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It's An Upside Down World... Or So Much For "Decoupling"

Tyler Durden's picture




 

From Peter Tchir of TF Market Advisors

It's An Upside Down World... Or So Much For "Decoupling"

Italy has “successful” bond auction and for all intents and purposes, JPM misses earnings.

Stocks failed to respond to a “successful” Italian bond auction.  The market isn’t giving them much credit for placing bonds that mostly mature in the timeframe covered by LTRO.  The auction results are good, but the market is taking a wait and see attitude towards them as everyone is fully aware of how much LTRO money is out there, that Italian banks in particular issued bonds to themselves to get financing and are “indebted” to the government and ECB (in more ways than one).

JPM’s earnings may be enough (or not enough as the case may be) to end the rally in financials.  The numbers were not great and no matter what the official analyst numbers were, everyone was set up for them to beat.  Weak earnings in trading does not bode well for other banks.  It was a decent quarter for the markets (with volumes and volatility far higher than what we have seen so far this year), and JPM is big in the US new issue market, so has a competitive advantage, so their performance is concerning.  DVA give back was about 30% of what they had taken as a gain in Q3.

I think Morgan Stanley in particular is exposed as I doubt they did significantly better than JPM in investment banking, they had a settlement with MBIA that will show up as a big hit (spun as one time, even though the associated earnings were never spun as one time) and they have a much larger DVA give-back.

So as European sovereign debt shows signs of stability (manipulated stability, but stability nonetheless) the US is disappointing on earnings. With the “decoupling” trade so prominent, the US markets are set up to be very weak relative to Europe.  This is second day in a row where the decoupling thesis is taking a beating (yesterday’s economic data was weak).

 

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Fri, 01/13/2012 - 09:08 | 2061044 Mae Kadoodie
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Was it really an "auction"?

Fri, 01/13/2012 - 09:09 | 2061046 GerritB
GerritB's picture

Was less strong then the spanish...the mafia is bailing out!

Fri, 01/13/2012 - 09:09 | 2061048 BoNeSxxx
BoNeSxxx's picture

...Dogs and cats sleeping together... it'll be anarchy

Fri, 01/13/2012 - 09:21 | 2061072 The Limerick King
The Limerick King's picture

 

 

Decoupling is merely delusion

Just more ponzi-pumping confusion

Nothing has changed

The world is deranged

Our safety is just an illusion

 

Fri, 01/13/2012 - 09:16 | 2061050 Irish66
Irish66's picture

ECB deposits hit record high, how can that be?  Who bought the auction?

Fri, 01/13/2012 - 09:19 | 2061071 tiger7905
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Gold update from Alf Fields

http://goldandsilverlinings.com/?p=1823

Fri, 01/13/2012 - 09:12 | 2061053 falak pema
falak pema's picture

Reposted  from 'contributors'  section (apologies for double post) :

 

Circular capitalism; where the ECB lends money to Eurobanks @ 1% via  LRTC to buy Soveriegn bonds with 3-6% Yields which then get deposited with ECB @ .25% by the same banks! Allowing those ponzi banks to improve their private balance sheets by socialising their debts, sterile exercise as it doesn't solve root cause. Can anything be more crazy than this?

And the FED does the same thing with unlimited printing and Zirp, to feed the ponzi creating PD/HF community beast with liquidity, levitating the markets and instrument of carry trades to HFs attacking the EUrozone weak peripherals, where the spreads are gigantic; how the market and notationals can justify money market lending to zombie TBTF banks @ .01% by FED, all the while they ask 7%+ for Portugal, aka a lending rate ratio of 700% relative to a sovereign that can raise taxes, so has access to assets (whereas those banks have debts that are beyond hopeless compared to their lousy BS assets, if you included all the off balance sheet, incestuously interlinked crap!!!), is beyond all rational "free market" functionality. 

Circular capitalism going nowhere except increasing the debt as there is NO sign of visible real growth in the first world economy, where debt mountain grows alarmingly. All inflation numbers are fudged, as those of unemployment rates. Pure bureaucratic, systemic sleight of hand in ALL developed economies. The role of corrupt governance, hidden under the carpet.

Assuming that the burgeoning BRIC economies, launched thanks to "outsourcing" on an asymmetric growth tangent, can rescue those first world duds who account today for 80 % of world GDP and 99.9% of world debt, is nothing short of suicidal Hopium. And criminal mayhem at the expense of the people, as this whole financial architecture is based on cheating and lying by the financial community with their crony politicians looking the other way.

This current exercise of world financialised capitalism has laid bare to the people of the world some very simple long term truths :

1° Free Markets and invisible hand is exposed as a sick cynical joke. Always has been. Joan Robinson was right. THe only rule in capitalism, as practised in our nation state legal frameworks, now gone global to totalitarian oil monarchies and third world one party oligarchies,  is Oligarchical concentration; with rampant corruption and market manipulation as inevitable resultant. All economic growth is based on comparitive advantage of labour and cheap access to nature's gift, RMs of Earth's crust. Basically all labour intensive, as capital is only labour in proxy form. Make no doubt about this truism.

2° Capitalism and especially 20th century capitalism, under the aegis of PAx Americana since 1945, is nothing more than a proxy for cheap labour arbitrage all over the world, and cheap energy arbitrage, essentially based on one commodity : OIL.

The whole construct of Pax Americana since 1945 has been built on three main axes, carefully planned by Big Business and Big Government in DC, home of the Corporate Welfare State construct :

a) Cheap Oil. When USA peaked in oil production in late 1960s  as biggest world producer, early initiator of oil/motor car model (Rockefeller-Ford national hegemony of early 20th century), the whole energy shooting match evolved around the ME oil patch, Jerusalem of oil, concentrated form of transportable fossil energy. The Seven Sisters ruled the world.

b) Exorbitant privilege. Or the USD money line hegemony and its corruption since 1971 into debt mountain economy by Richard Nixon (Our money, your problem). With the creation of the uncontrolled EUrodollar market in 1971 onwards, the offshore USD market moved to City, LOndon. It then mushroomed into the Petrodollar market, as peak US oil allowed OPEC to become top-dog partners of Seven Sisters cartel; thus essential ingredient to Kissinger's ME shuttle diplomacy to sanctuarise the OIL patch political construct. (THe Israel/Egypt/Saudi 'defacto' alliance and planned destruction of 'pinko', third world/soviet leaning, independent governments inherited from 1955 Bandung Asian-African conference axis). The Thatcher construct fed on the teat of the now burgeoning City financial economy. She made it the home of the Oligarchs and of deregulated 'offshore' finance, even more so than WS. SHe and Volcker snapped the 1979 inflation spiral and decoupled salary indexing to inflation. It allowed subsequent Reaganomics model to create the current deregulated, ponzi construct and the NWO that was shooed in after Berlin Wall and Soviet collapse. Now the Ponzi, bubbled risk asset economy could really begin on a world-wide scale. This synthetically financialised economy fed FIRE sector and replaced the business cycle; all the while deindustrialising the first world, thanks to international labour arbitrage and crony third world one-party controlled political collusion,  to line the pockets of "the happy few". Hallelujah, land of the free became land of the totally indebted.

c) Behind the financial and energy curtain, the MIC of USA built the Arms BAzar model, subsequent to 1962 Cuba crisis. Where it became evident that NUclear first world stand off was no longer feasible. The arms bazar, (USA leading the competition against competitive might of the USSR and French, Kalashnikov and Mirage planes syndrome,  to all and sundry), has built the US military global hegemony of massive military retaliation. All you have to do to understand this construct today is to look at the map of US military bases around Iran. It says it all, as it reflects the same type of MIC construct ALL over the world. Same military noose and overkill everywhere, on six continents. 

SO Pax Americana based on these three fronts is now facing the inevitable fall out of its unique capitalistic construct; that splutters under debt mountain, under ever increasing rising MIC hegemony sustainance costs, under peak Oil world-wide scenario, under the alarming ecological menace which will cost more than an arm and a leg  globally, if we stay on this path, and finally, under the demographic explosion world wide totally correlated to the cheap energy miracle of 20th century.

In the face of this seemingly insurmountable challenge you don't need an IQ of 145 to realise that a huge number of black swans are now swirling around over Planet Earth. SOmethings got to give if we want to avoid collective mayhem as a species, become biodegradable cousins of the Dinosaurs; it has to be PAx Americana construct, as it has led us straight into this wall from where there is no issue at all. Those who rule the world are not fit to exercise this function, at least not on their own.

Paradigm change of profound magnitude is the only way out. And it will be very painful. Think 1300 century... hundred years war and the plague, and you'll understand that the 21 st century will be a bitch; unless somebody invents the perpetual energy machine without green house effect at a cost below grid parity! WHere is 'Einstein squared'? Prometheus's new son to concoct this miracle...

We never stop being the eternal optimists in the midst of our own decadence. We'll have to change our visible skins pretty fast, like the proverbial snake, to survive our own Oligarchical hubris.

 

 

Fri, 01/13/2012 - 09:36 | 2061095 GeneMarchbanks
GeneMarchbanks's picture

'WHere is 'Einstein squared'?'

Not the issue at all. Remind me again, what was it that Einstein's theoretical work translated into in practice? Or, let's take a practitioner like Tesla. Where are all of his incredibly applicable concepts now? That's right, science in the last analysis is nothing but an affair of bureaucrats and all the engineers that have come into society since haven't really been anything but another pillar in the body politic. Meanwhile, actual inquiry is marginalized by all institutions presently.

Truth is falak, we have incredibly intelligent people everywhere. Unfortunately, life takes more than just intelligence. I'd take a person who is beholden to his conscience instead of genius who has an infrahuman construction any day.

Fri, 01/13/2012 - 10:34 | 2061244 falak pema
falak pema's picture

I use him as Icon, whatever you may feel of his own contribution, he stays to modern man as referential continuator of Pythagoras, Archimedes, Galileo and Newton. Just saying...that family tree of scientific knowledge. Philosophus autodidactus.

I know its not unique solution, we also need Theologus Autodidactus, but without dogma. Spiritual wisdom to complete and harmonise itself with scientific, practical wisdom. Its been Man's perennial quest through the ages; making Aristotle, complete expression of Man's intelligence, talk to God; to seize the Metaphysical quandry. During the Middle Ages they tried and the Princes of religious dogma cried: "Fail, Man can never equal God's revealed word". We now know where that dogmatic route led to : Crusade, Inquisition and the Ayatollah strain on the other side, cousins to christians.

So today, as secular men, we only have left the essence, spirituality without dogma, which leaves unsolved the metaphysical questions to which there are no answers. We stay like Sisyphus, on this plane, recurrent serfs. All we have left to move forward as fallible humans is the legacy of Aristotle : knowledge, and its corollary, science.  So I limit my enquiry to finding the scientific solutons to the energy conundrum which is the obvious key to resolving the societal political construct of PAx Americana in the nodal ME maelstorm. It is the vital key to move forward. Energy...

I refer to the technological cum socio-political revolution, mindset change, that this moral corruption of modern 'political' man, now requires, as ONE possible route out of conundrum. Science will play its part as solution; as it does also, alas, as problem creator. Pandora's box, aka the nuclear dilemma. That is the double legacy of Prometheus...we are our own worst enemies and also our saviours...

Play on Sisyphus. We have no choice but to be ourselves.

Fri, 01/13/2012 - 09:15 | 2061057 youngman
youngman's picture

"Who bought the auction?".......that is the question...so much could be learned if we know who were the buyers of these bonds.....would you feel better if it was Billy Bob´s Cheesesteak restaurant in Clevland Ohio.......or some shadow bank on an island somewhere???????? 

Fri, 01/13/2012 - 09:15 | 2061058 overmedicatedun...
overmedicatedundersexed's picture

for fun I clicked on the obuma family add..put in FU FU FU puke on you in the fields and funny it would not accept my accolates to the F'n family.

Fri, 01/13/2012 - 09:17 | 2061065 Sandmann
Sandmann's picture

Somewhere I read that Italy has to rollover Debt equal to 25% GDP in 2012 and is the world's third-largest borrower. I wonder if large Zombie Banks fearful of an italian haircut following a Greek one are simply keeping the show on the road ?

Fri, 01/13/2012 - 09:25 | 2061082 yogibear
yogibear's picture

The ECB is out announcing everything is fixed while rearranging the deck chails on the Titanic. More reasons to lie and cover up. The ECB is hoping to muddle through to buy more time.

Fri, 01/13/2012 - 10:21 | 2061100 Monedas
Monedas's picture

Decoupling ? A marvelous word for the Monedas ? Trains decouple, Greeks and their goats decouple, markets decouple.....even copulating couples....decouple ? The "Big Bang" decouple is when the DOW and Gold "Decouple".....until then....yawn ! These decouples are like "ante-shocks" (after-shocks?) before the Big Tumble....10 on the financial Richter scale ! When is TS going to HTF ? How long can they drag this out ? I'm tired of waiting.....but I fear I may rue the day when the feces hit the flutter wheel ? What's a hoarder to do ?        My $13,995 Kia Soul baseline unit came with air conditioning, black paint and a free Sirius radio and three month subscription ! Things you had to pay through the nose for on your Mercedes ? Anyway, sometimes I tune in CNBC or Bloomberg ! It seems that on CNBC they rarely mention Gold unless they have to (Jim Rogers interview, etc.).....while on Bloomberg they seem to quote the Gold price as much as the DOW, the Dollar and Da Crude oil ?   Monedas Comeditatus  2012  Here's to peeing on their corpses !.....Monedas, The Fifth Pisser !

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