Despite the market knowing better, the so-called housing recovery has hit a speed-bump (or brick-wall). Goldman's housing swirlogram shows that the revisions from an exuberant few months into January 2013 have dragged the reality of the 'recovery' rotating into full-blown 'expansion' to a crumble back into 'contraction'. Of course, we have seen homebuilder stocks exuberant like this before in the face of disappointing facts, but even the NAHB (desperate to portray confidence) is 'admitting' things are not as rosy as all-time highs in stocks might suggest.
While every European leader, banker, street-sweeper has made a point to use the phrase "Cyprus was not a template" in the last few weeks since D-Boom dropped his tape-bomb, it appears that in reality plans continue to push ahead to indeed 'legalize' these confiscations. As Reuters reports, European Union ministers will consider a proposal this week to impose losses on short-term interbank deposits of lenders. The proposal is part of wider talks to consider when depositors should be bailed-in. Of course, it makes sense that banks should 'not' get special treatment for their overnight lending operations to one another, but the EU leaders want to ensure that these 'sacred' deposits do not escape confiscation, "while it is acknowledged that bailing in interbank liabilities may carry certain risks; on balance, it is preferable... that these liabilities are not excluded from bail-in". Of course, this will worry the ECB as they have worked so hard to unfreeze the interbank lending market post-crisis (with their direct backstops and intermediation). So while there is no template, and Cyprus is unique, it appears the new 'resolution' laws provide a clear plan (not template) for reaching all the way down the capital structure just as they did in Cyprus (and is legally correct from a pari passu basis).
Here We Go: Cyprus To Sell €400 Million In Gold, About 75% Of Its Total Holdings, To Finance Part Of Its BailoutSubmitted by Tyler Durden on 04/10/2013 10:38 -0400
Curious why every bank and their grandmother, and most recently Goldman today, has been lining up to push the price of gold as low as possible? Here's why:
- CYPRUS TO SELL 400 MLN EUROS WORTH OF GOLD RESERVES TO FINANCE PART OF ITS BAILOUT - TROIKA DOCUMENTS - RTRS
Or about 10 tons of gold. But... the bailout was prefunded and there was no need to provide any additional cash? What happened: was the deposit outflow discovered to have been even greater than the worst case scenario and thus Cyprus needed even more cash? As for the buyers? We will venture a guess: central banks buying at the lows.
Finally: congratulations Cypriots. You are now handing over your gold for the one time, unbeatable opportunity to remain a vassal state to the Eurozone. But at least you have your €.
We noted yesterday that the 'gains' that shorts had temporarily enjoyed from the start of April were rapidly squeezed out since the gap-open lows on NFP Friday. However, yesterday's massive outperformance of the Russell 3000's 'most-shorted' names relative to the index itself suggest more than a few weak hands threw in the towel. Desk chatter this morning was that this was the largest cover day since June. Of course, this morning's ramp suggests there are more stops and shorts to be chewed through yet...
Remember the Wal-Mart employee who sent out an intercepted email disclosing that "Wal-Mart February sales were a "total disaster", and was the worst monthly start since 2006"? Well, he won't be making that mistake ever again.
BREAKING: Wal-Mart executive who called retailer’s February sales a “total disaster” in an internal e-mail has left the company
— Bloomberg News (@BloombergNews) April 10, 2013
Moments ago the Treasury priced it latest monthly issuance of 10 Year bonds in the form of a $21 billion reopening of one of the Fed's favorite CUSIPs to monetize, the 912828UN8 first auctioned off in February. The auction was hardly stellar, with the yield closing at 1.795%, tailing the When Issued of 1.790% by half a basis point. The Bid to Cover was also rather weak at 2.79, well below March's 3.19, and under the TTM average of 2.96%. Yet for all the complaining by the Dealer community, they ended up taking down 33.6% of the auction, with $40.8 billion in bids tendered, a 17.3% hit rate, and well above the 22.3% take down in March. The direct took down a sizable 29.1%, above the TTM average of 21.6%, leaving 37.3% to the Indirects, precisely as much as they had been allotted in the average auction during the past year. Still, hardly was the auction the disaster that Goldman's downgrade of the 10 Year point on the curve would have made it seem earlier today.
Wondering which dominoes are next to fall in Europe? Here is a list based on a simple but powerful precept: follow the smart money. In this case, the smart money entered the at-risk banking sector of a particular nation to skim the fat premium offered by its higher interest rates--rates that reflected the higher risk. The smart money then exits the nations' banking sector before the inevitable solvency crisis triggers capital controls and depositor expropriations (the comically misleading "bail-in"). Why is any money left in at-risk periphery banks? "Things fail from the periphery to the core." With this in mind, we might arrange the dominoes in this order: Slovenia, Portugal, Malta, and then Spain.
In a day full of stunners, we next get news from Cyprus, where a few weeks after the start of the "investigation" into who pulled their cash out of the country's doomed banking system in advance of the confiscation news on March 16 (and where even the current president was implicated in transferring over €20 milion in family money to London) the parliamentary committee tasked with tracking down the leaks, has suspended its probe. As it turns out, it was "all the central bank's fault", which was charged with providing the data. The head of the Cypriot parliament's ethics committee, which was due to look into a list detailing transfers of more than 100,000 euros from the two major banks - Bank of Cyprus and Cyprus Popular Bank - said on Tuesday that the list fell short of what he had requested. "It was with great disappointment and anger that, when we opened the envelope, we realized it contained data for only 15 days even though we had asked for a year," lawmaker Demetris Syllouris told reporters. "This kind of behavior is unacceptable."
No news is good news apparently. European stocks had their best day in over seven months today. Spanish and Italian equity indices surged - now +4.7% on the week. Italian bank stocks were halted limit up. European bank stocks smashed 6% higher - the biggest rally day since early September. Sovereign bond spreads leaked lower (Italy/Spain -16-20bps on the week). EURUSD ended the EU session -20pips (but off over 65 pips from overnight highs). While stocks went out at their highs (and credit at its tights), Europe's VIX pushed notably off its lows into the close - ending at 19.2% (and Swiss2Y held near its lows of the year).
Presenting Brian Gross, Special Assistant to the Fed for Congressional Liaison, who as Bloomberg reveals, is the person who released the FOMC minutes at 2 pm yesterday. Amusingly, Brian worked as Chief Ethics Officer while he was a deputy staff direct on the Banking, Housing and Urban Affairs Committee. Just as amusing is that according to his LinkedIn profile, Brian is involved in virtually every governmental organization, up to an including the Securities and Exchange Commission Alumni Association.
It's all about the children... President Obama has just proposed a budget with a clear message from what we can tell:
*OBAMA BUDGET SEEKS TO TAX CARRIED INTEREST AS ORDINARY INCOME
*OBAMA BUDGET IMPOSES MARK-TO-MARKET TAXATION ON DERIVATIVES
*OBAMA BUDGET CAPS DEDUCTIONS FOR TOP EARNERS, RAISES ESTATE TAX
and while the budget lowers growth expectations for the US notably (from 2.7% to 2.3% for 2013, and from 3.5% to 3.2% in 2014), it assumes: *U.S. BUDGET SAYS HOUSING RECOVERING, AUTOS `AGAIN RESURGENT', and so, *OBAMA BUDGET SEES $51 BILLION GAIN FROM FANNIE MAE, FREDDIE MAC ... For the first time since 2000, the budget plans to collect 20% of GDP as revenue (compared to 16.9% this year). Winners and losers are...
While the Fed's spoksperson has reassured us that none of the 100 or so people who received the somewhat hawkish Fed minutes prematurely (right-time, wrong date) yesterday traded on that information, coincidental trading behavior appears to tell a different story. The inexorable rise seemed to halt almost instantly as the Minutes were released and read by humans this time driving the S&P down 6 points into the close...
Concerned the Fed believes in an Animal Farm market, where those who can legally trade on inside information are more equal than others? Don't be: The Fed's Inspector General is on the case...
— Annalyn Kurtz (@AnnalynKurtz) April 10, 2013
A @federalreserve spokesman tells me, the Fed accidentally emailed its March minutes to roughly 100 people yesterday, shortly after 2 p.m.
— Annalyn Kurtz (@AnnalynKurtz) April 10, 2013
This shocker just hit the tape:
- FED TO RELEASE FOMC MINUTES AT 9 A.M. VS SCHEDULED 2 P.M.
- FED: MINUTES MISTAKENLY SENT EARLY TO CONGRESS, TRADE GROUPS
So the Fed now pre-releases data to US politicians ahead of everyone else. What else does the Fed leak to those for whom frontrunning is still legal? And as if we needed more confirmation, the market is now officially a complete circus.