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Macro Commentary: Risk-on/Risk-off - Welcome To Dyslexic Friday

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From Brian Rogers of Fator Securities

Macro Commentary:  Risk-on/Risk-off - Welcome to Dyslexic Friday

Markets are currently rallying in reaction to the short-sale bans enacted in Europe.  Time will tell if these bans ultimately prove effective seeing as how when the US banned the short-selling of financials in 2008, they proceed to collapse over the next few months.  Investors are usually correct in estimating that a trading ban is nothing more than formal confirmation that there is indeed a problem.  With banks borrowing more from the ECB in recent days and less from each other, we have yet another sign that European banks are getting nervous of each other’s risk.  But at least for today, equities are solidly in the green. 

Despite the positive reaction in stocks today, the economic data out of Europe this morning was ugly as European industrial production fell and France posted below consensus GDP numbers.  The concern with the French numbers is that it will impair the French’s ability to maintain their cost-cutting efforts which are key to maintaining their AAA.  If France were to lose its AAA, the ESFS would be imperiled as would Europe’s efforts to avoid haircuts on PIIGS debt.  Data in the US was better than expected with retail sales coming in slightly above expectations and higher m-o-m.  All-in-all, chalk this Friday up to risk-on.  However, given the price action lately, that could change to risk-off with a single headline, we’ll see how U. of Michigan Confidence and Business Inventories look.

The political season is gearing up in the US with Republican Presidential hopefuls holding a debate in Iowa in front of Saturday’s critical straw poll which is a critical gauge of a candidate’s viability at this stage in the game.  Mitt Romney appears to have been the winner or at least the candidate that looked the least bad although he has played down the Iowa results and thus has lower expectations about his performance.  Besides Ron Paul, who probably doesn’t have a realistic chance of winning the Republican nomination given his stance on cutting defense, ending the Fed, legalizing marijuana and any number of other issues the Repuliban party takes issue with, Romney seems to be the only candidate with the bona fides to successfully attack Obama on the economy. 

However, I remain of the opinion that the election in 2012 will hinge on what the Tea Party does.  If the Tea Party decides to run a candidate, any candidate, it’s likely the Republicans will lose and Obama will win.  Why?  Simple math.  The Democrats will typically end up with about 38% of registered voters while the Republicans will get somewhere in the neighborhood of 32%.  Independents, Libertarians and others will make up the other roughly 30%.  Any Tea Party candidate will naturally pull more votes away from the Republican candidate than the Democratic candidate.  Unless the Republican candidate can dominate the independent vote, something that is certainly possible, but not likely given historical trends, Obama will win even though he probably doesn’t deserve it.  But if the election trend of 2010 carries into 2012 and the Republicans are able to take the Senate, we will find ourselves in the situation that most Americans seem to favor, one party leading Congress, the other party in the White House.  So what will the Tea Party do?  Until we know the answer to that question, we won’t know who really has a chance of winning in 2012.  Does this mean that Rick Santelli, philosophical founder of the Tea Party, is the new kingmaker in DC?

One final thought on this green screen Friday, lots of chatter going around about the Swiss potentially pegging the CHF to the EUR, even if only temporarily.  Given the difficulties the Swiss would have implementing such a policy as it would likely require a change in their constitution, it seems unlikely to me that this will happen.  However, it provides a window into the extreme pain being felt in Switzerland.  It’s not easy being the world’s strongest fiat currency.  Unfortunately for the Swiss, with ZIRP going on until at least 2013, the pressure isn’t about to go away any time soon.  And obviously, the Swiss aren’t the only ones suffering from a strong currency – the Brazilians, South Koreans, Chileans, Australians and Japanese are also suffering as their exporters bleed cash.  How long before we see real capital controls from one of these countries?  It can’t be too far off now.  How long can Japanese exporters, which don’t make much money with the JPY at 90, stay in business with the JPY at 76?  Some of these countries can lower interest rates (Brazil) but doing so risks stoking domestic inflation, already running at uncomfortable high levels.  Central bank interventions have stopped working as the half-life of success is now measured in hours before the market overwhelms the move.  Raising taxes and fees can have some effect, but when you’re getting a negative real return in the US and a positive real return somewhere else, even allowing for the taxes and fees, then the choice is easy.  So the investment flows will continue.  And the strong and/or high yielding currencies will keep appreciating.  Until governments take more extreme measures to stop them.  Which they will be forced to do eventually.  The only questions are when and how.  Have a great Friday!  -Brian

Addendum: U. of Michigan Confidence numbers just came out and they were a disaster (54.9 actual vs. 62.0 expected).  Worst number since May of 1980.  Market is moving lower on the data.  Risk off.  But stick around another 15 minutes or so, that could change…

* Fator Securities LLC, Member FINRA/SIPC, is a U.S. entity and a member of the Fator group of companies in Brazil. The comments below are from Brian Rogers, who is employed by Fator Securities (Brian’s opinions are his own and do not constitute the opinions of Fator Securities or the Fator group of companies).

Fator Securities LLC is not affiliated with Zero Hedge or any third party mentioned in this communication; nor is Fator Securities LLC responsible for content on third party websites referred to in this communication.

This material was not prepared by Fator Securities LLC. U.S. Persons seeking further information must contact Fator Securities LLC in New York at (646) 205-1160. This material shall not constitute an offer to sell or the solicitation of any offer to buy (may only be made at the time qualified participants are in receipt of the requisite documentation, e.g., confidential private offering memorandum describing the offering, related subscription agreement, etc.). Securities shall not be offered or sold in any jurisdiction in which such offer, solicitation or sale would be unlawful or until all applicable regulatory or legal requirements of such jurisdictions have been satisfied. This material is not intended for general public use or distribution and is intended for distribution only to appropriate investors. The opinions contained herein are based on personal judgments and estimates and are, therefore, subject to revision. Past performances are not indicative of future results.


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Fri, 08/12/2011 - 11:56 | 1554432 anynonmous
anynonmous's picture

from the above article

If the Tea Party decides to run a candidate, any candidate, it’s likely the Republicans will lose and Obama will win.

to which I say

F off

Fri, 08/12/2011 - 12:08 | 1554474 Greater Fool
Greater Fool's picture

Was just chatting about this eventuality this morning and reached the same conclusion. The open question is who the TP'ers would accept as a candidate, and who would be willing to stab the GOP in the back that way. Not Ron Paul, surely.

I couldn't think of another likely name; thus, I doubt this scenario will actually play out.

Fri, 08/12/2011 - 13:04 | 1554629 TruthInSunshine
TruthInSunshine's picture

Felonious Monk goes off on Obama (NSFW - F Bombs Everywhere):

Real Sh*t: Felonious Munk Presents "Stop It B! OBAMA PAY YOUR F**KING BILLS


Shit just got real. Yo.

Fri, 08/12/2011 - 13:04 | 1554634 walküre
walküre's picture

Tea Party

Selling you down the austerity hole. Indoctrinating you to be angry that austerity wasn't imposed sooner. All the while the cabal is making sure their profits are protected.

You know, the more I look into the Tea Party aspects the more it resembles certain parts of Naziism. Now I understand that may sound far fetched for most, but any ideology that can make you take the bitter medicine, knowing it will eventually kill you but you're still proud to be part of it is just fucking awesome.

Fri, 08/12/2011 - 17:26 | 1555664 JW n FL
JW n FL's picture

the sooner austerity kicks in.. the sooner we can get over the hump and re-build.

the purge is needed at this point..

to many stupid.

to may lazy.

to many who dont speak the language.

to many rich fuckers doing nothing.

to, too many all around!

we need to cut back on our population.

I could go on and on!

but the bottom line is! there is NOT! enough Energy to go around!

thusly there will be no recovery until there is a way to power our recovery!

Federal matching dollars bitches! for grid projects!

but lets go back to what people know.. the stock market is going up and down? wow!

the economy is dragging.. wow!

whatever, people in America are stupid fucking sheepish consumers and deserve whatever The Powers That Be dream up to inflict upon them!

Fri, 08/12/2011 - 17:28 | 1555667 JW n FL
JW n FL's picture

lets rip the bandaide off quickly!

let the riots begin already!

vote republican / tea bagger austerity! no worries if they dont make it in! the dems will vote for austerity if they have too!

Fri, 08/12/2011 - 12:32 | 1554475 SheepDog-One
SheepDog-One's picture

Right, more party politics bullshit with overtones of 'better not run someone who can actually win, that will only cause a sure loss for 1 head of the 2 headed 1 party Republicrat govt' far better to just not run any candidate at all, how dare you challenge The Messiah! Cant a person or group be thrown in the gulag for such blasphemy?

Fri, 08/12/2011 - 12:08 | 1554476 InconvenientCou...
InconvenientCounterParty's picture

You are both insightful and truthy. Everything the Tea Party represents.

If you are white, would you consider coming out of the shadows and running for office?

Fri, 08/12/2011 - 12:10 | 1554484 SheepDog-One
SheepDog-One's picture

My God! Run a white candidate? How racist!

Fri, 08/12/2011 - 12:14 | 1554493 slaughterer
slaughterer's picture


After the US short ban in 2008, there were some pretty disastrous developments that might have also led to the market falling:

FN and FM conservatorship on Sept 8th,
ML bought by BAC sept 14th
LB went under on the 15th, 
AIG sept 17th
Wachovia sept 26th
WM sept 28th

If you can imagine the above names replaced by European names this year, then trade synthetic shorts.  They did not ban that. 

Fri, 08/12/2011 - 12:31 | 1554542 fuu
fuu's picture

Nice tits, could you cover them up please?

Sat, 08/13/2011 - 00:07 | 1556454 StychoKiller
StychoKiller's picture

Political correctness?  In Fight club?  No way!

Fri, 08/12/2011 - 12:17 | 1554501 ryanseventyfive
Fri, 08/12/2011 - 12:22 | 1554513 slaughterer
slaughterer's picture

Romney's oratorical style -vs- Obama's oratorical style.  That would be an entertaining debate!


"Ron Paul, who ... (has a) stance on cutting defense, ending the Fed, legalizing marijuana"

Seems like the perfect President to me!

Fri, 08/12/2011 - 11:55 | 1554435 TradingJoe
TradingJoe's picture

Nice setup for another leg down! Me Like It! :))

Fri, 08/12/2011 - 12:18 | 1554507 hedgeless_horseman
hedgeless_horseman's picture

Looks like Giant Squid shareholders agree.

Fri, 08/12/2011 - 11:55 | 1554439 cowdiddly
cowdiddly's picture

Can't wait to see what news is being suppressed until the market close. Cheers

Fri, 08/12/2011 - 11:57 | 1554444 swissaustrian
swissaustrian's picture

Rick Perry is the choice of Bilderberg, Romney plays the role of the main competitor who is going to loose. He is the backup for Perry, in case something goes wrong. Rick Perry is full of sh~t. Just in case you consider him a viable candidate.

Ron Paul is the choice of the people. Tommorow the Iowa straw poll takes place. I expect Ron Paul to win!

If you want Ron Paul to win, go donate some of your short selling profits ;)

Fri, 08/12/2011 - 13:13 | 1554664 John Law Lives
John Law Lives's picture

Ron Paul has approximately 0.0% chance of winning the GOP nomination.  If he runs as a 3rd party candidate, he would hurt the GOP's chances in the general election.

Rick Perry will likely win the GOP nomination (imho).  Romney is not well liked in the conservative South.

Fri, 08/12/2011 - 14:41 | 1555035 cowdiddly
cowdiddly's picture

he Will hurt the GOP chances. Even more reason to vote for him.

Fri, 08/12/2011 - 15:04 | 1555151 John Law Lives
John Law Lives's picture

If you want 4 more years of Obumble, go right ahead...

Fri, 08/12/2011 - 12:00 | 1554455 firstdivision
firstdivision's picture

Tyler, check out this rather peculiar analysis.

Fri, 08/12/2011 - 12:01 | 1554461 Ghordius
Ghordius's picture

"...lots of chatter going around about the Swiss potentially pegging the CHF to the EUR, even if only temporarily.  Given the difficulties the Swiss would have implementing such a policy as it would likely require a change in their constitution, it seems unlikely to me that this will happen.  However, it provides a window into the extreme pain being felt in Switzerland..."

I started to count the mistakes in this sentence, stopped by 10. Seems Hildebrand just found the right guy to "spin" the right way to get the CHF a bit down. Forty years of Fiat and even good economic and financial commentators just don't understand how a Central Bank works...

Now the Swiss will start to find gold interesting, too?

Fri, 08/12/2011 - 12:06 | 1554470 swissaustrian
swissaustrian's picture

We really need correct translations of these interviews. It´s so funny to observe what the actual quotes of the SNB turn into once they move arround the world.

You surely know the game "Stille Post"?

Fri, 08/12/2011 - 12:16 | 1554500 SheepDog-One
SheepDog-One's picture

I cant wait until they start running interview with opinions of trading robots. Fast Money can have on 'C1342-A' trader bot for their lunchtime show, ask what he thinks about FED policy or how J&J earnings will be or whatever.

Fri, 08/12/2011 - 12:09 | 1554481 Long-John-Silver
Long-John-Silver's picture

Gold is now the Worlds Reserve currency. It will take some time before everyone realizes this has happened.

This is not up to debate simply because no one is going to trust any of the worlds paper currencies soon.

They are all finished.

Fri, 08/12/2011 - 12:37 | 1554553 penisouraus erecti
penisouraus erecti's picture


Fri, 08/12/2011 - 12:24 | 1554521 Mountainview
Mountainview's picture

International money printing will run the CHF and the Swiss economy to wall ! Politicans are stunned, including the SNB chairman!

Fri, 08/12/2011 - 12:03 | 1554463 kengland
kengland's picture

"Investors are usually correct in estimating that a trading ban is nothing more than formal confirmation that there is indeed a problem. "


There is your problem. This is central bank buying

Fri, 08/12/2011 - 12:12 | 1554489 SheepDog-One
SheepDog-One's picture

Meaningless when all 'traders' now run on 120v a/c.

Fri, 08/12/2011 - 12:06 | 1554464 iNull
iNull's picture

There are those among us who excel. See => Hyperlexia. Hyperlexic children are characterized by having average or above average IQs and word-reading ability well above what would be expected given their age.[1] First named and scientifically described in 1967,[2] it can be viewed as a superability in which word recognition ability goes far above expected levels of skill.

See => Hyperlexic:

Fri, 08/12/2011 - 12:07 | 1554467 bania
bania's picture

BoJ teaching US Fed how to manipulate a multi decade deflationary economy...

"Bernanke-son, show me risk on! risk off! Paint the tape! Ah look and lie! Always look and lie!!!"

Fri, 08/12/2011 - 12:12 | 1554488 Threeggg
Threeggg's picture

Faux Business has out the party favors and shiny shoes touting the market. They are "marketing" the market instead of reporting "on" it.

It reminds me of a cross between the Piccadilly/Barnum & Bailey circus.

Their next segment regarding the down market this week "Blame the Machine" regarding HFT trading. I swear you can't make this shit up.

Fri, 08/12/2011 - 12:14 | 1554495 SheepDog-One
SheepDog-One's picture

All is well! Except for the occasional glitch in a trading robot, (only a down move in stocks is considered an error) the markets have never been better!

Fri, 08/12/2011 - 12:16 | 1554497 breezer1
breezer1's picture

on romney and corruption in general...

i like elaine's rants.
Fri, 08/12/2011 - 12:17 | 1554502 onlooker
onlooker's picture


Rick Perry could get my vote, BUT/HOWEVER-----I think he is making a large strategy mistake by not being on the Texas news constantly addressing the weather related disaster we are in.


A prayer for rain is not enough. This is a huge historic problem. Obviously, he has a problem in that if he addresses the issue, other states can point to it and say that business is foolish to move to Texas. Individuals could feel the same.


But to meet the problem head on, I would like to know that Rick Perry is thinking of us with dry ponds, no grass, failed crops, agricultural businesses that are literally high and dry  (and hot as hell).


It is foolish to think Obama would issue emergency aid to Texas. He no doubt would see us starve. If Perry has asked, I missed it. Perry asked for Nation Guard along the deadly Texas border and was snubbed. Maybe the Left media controlled the news, but I have heard little more and the situation is worse.


Perry needs to assure Texas first that he is the man and then talk to the rest of the Nation.


He may have done just that and I wasn’t paying attention. However, he needs to get the attention of voters like myself.

Fri, 08/12/2011 - 12:27 | 1554517 JW n FL
JW n FL's picture
Tick Rate Hits New Highs, Indicating HFT Activity

Traders Magazine Online News, August 12, 2011

James Armstrong

Bloomberg is reporting an unprecedented number of quotes in recent days, rising to new highs on Wednesday even as overall volume was down slightly, an indication of unfilled orders and the likely presence of active high frequency traders.

“The tick volume is up dramatically, when the actual volume of shares traded isn’t at the highest levels that we’ve seen,” Nagrath said. “Every time an order goes out, even though it’s canceled, for us it counts as another tick, another quote.”

Wednesday set an all-time high of 43.7 billion ticks. That was about one and a half times the number of ticks recorded during last year’s flash crash. Yesterday, data showed about 38 billion ticks, according to Bloomberg.

Click for chart <------------ Great PDF Chart of Ticks 2008 Fincial Crash / Flash Crash in 2009 / Japan Tsunami as well in this chart for comparison.

Fri, 08/12/2011 - 12:46 | 1554580 JW n FL
JW n FL's picture

sniffing for liquidity is getting harder!


Fri, 08/12/2011 - 12:24 | 1554522 SheepDog-One
SheepDog-One's picture

So looks like another +400 close in store for today then?

Fri, 08/12/2011 - 13:11 | 1554651 DaveyJones
DaveyJones's picture

those are 2011 dollars right?

Fri, 08/12/2011 - 12:25 | 1554523 adr
adr's picture

We'll get DOW 13,000 before DOW 10,000 again. Even though all data points to a recession, the banks blowing up in Europe, and everything else that should have already sent stocks through the floor, we still get the insanity of stocks going up.

Bubble BS stocks Like Amazon, Priceline, Chipotle, Hansen Naturals, Autozone and Lulu have all made up thier losses since the start of August and are within a couple dollars of thier all time QE inflated highs.

Even frickin Sodastream which got hammered all the way back down to its closing price on May 17th 2011, big frickin deal, is up 4%. How by any metric would any person buy that stock after the company's abysmal performance.

Everyone knows the answer. BECAUSE NO HUMAN IS ACTUALLY BUYING THESE STOCKS. However if by some miracle you bought any of these stocks Wednesday night you are up between 15-20% in one and a half days.

No we don't have a broken bubble market, not at all.

Fri, 08/12/2011 - 12:30 | 1554539 SheepDog-One
SheepDog-One's picture

OK so we AGAIN are waiting for DOW +- 13,000, which was the old mark to meet before 'the big drop' how many times back and forth in this 2,000 point weekly range will it be?

Fri, 08/12/2011 - 12:26 | 1554524 eurusdog
eurusdog's picture

Gold is now testing the bottom side of the neckline. Jackson Hole is going to be in-ter-es-ting!

Fri, 08/12/2011 - 12:26 | 1554527 New_Meat
New_Meat's picture

Lysdexics of the World, Untie!

Fri, 08/12/2011 - 12:29 | 1554534 penisouraus erecti
penisouraus erecti's picture

Oh, if we all weren't so greedy all this mess could have been avoided. Why oh why did we resist raising taxes to fund that 14 -15 trillion dollar deficit we now have. If only we'd have sent that 14+ trillion to DC we'd all be so much better off now.

Fri, 08/12/2011 - 13:01 | 1554622 slaughterer
slaughterer's picture

You forgot to add: /sarc

Fri, 08/12/2011 - 12:39 | 1554563 Bohemian Clubber
Bohemian Clubber's picture


Fri, 08/12/2011 - 12:57 | 1554608 risk-reward
risk-reward's picture

Dyslexic SHOULD be written know.

Fri, 08/12/2011 - 14:48 | 1555072 Conax
Conax's picture

Do you know the definition of a dyslexic, agnostic, insomniac?

A person who stays up all night, wondering whether or not there is a dog.


Fri, 08/12/2011 - 13:01 | 1554620 TruthInSunshine
TruthInSunshine's picture

For tonight, we dine in hell!


--King Berankeonidas

Fri, 08/12/2011 - 13:03 | 1554626 DaveyJones
DaveyJones's picture

"Investors are usually correct in estimating that a trading ban is nothing more than formal confirmation that there is indeed a problem."


Fri, 08/12/2011 - 13:51 | 1554836 Instant Wealth
Instant Wealth's picture

These days in Germany, politicians and the state run TV stations are blaming it all on the shortseller.

Headline for tonights  ZDF evening news broadcast as just anounced: "The dangerous games of the speculators".

Wonderful, scapegoat politics like they did in the 1930´s and 1940´s.

Fri, 08/12/2011 - 15:21 | 1555222 JuicedGamma
JuicedGamma's picture

America is failed by the two party system once again.

It's a sad day when every single candidate (including the current incumbant) has no chance of being a great leader or has zero chance of winning.  This has been going for as long as I can remember.

I suppose we could be stuck with Mugabe, Kadafi, Idi Amin or Blagojevich, I just don't understand why the two parties can't field better candidates.  I think it must be that running for president sucks so bad no one reasonable would ever try it.



Fri, 08/12/2011 - 16:13 | 1555404 ivana
ivana's picture

From Jim Willie on UST bond "demand":

Do not be fooled by the knee-jerk pied piper response to flee the frying pan and find the fire, as investors moved from stocks to USTBonds. They are sheeple in boats led by a powerful application of leverage by siren calls to the rocks ashore. Last week, it was mentioned the gigantic $9.1 trillion additional Morgan Stanley application of Interest Rate Swaps. They exploit the artificially low short-term USTBill yields and create phony demand in long-term USTreasurys like the 10-year and 30-year maturities. The demand is artificial but felt with impact in a TNX approaching the magic 2.0%. When it reaches the milestone, shrill calls will come of an asset bubble. The investor community incorrectly believes that actual money is flowing into USTBonds as safe haven. They are fooled by the powerful Interest Rate Swaps applied by the big US banks, the agents of the Syndicate. The only massive asset bubble in existence is the USTreasury Bond.

9,1 trillion ?????????????

Sat, 08/13/2011 - 01:56 | 1556538 el Gallinazo
el Gallinazo's picture

I personally don't give a rats ass if we get Obama Bilderburg or Perry Bilderburg.  It's all total bullshit to give the illusion of democracy (or a republic).  You may vote for Tweedledee or Tweedledum - now ain't you privileged!  I subscribe to the politics of the late George Carlin.  It's a club . and I'm not in it.

Sat, 08/13/2011 - 19:07 | 1557696 Fíréan
Fíréan's picture

I'm beginning to think that "Tyler Durden" speaks with fork tongue. Or that the collective which writes under the one pen name does not have a singular and consistant agenda/policy/directive..

Do NOT follow this link or you will be banned from the site!