A modest pick up in insider buying this week as 16 insider purchases for $1.7 million worth of stock put recent non-existence insider purchasing to shame. The biggest buying was seen in GE and Caterpillar, which two cumulative purchases for $800k accounted for nearly half of the buying in the week ended February 4. On the other side, it is relentless selling as usual: 126 insider sales amounted to $749 million worth of holding dispositions, with the core of the selling as usual focused on the usual suspects: MSFT ($154 million), QCOM ($73 million), Google ($69 million), GameStop ($60 million) and FCX ($30 million). This is a major pick up in the rate of selling compared to January, and represents a double from the last tracked number of $373 million for the week of January 22.
One chart as usual does more to convey a simple message than all the Fed speeches equating the economy with the Russell 2000 ever could. Below we demonstrate the performance of three key market data points since the August Woods Hole speech: the performance of the S&P (via the ES), the price change in the 10 Year bond (TY1 inverse scale), and of course the change in non-farm payrolls (remember that old-school Fed mandate about full employment something something). Bottom line: the S&P is up over 30%, the 10 Year has plunged from over 126 to 118, while NFPs have added 392k, or 78.4 per month, nowhere near enough to even keep up with the natural growth of the labor force. So has QE been a success? We leave it up to you.
RANsquawk US Afternoon Briefing - Stocks, Bonds, FX etc. – 07/02/11
It is easy to forget that when dealing with corrupt, foreign regimes, the labor structure tends to be just "slightly" different from our own. Case in point - Egypt. In today's note from Art Cashin, we read something quite fascinating, namely that while unemployment in Egypt may be very high (who knows what the real number is - we have enough problems with snowfall and reconciling the household and establishment surveys as is), a far bigger concern is that of those employed, 70% work for the government. Is there a better indication of just how pervasive the Stockhold Syndrome is. Surely, at some point Egyptians will want to go back to work. Yet they work for the government, the same government that may well be in tatters should the revolution proceed according to such a plan that ultimately ousts Mubarak. Which begs the question: was the revolt doomed from the get go, and what is the breakdown between employed and unemployed in Egypt, for the anger to get off the ground in the first place.
According to some analysts, the "recovering" U.S. economy is poised to enter a phase of explosive growth. Other analysts see evidence that the bogus "recovery" (all Fed stimulus "hat" and no organic growth "cattle") is teetering on the edge of implosion from any number of causes: high inflation, declining home values, high oil prices, etc. My view? Whatever. The real economy is so detached from the one presented by official data and the stock market that "growth", explosive or modest, is a matter of managed perception, not reality. As for the implosion, Central State intervention and massive spending/credit creation has already limited it to a decline heavily smoothed by extended unemployment, food stamps, zero interest rates, Federal Reserve purchases of Treasuries and mortgage instruments, and massive Federal spending on everything from fighter jets to Medicare. The relentlessly managed perception is that the "spot of bother" circa 2008-09 is history, and the situation has been restored to normalcy, i.e. a rising stock market, super-low interest rates and unlimited Central State borrowing...Put very simply: the U.S. economy is now totally dependent on unlimited expansion of debt and credit creation by the Central State and its proxies. Withdraw those and the gap between the managed-perception economy (the propaganda facade) and the real economy vanishes: reality trumps perception.
Over the past 3 days America has been battered by one after another apologist explaining just how good the employment data is if one strips out all the "bad", and how all the "bad" can and should be stripped out by all patriots, and attributed solely to bad weather. For those who are beyond sick and tired of listening to this tripe, here is David Rosenberg once again telling it how it is. In summary: "The data from the Household survey are truly insane. The labour force has plunged an epic 764k in the past two months. The level of unemployment has collapsed 1.2 million, which has never happened before. People not counted in the labour force soared 753k in the past two months. These numbers are simply off the charts and likely reflect the throngs of unemployed people starting to lose their extended benefits and no longer continuing their job search (for the two-thirds of them not finding a new job). These folks either go on welfare or they rely on their spouse or other family members or friends for support."
We were glad to see that for the first time someone besides Zero Hedge took offense at the Fed's now ceaseless monetization of just auctioned off, more often than not 'on the run' bonds, as an indication that not all is well in Sack Frost Kansasville. Bloomberg writes: "Fed spends 40% on newer, cheaper benchmark Treasuries" and clarifies: "More than 40 percent of the government bonds the Fed bought in January for its so-called quantitative easing were auctioned in the previous 90 days, up from 20 percent in December and 15 percent in November, according to Bank of America Merrill Lynch. The central bank is concentrating on newer securities as its $600 billion program depletes primary dealers’ holdings of Treasuries to the lowest since November 2009. “They’re getting all the bang for their buck that they can” by purchasing so-called on-the-run bonds, said Mitchell Stapley, the Grand Rapids, Michigan-based chief fixed-income officer for Fifth Third Asset Management, which oversees $22 billion. “When you’re the largest buyer out there, when you replace China in terms of the size of your holdings of Treasury securities, that will happen.”" It is great that more and more are starting to pay attention to what has been a ZH peeve ever since the beginning of QE2: namely relentless taxpayer rape. We do have one problem however: when Bloomberg says "cheaper" to qualify the "newer" Treasurys, it is, unfortunately, very much wrong. Take today's POMO for example. In 15 minutes the FRBNY will announce the completion of today's $7-9 billion monetization of bonds between 2017-2020. The most recently auctioned off CUSIP in the roster of 19 bonds is the 912828PC8 CUSIP also known as the 2.625%s of 11/15/20. This is the 10 Year bond acquired by PDs during the December auction (the January is structurally excluded as it matures in 2021). Now if Bloomberg is correct, not one single PC8 will be monetized today, since, as Morgan Stanley once again confirms, this is among the richest (as in, the opposite of cheapest) bonds to put to the US taxpayer, and the result of such a monetization would be yet another implicit impairment of Fed fiduciary interests. We will advise readers as soon as we know what the final outcome of today's POMO is as to how much PC8 was put back to Sack Frost.
It is a Monday, and like any day ending in "y" we get another Obama administration foreign relations screw up. Today's edition comes from President Obama's special envoy to Cairo, Frank Wisner, who over the weekend made waves with his call urging for Hosni Mubarak to remain president. The glitch, however, is that supposedly unbeknownst to the administration and to the journalist cadre, Mr. Wisner works for litigation firm Patton Boggs, which according to the Independent: "openly boasts that it advises "the Egyptian military, the Egyptian Economic Development Agency, and has handled arbitrations and litigation on the [Mubarak] government's behalf in Europe and the US". Wisner's words, now making the rounds, and which appear to have infuriated Egypt's opposition just as things were going back to normal: "President Mubarak's continued leadership is critical: it's his opportunity to write his own legacy." In other words, yet another huge conflict of interest by a man paid by none other than the president of Egypt, which has "called into question Mr Obama's judgement, as well as that of Secretary of State Hillary Clinton", and puts Obama's (in)ability to handle foreign conflicts, in an even more questionable light.
BBH's Marc Chandler gives his latest outlook on the FX board. Not surprisingly, and as we pointed out following the CFTC COT data, following a fresh round of record bearish bets on the USD, the Brown Brother's chief FX strategist sees a short-term bottom in USD sentiment (until we get a fresh new low of course), which coupled with a dose of irrational exuberance over how fast Europe has come on the past month, on nothing real but merely more expectations of improvement, could make the EURUSD fall to a $1.3250-$1.3350 range. Of course, this is the worst outcome for the dollar debasing central banks (i.e., all of them currently, due to the implicit G-20 understanding that a temporary bounce in the US stock market in nominal terms will lift all boats). Specifically: "For three days the euro tried to rise convincingly above the $1.3840 area, a technical area we had been monitoring. Provided this is indeed a failure, the euro could fall back into the $1.3250-$1.3350 range in the near-term. Sterling neared $1.62 and appeared also to run out of gas. Yet given the rebound in UK data and the prospects of heightened tensions in the euro zone, sterling can outperform the euro. Sterling may encounter support in front of $1.60, but there appears to be potential toward $1.58." Keep in mind that Citi's Steven Englander proposed a comparable logic recently, claiming that increasingly the only way to moderate surging inflation (check out commodity futures) aside from CME, ICE and other exchange margin hiking gimmicks which work for all of 24 hours, is for a concerted push to raise the dollar. Naturally, by the time a move like that is espoused by Bernanke it will be far too late.
Today Egypt came to market in an attempt to pull a Geithner, and fund $2.52 billion worth of deficit spending at the expense of external investors: a privilege for which it was prepared to pay a lot of money. And even despite ultimately paying a rate of 10.972% that even Portugal would cower in fear and shame from, the Egyptian Central Bank was forced to reduce the size of its combined 15 billion Bill offering by over 2 billion Egyptian pounds as interest just wasn't there.
Bangladesh investors just can't catch a break. After the Dhaka stock exchange dropped by 7% in December 2010, leading to widespread rioting and mostly looting, this was subsequently followed by two other market crashes in January both of which were about 10% in magnitude. Today, third time for 2011 may or may not prove to be the charm for the DHAKA, after overnight the stock exchange was in a 10.3% free fall. It is about time Sack Frost hold seminars to the less than developed nations, and teach them just how to deal with that phenomenon, which the WHO recently declared as extinct, known as selling, on those rare occasions it does flare out despite inoculations to the contrary. And while stock market induced rioting comes and goes as margin lenders realize that money is long gone, it is nothing compared to what may happen should the Rough Rice rocket continue taking out all highs. And one look at today's grains and softs futures demonstrates just what happens to commodities nominal prices when the Chairman refuses to allow even one down day in stocks.
- A Modest $500 Billion Proposal (Rand Paul, WSJ)
- AOL Agrees To Acquire The Huffington Post (HuffPo)
- When HuffPost Met AOL: "A Merger of Visions" - Ariana Huffington Explains The Logic Behind The Deal (HuffPo)
- Fed Spends 40% on Benchmark Treasuries as Newest Proves Cheapest (Bloomberg) actually no, they are very rarely cheapest as Zero Hedge has actually demonstrated instead of insinuating
- China Moves to Strengthen Grip Over Supply of Rare-Earth Metals (WSJ)
- Tunisia takes steps to halt "security breakdown" (Reuters)
- Suleiman holds talks on Egypt reforms (FT)
- More bad news for wheat: Perth Area Declared Disaster Zone as Bushfires Rage Near City (BusinessWeek)
- 'Toxic' Assets Still Lurking at Banks (WSJ)
- European corporate tax plans under fire (FT)
- Sputnikonomics (New Yorker)
Markets in positive territory in the early going as Friday’s mixed-message job data continues to be debated. We believe that it will be another month at least before the data is confirmed/denied, but the changes to the denominator do not give us a lot of faith despite the headline. The week’s light calendar will put focus on geopolitical issues including Egypt and Euro sovereigns. 10s and 30s are scheduled for issuance later in the week after long dated purchases on Tuesday. This should test the selloff observed last week. Implied Fed Funds point to an opportunity in the front end, though we are still a bit off of the hike expectations that were priced in mid December. Bernanke testimony to the House Budget Committee on Wednesday will generate sound bites ahead of the debt ceiling debate.
Morning Gold Fixing: JP Morgan Accepts Gold Bullion As Collateral – Silver Backwardation To Lead To Short Squeeze?Submitted by Tyler Durden on 02/07/2011 08:34 -0400
JP Morgan announced today that from now on they will accept physical gold bullion as collateral. This is a sign of gold’s further remonetisation in the global financial and monetary system. It may signal that JP Morgan is having difficulty in securing gold bullion in volume. JP Morgan is the custodian for many of the gold and silver exchange traded funds. They will not accept ETF trust gold as collateral. In October, the clearing house of global exchange CME Group – CME Clearing – announced it will now accept gold as collateral for trades on the exchange. Gold bullion can be used for margins for CME trades, ranging from crude oil, gold, grains, equity indexes and Treasury bonds. Given the current monetary, macroeconomic and geopolitical risk gold is an attractive alternative to debt, equities or other paper assets as collateral. JP Morgans’s move shows how gold bullion’s fungiblity and tangibility as an asset makes it attractive and shows gold’s increasing importance in the financial system. Interestingly, the CME is storing their collateral gold at JP Morgan Chase Bank in London. The exchange said it hoped to add additional depositories in the future but there has been no announcement of developments in this regard.
After the EURUSD hit on overnight high of 1.3625 on the now traditional meltup which precedes that of stocks, courtesy of a very tight EURUSD-ES linkage, the last 4 hours have seen a persistent sell off in the pair on the back of weaker German manufacturing data, which was to be expected: after all Merkel's trade off to keep the dollar weak, and thus stock markets in the US (and Europe by sympathy) strong, was bound to have an impact on Europe's strongest economy. And so it has. Market News has the details: "Industrial orders in Germany fell by a
stronger-than-expected, seasonally-adjusted 3.4% on the month in
December, the Economics Ministry reported on Monday, on expectations of -1.5%, and a +5.2% previous print.
-- Germany December orders m/m below MNI median fcast (-1.9%)
-- Germany November mfg orders unrevised m/m at +5.2%
-- Germany December orders 3-month moving avg (October-December:
-- Germany 4q mfg orders +2.7% q/q, 3q +1.8%, 2q +7.4%
-- Germany December domestic mfg orders -2.4% m/m, foreign -4.2% m/m
-- Germany December foreign mfg orders: EMU +3.7% m/m, non-EMU -8.9%
-- Germany December capital goods orders -6.6% m/m
-- Germany December consumer goods orders -0.1% m/m
-- Germany December basic goods orders +0.6% m/m." Time for the algos to switch to a dollar strength = stock strength regime.