Somewhat ironically, up until the Texas Instruments news hit, NYSE market volume today was 3.2 billion shares. This is on par with the lowest non-holiday market volume since just before the market crash in September 2008. It seems not even algos and robots care to trade this market anymore. Any banks that may have been hoping to make some commission-based profits on a mythical jump in trading this uear will have to shelve such plans and continue to rely on the only proven money-making model: massively leveraged prop trading.
RANsquawk Market Wrap Up - Stocks, Bonds, FX etc. – 04/04/11
Yet another notable deal, with an 80% premium, to be funded by cash and debt. Mostly debt. Very cheap debt.
Many are quick to point out that oil still has a good $30 to go before passing the all time highs from 2008. True... If one lives in the US. Those on the other side of the pond, who care little about the USD, and who pay for everything in euros, and paid for everything in euros back in 2008, are not quite so fortunate. As the chart below shows, Brent priced in Euros is literally just off its all time previous highs of €92.88. At last check it was just over €86. Which means that the European economy is about to, literally, grind to a halt.
Tim Geithner Releases Latest Mutual Assured Destruction Threat: Says "Debt Ceiling To Be Breached No Later Than May 16"Submitted by Tyler Durden on 04/04/2011 15:16 -0400
Anyone remember the scaremongering tactics used by the kleptocracy when TARP was passed and when the Fed tried to hide its discount window borrowings (oh yes, the market really plunged on Thursday)? If not, here is a reminder, courtesy of a letter just released by the boy who not only cried wolf on so many different occasions, but continues to do so today: "The longer Congress fails to act, the more we risk that investors here and around the world will lose confidence in our ability to meet our commitments and our obligations. If Congress does not act by May 16, I will take all measures available to me to give Congress additional time to act and to protect the creditworthiness of the country....Defaulting on legal obligations of the United States would lead to sharply higher interest rates and borrowing costs, declining home values and reduced retirement savings for Americans. Default would cause a financial crisis potentially more severe than the crisis from which we are only now starting to recover....defaulting on legal obligations of the United States would lead to sharply higher interest rates and borrowing costs, declining home values and reduced retirement savings for Americans. Default would cause a financial crisis potentially more severe than the crisis from which we are only now starting to recover. Nor is it possible to avoid raising the debt limit by cutting spending or raising taxes. Because of the magnitude of past commitments by Congress, immediate cuts in spending or tax increases cannot make the necessary cash available. In order to avoid an increase in the debt limit, Congress would need to eliminate annual deficits immediately. " We are now, thusly, screwed.
Following the recent conviction of Bernard von NotHaus for his "domestic terrorism", "dollar counterfeiting" Liberty Dollar operation (for which he faces up to 25 years in jail and a $750,000 fine), the Feds are now scrambling to recover each and every ounce of physical silver available as part of the fallout. Today, for example, AP reports that Federal prosecutors tried to confiscate NotHaus' hoard of silver "Liberty Dollars" worth about $7 million. Whether or not this 181,000 ounces of "fungible" physical silver will be enough to satisfy Comex silver deliveries by Federal authorities (read a key tri-party repo clearer bank), remains to be seen.
Remember the massive surge to world GDP courtesy of the Japanese disaster spouted by every idiot on CNBC? Well, here we go:
- TOYOTA SAYS WILL HAVE TO SHUT DOWN N. AMERICAN FACTORIES
- TOYOTA SAYS SHUTDOWNS MAY AFFECT 25,000 WORKERS
This is massively bullish for horse buggies and Flintstonemobiles.
Here Comes The 4th Front For America's Nobel Peace Prize Winner: UN Attack Helicopter Fires On Pro-Gbagbo Military Base In Ivory CoastSubmitted by Tyler Durden on 04/04/2011 13:30 -0400
Update: Nobel Peace Prize winner for 2011, Nicolas Sarkozy, has just authorized the use of force in Ivory Coast.
They don't make Nobel peace war prizes like they used to anymore. The 4th war front for the president of peace Barack Obama, who just started his reelection campaign, is almost here. Naturally, don't expect any actual declaration of war. From Reuters:
- U.N. ATTACK HELICOPTER FIRES ON PRO-GBAGBO MILITARY BASE IN IVORY COAST'S ABIDJAN - TWO WITNESSES
More as we get a list of casualties, whom we expect will be more than just chocolate lovers worldwide. In the meantime, the black market for Blood Chocolate is percolating.
Remember how OPEC promised it would immediately expand its "millions" in barrels in "excess capacity" when Brent passes $120? We are expecting a PR from Saudi Arabia it promises to releases it gobs of strategic reserves any...... minute.....now.......now.........NOW damn it. And to all our European readers, we offer our condolences for $10/gallon gas. Take it up with the Chairsatan... oh wait, the San Fran Fed just issued a paper saying the Fed is not, repeat not, responsible for $121 Brent. And the San Fran Fed is always, repeat always, correct. Oh well, it's all that perfectly inelastic demand for gas at surging prices then. Sorry.
The Fed is in a bind. No matter which way it turns, utter failure is a risk. Putting more money into the system risks no less than the dollar itself. Stopping quantitative easing (QE) risks plunging the economy and financial system into another period of turbulent decline. It looks like they are going to choose the latter. In a recent report, I made the case that pressure was building on the Fed to end its QE 2 program in June, and that if it did, there would be an enormous rout in the stock, bond, and commodity markets. That analysis still stands.
Is that a tent in the cumulative volume chart of the SPY April 130 Puts or is some investor just happy to see the supposed end of QE2? Either way, no better time to hedge against a market collapse in the next 2 weeks than when the VIX is (as usual) dropping. Someone has purchased 249,420 lots, or a $12 MM bet the SPY will slide notably by the 15th.
The next decade will see the complete failure of conventional economics. Why is this so? If we take the very long view, we find that all of conventional economics developed in the era of ever-cheaper, ever-more abundant energy and the miraculous "low hanging fruit" productivity gains made possible by cheap energy and the tools of mass production and industrialization. Like a creature that was born in the morning and has only seen daylight, conventional economics has never experienced night and so it has no conception of darkness. This is true of classical, neo-classical, Marxist, Socialist, Keynesian, Neoliberal, "Capitalism with Chinese characteristics," etc. Not one of these ideological strands of conventional economics recognizes the limits on conventional "growth" as measured by GDP, increased production, etc. When the planet's population stood at 500 million, there were sufficient resources to enable a doubling to 1 billion. Then 1 billion tripled to 3 billion, which doubled to 6 billion. Now, the 600 million high-energy-consumption "middle class" of post-industrial economies is expanding four-fold to 2.4 billion. There simply isn't enough oil on the planet, in any remotely plausible scenario, for 600 million of China's 1.3 billion people to live on an American scale of oil consumption, not to mention 600 million of India's 1.2 billion, and so on for every developing economy.
Grotesque, meet tragicomic. In today's POMO the biggest CUSIP monetized was QB9, of which the Fed purchased $5.99 billion (of a total $8.03 billion). And here's the kicker: when we commented on last week's 7 Year auction we once again were rather prophetic: "Altogether a weak auction but it's not like the PDs would let it fail
especially not with QB9 becoming the next "flip back to the Fed" bond
for the PD community." And tadaa: today, the Fed bought back 50% (!) of the Primary Dealer take down ($12.115 billion) of last Wednesday's (yes that would be the QB9) auction. This is probably the fastest episode Flip That Bond on record. Anything else and the Fed would be monetizing bonds that had not yet settled.
In what is either a delayed April Fool's report, or its latest exercise in rhetoric the IMF asks the humorous question: "An Analysis of U.S. Fiscal and Generational Imbalances: Who Will Pay and How?" The obvious answer is naturally the Fed. The unobvious answer, according to the IMF, is the impossible: a slashing all of USSA's entitlement benefits by a whopping 35% combined with a hike in all tax rates. From the IMF: "This paper updates existing measures of the U.S. fiscal gap to include federal laws up to and including the mid-December 2010 federal fiscal stimulus. It then applies the methodology of generational accounting to establish how the burden of adjustment required to attain fiscal sustainability is shared across generations. We find that the U.S. fiscal and generational imbalances are large under plausible parametric assumptions, and, while not much affected by the financial crisis, they have not improved much by the passing of the Final Healthcare Legislation. We find that, under our baseline scenario, a full elimination of the fiscal and generational imbalances would require all taxes to go up and all transfers to be cut immediately and permanently by 35 percent. A delay in the adjustment makes it more costly." Such drama: have these people really not heard of the Fed. What is rather shocking is that Larry Kotlikoff, who has made it all too clear the US is bankrupt, was used as a consultant: "We are extremely grateful to Lawrence Kotlikoff who acted as a consultant providing unique inspiration,
guidance and supervision." Are massively dissenting voices now credible sources of information? What next: Fed white paper citing Zero Hedge?