• Buffett Shortens Bond-Holding Duration After Inflation Warning (Bloomberg)
• No Need for New Fed Stimulus (WSJ)
• UK RICS House Price Balance for July -8% - lower than expected: UK Economic Fears Rise As House Prices Dip (FT)
• Fed Efforts to Spur Growth May Move Markets More Than Economy (Bloomberg)
• Unemployment: What Would Reagan Do? (WSJ)
• China July Trade Surplus Surges as Imports Soften (BusinessWeek)
• China Tells Banks to Take Back Trust Firms Loans, People Say (Bloomberg)
• Incomes Fall in Most Metro Areas (WSJ)
• Shirakawa Signals Japan Recovery Withstanding Yen’s Advance (BusinessWeek)
• Housing Gauge Signals First Price Drop in a Year (BusinessWeek)

The NFIB Small Business Report came in at 88.1, down from 89.0 but just beating the expectation of 88. Yet there was nothing optimistic in the index itself: "The Index of Small Business Optimism lost 0.9 points in July following a sharp decline in June. The persistence of Index readings below 90 is unprecedented in survey history. The performance of the economy is mediocre at best, given the extent of the decline over the past two years. Pent up demand should be immense but it is not triggering a rapid pickup in economic activity. Ninety (90) percent of the decline this month resulted from deterioration in the outlook for business conditions in the next six months. Owners have no confidence that economic policies will “fix” the economy... Bottom line, owners remain pessimistic and nothing is happening in Washington to provide encouragement. Confidence is lost. At least the “real variables” (hiring, capital spending and inventory investment) did not deteriorate substantially in July. The damage to the Optimism Index was done by expectations for business conditions for the second half – owners predict that the economy will not improve appreciably, at least on Main Street. Big banks and big manufacturers may be doing well, but the small firms are not. If this doesn’t change soon, the success of the large firms will be imperiled as well." And guess where the bulk of hiring in America comes from. The double dip recession in an ongoing depression continues to remind everyone it is not going away.

RANsquawk European Morning Briefing - Stocks, Bonds, FX etc. – 10/08/10

And so it continues: since we first posted Nanex' report on quote stuffing two months ago, and the follow-up analysis, the firm's images of visualizable HFT algorithmic "crop circles" have appeared everywhere, from the pages of Huffington Post to The Atlantic. Which is terrific, as it further raises public awareness of the fact that no matter what one does, the market is now merely a computerized playground in which human traders have no chance of even breaking even in the long run, as the adversary uses consistently illegal means (intentional bid stuffing) to extract every last penny from whoever is left trading. In order to keep the public's, and the SEC's ADD-addled attention on this matter of major significance, we present the latest patterns of illegal computerized quote stuffing as further glaring evidence that the regulators have given up trying to restore any sort of credibility in the market (and people wonder why ICI reports 13 consecutive weeks of mutual funds outflows). Our only hope is that someone will be clever enough to reverse engineer the pattern generators in these algos, and to punish the HFT operators who day after day leave their fingerprints all over the biggest crime in capital market history with complete impunity.

It's official - KKR has pulled its US Offering (S-1). It appears distribution is actually a relevant metric when it comes to pricing overbloated, DOA PE corpses (especially when the memory of BX and FIG is still fresh). HFTs get an F for pushing the market up 10% on next to negative volume. And since when is a parabolic move up of almost 10% considered "Unfavorable Market Conditions." Just how much bullshit is going on behind the scenes of this market?

Gallup presents some troubling statistics for the democrats as we approach mid-term elections (a mere three months away). In a nutshell, the party of a president who has a sub-50% rating into midterms, has lost, on average, 36 seats since 1946. Alternatively, presidents with a popularity rating over 50%, lose just 14. As Gallup says: "The clear implication is that the Democrats are vulnerable to losing a significant number of House seats this fall with Barack Obama's approval rating averaging 45% during the last two full weeks of Gallup Daily tracking. The Republicans would need to gain 40 House seats to retake majority control."

One of the saving graces of the burgeoning US Federal debt was, for the majority of the post-crisis days, its composition, split between short-term (Bills), and long-term (Coupons) debt. As Bills have on average yielded well below 0.5% (and recently even less, now that the 2 Year is yielding 0.5%), a sizable portion of the US debt, was for structural reasons, paying essentially no interest. Since in early 2009, over a third of total US debt consisted of Bills, due to massive foreign (especially China) and domestic demand for ultra short-term US paper, nearly a third of US debt was "free" to the US. However, as Morgan Stanley points out recently the Bill portion of total marketable debt (which today closed at a record $8.777 trillion) has plunged to just 22%. The balance, as the debt portfolio has rolled in time, has logically been filled by much higher interest paying coupon debt: from a low of just 55% in early 2009, this has risen to 72% currently, or roughly $6.3 trillion. This is troubling for the Treasury as it means that due to ongoing rolling of Bill debt, there is no longer an easy way to issue "interest-free" debt. In summary, the average maturity of US Treasury debt is now 58 months from just 48 months at the end of 2008, and as Morgan Stanley points out, is directly in line with the average since 1980. The conclusion is simple: very soon what the Fed does on the front end will have increasingly less of an impact on the interest rate the US pays on its borrowings.