After an extended and detailed rant against the BLS and their ineptitude, which is worth watching in its own right, Charles Biderman (CEO of TrimTabs) sums up Europe's troubles and hopes in 30 seconds. Towards the end of the clip, Biderman notes that Monsier Hollande is saying that governments should borrow more money so they can give more money to more people and THAT will create economic growth. Instead, Charles sees Europe sliding down a slippery slope faster and faster with no end in sight.
Gold just lost the $1600 handle for the first time since January 5th and is suffering its biggest one-day loss in over two months as Europe's meltdown is driving broad liquidations. Are hungry Chinese central bankers more than happy to soak up the precious metal at a discount from levered longs liquidating into the European fiasco?
"Uncivilized" China Quietly Building Gold Reserves As Gold Imports From HK Soar By 587% In First QuarterSubmitted by Tyler Durden on 05/08/2012 10:00 -0400
A month ago we ended up with the hilarious situation where the US was actively considering releasing petroleum from the Strategic Petroleum Reserve even as China was demonstratively and concurrently adding to its strategic inventory. Now, as the developed world is seeing day after day of gold hammering on amusing flights of fancy that central banks won't be forced to engage in more and ever bigger rounds of monetary dilution, and where the seller apparently has no regard for getting a "good" price, but merely seeks to crash the bid stack slams various PM prices, we see the same inversion with gold. Because as Bloomberg reports, "Mainland China's gold imports from Hong Kong surged more than sixfold in the first quarter, to 156 metric tons, adding to signs that the country may displace India as the world's largest consumer of the precious metal on an annual basis." And the punchline: "The purchases through Hong Kong may signal that the mainland is accumulating reserves, London-based brokerage Sharps Pixley Ltd. said in February. The nation last made its reserves known more than two years ago, stating them at 1,054 tons." Yep ladies and gents: the PBOC is very grateful that it can add hundreds of tons of gold to its reserve holdings in a stealthy operation which it will announce only after its conclusion, at which point, like true 13F chasing lemmings, retail will send gold soaring. But in the meantime, dear hedge funds worried about your margin calls and 1 month performance reports, please proceed calmly along with the lemming herd, and keep pushing gold lower and cheaper for our new Chinese overlords, and for everyone else who, without P&L timing constraints, takes delight in such brief arbitrage opportunities.
The Athens Stock Exchange broad index of Greek stocks just dropped to its lowest level since 1992. It is now around 90% lower than its 1999 and 2007 peak levels. The index of Greek banking stocks is rumbling along the lowest levels on record down over 97% from its 2007 highs. Where is the Greek Whitney Tilson (or Dick Bove) when they need him?
When you were a child and did something wrong, the worse possible words your mom could say were "wait til your father comes home!" and that dreaded anticipatory angst is what Europeans must be feeling now as the threat of austerity hangs like the sword of Damocles over their heads. The reason we say this is that in fact, as Veronique de Rugy of National Review Online notes, the 'savage' spending cuts in Europe have yet to show up anywhere. All the rhetoric of how Europe's austerity has failed, all the hand-wringing and election-winning, and yet all the major nations are spending more than pre-recession levels; France and the UK did not cut spending at all, and even in Greece and Spain cuts have been small (and any meaningful reforms failed to be implemented). In fact, the epicenter of the current meltdown - Spanish banking - has seen only de-minimus headcount reduction over the past few years - so who is tightening their belts? The trouble, of course, is that while the threat of austerity has struck fear in the hearts of every European voter, the action of raising taxes has hurt just as much and perhaps the "trumpeting the failure of austerity as a reason to go full-Keynesian again" chatter will recede as facts overtake fallacies. As Mark Grant recently noted, there's a big divide between austerity pledged and austerity implemented, as it appears its more about raising taxes than cutting spending.
If French Fitch, which will first be Egan-Jonesed than downgrade France from its unmovable AAA rating is starting to say that the unthinkable, namely the departure of Greece from the Eurozone, would be "bearable", then things are about to get once again exciting, as this is merely setting the stage for the next leg down. Among the other google translated gibberish said by Fitch chief Taylor, here is the argument: Germany would merely soak up the damage caused by a Greek departure: "Greece's exit does not mean the end of the euro. Above all, Germany has a fundamental interest in preserving the common currency remains. Would the D-mark re-introduced, they would add value compared to other currencies strong. The export industry, that is: would the engine of the German economy, damaged. This will not allow Germany - even if one or more countries leave the single currency area." How about Italy's exit? Or Portugal's? Or Spain's? At what point does it become unbearable for German taxpayers to burn their wealth to preserve a system that virtually nobody but a few select career politicians demand?
Hardly a surprise to anyone, but here it is black on white - Greece officially makes the odds for a Euro departure well over 50%:
- TSIPRAS SAYS GREEK RESULTS MAKES BAILOUT ACCORD NULL AND VOID
- TSIPRAS SAYS GREEKS HAVE VOTED AGAINST BARBARIC BAILOUT
- TSIPRAS SAYS WON'T JOIN A GOVT OF NATIONAL SALVATION FOR LOAN
- TSIPRAS SAYS GREEKS HAVE ENDED PLANS FOR ADDITIONAL AUSTERITY
- TSIPRAS ASKS VENIZELOS, SAMARAS TO RENEGE PLEDGES IN WRITING
And here it comes
- GREECE'S TSIPRAS SAYS WANTS INTERNATIONAL COMMISSION TO INVESTIGATE IF GREECE'S DEBT IS LEGAL
- TSIPRAS SAYS MUST BE MORATORIUM ON GREEK DEBT PAYMENTS
Remember Odious Debt?
- It just get worse and worse: After McClendon's trades, Chesapeake board gave blessing (Reuters)
- Iran Accepts Renminbi for Crude Oil (FT)... which is not news: recall China and Iran Bypass Dollar from July 2011
- As Gas Prices Fall, a Sigh of Relief (WSJ)... so now people can direct their disability payments to where they belong: extra fries
- Greece Braces for a Repeat of Elections (FT), as first predicted by Zero Hedge, this will be a recurring affair
- China dissident Chen says officials must face justice (Reuters)
- Merkel Urges Athens to Stick With Reform (FT)
- Hollande’s Win is a Chance for Change (FT)
- U.K. Manufacturers Expect Exports to Rise (WSJ)
- U.S. Says Bomb Plot Disrupted Before Public Threatened (Bloomberg)
- Santorum Endorses Romney as Republican Nominee (Bloomberg)
- Beijing May Host OTC Market (China Daily)
- India Delays Tax Avoidance Laws (FT)
European equity markets are seen trading in negative territory across the board at the midway point as the lack of a Greek governing coalition continues to weigh on sentiment. As such, an earlier Greek T-Bill auction passed by with an unsurprising increase in borrowing costs for the country. The concern over sovereign debt is clear elsewhere, as the spread between peripheral 10-year government bond yields remain wider against the German Bund. Very strong German Industrial Production data has failed to provide relief for the DAX index as concerns on the periphery outweigh the strength in the core. The monthly reading for March beat expectations, coming in at 2.8% against estimates of 0.8%. Overnight reports from the Spanish press concerning a government intervention in the lender Bankia have been denied by the Spanish Ministry, commenting that the aim for the company is a cleanup and restructuring, not a seizure. EU’s Almunia has commented on the developments, saying that it seems likely the bank will receive state aid.
While Turkey has assured the U.S. government it will cut purchases of oil from Iran by 20% this year, its total trade with the Islamic Republic increased 47% to $4.8 billion in the first quarter from a year earlier. Sanctions aimed at isolating Iran because of its nuclear program, combined with revolutions in the Middle East, have spurred a tripling in the region’s purchases of Turkish precious metals and jewels to $942 million in the first three months, from $282 million in the same period last year. This 30% increase in demand is contributing to gold remaining above $1,600/oz in what has all the hallmarks of another period of consolidation prior to higher prices. “Turkey is exporting massive quantities of gold to Iran and Arab Spring countries as citizens in those countries switch to portable wealth,” Mert Yildiz, chief economist for Turkey at Renaissance Capital, told Bloomberg on April 30. The increase in trade with Iran comes as sanctions make it harder for trading partners such as Turkey, India and China to pay in dollars and euros. Iran said in February it would accept payment in any local currency or gold. Reuters report today that Iran is accepting payments in yuan for some of the crude oil it supplies to China, the Iranian ambassador to the United Arab Emirates said on Tuesday. "Yes, that is correct," Mohammed Reza Fayyaz told Reuters when asked to comment on an earlier report in The Financial Times.
Confirming that the market is now completely insane is a rehash of the actual catalyst data flow: recall that yesterday the one thing that pushed stocks higher, as described in Clutching at Straws, was the surge in German factory orders. Today, we get another huge beat of expectations in German Industrial Production and everything is red. Although now that US traders, most of them originating at Liberty 33, are starting to walk in, we may get yet another of the much anticipated and largely loved turns from a blood red premarket to green everywhere.
It may not be a big rise, but the €1 billion increase in Italian bank borrowings from the ECB, from €270 billion to €271 billion in Apirl as just reported by the Bank of Italy, is still a record, and not one Italy should be proud of. The Spanish bank update is pending and will be out in a few days, although if the recent about face by Rajoy, admitting the Spanish banks are about to be nationalized, which today is no longer sending the markets higher, is an indication, it won't be a vast improvement. Sure enough, the fact that the market's attention is once again drawn to an indicator of the PIIGS financial sector insolvency is not good for sovereign spreads and at last check everyone was wider, core and periphery together, as Spain was+5.3 bps, Italy +3.8 bps, Netherlands +0.3 bps, and France 1.8 bps. Even the futures are shocking not green on more bad news.