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Before the Tape 9-20-11 (Waiting on the Fed)
This is our daily market commentary published before the market’s open. For more market insights, investment strategies, and FREE Special Reports detailing how to prepare yourself for the Coming Crisis, visit us at www.gainspainscapital.com
All eyes are on the Fed’s two day meeting today and tomorrow. The general view as expressed by Goldman and the rest of the Street is that some form of QE 3 or Operation Twist will be announced.
Our view is that the markets could be very disappointed here. While Stocks have erased most of their QE lite/ QE 2 gains (the S&P 500 was at 1,075 for QE lite and 1,200 for QE 2)….
…Commodities remain 22% above their pre-QE lite levels and nearly 10% above their QE 2 levels.
Gold is most certainly not predicting additional easing:
Nor is Copper:
Meanwhile, behind the scenes, the financial system remains under major duress.
Dollar Funding Costs Rise As Central Banks' Plan Seen Inadequate
European banks are finding dollars an expensive commodity once again, as the afterglow fades from a coordinated central bank plan to improve liquidity.
Swapping euros for dollars now costs about as much as it did before the European Central Bank said Thursday it would work with counterparts in the U.S., Europe and Japan to provide dollars for banks struggling to access U.S. currency. The three-month ...
http://online.wsj.com/article/BT-CO-20110919-708511.html
Only last week, five Central Banks (the Fed, ECB, Bank of England, Bank of Japan, and Swiss National Bank) performed a coordinated intervention. Already the effects of that intervention have been erased.
In Europe, corporations are now seeking shelter for their cash hoards:
Siemens shelters up to €6bn at ECB
Siemens withdrew more than half-a-billion euros in cash deposits from a large French bank two weeks ago and transferred it to the European Central Bank, in a sign of how companies are seeking havens amid Europe’s sovereign debt crisis.
The German industrial group withdrew the money partly because of concerns about the future financial health of the bank and partly to benefit from higher interest rates paid by the ECB, a person with direct knowledge of the matter told the Financial Times.
http://www.ft.com/cms/s/0/dca4cc08-e096-11e0-bd01-00144feabdc0.html#ixzz1YUDV8yBw
While in the US, the Great Cash Grab is well underway
SEC seeks offshore cash disclosure
The US securities regulator is pushing more companies to disclose how much cash they hold offshore, as attention focuses on the impact of tax rules that encourage US companies to keep earnings overseas.
The Securities and Exchanges Commission has asked companies, including Dow Chemical, Fortune Brands, Caterpillar and CIT to increase the information they provide to investors about overseas earnings and cash.
http://www.ft.com/cms/s/0/462980ea-e2c9-11e0-897a-00144feabdc0.html#ixzz1YUDJPF34
Worldwide, there is a shortage of capital. Leverage levels exceed those of the Tech Bubble. Even Central Banks, such as the Fed are leveraged to the hilt (with $50 billion in capital and $2.8 trillion in assets, the Fed is leveraged at 56 to 1. Lehman was at 30 to 1 prior to its collapse).
Meanwhile, China appears to have abandoned its European backstop:
China bank stops FX swaps, forwards with some European banks –sources
A big market-making state bank in China's onshore foreign exchange market has stopped foreign exchange forwards and swaps trading with several European banks due to the unfolding debt crisis in Europe, two sources told Reuters on Tuesday.
The European banks include French lenders Societe Generale , Credit Agricole and BNP Paribas .
"Apart from spot trading, all swaps and forwards trading (with the European banks) have been stopped," one source who is familiar with the matter told Reuters.
http://www.reuters.com/article/2011/09/20/idUSB9E7K102K20110920
China to keep buying U.S. Treasuries: report
China, the largest foreign holder of U.S. government debt, will keep buying U.S. Treasuries, the official People's Daily, the ruling Communist Party's mouthpiece reported on Tuesday, citing government researchers.
In an article about the reasons for China's increased purchase of U.S. Treasuries, the newspaper cited Yan Xiaona, a researcher with the Chinese Academy of Social Sciences, as saying that the dollar "is relatively safer than the euro" because of the unfolding sovereign debt crisis in Europe.
Yan was quoted as saying that dollar-denominated assets remained attractive for investors around the globe.
Wang Chaocai, a Ministry of Finance researcher, was quoted as saying that "what else we can buy if not U.S. Treasuries? It's more risky to buy into equities."
http://www.reuters.com/article/2011/09/20/us-china-us-treasuries-idUSTRE78J0BL20110920
This and the following story are Dollar positive and Euro negative, which ties in with our theme of deflation in the near future.
S&P downgrades Italy
Standard and Poor's rating agency has downgraded Italy's sovereign debt by one notch, deepening the eurozone's economic woes. The agency now lists Italy as A/A-1, down from A+/A-1+.
The move was prompted by fears the country's huge debt is out of control, despite parliament recently passing an austerity budget.
The Italian government has strongly criticized S&P for this move, calling it “contaminated” by political considerations. In their statement issued on Tuesday, Silvio Berlusconi's government insisted their measures to balance the budget would bring results soon.
http://rt.com/news/rating-agency-downgrades-italy-905/
We continue to believe deflation, triggered by a collapse in Europe, is the primary threat to the markets today. This implies a large cash position and minimal exposure to equities.
This is our daily market commentary published before the market’s open. For more market insights, investment strategies, and FREE Special Reports detailing how to prepare yourself for the Coming Crisis, visit us at www.gainspainscapital.com
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Agreed. Ben is not going to QE to the level expected. Greece will need to fail and stock markets crash.
Wasn't today supposed to be a good day for Greece to go? I wish.
Let's get this shit on.
I dont think Ben can meet the ultra high QE3 expectations, the early QE3 chatter was about trillions of dollars delivered as a gift to stocks? It cant happen today, it would blow the wheels off everything.
So when Ben comes out and talks about 'Monitoring the situation, I've got some real nice tools here, bond rate hand holding', will that be enough to make the greedy hungry stocks happy? I dont think so!
here is an article I enjoyed reading, posted earlier, about the USD debt monetary system collapse and "freegold nuclear" weapon.
http://fofoa.blogspot.com/2010/02/greece-is-word.html
http://maxkeiser.com/2011/09/20/kr186-keiser-report-dollar-trapped/comme...
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[KR186] Keiser Report – Dollar-Trapped!
Posted on September 20, 2011 by stacyherbert| 23 Comments
Stacy Summary: We interview Bill Still.
ist frustarting each time you think the markets will crash, they recover
this is getting so boring waiting for the inevitable
Yea but its getting way more chaotic every day...one of these days it WILL be an unrecoverable crash. I dont think Ben CAN please 'the markets', such high expectations priced in.
No doomsday today either, pre-market index are +++++. & i'm going back to bed!
Good place for you, back in bed...never seen you make any comment other than 'NO DOOMSDAY TODAY'!
Yes, it's all Rainbows (with a Pot of Gold), Sunshine, and Pink Unicorns today!
It's the same story from the US to Europe. Governments are spending more money than they take in revenue. The answer is clear reduce spending and get your fiscal house in order. Some how everyone misses the obvious and instead prefers to make a mockery of sound finance.
If you are in the inner circle I'm sure there's lot's of money to be made. If you are the average Joe then I'm afraid all the responsible actions on your part will be undone by the madmen we have running the financial systems.
Welcome to bizarro land.
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rob
stocks havn't lied about QE they have only lied about the economy
you used to be able to see world evenst on stock markets ie 9/11 etc but now they just sho2w when Ben turned on or off the printing press
a truellly pathetic state of affairs
Fundamentals, techincals or anything for that matter mean anyhting, it all relies on Bens press
How theer havn't been more protests at this I do not know
Its a a f*cking travesty
How there hasnt been more protests? Easy, the Gubment keeps people quiet with this massive 'pay the peasants to eat for now' program where at least 50% of the public eat and have a place to live only due to a Gubment check...but that wont last much longer.
And besides that, americans are good trained sheeple, as long as the TV is on and you can still text message in a Dominoes pizza, all is well!
Well, until it suddenly isnt, and that moment is coming soon so the only intelligent thing to do is plan and prepare for it.
Good points. I look at articles from as far back as February where the news was bad but NO PROBLEM we surely got 'QE3' comin! Markets were around 9,800 when the promises of QE3 started meeting all bad news...theyve built one huge sandcastle and the tide is coming in, I dont believe Ben can deliver anything but disappointment.
yeah...what yabs said...
then again stocks have lied for almost 3 years...or was that Wall Street?
Gold revaluation as official policy with gold at vastly higher prices would act as an anchor to the runaway train of derivatives, which are wrecking the worlds banking sectors. I wonder if that tool will come out of Bernankes bag, or if the 'this sucker is going down' scenario will be staged first.
meanwhile stocks ARE predicting QE3 or more by rallying to over 2 percent today
OH really so stocks are pricing in QE3 yet again? How many times have stocks priced in QE3 now, about 40 times?
I dont see any 2% rally, DOW futures up 50, but if youre all-in on the QE3 bet well good luck.