The last time we checked on the (funding) status of America's real presidential race - the one where America's uber-wealthy try to outspend each other in hopes of purchasing the best president money can buy - the totals were substantially lower. With November 6 rapidly approaching, however, the scramble to lock in those record political lobbying IRRs is in its final lap. And thanks to the unlimited nature of PAC spending, look for the spending to really go into overdrive in the next 2 weeks as the spending frenzy on the world's greatest tragicomedy hits previously unseen heights.
Yesterday we made it very clear why with the Turkey provocation avenue to further Middle East escalation rapidly closing, the one pathway left is Lebanon. Sure enough, today the escalation playbook is firmly in play - from Reuters: "Heavy gunfire erupted in central Beirut on Sunday after protesters tried to storm the offices of Prime Minister Najib Mikati, demanding that he quit over the assasination of a top intelligence official. An official said security forces had fired in the air. Witnesses said at least two protesters had fainted, apparently as a result of tear gas fired by security forces after protesters breached an outer barrier around the prime minister's offices. Hundreds of protesters, waving flags from the anti-Syrian opposition Future Movement - a mainly Sunni Muslim party - and Christian Lebanese Forces as well as black Islamist flags, marched on Mikati's offices after the funeral of Wissam al-Hassan."
From 1987: How much time do I have to liquidate? Answer: We need you to do this by Monday night.
EU leaders committed to establishing a euro-area bank supervisor by year-end, leaving the door open for supplying direct aid to Spanish banks. The EU must now agree on the structure that makes the ECB (European Central Bank) the main supervisor by January 1st. This new system was created to break the link between banks and governments at the root of the zone’s financial crisis and will roll out in the next year and expect to cover all 6,000 eurozone banks by January 2014. “Our goal is banking supervision that’s worthy of the name, because we want to create something that’s better than what we currently have,” Merkel told reporters. Germany and France argued contentiously about the timing. Berlin has insisted the supervisor be effective before the ESM can begin cash injections into Spanish banks, those transactions are not foreseeable to occur until the latter half of the year, around the time of Germany’s national elections. Angela Merkel said it would take more than a few months before the supervisor was fully effective and direct bank recapitalisation could be considered. However, the agreement appeared to upset German finance minister Wolfgang Schaeuble's efforts to delay and limit the scope of European banking supervision. Germany has been averse to see its politically sensitive Savings and Cooperative banks come under outside supervision. It rejects any joint deposit guarantee under which wealthier countries might have to underwrite banks in poorer states.
- Debt Fuels a Dividend Boom - Firms Collect Payouts, and Investors Get Yield; 'Reminiscent of the Bubble Era' (WSJ)
- Black Monday Echoes With Computers Failing to Restore Confidence (BBG)
- Poll: Obama Leads in Wisconsin, Iowa (WSJ)
- Gold Imports by India Seen Climbing First Time in Six Quarters (BBG)
- Europe pushes ahead towards ECB bank supervision (Reuters)
- ... And fails: Summit fails to agree timetable for aid to failing lenders (FT)
- Toyota Prius Dominates California as State’s No. 1 Model (BBG)
- Italy raises €18bn in huge bond sale (FT)
- Diplomacy inbox fills up as U.N. awaits U.S. presidential vote (Reuters)
- Goldman braced for more revelations (FT)
- China power brokers agree preferred leadership team (Reuters)
- EU, Japan Warn Against New US Swaps Rules (WSJ)
- Why VaR is the most meaningless contraption ever: Morgan Stanley shows the ‘flaky’ side of model (FT)
- Made in France Trumps Consumer Choice in Hollande Jobs Quest (BBG)
- North Korea threatens South over propaganda balloons (Reuters)
Yesterday for the first time in years, the irrelevant headlines out of Europe, which continues to pretend to shuffle money out of one pocket (Germany's) into another (everyone else's), was well-deservedly backstage to the Google earnings fiasco one day ahead of the 25th anniversary of Black Monday (which is today). The EU summit was one of the more toothless ones in a long time, with no discussions at all of the one item that matters - Spain's bailout (as well as Greece's) - but with a lot of fluff considerations for a EU banking union and joint deposit guarantees - events which, like in the June summit, Germany has implicitly gone along with for the ride, but explicitly has said only over its dead body and in which it will not participate (note we said "pretends" above). The summit continues today for a second day, and will hardly make any more news than it did yesterday. In real news, GE missed revenue expectations and joins virtually every other company this earnings seasons in confirming deteriorating unfudgable topline conditions. Elsewhere, in Greece a pool by VPRC for Greece Tomorrow showed that the anti-bailout Syriza party would win outright with 30.5% of the vote, with New Democracy getting 27% and the Pasok coalition partners getting 5%. The Neo-Nazis would get 14%. Also notable is that on Sunday Spanish regions Basque country and Galicia hold local elections. As Rabobank warns, Galicia is Rajoy’s home region, and traditional stronghold of his Popular Party. A poor PP showing may highlight political hurdle to making bailout request, thus challenging the recent OMT-inspired support to Spanish bonds. This in turn would confirm what we have said all along, namely that a bailout request means an end to the current ruling regime and political chaos. Finally, the November 25 Catalonian elections may also trigger Spanish euphoria reversal.
The World Gold Council issued a summary on gold’s price performance in various currencies during the third quarter. The report looks at influences that monetary policies and central bank actions have on gold. Gold’s 11.1% USD/oz return in 3Q was in response to central bank stimulus measures. Volatility decreased and generally correlated with other assets. Central banks announced a continuation of their unconventional monetary policy programmes in Q3 which mainly are used to lower borrowing costs and supporting financial markets.Financial assets have responded to central bank policy announcements, but gold's reaction has been the strongest. There is a consensus that these policies drive investment into gold purely due to inflation-risk impact. The World Gold Council believes that there are not one but four principal factors that provide further support to the investment case for gold: Inflation risk, Medium-term tail-risk from imbalances, Currency debasement and uncertainty, and Low real rates and emerging market real rate differentials.
- Germany will pay Greek aid (Spiegel)
- Spain Banks Face More Pain as Worst-Case Scenario Turns Real (Bloomberg)
- China’s Growth Continues to Slow (WSJ)
- Executives Lack Confidence in U.S. Competitiveness (WSJ)
- Poor Market Conditions will See 180 Solar Manufacturers Fail by 2015 (OilPrice)
- Wen upbeat on China’s economy (FT)
- Gold remains popular, despite the doubts of economists (Economist)
- Armstrong Stands to Lose $30 Million as Sponsors Flee (Bloomberg)
- IMF urges aid for Italy, Spain but Rome baulking (Reuters)
- EU Summit Highlights Financial Divide (WSJ)
- FOMC Straying on Price Target, Former Fed Officials Say (Bloomberg)
- Putin defiant over weapons sales (FT)
Today Europe awakes to yet another Eurozone summit, one at which such topics as Greece, Spain, the banking union project or a economic/budgetary union will have to gain further traction, if not resolution. In fact Greece could hardly wait and has already launched it latest 24 hour strike against austerity. The same Greece which demands a 2 year, €30 billion extension from Europe to comply with reform, a move which Europe has/has not agreed to as while the core have said yes to more time, all have refused to fund Greece with any more money. Alas the two are synonymous. As SocGen predicts unless there is some credible progress today, all the progress since the September ECB meeting, which has seen SPGB 10 Year yields decline from 690 bps to sub 550 bps, may simply drift away. And as everyone knows, there is never any progress at these meetings, except for lots of headlines, lots of promises (the Eurozone June summit's conclusions have yet to be implemented) and lots of bottom line profits by Belgian caterers. Elsewhere, Spain sold 3, 4 and 10 year bonds at declining yields on residual optimism from the pro forma bailed out country's paradoxical Investment Grade rating. In non-hopium based news, Spanish bad loans rose to a record 10.5% in August from 10.1% previously while the oldest bank in the world, Italy's Banka Monte dei Paschi was cut to junk status. All this is irrelevant though, as no negative news will ever matter again in a centrally-planned world. Finally the only real good news (at least until it is revised)came out of the UK, where retail sales posted a 0.4% increase on expectations of a 0.2% rise from -0.2%.
Whereas yesterday we learned that Chinese September electricity consumption had dropped to a multi-year low of 2.9% Y/Y (ignoring the Chinese New year data aberration of -7.5% from January which should be a blended reading with the February surge of +22.9%), down from 3.6% in August, and the lowest since August 2010, today in turn we find that the flip side to the this number, electricity production, was an even bleaker +1.5%, and the lowest in three months. And while it has been rumored that China has an incentive to manipulate the former down, this has been offset by manipulating the latter - output - up. Which is why whereas the consumption data implies a modestly weaker GDP, which declined and missed the official target (if ended precisely as the goalseek-o-tron expected), it is the electricity production data that is the outlier, and which indicates that in reality the GDP is now trendlining well below the official 7%.
Och-Ziff Calls Top Of "REO-To-Rental", And Distressed Housing Demand, With Exit Of Landlord BusinessSubmitted by Tyler Durden on 10/17/2012 18:25 -0500
The primary, if not only, reason there has been a brief spike in subsidized demand for housing in recent months, has been the GSE/FHFA endorsed REO-To-Rental plan, and associated securitization conduits, in which large asset managers have been encouraged to take advantage of government funded, risk-free financing (and entirely bypassing banks who have given up on loan origination due to legacy liability issues which have every bank tied up in litigation from now until Feddom come - just see today's Bank of America results) and purchase foreclosed properties in bulk, with the intention of converting them into rental properties. Needless to say, the subsidization of this wholesale purchasing of foreclosures, coupled with the ongoing "foreclosure stuffing" pursued by the big banks (as a reminder days to foreclose in New York just hit a record 1,072 per RealtyTrac as banks simply refuse to clear housing inventory faster knowing full well withheld inventory is an additional clearing price subsidy) is the main reason why the punditry has been confused into believing there is a housing rebound. That this "rebound" is merely a subsidized demand pull phenomenon a la the "cash for clunkers" auto sales program is patently clear to most. Nonetheless what little confusion is left, is finally coming to an end, thanks to none other than one of the first entrants in the REO-To-Rental space, $31 billion hedge fund Och Ziff, which a year after entering the program with hopes of quick riches, is now looking to cash out.
- Obama takes offensive against Romney in debate rematch (Reuters)
- Obama Says Romney Words Aren’t ‘True’ in Second Debate (Bloomberg)
- Obama takes Romney head-on in debate (FT)
- And another joins the club: Thailand Unexpectedly Cuts Rate as Global Outlook Worsens (Bloomberg)
- PBOC Injects Less Cash (WSJ)
- Japan to Hold Special Cabinet Meeting After Economy Downgraded (Bloomberg)
- Greek Coalition Duo Reject Labour Moves Proposed by Troika (WSJ)
- Opposition wanes to Spanish aid request (FT)
- RBS to Exit U.K. Asset Protection Plan After $4 Billion Fees (Bloomberg)
- Spain Retains Investment Grade Credit Rating From Moody’s (Bloomberg)
- US diplomat asks Japan, ROK to resolve islands spat (China Daily)
- Stagnation not due to austerity, says OBR (FT)
To summarize: European stocks are little changed although Spanish shares rise. Spain 10-yr bond yields fall to the lowest level in more than 6 months. S&P futures are now higher on the trading session, driven by correlation engines as the euro is up vs the dollar, despite major disappointments by IBM and Intel. In other news Germany formally shut down the debt redemption fund proposal, ending one more rescue avenue for when the recent baseless euphoria ends, even as Spanish La Vanguardia reports that Germany is pressuring Italy to request European aid alongside Spain so that the government of Prime Minister Mario Monti doesn’t reap the benefit of lower borrowing costs without being tied to tougher economic reforms. Needless to say, Italy is said to resist the proposal: after all in Europe one just wants the upside from being bailed out, as opposed to actually being bailed out...
The head of industrial and precious metals trading at Barclays, Cengiz Belentepe, has told Bloomberg that investors are selling their investments in gold ETFs and opting for the safety of allocated physical gold.
Barlcay’s Belentepe said “the question is whether the pace of buying has slowed, or whether the people have become a bit more sophisticated in recognizing the costs and liabilities.”
Curious why the EURUSD has taken off like a stung dog again? The same reason as always: posturing out of Germany that contrary to previous Reuters misreports, it actually is happy with Spain doing a mini-bailout. To wit:
- GERMANY OPEN TO PRECAUTIONARY CREDIT FOR SPAIN, LAWMAKERS SAY
And now the ball is back in Rajoy's court, as Spain will have no choice but to implement this mini-bailout, which is not the full ESM rescue package, but will allow the ECB to buy piecemeal Spanish debt (as opposed to merely dangling the threat it will do so). The bad news is that like QEternity, the open-endedness of the ECB threat to monetize Spanish debt is far more powerful than the actual process. Furthermore, the entire Spanish bailout, not just the partial one, has already been long priced in in its bonds. In other words, this is nothing but posturing, but one meant to push Spain ever closer to requesting not only a small bailout request (one which would not allow the ESM to monetize Spanish debt in the primary market, but will allow ECB to buy Spanish bonds in the secondary market), but a full blown one. Finally, never forget that to Germany this is all a process geared for one simple thing: keeping Europe's biggest and most relatively undercapitalized bank - Deutsche Bank - afloat. If this means rescuing it via the guise of Spain, so be it.