A quick glance at today's cross asset class market moves shows a clear standout. The massive outperformance of Gold (relative to USD strength, Stock weakness, and Treasury yields tumbling). However, focusing on a slightly longer-term context shows that it appears you can't keep a good gold market down as it has merely recovered from its over-zealous selling pressure of earlier in the week - to resync with FX, stocks, and bonds. Most importantly, as we pointed out yesterday, it is now clear once again that 'sexy, smart' stocks knew nothing then (for the fourth time this week) - but keep on believing, as we will focus on 'other' asset classes as a signal.
While we can argue over which exact position Iksil and his crew had on, the widening in IG9 10Y spreads post-Dimon signals an unwind of epic proportions continues. It seems the mainstream media has grown tired of discussing skews, basis, curves, tranches, and tail-risk but for those who care about the reality that JPMorgan faces - we note that the credit index most closely tied to the CIO's office debacle continues to push wider. Today sees the spread at six-month wides (up a hulking 33% since Dimon's mea crapa). Perhaps this helps explain why JPM just can't get a bid (or hold onto one even after last week's ECB/Fed print rumors) as its stock's price hovers just in the red YTD (with a $32 handle).
First it was Nigeria cutting back its European exposure, now it is South Africa's turn:
- S. AFRICA'S MARCUS: SCALE OF GLOBAL CRISIS IS `HUGE'
- MARCUS: WORLD IN WORST POSITION NOW THAN BEFORE CRISIS
- MARCUS: CENBANK MONITORING POSSIBILITY OF CONTAGION
Who is next? Kalahari Bushmen pulling their coke bottles on deposit in Murcia cajas? Mail tribesmen wiring their funds from Zurich to Singapore? Somalian pirates watching the VaR models of their Spanish bond portfolios #Ref! out and give up in sheer disgust?
We are constantly told all our problems are too complex to be addressed with simple "big idea" solutions. Complex problems require complex solutions, we are assured, and so the "solutions" conjured by the Central State/Cartel Status Quo are so convoluted and complex (for example, the 2,319-page Dodd-Frank Wall Street Reform and Consumer Protection Act or the 2,074-page Obamacare bill) that legislators say they must "pass the bill to see what's in it." The real "solution" is to see that complexity itself is the roadblock to radical reformation of failed systems. Complexity is the subterfuge the Status Quo uses to erect simulacra "reforms" while further consolidating their power behind the artificial moat of complexity. Over the next three days, I will present three "big idea" solutions that cut through the self-serving thicket of complexity. Nature is complex, but it operates according to a set of relatively simple rules. The interactions can be complex but the guiding principles can be, and indeed, must be, simple. Big Idea One: Radically lower the cost basis of the entire U.S. economy. The cost basis of any activity is self-evident: what are the total costs of the production of a good or service? The surplus produced is the net profit which can be spent on consumption or invested in productive assets (or squandered in mal-investments).
UPDATE: An hour later - BofA has tumbled over 2%, reverting rapidly from unreality...
From last Wednesday's ECB rumor that ramped stocks higher and financials more than anything else, Goldman and JPMorgan have retraced it all and the rest are reverting rapidly on the total refutation of any rumors. There is one financial however that is still up 6%...
Europe was a sea of red (apart from Bund prices) today. With yesterday's window-dressing done and overnight dismissal of Spain's hopeful ECB-workaround, European equity and credit markets were dismal, EURUSD ended under 1.2400, and 2Y Bunds at 0.00% yield. Financials underperformed in stocks and credit with senior bank spreads back up to 300bps and LTRO Stigma jumping 12bps to 177.5bps (near record wides). Spain and Italy dominated both single-name banking and non-banking credit and equity moves as well as sovereigns with Spanish 10Y now +45bps on the week and Italy +37bps (with Belgium, France, and Austria all around 9bps wider). All European equity indices are down for the week with Spain down almost 8%. EUR-USD 3Y basis swaps turned back lower (worse) back to -70bps - not a good sign for funding (especially in light of the drop in LTRO we noted yesterday). On a final note of despair, Spanish 2s10s is now flatter than at any time since LTRO1 - implying that any LTRO debt used to fund a real carry trade is now a loser.
Einhorn Eviscerates Buffet: "If You Wrap Up All $100 Bills In Circulation, It Would Form A Cube 74 Feet Per Side"Submitted by Tyler Durden on 05/30/2012 11:00 -0400
In Greenlight's latest letter we learn that "At quarter end, the largest disclosed long positions in the Partnerships were Apple, Arkema, General Motors, gold and Seagate Technology. The Partnerships had an average exposure of 98% long and 62% short." Also, we find a spirited defense of AAPL (if one which breaks no real new ground with the ever louder recent criticisms of the company), some thoughts on STX, a discussion on the Yen, some of the firm's profitable shorts, including DMND, GMCR, and JOE, but most delightful is this scathing attack on old crony capitalist, TBTF money bags himself...
We have explained in the recent past just why the rotation from a professional European bond-run to a retail bank-run is critical to the euro-zone banking system - with deposit losses creating even more encumbered asset levels among European banks, which would then exaggerate contagion problems as funding pressures mount. The problem is existing deposit guarantee schemes are implemented at the national level and are not currently funded to handle a systemic crisis - this is why there has been so much chatter of a pan-Europe guarantee scheme. However, not only does a euro-wide guarantee rely on credible commitments from core European governments but it misses the redenomination risk - as unlike the US FDIC, it would need to explicitly guarantee the euro-value of deposits. Barclays shares our doubts on the implementation (short- and long-term) of such a solution, noting that Eurozone deposits are greater than eurozone GDP (as opposed to US deposits at ~68% of US GDP). Between operational difficulties, the size of redenomination losses, moral hazard, and the massive (deposit/GDP) contingent liability dependent on actual exit of a member state, we would urge any exuberance over 'talk' of a guarantee to be stymied once again by the dismal reality of implementation and agreement.
EURUSD just broke below 1.2400 - back to July 2010 levels
Just when talks of Accelerated Kinetic Action In Close Proximity To Cash Dispensing MachinesTM in Spain were quieting down, here comes Goldman to reminds us that nothing is fixed. "The ECB released April deposit data today. Italian deposits in April were stable, with a moderate increase in retail (+€7 bn) more than offsetting a small reduction in corporate deposits. In Spain, April saw €31 bn (or 1.9%) deposit outflow from banks. Within this only half is attributable to corporate (down €7 bn or -3.4%) and retail balances (down €8 bn, or -1.1%). The residual outflow is attributable to deposit reductions by others (financial institutions / pension funds / etc)."
At this point it is no longer interesting to recap the ever-growing list of problems facing Spain - we all know the country needs billions and billions in aid to merely contain its implosion, let alone grow. And while as of as of minutes ago we just got another rumor of "Accelerated Kinetic Action In Close Proximity To Cash Dispensing Machines" which is the proper nomenclature, as the B-R word is not in good form these days it appears, the real news is that as the ECB fiddles, and Madrid burns guess who is buying? Why China of course.
The avuncular Art Cashin opines on the roller-coaster of unreality that has been the equity markets for the last few days as outcomes become increasingly binary and investors increasingly herded from one direction to another. His sage advice - as if spoken by the most-interesting-person-in-the-world - "Stay nimble", my friends.
You know its bad when... two of the largest and best-known 'familia' in Europe and the US come together. As the FT reports, The Rockefellers and The Rothschilds are uniting under a common group as Rothschild Investment Trust and Rockefeller Financial Services become one. The patriarchs (David Rockefeller 96, and Lord Rothschild 76) have been 'connected' for five decades. Between the Rothschild's 'sprawling' multi-century banking empire across Europe and the Rockefeller's roots in 1882 Oil-money, we can only imagine the Illuminati, Freemasons, Templars, and Central Bankers of the world are quaking in their boots at this new global force for change - The Rothsellers or is it The Rockchilds. What next? It seems only Soros is left to complete the holy trinity...