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Market Snapshot - The Other Silver-and-Black Not Winning
While the Raiders may have succeeded against Denver tonight, Silver-and-Black Gold (and real gold) are leaking lower as macro data and European/Chinese leader chatter is trumping any more unidentifed-rumor-mongers (URMs). Aussie business confidence fell to its lowest since APR09 and fell its most MoM since OCT08, French CPI came a little hot, and Merkel warned everyone to keep their mouths shut (our rough translation/interpretation) for fear of more uncertainty in financial markets and an "uncontrolled insolvency" in Greece.
Chart: Bloomberg
S&P futures are drifting lower slowly with the inevitable snap back to VWAP every few hours (UPDATE: ES now 1% off overnight highs).
Early runs on European credits show some compression but not as much as one might expect given the excitement late in the day in the US. Main is 2.5bps tighter at 197bps, XOver -6bps at 793bps, SovX a meager 1.5bps better at 351bps and SENFIN only 4bps tighter at 310bps. Interestingly, the 3Y spreads are a little wider still - more of the same theme we have seen in the US of curve flattening trades.
Lots of tweets and headlines on Greece's imminent default as priced by the CDS market (99.3% probability seems de rigeur) but while it is very high, the fact of the matter is with longer-dated GGBs trading at around 32 (the CTD bonds), default probabilities implied by CDS are a little more like 85% over five years so still ugly. Recovery expectations are clearly lower than the standard recovery assumptions in CDS models since bonds are already trading through those levels (even adjusted for some earned carry).
It is also evident (though not exactly reassuring) from the price-based term structure (please ignore yields from now on), that the pivotal period is Q2/3 2012 for now as prices/recovery-expectations are pretty much flat from there to 15 years out at around EUR40. While China was seen by many talking-heads as the solution to the Greek (and now Italian) problems late on Monday, we think Mrs. Merkel's word should be borne in mind (from Bloomberg):
Euro-area countries must avoid an “uncontrolled insolvency” in Greece because it is likely that
this would affect all other member states, German Chancellor Angela Merkel said in an interview with RBB-Inforadio today.
“Everybody should weigh their words very carefully,” she said. “What we don’t need is unrest at the financial markets. The uncertainties are big enough as it is,” she said, according to a transcript of the interview.
This, as opposed to Wu Xiaoling's (the ex-Chinese central banker) statement picked up by Reuters:
"I agree with great majority that the euro should not fall apart," Wu said.
"The market panic is not necessary and can only make things worse," Wu said when asked about her view of the euro situation.
"We will continue to support Europe's measures in maintaining a stable euro," she said.
Europe is not opening particularly strong in sovereign bond land - while its early and trading is not exactly super liquid, for 2Y notes, it seems ITA is 3bps higher in yield, PTE +7bps, FRA +5bps, and IRE +5bps - as GER also ebbs 2bps or so higher in yield. GRE is already a few hundred bps higher again across the curve as we noted above with The Troika knocking on the doors.
Most asset classes have traded in a very narrow range since the US close with FX majors pretty much unchanged, TSYs modestly higher in yield, and ES marginally in the red (no green, no red). CONTEXT, the risk-basket based view of ES is 8-11bps lower - implying ES is adrift for the moment relative to risk-asset's general lack of excitement.
UPDATE: Italian banks appear magically bid (yet there is no specific from any Italian minister of the mysterious meeting last week - which it seems to us would be standard practice anyway for a large sovereign wealth fund):
*INTESA SHARES INDICATED UP 7%, UNICREDIT INDICATED TO RISE 7.9%
...and its seems the Chinese are getting a little more nervous:
*CHINA HOPES EUROPE WILL WORK TO ENSURE SAFETY OF INVESTMENTS
*FOREIGN MINISTRY SPOKESWOMAN JIANG COMMENTS ON EUROPE :MFAZ CH
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Wasn't Jim Rogers short the Euro? Gotta love those yields on the one and two year for Greece!
I guess the only comparison is the Russian bonds back in 98 with 200% yields. But at this rate and the games the eurozine is playing it might trump it.
Italian bond yields are up on my screen (up relative to yesterdays italian close, BEFORE the china rumor) and up substantially
http://www.bloomberg.com/apps/quote?ticker=GBTPGR10:IND
The market made up its mind about the quality of that rumor?
I've been nosing around various sites looking for any confirmation of the 'China to Help Europe' rumor.
All I have found are rehashes of old news.
Here is a fluff piece from BloomBull that is typical of the bs press releases yesterday... Notice that Italian leaders met with Chinese leaders recently but 'buying Italian bonds was not discussed'. Italian leaders 'declined to say what was discussed'. So, the rumors were baseless as far as I can tell. Maybe the discussion was about spaghetti priced in Yuan?
But, I recall vividly that China dumped agency debt (Fannie, Freddie, etc) when it became aparent that the US was straddling the fence on backing agency debt...and some time ago China commented that if Italians aren't buying Italian debt, why should Chinese.
http://www.bloomberg.com/news/2011-09-13/china-called-on-as-lender-of-last-resort-with-italy-joining-morgan-stanley.html
"But, I recall vividly that China dumped agency debt (Fannie, Freddie, etc)"
I don't see the Cnisese buying Italian debt in quantity unless they have some EU backstop.
They would provide the liquidity but would not want to take the solvency risk.
"I don't see the Cnisese buying Italian debt in quantity unless they have some EU backstop."
I see it the same way. Europe is a big market for Chinese exports so it is in China's interest that EU economies remain solvent enough to continue to purchase goods from China... At the same time China is trying to boost internal consumer purchasing to absorb more Chinese production.
It is in China's interest to be 'perceived' as attempting to help Europe... So, watch what they do, not what they say.
In future the lying from MSM will grow ever more obvious to us... but not necessarily to the two or three day traders that have avoided trading account meltdown... and without intervention by the central banks in every asset mkt the picture would look very different now.
And Greek 1 Year now @ 123%
http://www.bloomberg.com/apps/quote?ticker=GGGB1YR:IND
Greek 1 Year CDS @ 9,620
http://www.bloomberg.com/apps/quote?ticker=CGGB1U1:IND
Not pretty.
Gold dusting itself off and heading up. Are Chinese passing on Spaghetti and hoovering up PMs?
"Chinese passing on Spaghetti and hoovering up PMs?"
China has an ongoing program to increase their gold reserves and nothing that is happening in Western economies has disrupted the program. When the Western Central Banks suppresses the price of gold they are, in effect, doing SE Asians, Indians, and Mid Easterners a huge favor.
At the same time China can give a lot of lip service to helping Europe while doing very little. That is exactly what we have seen so far. So, the decisions of China are not 'do this' or 'do that'...
Western pols are hamstrung by election cycles and do not make long term decisions unless those decisions help get them reelected. China must also take into account the mood of their population... but at the moment the Chinese seem very proud of the progress that their country is making... Can the same be said of the US population?
The fucker *is* going down. When leaders start worrying more about the control of information than about policy -- it means policy responses are done, and have failed.
This is a burning theater. And like the classic game-theory burning theater scenario: The first ones out will live. Those who delay -- and more sadly, those who believe in keeping "order" are the ones who burn to death.
The only way to keep money in currencies is to tank markets. Because *everybody* knows that there will be no recovery. At all.
Tick.
Tick.
Tick...
Control of information IS part of policy...and it always and everywhere has been.
But, I get your drift... Control of information is now more of a policy tool than at any time in my lifetime.
Nobody in his right mind would buy the Euro right now........ so what's keeping it up......... GOVERNMENT INTERVENTION
Kick the dead cat down the road bitches!
The banking cartels monetary tool of choice; Dead Cat Punt, bitches.
Hey Michael... I know you're a huge Ron Paul fan - if I didn't know it by your posts, I certainly could tell from your avatar. What did you think of the audience booing RP tonight at the republican debate? His exchange with Rick Santorum really got the audience to hate him... they were booing him and yelling at him. RP was visibly shaken by the ordeal. Seems like RP is out of the race for good after tonight's performance.
Any thoughts?
Depends on if CNN was pumping in crowd noise like some football stadiums have been known to do. I say wait until the Constitution Day Money Bomb and the Revolution Super PAC Money Bomb before you decide to throw Ron Paul under the bus.
Hey... you must have read the same article that I did. Last week, CNN hired a bunch of unemployed ventriloquists to "throw" fake boos and fake jeers across the audience whenever RP make his typical anti-American comments about 9/11. And speaking about 9/11, one thing I've learned about libertarians is that a significant number of them blame America for 9/11. Many of them believe our government was responsible for it, while the others squarely blame ourselves for getting attacked. It's like the terrorists are never blamed for what they did. Really weird... and it explains why so many people at ZH voiced their disdain for reflecting on the ten year anniversary this weekend. I never knew that libertarians are so anti-American when it comes to the topic of 9/11, and that includes RP tonight.
Is it necessary for you to put everyone into a pigeon hole of your choice. Is your mind so small that you cannot comprehend that there are people who try to think for themselves? You work at irritating people like a couple of others that show up over here from time to time which makes me think you are just a clone which makes your input mostly irrelevant. Like dog shit. You smell bad for a while but eventually dry up and blow away in the wind.
"Go try crazy somewhere else, we're all stocked up here."
Boy, are you stupid or WHAT? Our government has been killing hundreds of thousands of people IN YOUR NAME for DECADES. So to not look at ourselves in the mirror when they retaliate is equivalent to a mass murderer not owning up to his crimes and blaming the families of victims' vitriol on them.
What's wrong with theose people? Why can't they just continue to take beatings from us without fighting back? Fuckin' assholes! You must be EVIL because I'M GOOD! Die! Die! Die!
Sigh.
I can appreciate that your appearance here is an effort to catch yourself up on stuff important for peeple what wanna survive need to know...most do it a little less antagonistically than yurself, but hey, spice of life an all -right!?!?
So, OK, lemme throw you a lifeline.
First, you gotta get over the spelling thing. Folks at ZH are not "anti-American. Dey be anti-Amerikan. Take your time, roll it around, it will come to you. Anti-Amerikanism is to patriotism what gold is to "real money" ...your trolling of the phrase "anti-american" is what tungsten is to gold. Yur a big boy(or grrrll?!?), I'll let you work out what all that means about RP for yurself.
couple of corrections to help your thinkin process futher....
no, nobody really believes "our government" did it. They know and understand that the "shadow" or "secret" gubberment long ago supplanted the legitimate representation of the population by elected officials and therefore know that "our government" is nothin but a hollowed out similucrum of what our great grand parents generation used to vote for.
no, people at ZH did not express their disdain for reflecting on the ten year anniversary this weekend: they enunciated their desire to get past the bs and reach an accomodation with the FACT that in their midst live traitors to the dream what brought their forebears to America in the first place. They long for the day when there will indeed be a form of "our government again. That may require the removal of the traitors in their midst.
now tell us all - who's YUR Daddy?
huh, did you junk me twice, or did you hand the file off to a "colleague" at Langley? It's the witchin hour in Merika, an you seem to think you've got the field to yourself.
Wrong.
There's a Pale Horse a stirrin. And he's lookin at you crossways donkeyboy. I think he's fixin to eat your breakfast lunch n dinner.
Fess up...who's yur Daddy muleboy.
911 WAS an inside job ASSHAT!
GET OVER IT! IT IS A FACT OF LIFE!
Good call doc.
CNN = Propaganda Machine
Yep. Definitely a good call, doc.
CNN = ventriloquist experts.
Is this what you are referring to?
http://www.youtube.com/watch?v=V9RaV44a0EE
It seemed to me he won the exchange.
So what is some booed.
They support another candidate. More were in support of Ron Paul by the sound of the applause.
Agree. Listen to the exchange carefully and unless you are from the cretinous majority that drinks the kool-aid 24/7 , there was nothing particularly controversial about RP's comments. None so blind as those who will not see.
There does however seem to be a desperate fear of Ron Paul.
And the MSM doing everything they can to play down his chances or simply ignoring him.
Whether or not one agrees with RP what is apparent is that the MSM are most certainly not acting in to interests of freedom or the USA.
I'm not sure that they care who gets in as long as it is not an independent thinker.
They know anyone else can be corrupted in five minutes flat.
I thought that was interesting myself. It is now taboo to talk about 9/11 in any other light than America the Innocent was molested by evil swarthy men who hate our freedom and prosperity.
Since we are no longer free or prosperous we should be good to go now.
All Ron Paul asked is WHY did they attack us?
If your answer is:
1. because they hate us for our freedoms
2. because their viewpoint is incompatible with western civilisation
3. because they want an islamic caliphate
FAIL. Do not pass go and do not collect $200.
Do you really think some poor muslim kid in Yemen cares about our SUVs, HD Tvs or Playboy? No, he cares that our predator drone killed his mom and sister while they were just struggling to get food. Life is hard enough there, why make it harder by killing civilans, imposing sanctions (that only affects civilians, NEVER the regime) and daily military raids. Not to mention the 'death squads' that have been well documented, both by mercenaries (Xe) and US military forces.
THAT is why they hate us. If you kill a man's entire family, when you take away his livelihood, when you make his children starve and die from lack of medicine via sanctions, that man, his son and brothers will be willing to die to avenge them.
It's not about excusing the radicals, it's not about 'blaming' America, it's about understanding the root cause.
I hope Rick Santorum is the first 'general' in the first tank when we invade Iran. Easy to talk about war, not so easy when you have to be the one that's sent in harms way.
And for the record RP was not 'visibly shaken', I got the sense he was frustrated that the American public is SO brainwashed by the MSM that they won't even ask the right questions. They say they are against the status quo, against big government, against the power of the state, yet when it comes to 9/11 they refuse to ask WHY. They refuse to challenge the notion that it was DUE TO THE STATE that it occurred.
Well, Libertarian777,
surely they're jealous of our extravagant lifestyle where for an extra 99 cents, we can SUPERSIZE our entire meal! I mean, that shit's a bargain! Take that, Al Kaeda!
Fuck Rick Santorum. "They hate us for our freedoms." Really Rick? Because you voted for the fucking Patriot Act which takes Americans freedoms away. Yep. Fuck you Rick Santorum!
And smiley Hitler? You are a paid shill douche bag. Go troll somewhere else. You arguments don't hold water much less an ounce of reason.
Another late night, thanks Tyler. Good to have you around!
Looks like the bourses early pop is already starting to fizzle just 5 mins into the trade.
Upon further reading, the rumor re china buying italian bonds is still unfounded. They had talks not bond related about two weeks ago.
... some guest named Angus on CNBC is parroting the China buy rumor. 3am est us
Must. Have. Controlled. Insolvency.
it puts the lotion in the basket...it puts the lotion in the basket!
When will it end? Someone please stop the can kickin'- it's madness...
Gold just got SMOKED
Wherein the heck did that come from? Had been positve nearly all night/this a.m.
Check out that chart
http://3.bp.blogspot.com/-MlqoQxRUVzo/Tm8QBpGT8pI/AAAAAAAAAJw/JJAcuqquowo/s1600/woah.PNG
But it'll bounce back... Unlike the FTSEmib
already has
...did
...red again
When gold 'goes red' simply picture gold with wings... flying away from the West in migration to the East.
Western bankers will rue the days that they played paper games with physical gold... for the gold will not be available to the West to recapitalize their smoked economies.
...and, before you tell me about the 8,100 tons of gold in US possession ... show me the audit!
Come on down honey, just a little bit more. Daddy's got big pile of green paper to trade for something shiny and hard. That's it, just keep stroking it on down.
The unthinkable is staring everyone in the face but no one wants to see the meltdown which moves further everyday.Those who sell the crap first gain security of the fiat variety which will soon be only fit to light the fire with or stuff down your clothes to keep out the cold.Buy physical Gold and Silver,forget the price be glad its on sale for the moment as once the shock wears off the plunge in everything will be 100,s of points everyday as stability collapses.
Destroyed the Country to save the worthless banks.
The Government have spent your earnings before you have even earned them.
Prisons should be full of Politicians,Bankers,Central Bankers and Regulators doing hard labour for years and years on end.
"The unthinkable is staring everyone in the face but no one wants to see the meltdown which moves further everyday."
Blinkered bullfrogs.
Italy 5 yr bond auction was a disaster. 5.6% BTC only 1.27
Meanwhile, BNP Paribas says not to worry, they have plenty of cash:
http://www.reuters.com/article/2011/09/13/banks-france-bnpparibas-idUSWEA413020110913
Shorter BNP: Yes, we have no liquidity
You "gold bugs" are on the verge of getting destroyed. Gold is about to collapse below 1200. Watch and learn.
Wow, another idiot troll... I am so underwhelmed.
Care to elaborate on why gold will collapse below 1200.
Unicorns, Skittles & Hopium?
Don't bother. These trolls have nothing.
Thanks troll, for the buy signal!
did your father teach you that the goyim deserve to be 'destroyed'...or was that part of your religious studies? got your number benji benji! reverb effect in application now khazarboy
This price action on gold has got me thinking about Fed manipulations. Im trying to see if there are natural limits to what they can do.
Let's say Fed uses debt/prints dollars to,,,
sell GLD...
...price goes down, and does not recover
more dollars in circulation = inflation
even more dollars created by profit on short = even more inflation (? is this right, or does a profit actually pay off the debt and reduce inflation)
none of these doubly created dollars are in productive assets = no support to economy
loss of private capital due to falling gold price hitting gold hedges in portfolios = less investment, weaker economy
flight from PMs to risk/stonger fiat = might cancel out the above
sell GLD...
...price goes down, but recovers ending up
more dollars in circulation = inflation
dollars destroyed by losses on short = inflation above cancelled out (? is this right, or is a loss on the debt actually creating more debt therefore more inflation?)
gold still works as a portfolio hedge, but doesnt look as attractive to investors as an alternative to risk
This would suggest there is a real limit to how much the Fed would want to push the price of gold down, but it is very attractive to slow the price rise down, as long as they lose on the trade in the end.
The Fed could also ensure it keeps gold rising after a manipulated paper drop by buying physical. This would give it the double benefit of controlling the price both ways, and building its gold reserves.
But still (infact more so if it owns physical), it will ultimately want the gold price to rise.
I'm just thinking out loud here- what do you people with a better understanding of all this than me think- I know there are a lot of you out there!
I think you are correct. In fact I think there is no financial manipulation they can do which doesn't end with and inflationary pressure. This is why they say it's the only thing these guys can do. It's all one way. A one-trick pony. The same argument applies to Gold futures as well.
That's why people here will say that GLD and futures are both a way to get drawn away from the real thing. Once you are playing the futures / GLD game, they've separated your money from the actual physical market and you are subject to their manipulations.
If you buy physical, you are away from their control. You are right, they could in theory manipulate the paper prices and then buy the physical, but why? They don't want money being parked somewhere, they need it to shore up banks' balance sheets.
pmcgoohan... Your thinking has left out the rest of the world and is America centric.
As the Western central banks force down the price of gold by paper manipulation, physical gold is being purchased at discount prices by the East... SE Asia, India, Mid East, etc.
If carried to the extreme no physical gold would be left in the West.
At what cost would some gold then be sent from East to West to recapitalize ruined Western economies?
BTW, when thinking of gold it's more realistic to think of the entire world... For instance, the population of India holds about 15,000 tons of PHYSICAL gold...
Does the US have any gold reserves, other than that owned by individuals and a few funds?
oh dont worry- im up to my eyeballs in the stuff. I use paper for my entry points, and convert to physical after.
Any ideas on whether the dollar losses on a Fed paper gold short would create more inflationary debt, or reduce the money supply (in the loss of the printed dollars)? I cant get my head round this but it seems important to me
pmcg... I'm not worried.
Dollar printing, done for suppression or support of any market, is destructive for the dollar. Von Mises put it into words better than anyone... and this is exactly where the printing will lead...
"Banks expand credit well beyond their own assets and by the funds of their clients, often supported or encouraged by the setting of low interest rates by a central bank. This additional credit flow into the economy from increased borrowing for capital projects stimulates economic activity. Projects which would not have been started before, seem now profitable, creating malinvestment. They increase demand for production materials and for labor and their prices rise, which, in turn, leads to an increase in prices of consumption goods. If the banks would stop the extension of credit, the boom would be rapidly over. To prevent the sudden halt of this boom (and the resulting collapse of prices), the banks must create more and more credit, and the prices will rise even more.
But this expansion of credit cannot continue forever. There is no additional capital or labor; there is only more money (and debt). The means of production and labor which have been diverted to the new enterprises have to be taken away from others. Society is not sufficiently rich to permit the creation of new enterprises without taking away from others. As long as the expansion of credit is continued this will not be noticed, but it can't be pushed indefinitely. The inflation and the boom can last only as long as the public thinks that the prices will stop rising in the near future. When the public becomes aware, that there the inflation will not end, and that prices will continue to rise, panic sets in. Eventually, people may give up the currency and rush to exchange money for goods, buying things they have no use for, just in order to get rid of the money."
http://wiki.mises.org/wiki/Austrian_Business_Cycle_Theory
+1,
Snidely quoting von Mises - excellent!!
One cannot elaborate on mindless conjecture.
Sorry PMC, my post was meant for DavidDavid above
today seems to be good performance day ....not much fear around ..CAC down 2.2%
Gotta say, this is looking like real estate circa 2006:
http://www.bloomberg.com/apps/quote?ticker=GLD:SP
That's some chart. Plus two other things: if the eurozone can work out a financing deal (excluding Greece, which is finished), and how gold performs in a deflationary environment.
I have my PMs. But no harm in taking some profits at these levels, plus I may short the paper gold ETFs.
Apples and oranges my friend. If you are so confident, open that short on gold. Be my guest!
My only concern is that oil is paid for with dollars. Is this not the lunch pin?
I think it's going to continue to be this way. U.S. is a fiscal train wreck, no doubt. But what other currency will fill the void? Euro is trash -- and if they kick Greece out, arguably it gets stronger. Yuan? Junk. Franc, pegged to the Euro. Maybe AUD or CAN, but not widely used.
King dollar will price oil for many years to come.
Gold may continue to slip some more, but it should find good support below. http://bit.ly/q03yyU
Yeah, gold has slipped all the way to $1826... lol ... Down less than 5% from all time highs after intense shorting by Western Central Banks.
How is your portfolio of equities doing for the last 10 years? lol
Natural News:
http://www.naturalnews.com/z033491_counterfeit_culture.html
Interesting...
The dollar is strengthening right now so gold and commodities are soft. Ask yourself this: Have the fundamentals or the long term forces changed?
BTFD.
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