Markets up again this morning. Wisconsin’s state assembly passed the highly debated legislation that weakens state workers’ unions and the bill will now head on to the state senate. In a meeting with outside economic advisors, President Obama acknowledged that current rates of unemployment will continue in the near term. St. Louis Fed President James Bullard told reporters yesterday that he supports a more flexible quantitative easing program that would change the amount of bond buying based on the health of the economy. Bullard’s comments were not limited to QE2, and said a third easing program is a possibility. Today will see the release of 4Q GDP, estimated at 3.3% v 3.2% prior.
Following a surprising confirmation of a double dip in the UK a few weeks ago, after GDP was reported to have dropped by 0.5%, today the economic growth number was revised even lower, coming in at -0.6%. Per Bloomberg: "Gross domestic product fell 0.6 percent from the previous three months, compared with an initial estimate for a 0.5 percent drop, the Office for National Statistics said today in London." Yet how pathetic would a country be seen if it didn't blame a weak winter data point on the snow: "The statistics office said its “best estimate” for the impact of cold weather on the data remains 0.5 percent. The slump was led by construction and investment. The coldest December in a century hampered the recovery, dragging the economy to its worst performance in more than a year. The Bank of England kept its key interest rate on hold this month as inflation at twice the 2 percent target led to a four-way split among officials. Recent surveys suggest the contraction may have been a temporary setback, with services resuming growth in January and manufacturing strengthening." Of course, with no additional money printing (for now) it may well have been permanent. We will need to wait until spring showers are blamed for another 1% or so drop. And it wasn't even half an hour later that the entire London Stock Exchange crashed. "Investors were left in limbo as the London Stock Exchange halted trading due to a technical glitch, dealing an embarrassing blow to its new systems. The LSE, which launched its new trading system last week, suspended dealings before the opening bell on Friday morning in the latest in a string of technical problems." Snow was not blamed: "It blamed issues with the market data technology and said it was investigating the problem." So once again, just like in the case of the Italian market a week ago, the second there is the potential for massive market volatility following disappointing data, a market wide "circuit breaker" comes in preventing anyone from selling. Truly an effective solution to retain asset price stability.
RANsquawk European Morning Briefing - Stocks, Bonds, FX etc. – 25/02/11
So here we are, waiting for the “event” which triggers a loss of confidence across the system. Will it be a sovereign, a US state, a bank, QE3 or QE5, the oil price, Chinese fixed investment, a false flag event (a convenient distraction/excuse) or a revolution? When it happens, the speed at which capital will move in today’s over-liquefied world will take people’s breath away. Where will it go? This is the global end of normal (baby) so that, first and foremost, it will go into the strategic assets - gold/silver, energy, food/agriculture, rare earths, etc, (as well as the equities of the financially strongest economies). Bernanke’s QE2 is nothing short of economic warfare, in the form of a wave of inflation, directed at the rest of the world and even his own population (at least anybody without a large stock market, commodities or precious metals portfolio). This inflation is not temporary, as per the false reassurances, it’s baked in. In response, creditor nations have no other choice than to cut purchases of US Treasuries (China is selling), leaving the Fed increasingly standing alone. Rampant or hyperinflation results from the complete loss of confidence in a currency and we are being steered in this direction by the gentlemen above. Sure, they are smartly dressed, well educated (kind of) and pretend to know what they’re talking about with their carefully worded “policies”. It’s all NONSENSE. All they’re doing is leading us down a well-trodden path which has happened time and again throughout history.
The first, most fundamental, and most necessary step in the transition to a free society is the demise of the modern “monster state.” And the first, most fundamental, and most necessary step in this process is the demise of the monstrous American state, its erstwhile role as a beacon to the world having long ago given way to a superpower that brings not light but heat, pulling a shroud over its own people in the process. The monster will object that it only wants to keep its people warm and safe, of course, but as people elsewhere start kicking their shrouds off, it is increasingly clear that the status – as in statist – quo is changing and that neither suffocating domestic policies nor incendiary foreign ones will be tolerated much longer.
What You Need To Know About Buying Silver At A Time When Even The Canadian Mint Says "It Has Sold Everything It Has"Submitted by Tyler Durden on 02/24/2011 19:27 -0400
Even as silver performed some unprecedented fireworks today, plunging on what was a margin hike in... crude, the metal continues to trade just below its post-Hunt Brother highs. So for those who still have not decided whether or not to take the plunge and buy into the precious metal (which, granted, was selling at $8.80 three years ago, and has since nearly quadrupled in price), we present the following discussion between Jeff Clark of Casey Research and The Daily Crux, which answers "what you need to know about buying silver today." This comes a week after we first highlighted that the Canadian Mint has sold it last stock in silver and has demand for much more.
In listening to some old lectures by Rothbard, I heard him bring up a concept called “social ownership” that was being pushed by communists in the former country of Yugoslavia as a way of managing the ownership of industry. In Yugoslavia there was a communist general named Josip Broz, who commonly went by the name Marshal Tito (how can you not love a guy that walks around calling himself Marshal Tito?). Marshal Tito is not your average run of the mill commie hahaha. I actually somewhat like this guy. Marshal Tito is one of those guys that accomplished a tremendous amount of good for his country, which is why you’ve probably never heard his name before. You see, Tito came to recognize that while the Marxists constantly called for the ownership of industry “by the people,” they never actually got around to making this happen. Tito believed that “ownership by the people” must obviously preclude the ownership of industry by the State. In Tito’s view, communist social ownership should consist of the factory workers owning a share of the company they worked for...The communists ran into some problems though.
Stratfor explains why the developments in Libya, while important, are materially less relevant from a macro perspective than those in smallish Bahrain: "The reason why Bahrain is very important is because in any negotiation you have to have some give-and-take, and it’s likely that the Bahraini monarchy will have to give some concession to the opposition. And once that happens, it will lead to an empowerment of the opposition, 70 percent of which is Shia — 70 percent of the population of the country is Shia — and that has very large-scale implications for the region, particularly for Saudi Arabia and Kuwait."
As usual, our Onionesque predictive powers are spot on. Two hours ago, when we reported the ICE margin hike, we stated: "We expect the NYMEX will follow suit on its own WTI contract margin hike any minute." 60 minutes later, this prediction comes true. Per Bloomberg: "CME Group’s New York Mercantile Exchange plans to raise margin requirements on its light, sweet crude oil contract for the first time since March 2009, according to the exchange. Margins for speculators will increase to $6,075 per contract from $5,063, and for hedgers to $4,500 from $3,750, according to a notice on the CME’s website. The change will take place after the close of trading tomorrow." The heavy artillery in crude is out. And while margin hikes do nothing any more for silver and gold, the weak hands in crude have at least two rounds of margin hikes before they are flushed out. Of course, the half life of margin hikes is about 2-3 days. We expect this increase to be internalized very quickly. The next one will be priced in within hours. And the third one will be ignored. After that... who knows.
RANsquawk Market Wrap Up - Stocks, Bonds, FX etc. – 24/02/11
If anyone is alive after today's utterly insane trading action, congratulations. The volatility lull of the past 6 months is now over: swaption traders rejoice.
And now, for the real reason for the oil plunge: the ICE has just announced it is hiking oil margins for the second time this week, this time increasing both Brent and WTI margins. The new Brent applied margin is 5200 compared to 4850 before. We expect the NYMEX will follow suit on its own WTI contract margin hike any minute. As usual, we continue to patiently await the Globex to hike margin requirements on the ES. The most recent update of the ICE Brent Scanning range and Tiering can be found here.
Oil production in Libya is expected to shut down completely and could be lost for a prolonged period of time, Bank of America Merrill Lynch said on Thursday.