Gold, silver, and the dollar performed well today and despite some early strength from equities, risk-on-related assets were set to pull equities lower calling the bluff of marginally better trade figures. Of course, with Swissy off the table from a safe-haven perspective (losing 2% against the USD today), gold benefited from the anxiety that Bernanke's 'shrug' provided. Unless the game-theoretic (bargaining) response from Republicans over whatever Obama proposes tonight is ignored, we suspect selling pressure will continue in equities as they adjust to life on their own for a bit.
Wall Street 2 was an epic disappointment, and massive failure due to a totally mangled mishmash of a script (and how could it not be after some rather prominent, literally, bloggers were asked to provide screenplay input) for a movie that was supposed to encapsulate the Great Financial Crash of 2008 (we won't even bring up that straight to premium Lifetime fluff piece by a liberal name-dropping OpEd columnist). Yet where the sequel to the quintessential Wall Street (hence the name) movie failed, a new one may take its place: Margin Call. We have not seen the advance screening yet, but it really can not be worse than the "other" GFC movie - at least here they can afford Bloomberg terminals.
BOTTOM LINE: Fed Chairman Bernanke’s speech to the Economics Club of Minnesota today contains no surprises and will do nothing to dispel market expectations of further easing action at the September FOMC meeting.
Volume picked up significantly after Bernanke's speech was released, providing little (if any) new fodder for QE3 equity-market-hopers and once again pressing for Congress to act. ES has dropped around 1% led by financials.
While the move by the SNB to basically link its currency to the dying Euro was shocking and will send shockwaves throughout the global financial systems for months to come, in many ways it was inevitable. The central planners are still in control and they are getting increasingly desperate. Part of their desperation manifests itself in acts to prevent markets from sending out signals to investors and the general population. This is why Central Bankers print money and buy government bonds. This is why the ECB is buying worthless PIIGS debt. This is why the SNB decided to destroy its currency. After all, if they agree to destroy the value of the Franc at the same pace as the Euro then it will become less clear to the currency market just how quickly purchasing power is being destroyed. Of course, you can always tell in the commodities sector. What the Swiss did is unfathomably bullish for commodities, in particular energy, food and precious metals. Every rich person with a Swiss bank account in Swiss Francs will be scrambling to turn that into the one hard currency left: GOLD. That is what the Swiss said to us earlier this week. They told every investor on the planet “we don’t want to have a hard currency.” If you want a hard currency you have once option now. Gold. When people really figure this out it is going to be a mad scramble for physical metal the likes of which no one alive has ever seen.
Word Cloud Summary: Inflation - 16; Deflation - 0; Easing -2; Tightening - 0; Gold 0; Weak - 8; Strong - 4; Transitory - 1Submitted by Tyler Durden on 09/08/2011 13:48 -0400
"the finances of the federal government will spiral out of control in coming decades, risking severe economic and financial damage" - 1
The embargo has been lifted and here are the headlines, which are eeriely reminiscent of the Jackson Hole speech, courtesy of Bloomberg:
- BERNANKE: POLICY MAKERS SHOULDN'T DISREGARD ECONOMY'S FRAGILITY
- BERNANKE SAYS FED HAS `A RANGE OF TOOLS' FOR MORE STIMULUS
- BERNANKE SAYS SUBSTANTIAL FISCAL TIGHTENING COULD HURT RECOVERY
- BERNANKE SAYS FED PREPARED TO USE TOOLS `AS APPROPRIATE'
- BERNANKE SAYS INFLATION `EXPECTED TO MODERATE' IN COMING Q'S
- BERNANKE SAYS FED SEES `GREATER DOWNSIDE RISKS' TO OUTLOOK
- BERNANKE: POLICY MAKERS SHOULDN'T DISREGARD ECONOMY'S FRAGILITY
- BERNANKE: U.S. FINANCES COULD `SPIRAL OUT OF CONTROL'
After breaking the story of Solyndra's shady taxpayer funded practices (which were not enough to stave off bankruptcy, and yet another confirmation that government stimulus in the form of subsidies is virtually always an epic failure), Bruce Krasting subsequently delved into the one entity that somehow had managed to get priority interest to subordinated government loans to the tune of $528 million in government funding: Argonaut Ventures, and specifically one George Kaiser who just happens to be a material fund-raiser for the president. And while it is not known yet whether the embedded improprieties in this peculiar relationship will end Obama's chances for reelection, things are starting to stink. Because as Bloomberg reports, as of a few hours ago, the company's headquarters was raided by the Feds. While at this point they are certainly looking for signs of criminal malfeasance by management, it won't be long before they put two and two together and decided to analyze the logic behind the funding, and why it is that an Obama-favored person will get his money out first while US taxpayers will likely suffer a total wash.
The Yahoo drama just got more exciting with the inclusion of Mr. Pink, who just announced he owns 5.1% of YHOO shares, and has submitted a letter in which Third Point "details our principled demands for sweeping changes in both the Board of Directors (the “Board”) and Company leadership, and outlines the hidden value of Yahoo, which has been severely damaged – but not irreparably – by poor management and governance." Read on to see what has the famous activist pissed this time around. Oh, and Dan, good luck saving this sinking titanic: your buddy David Einhorn got out just in time... Or did you just end up buying your friend's shares?
If you’re one of the tens of millions of unemployed in the western world, I have good news and bad news. The bad news is that your situation at home isn’t getting better anytime soon. The good news is that many foreign job markets are quite strong. Here in the Middle East, there are a number of countries that shook off the effects of the economic downturn and are still growing feverishly. If you’re looking for a job, this may be a good place to start. Most of the positions, especially the better paying jobs, have great benefits. And no I’m not talking about casual Friday. In this part of the world, it’s common for employers to provide a house and chauffeured car in the package, and sometimes even private schooling for the kids. Commissions and profit shares are also common, depending on the position. And as an added benefit, most of these places have little or no local tax… so you keep what you earn. By way of comparison, if you make $4,000/month ($48,000 annually) in Abu Dhabi, that’s the after-tax equivalent of making $65,000/year in the US. If you make $7,500/month ($90,000 annually) in Dubai, it’s like making $130,000 in the US. What’s more, US tax law excludes the first $92,900 from income tax. Other nationalities pay nothing.
If the market always finds the pain trade, making an entire industry feel like they are back in high school, would have to be the mother of all pain trades. It seems like there is a "cool" group that knows what to focus on. What is hot and trendy and important at any given moment. Some kids are left wondering why they were part of the cool group last year, but suddenly are sitting by themselves at the cafeteria (hedge funds down 10% or more on the year, know that feeling well). There are even a few new kids at the cool table - most noticeably, that weird kid who always talked about gold is suddenly popular.
Once is fine, twice - passable, three times - eh... But when one has missed forecast after forecast after forecast as many times as Greece, one wonders what the hell is going on. Earlier today we got confirmation that what everyone with half a brain (obviously this excludes the apparatchik idiots in Brussels) had been expecting had come to pass, namely that the Greek economy has completely imploded. Per Reuters: "GDP contracted at an annual pace of 7.3 percent in the three months to June, from 8.1 percent in the previous quarter, according to seasonally unadjusted figures by statistics agency ELSTAT, while unemployment stayed near record highs. "Domestic demand is incredibly weak, exports do not benefit from global economic growth ... A 2011 deficit of 8.5 percent to 9 percent doesn't seem implausible," said Ben May, a London-based analyst at Capital Economics. Unemployment fell slightly to 16.0 percent in June, helped by seasonal tourism jobs. But it remained close to a record 16.6 percent it hit the previous month, well above its 11.6 percent level in June 2010. And as rumblings from everywhere confirm, most notably from Greek 1 Year bond yields which are pennies away from 100% (i.e. one doubles their money if Greece does not go broke n the next 365 days), and Greek CDS which now predict a virtual certainty of bankruptcy, Europe has had enough of being used as a liquidity source over and over. Because as speculated ever so often, Greece (and now Italy) realized that the balance of power in Europe is entirely with the broke nations: after all what will Brussels do: blow itself up by kicking Greece out? As a result, Greece continued to promise and promise while doing nothing. Well, it appears that Europe is now about to test just what happens when Greece is kicked out. According to sources Greece will either be kicked out of the Eurozone by the end of the year or will be insolvent in the next 4 months. Either way, things are about to get truly exciting. And unfortunately, what Greece is doing by leeching of the Eurozone is precisely what the US is doing by "leeching" of the (temporary) dollar reserve standard. As Greece is about to find out, all good things come to an end. Soon after, America will also discover that those 4 week Bill yields of 0.000% will be a much cherished memory.