We outline various fundamental and technical characteristics of each of the three stages of a standard rally such that one could use the blueprint in identifying an imminent top. The table below leverages statistics compiled from the prior decade from various selloffs (i.e. > 7%) which have produced consistent patterns that help traders ascertain the potential depth and duration of the current downward move.
Last night, Japan issued an update of its total public debt. The number was ¥983 as of September 30. Trillion. The bad news is that the long anticipated currency legend which will finally say "¥ in Quadrillions" is once more delayed. The good news, is that with the recently expanded BOJ QE8 and QE9, the excess monetization debt capacity, a lot of its going to sweep the aftermath of Fukushima under the rug, will promptly be filled, and we fully expect the December 31, 2012 debt update to finally bring us to the first instance of the word "quadrillion" used in the context of a modern, developed nation.
Gold is 3.35% higher and silver 4.53% higher this week in US dollars in the aftermath of Obama's re-election. Gold in euros looks set to break out above €1,400/oz and is 4.1% higher and in sterling gold has risen 3.7% so far this week. Silver is 5.25% higher in euros and 4.8% higher in pounds. Gold and silver are set for higher weekly closes in all fiat currencies which may negate the recent bearish short term technical picture and set the precious metals up for the traditional yearend rally. The data clearly shows that November is gold's strongest month and one of silver's strongest months. December, January and February are also strong months - prior to a period of weakness is often seen in March.
Another day another sell-off…with equity markets in Europe trending steadily lower after it was reported that the decision on Greek aid will not be taken during the Eurogroup meeting scheduled for November 12. Still, EU official said that there will be no Greek default on November 16th (EUR 4.1bln redemptions) and that this redemption is to be "factored in" decision on disbursement. Separately, analysts at Fitch rating agency noted that while current Spain’s rating is appropriate, further action would more likely than not be to sub-investment grade. Moody’s also commented on the never-ending sovereign debt crisis today, stating that actions taken by the ECB only buying time for Euro region and that a decision on France will be communicated within a few weeks. As a result, bond and credit spreads widen further today, with SP/GE 10s spread at 450 level, which is of particular importance given that this is the level at which the LCH begins to review bonds for margin requirements. Deterioration in Italian paper was linked to next week’s supply. In turn, EUR/USD and GBP/USD trended lower, with the USD index up 0.12% at last check. Going forward, market participants will get to digest the release of the latest U. Michigan Survey (Nov P), as well as macro forecasts from Philadelphia Fed.
- Greek Aid Payment Call Won’t Be Made Next Week, EU Official (Bloomberg)
- Eurozone faces brinkmanship on Greece (FT)
- Pressure Rises on Fiscal Crisis (WSJ)
- The JC Penney massacre continues (BBG) - In other news, any minute now Bill Ackman will get that 15x return...
- SEC left computers vulnerable to cyber attacks (Reuters) cue "back door Trojan" jokes
- Former Goldman trader accused of fraud (FT)
- Elizabeth Warren's Inadvertent Best Friends: Wall Street and Republicans (BusinessWeek)
- Zurbruegg Says Managing SNB Currency Reserves Is Major Challenge (BBG)
- Obama ally leads push on fiscal cliff (FT)
- Britain threatens to block banking union (FT)
- PBOC’s Zhou Says China’s Economy Improving as Data Due (Bloomberg)
- China slaps duties on steel tube imports (FT)
- Obama to Make Statement on Economic Growth, Cutting Deficit (Bloomberg)
With expectations that Europe will once again become a flaming powderkeg after the US elections are over running high, Europe has so far not disappointed. And as usual, the focal catalyst of greatest pain remains Greece, which is only now learning what ZH readers knew days ago, namely that the Greek "austerity" vote was merely theater, and that Europe, i.e., Germany, has certainly not decided to release any of the much needed cash that Greece needs not only to run its society but to make a key bond payment on November 16. Confirming this was German finance ministry spokeswoman Marianne Kothe, who said on Friday that Eurozone finance ministers will probably not be able to decide at their upcoming Eurogroup meeting on Monday whether to disburse a badly-needed €31.5 billion loan tranche to Greece, as MNI reported earlier. "Speaking at a regular government press conference here, Kothe reminded that German Finance Minister Wolfgang Schaeuble needs the approval of the German Bundestag, the lower house of parliament, before being able to approve any further aid for Greece. “It will be difficult to achieve this by next Monday,” she said." In other words, the Greek default is suddenly in the hands of the German people, of whom at last check about 60% wanted Greece gone. There is yet hope for Greece, with a story overnight running that George Soros is ready to commit "serious funds to aid Greece." Surely that generosity too will end well for the Greek people who by now must feel as if they are in the 5th circle of a NWO globalization hell.
It would appear Mark Twain's infamous quote that "history does not repeat, but it does rhyme" has never been so apt. The following eight charts suggest the rhythm is getting louder and louder. How is it possible? It's nonsense? Well at the heart of the markets, it is still us humans and our endearing greed, fear, and heuristic biases that drive the flows... trade accordingly. “Everything that needs to be said has already been said. But since no one was listening, everything must be said again.” — André Gide
From an outright libertarian, the headline seems contrary; but Ron Paul's affirmation that "pure democracy is dangerous" critically confirms what Romney accidentally admitted: that enabling the majority to dictate the minority is a problem when the majority are receiving a [government] check. Bloomberg TV's Betty Liu looks a little shocked when the thoughtful Paul confirms bluntly that the reelection of Obama is driven simply by 'the people' being on the 'receiving end' of government benefits and that the US is "so far gone; we're over the cliff already." From the lack of credibility in Washington to GOP's 'acceptance' of higher taxes and why he quit Congress, Ron Paul succinctly reminds many of the true state of the union in which we live... "As long as you think we have to please the world and run this welfare state, all we will argue about is who will get the loot."
While markets are digesting the probabilities of a dramatic rise in taxes and cut in spending as we approach the fiscal cliff, it appears that behind-the-scenes there has been a secret plan that we can only imagine is designed to rocket-boost us over the cliff - new manned missions to the moon. As Space.com reports, NASA is serious about sending astronauts back to the moon's neighborhood and will likely unveil its ambitious plans soon now that President Barack Obama has been re-elected, experts say. They go on to comment that "The space agency has apparently been thinking about setting up a manned outpost beyond the moon's far side, both to establish a human presence in deep space and to build momentum toward a planned visit to an asteroid in 2025. The new plans have probably already been cleared with the Obama Administration but have been kept under wraps in case Republican candidate Mitt Romney won Tuesday night's (Nov. 6) presidential election." While the claims are that this will not increase the budget, we suspect out-of-this-world manned outposts cost a little more than the $17.7bn budgeted for NASA in 2013... someone is clearly eating space-cakes. Ironic really given our earlier post...
Perhaps those sage English philosophers 'The Vapors' were on to something 32 years ago when they asked if we were "Turning Japanese" for it seems the following charts from Nomura certainly suggest the US bond market is heading in that direction. From demographics to monetary policy; from investor allocations to flows; and from bond bubbles and volatility to long-term interest-rate paths, it seems we share a lot more than a love for sushi and pachinko with our neigbours across the ocean as we seem to be chasing after many Japanese models (of asset allocation and macro-economics).
The losers in elections often take the loss badly. Just as some Gore supporters in 2000 shouted about moving to Canada, some Romney supporters have taken the loss particularly badly too. All the Republican rage made me think about the origins of America. For those who want to strike out into the unknown in the pursuit of self-governance, such options don’t exist anymore. There is no great sparsely inhabited continent spread out (except perhaps Antarctica which is already claimed-for). Where is the next America? Where is the next land that people seeking self-governance can emigrate to? The hunger for self-governance led to the birth of America. It seems highly likely, in the very long run, that the hunger for self-governance will be the force that leads not only to local space colonisation. Powerful central government drives nonconformists to find ways to escape it. If the only road to self-governance left is up into space, then that is the road that will be taken.
While there was clarity in the recent election results - there will not be any impending vote recounts that would leave control of the country hanging in the balance - Tuesday night’s results did nothing to change the basic dysfunctional dynamic between the two political parties. Now the fiscal cliff will have to be addressed in the coming lame duck session, and it won’t be easy to find a solution... Victory guarantees the president nothing more than the headache of building consensus in a gridlocked capital on behalf of a polarized public, that has become tired of struggling with heightened uncertainty. In Abe Gulkowitz's latest 'The Punchline' note below, reiterates his concerns regarding the growing gulf between the behavior of investors enamored with monetary largess and the realities on the ground of globally weak economies... Add the risk of more corporate-earnings disappointments and we have a situation that needs remedying. His 17-page one-stop-shop of unvarnish everything everywhere truthiness is a must-read.
At some point or another, anyone who is even remotely paying attention to reality will likely reach two critical moments of awakening in their lives. The first is what I call the “Aha! moment”. The ‘Aha! moment’ is usually brought about by something you learn or read… When you talk to your friends and family, most of them don’t want to hear about your ideas. They think you’re nuts. They haven’t had their ‘Aha! moment’ yet. Eventually, you learn to keep it all inside. But then, at some point down the road, the second critical moment occurs– the Breaking Point.
Yesterday, we were offered 'hopes and prayers' by Gluskin Sheff's David Rosenberg. However, as he warned then, there are some things to be worried about. From the wide gaps in voting patterns across socio-economic lines and the expectations that populist policies will be the hallmark of Obama's second term to the mixed-to-negative data across employment data, consumer spending indications, housing, and Europe; it appears the market is starting to price in some positive probability of a fiscal cliff and these macro data do nothing to subsidize that reality. While the President does not face the Great Recession of four years ago, he does confront the "Not So Great Recovery" nonetheless.