August Housing Starts come at 598K, on expectations of 550K, as the bounce along the bottom is now nothing but noise. None of this is relevant as the most recent (July) existing home inventory number hit 12.5 months from 8.9 months prior, and even with that in mind, the starts number is the largest since April 2010. Which merely means that even more spare capacity will be added. Of course, with the GMAC Mortgage scandal front and center, this whole statistic may soon be quite irrelevant should foreclosures grind to a halt. Oh, and this being a US Census number, the prior number was obviously revised lower, from 546K to 541K. No surprise there.
- Vacations now over, Greek labor union schedules next all day strike for October 7 - set your $0.01 stub quotes accordingly
- ECB Steps Up Its Bond Buys Amid Worries (WSJ)
- ECB Sterilizes €61.5 Billion in sovereign bond purchases, purchases €323 million of bonds last week (Market News)
- Which of course leads to... Ireland Sells 1.5 Billion Euros in Debt as Borrowing Costs Rise (Bloomberg)
- And to...Greek Sovereign Default Would Be a `Tragedy,' Papandreou Says (Bloomberg)
- Former Officials Oppose US Renminbi Bill (FT)
- Putting your money to work just 2 days a month: To make a lot of money in the stock market this year, all you had to do was invest on just the first two days of every month. And get the hell out of the market every other day (NY Post)
- Obama Says China's Growth is 'Good for US' (China Daily)
- Chris Whalen: Double dip or global deflation? (Reuters)
- From former Bernanke collaborator Vince Reinhardt: Getting Lehman Profoundly Wrong, The bankruptcy of Lehman Brothers is widely misunderstood: We have inverted a morality tale about individual recklessness to become one about collective culpability through inaction. (The American)
- Asian stocks gain as US economic concerns ease.
- Australia increases commodity export sales forecast to record $203B.
- ECB steps up its bond buys amid worries of default by Greece, Portugal, Ireland.
- Escaping double dip to growth recession means no unemployment relief seen.
- Greece sells 13-week T-bills, yield drops to 3.98%
- Gulf states in $123B US arms spree; Arab nations seek to counter power of Iran.
- Oil falls after US Homebuilder Confidence reading prompts demand concern.
- Treasuries hold gain as Fed may say it is open to boosting debt purchases.
- US recession ended in June 2009, NBER says amid threat of renewed slump.
Austrian banks may be sitting on a €2.6 Trillion off balance sheet derivatives time bomb and the central bank does not know how much risk is involved in these trades.
Opinions on the future are pretty binary: either uberdefl*tion or hyperinfl*tion. These views premised on an overreaction to some policy or belief that no policy matters at all. Do policies really mean nothing—or everything? Please. On the one hand, the Fed isn’t omnipotent, and on the other hand society will not tolerate leaders standing around slack-jawed as people starve to death. Seriously, whatever happened to old-fashioned flat prices or high inflation? Nature is too crazy in the head to predict with certainty, sure. But that does not imply a hell on earth scenario. Outcomes are a question of exit times on a non-Markovian process subject to drift and random jumps. Nature takes her time and the path of least resistance. She’s awful at chess, but plays with three queens. Make no mistake: Mother Nature is going to do her thing and she’ll just move on after she burns the club to the ground.
Irish Bond Auction Completed Courtesy Of ECB Backstops, As Europe Now Lives Paycheck To Paycheck And Auction To AuctionSubmitted by Tyler Durden on 09/21/2010 07:48 -0400
Today's market ripping false strawman (as if the ECB would let the Irish bond auction fail) was the issuance of €1.5 billion in 3.5 and 8 year bonds out of Dublin. And with yields a full percentage point higher than before, ECB backstopped banks using the newly purchased Irish bonds as collateral with the ECB, and/or the ECB picking up who knows how much itself, today's auction was a smashing success, if one can calls paying 6% for 8 year bonds success. But the market apparently loves ECB interventions so much it has tightened Irish CDS by 15 points on the day. Full results are as follows.
Now that the United States has had its own real-estate bubble pricked, a lot of smart people have been selling the idea that the U.S. will experience what Japan has experienced. But as a look at the balance of payments shows, Americans and their government have gone into massive debt with the rest of the world, in order to finance all their spending over the last 35 years. Japan, meanwhile, has been carrying a current account surplus. Therefore, the Japanese government has been borrowing money not from overseas, but from its own citizen’s savings. All of the Japanese government’s stimulus spending has been paid for by the Japanese people. This is the main difference between the United States and Japan. It should be obvious—and ominous—what this difference means. —Gonzalo Lira
RANsquawk European Morning Briefing - Stocks, Bonds, FX etc. – 21/09/10
Concerned what will happen tomorrow at 2:15pm? You should be: after all the Fed is now in charge of everything, and this (in)decision will impact your life much more than who the fattest person on this season's Biggest Loser is. Here is this year's most prescient economist, Jan Hatzius, once again doing the best summary on the four possible outcomes of tomorrow's FOMC decision. In a nutshell these are: i) No substantive change in the policy statement, ii) Recognition of a weaker economic outlook, but without an explicit signal that renewed unconventional easing is under consideration, iii) An explicit signal that renewed easing is under consideration, and iv) An announcement of renewed easing. Our personal choice is entree #2, although this being Chez Shalom, no matter what, it will always end being an omakase type of affair - fiat prix tres unfixe. (Oddly enough, Chez Shalom still does not have a Zagat's entry. As everyone in America eats (or defecates) there every single day, it is about time our more industrious readers provided their feedback and rating).
The compare and contrast between Japan and the rest of the developed world is a topic that will only get more and more attention as increasingly more pundits debate America's plunge into a deflationary spiral (sorry, with $2.1 trillion in shadow debt evaporating YTD, it is inevitable. It is the economy's reaction to the Fed's response, i.e., the nuclear option, at that point that is the topic of most contention - whether it will rekindle hyperinflation or have no impact on the deflationary collapse into a Keynesian black hole). The latest to chime in, interestingly, is the all important Bank of International Settlements, recently best known for promoting the regulatory farce that is Basel III. A just released paper by Shinobu Nakagawa and Yosuke Yasui looks at the nuances of Japanese household debt, and how its build up, concentration and composition is uniquely Japanese, and why Japan, unlike the US, has traditionally had the capacity of falling back on its domestic population to bid up its sovereign bonds (which is all in flux currently, as the Japanese savings rate is plunging, as the demographic shift so well covered in the past by Dylan Grice is currently taking place). Here are the findings of the BIS economists, which may provide some insight on how America's upcoming fight with deflation could proceed. Of particular note is just how skewed US society (based on GINI scores and the distribution of net worth) is compared to Japan. It also explains why America is now a democracy only on paper, while in fact it merely caters to the interests of the top 1% of the population.
Oil prices rallied on Monday as traders reacted to a US dollar that was under selling pressure for most of the day, even though it rallied later on, news of tension between China and Japan and on the strength of US equities, which were higher and implied to investors that risk trades were back as a successful mode of placing money. After four days of decline, the oil markets seem to have been ready for a rally, and prices were oversold on the most sensitive measurements. Having said all this, we have our doubts about several of Monday’s factors being able to take root in as fertile soil as we move through this week. Some of the reasons for the rally seem to have been specific to Monday, and might not be easily repeated later in the week. - Cameron Hanover
"Please ensure your staff is aware of these requirements immediately."
A few interesting observations out of ETF Securities, which concludes that not only is silver a cheaper play on precious metal trends, but is the equivalent of a levered gold play. Yet based on the 50 year average gold/silver ratio of 50, silver still has about 20% upside to catch up to its technical value.
Since we live in a day and age when nobody in their right mind has the attention span to read an actual deposition transcript, here is a powerpoint presentation prepared by Max Gardner's Bankruptcy Boot Camp excerpting the deposition of GMAC Mortgage employee Jeffrey Stephen in which he essentially confirms that the firm executes up to 10,000 fake documents per month. The punchline:
Q. So other than the due date and the balances due, is it correct that you do not know whether any other part of the affidavit that you sign is true?
A. That could be correct