 49.8, vs 50.6 exp; Italy 50.4 vs 49.8 exp; France 49.7 vs 49.8 exp; Germany 50.7 vs 50.3 exp) it is all up to the ECB today to preserve the myth of a European improvement coupled with a EUR currency at or near multi-month highs.

 
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NSA Admits: 'We Do Store All Your Data But We Don't Look At It All'





The Director of National Intelligence released three declassified "in the interests of transparency" documents this morning that authorized and explained the bulk collection of phone data - one of the secret surveillance programs that Snowden revealed. As Reuters reports, much of what is contained in the documents has already been divulged in public hearings by intelligence officials but the National Security Agency's "Bulk Collection Program," carried out under the U.S. Patriot Act, is now in the open. Have no fear though, "Although the programs collect a large amount of information, the vast majority of that information is never reviewed by anyone in the government," the report said. As Senator Patrick Leahy commented, "what has to be of more concern in a democracy is whether the trust of the American people is beginning to wear thin."

 
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Did Larry Summers Just Tap Someone On The Shoulder?





It seems 'someone' doesn't want the world knowing just how much of a 'long shot' Larry Summers is for the great-and-powerful-Oz position of Chairman of the Federal Reserve. As we showed just last week, PaddyPower showed Yellen as a strong 77% probability favorite with Summers lagging notably behind in the pack. Then comes this morning's comment from the second most powerful man in the world:

  • *OBAMA SAYS LARRY SUMMERS BEING UNFAIRLY CRITICIZED: SHERMAN
  • *REID SAYS SUMMERS IS A FRIEND, A `COMPETENT' MAN

And Goldman's Jan Hatzius' warnings that Summers is less 'enthusiastic' on using monetary policy than his competitor Yellen. And now - as the image below shows - PaddyPower has removed its betting on the next Fed head. We just wonder who got the tap on the shoulder?

 
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Frontrunning: July 31





  • Ackman Says Pershing Square Takes 9.8% Stake in Air Products (BBG) - So is APD Carl Icahn's biggest ever short yet
  • Latest Hilsenplant: Summers Hedges His Doubts on Fed's Bond Buying (WSJ)
  • China Stocks World’s Worst Losing $748 Billion on Slump (BBG)
  • U.S. Spy Program Lifts Veil in Court (WSJ)
  • Abenomics on the rock again: Japan July manufacturing PMI shows growth at 4-month low (Reuters)
  • EADS to be renamed Airbus in shake-up (FT)
  • Goldman's GSAM has significantly increased its exposure to European equities (FT) - there is a reason why this is Goldman's worst division
  • Japanese Megabanks Post Mega Profit Gains (WSJ) - when one excludes MTM impact from rate surge of course
  • Ex-workers sue Apple, seek overtime for daily bag searches (Reuters)
  • Hong Kong Yuan Deposits Snap Eight-Month Increase on Cash Crunch (BBG)
  • Downtown NYC Landlords Remake Offices in Shift From Banks (BBG)
 
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Greece Has Already Spent 75% Of Its Bank Bailout Cash





Eurozone taxpayers and the IMF are left wondering what their bailout funds have been spent on in Greece. The Hellenic Financial Stability Fund (HFSF) has spent EUR38bn (or 75% of its total) bolstering the capital of Greece's four biggest banks (and winding down eight small lenders). The EUR50bn fund looks set to be drained further  - despite the banks comments that costs have been cut, funds raised, and assets sold - as non-performing loans continue to surge. About a quarter of all loans are non-performing and that share is likely to increase as the country's six-year recession, which has wiped out over a quarter of the economy, shows little sign of abating. Have no fear though, since stress tests will be carried out later this year to establish whether Greek banks have more capital needs. Of course the key question is - just where were these rescue funds diverted within the bank shells.

 
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Bloomberg Beverage Ban Bounced By Appeals Court





And so Bloomberg's initial foray into testing the limits of America's nanny financial capital is officially over. Moments ago Reuters reported that Mayor Mike's quest to limit what New Yorkers may or may not drink is officially over after his forced plan to ban large sugary drinks from restaurants and other eateries was halted and deemed an "illegal overreach of executive power," a state appeals court ruled on Tuesday, upholding a lower court decision in March that struck down the law. Wait, if illegal overreaching of executive power is, well, illegal, there are a few other people in position of power that America's court system may want to take a close look at. Alas it won't.

 
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Frontrunning: July 30





  • "Ooops": Barclays reveals £12.8bn balance sheet hole (FT), Barclays Bows to Pressure With Share Sale (WSJ)
  • Bank of Italy Inspecting Top Lenders' Books (WSJ)
  • Obama to propose 'grand bargain' on corporate tax rate, infrastructure (Reuters)
  • China injects funds into money markets, quelling fears (FT)
  • Berlusconi faces verdict that could endanger Italian government (Reuters)
  • Shale Threatens Saudi Economy, Warns Prince Alwaleed (WSJ)
  • Qatar Finds Revolution Abroad Not as Easy as Stock Picks (BBG)
  • Cities Begin Hiring Again (WSJ) - not to mention filing for bankruptcy
  • Big Question Hangs Over Small-Caps (WSJ)
  • China Politburo Pledges to Press On With Restructuring Economy (BBG)
  • Bank Revenues Surge on Trading Over What Fed Will Do (BBG)
 
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Overnight News Not Terrible Enough To Assure New All Time Highs





While the market's eyes were fixed on the near record slide in Japanese Industrial Production (even as its ears glazed over the latest commentary rerun from Aso) which did however lead to a 1.53% jump in the PenNikkeiStock market on hope of more stimulus to get floundering Abenomics back on track, the most important news from the overnight session is that the PBOC's love affair with its own tapering may have come and gone after the central bank came, looked at the surge in 7 day market repo rates, and unwilling to risk another mid-June episode where SHIBOR exploded to the mid-25% range, for the first first time since February injected RMB17 billion through a 7-day reverse repo. The PBOC also announced it would cut the RRR in the earthquake-hit Lushan area. And with that the illusion of a firm and resolute PBOC is shattered, however it did result in a tiny 0.7% bounce in the SHCOMP.

 
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Bernanke To Be Deposed In Court Over AIG Bailout





Bernanke still hasn't picked what non-extradition country he will move to following his Federal retirement, and already the storm clouds are brewing overhead:

U.S. JUDGE SAYS EX-AIG CEO GREENBERG SHOULD BE PERMITTED TO DEPOSE FED CHAIRMAN BERNANKE OVER INSURER'S BAILOUT -- COURT RULING; U.S. COURT OF FEDERAL CLAIMS JUDGE THOMAS WHEELER SAYS THERE ARE "EXTRAORDINARY CIRCUMSTANCES" FOR TAKING OF BERNANKE'S DEPOSITION

Too bad Bernanke's predecessor, who is just as culpable for the AIG collapse and bailout, won't be sitting next to the Chairsatan or else we would very soon have a great reason to roll out the following image:

 
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Frontrunning: July 29





  • More Doctors Steer Clear of Medicare (WSJ)
  • Syrian Looters in Bulldozers Seek Treasure Amid Chaos (BBG)
  • Siemens CEO Peter Löscher Is Set to Leave His Post After Series of Earnings Misses (WSJ)
  • Silver Vault for 200 Tons Starts in Singapore as Wealthy Buy (BBG)
  • Omincom and Publicis merger shows that advertising is now firmly in the business of Big Data: collecting and selling the personal information of millions of consumers (NYT)
  • Apple supplier accused of labour violations (FT)
  • 'BarCap was the Wild Wild West – that’s what we called it’ (Telegraph)
  • P&G chief seizes opportunity in era of three-day stubble (FT)
  • Federal Reserve 'Doves' Beat 'Hawks' in Economic Prognosticating (WSJ) - LOL: Fed "hawks"
 
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Third Day In A Row Of Early Futures Weakness Set To Give Way To Low-Volume Levitation





Hopes that Kuroda would say something substantial, material and beneficial to the "three arrow" wealth effect (about Japan's sales tax) last night were promptly dashed when the BOJ head came, spoke, and went, with the USDJPY sliding to a new monthly low, which in turn saw the Nikkei tumble another nearly 500 points. China didn't help either, where the Shanghai Composite also closed below 2000 wiping out a few weeks of gains on artificial hopes that the PBOC would step in with a bailout package, as attention turned to the reported announcement that an update of local government debt could double the size of China's non-performing loans, and what's worse, that the PBOC was ok with that. Asian negativity was offset by the European open, where fundamentals are irrelevant (especially on the one year anniversary of Draghi FX Advisors LLC "whatever it takes to buy the EURUSD" speech) and renewed M&A sentiment buoyed algos to generate enough buying momentum to send more momentum algos buying and so on. As for the US, futures are indicating weakness for the third day in a row but hardly anyone is fooled following two consecutive days of green closes on melt ups "from the lows": expect another rerun of the now traditional Friday ramp, where a 150 DJIA loss was wiped out during the day for a pre-programmed just green closing print.

 
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Gold And The Endgame: Inflationary Deflation





Excessive monetary stimulus and low interest rates create financial bubbles. This is the biggest debt bubble in history. It is a potent deflationary force and central banks are forced into deploying increasingly aggressive (offsetting) inflationary forces. The avoidance of a typical deflationary resolution to this economic long (Kondratieff) wave is pushing the existing monetary system beyond the point of no return. The purchasing power of the developed world’s currencies will have to bear the brunt of the “adjustment”. Preparations for this by the BRICS nations, led by China, are advancing rapidly. The end game is an inflationary/currency crisis, dislocation across credit and derivative markets, and the transition to a new monetary system. A new “basket” currency is likely to replace the dollar as the world’s reserve currency. The “Inflationary Deflation” paradox refers to the coming rise in the price of almost everything in conventional money and simultaneous fall in terms of gold.

 
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Hundreds Killed In Overnight Cairo "Massacre" As 30 Million Take To The Streets





(?????: ??????)

Nearly a month after the Egyptian military coup (that wasn't a coup according to the US), the celebrations over the democratic overthrow of the Muslim Brotherhood's president Morsi (according to John Kerry) continue with hundreds of protesters killed and injured in the latest overnight violent breakout. The reports are obviously conflicting with the Muslim Brotherhood claiming 120 were killed in violent protests with police near Rabaa Al-Adawiya Mosque, describing events as a "massacre", alternatively the government's Ministry of Health says only 38 dead arrived at hospitals so far. The tragic deaths were a logical outcome of protests which according to the head of Egypt's Central Statistics Bureau General Abu Bahar Jundi, saw as many as 35 million people taking to the streets Friday on both sides of the ideological divide. Egyptian army officials put the number at around 30 million.

 
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