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Government Shutdown Silver Lining - Good For Personal Privacy

The nation's top intelligence officer, James Clapper, is worried:


and so is Senator Grassley:


But - for those who care about personal privacy rights, there is a silver lining:

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Obama Approval Rating Surges - Highest Since May

The president's total job approval for September inched up a point from August to 48%, his highest rating since May. But that’s still down eight points from December’s high of 56%.  Furthermore, according to the latest Rasmussen poll (of these people?), it is noteworthy that 29% "Strongly Approve" while 38% "Strongly Disapprove," leaving the spread at -9 - which while still negative, is the highest since June surging this week as the showdown over the shutdown continues. At this rate, by the time the debt-ceiling debate is over - Obama will have the entire nation begging him for a 3rd term...

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Options Markets Break... Again (And Un-Break 12 Minutes Later)


The stock market is trading down - therefore, options markets have broken:


Seems that options markets were not broken last night as VIX was banged into the close?

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EUR Soars Despite Draghi's "Weak, Fragile Recovery" Jawboning

EURUSD is at 8 month highs, having broken above 1.36 for the first time since Feb 4th. This is a 100 pip ramp from the start of Draghi's press conference as he offered little or no hope for imminent policy actions to weaken what has already become an earnings-impacting strength in the region's currency. Whether this knee-jerk is algo-driven reaction to "no news is good news" or market participants actually pressing the EUR higher on a lack of policy action in order to force Draghi's liquidity-providing hand down the line is unknown, but for now, we await the Q3 earnings data from European entities to see if they justify the near-record high stock prices being atrtributed.


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Bill Gross' Monthly Thoughts: Expect The "Beautiful Deleveraging" To Conclude... Some Time In 2035

A week ago, we first reported that Bridgewater's Ray Dalio had finally thrown in the towel on his latest iteration of hope in the "Beautiful deleveraging", and realizing that a 3% yield is enough to grind the US economy to a halt, moved from the pro-inflation camp (someone tell David Rosenberg) back to buying bonds (i.e., deflation). This was music to Bill Gross' ears who in his latest letter, in which he notes in addition to everything else that while the Fed has to taper eventually, it doesn't actually ever have to raise rates, and writes: "The objective, Dalio writes, is to achieve a “beautiful deleveraging,” which assumes minimal defaults and an eventual return of investors’ willingness to take risk again. The beautiful deleveraging of course takes place at the expense of private market savers via financially repressed interest rates, but what the heck. Beauty is in the eye of the beholder and if the Fed’s (and Dalio’s) objective is to grow normally again, then there is likely no more beautiful or deleveraging solution than one that is accomplished via abnormally low interest rates for a long, long time." How long one may ask? "the last time the U.S. economy was this highly levered (early 1940s) it took over 25 years of 10-year Treasury rates averaging 3% less than nominal GDP to accomplish a “beautiful deleveraging.” That would place the 10-year Treasury at close to 1% and the policy rate at 25 basis points until sometime around 2035!" In the early 1940s there was also a world war, but the bottom line is clear: lots and lots of central planning for a long time.

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Only Payroll Indicator In Shutdown Week Disappoints As ADP Misses, Follows Large Downward Revisions

With the BLS shutdown, and this Friday's NFP report indefinitely delayed, the only labor report this week would be the (highly inaccurate) anticipated ADP Private Payrolls data. Moments ago it came, and disappointed all those hoping that finally, after five years, the Fed's shotgun wealth creation strategy may be working when it not only missed expectations of 180K, instead printing at 166K with the bulk of jobs created in the service-providing sector, but excluding massive downard revisions (July from 198K to 161K, August from 176K to 159K), would have been the lowest print of the past 4 months. And while, finally, some 1000 manufacturing jobs were created in September, for the first time in over a year the high-paying financial sector saw an exodus of 4000 jobs. Wave goodbye to the "third half" 2013 recovery.

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Draghi's "LTRO Or No LTRO" ECB Press Conference - Live Webcast

Leaving rates unchanged for now, all Draghi has left in his arsenal is to jawbone the EUR down (since we already know the strength of the EUR is hurting corporate earnings). Moar negative rate "possibilities", a sprinkling of "things are not quite as awesome as markets presume", and a hint or two at the need for another VLTRO? And we are sure this time, he will explain exactly how the OMT will work...

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Futures Slide In Delayed Shutdown Response

If yesterday was the paradoxical government shutdown "relief rally" pushed higher by a last minute VIX smashing ramp, today reality is starting to set in and global stocks and US futures are set to open lower. The FTSE MIB remains the only European bourse to trade in positive territory in today’s session, having touched upon 2 year highs as it is expected the political tumult that threatened to cause a collapse of the Italian government will be resolved today even as the latest news indicate Berlusconi's PDL will support the Bunga godfather after all. Other European equities have failed to benefit from this as market participants remain cautious ahead of the ECB rate decision today when Draghi may or may not (most likely) announce a new LTRO.

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Berlusconi Flips, Says Will Support Italy's Government

Moments ago, Italy's most popular politician flip-flopped on his threats from the past weekend to take down Italy's government, and after realizing he does not have enough support even in his own party to push for early elections and a vote of no confidence for prime minister Letta, Berlusconi announced his party will vote to support the government of the current Premier, a major turnabout that signals he was defeated in his efforts to bring down the government.

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ECB Leaves Benchmark Rate Unchanged At 0.5% As Expected

No surprise this morning from the ECB, which keeps its benchmark rate at 0.5% and the deposit rate at 0.00%.

At today’s meeting, which was held in Paris, the Governing Council of the ECB decided that the interest rate on the main refinancing operations and the interest rates on the marginal lending facility and the deposit facility will remain unchanged at 0.50%, 1.00% and 0.00% respectively.

The President of the ECB will comment on the considerations underlying these decisions at a press conference starting at 2.30 p.m. CET today.

More at the press conference in 45 minutes when Draghi may or may not announce yet another forced LTRO, at a time when all of Europe is deleveraging at a record pace.

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US Shutdown Shakes Japanese Stocks (Worst Day In 6 Weeks); Rest Of Asia Mixed

A US government shutdown, slumping vehicle sales, Aussie trade deficit double what was expected (and building approvals tumbled), Asian growth expectations being cut, and Japan's monetray base is up 46.1% YoY (versus 42.0% exp.)... Japanese stocks are down over 400 points from the US day session highs, falling for the 4th day in a row (down 4.8% from the highs last week) as the third arrow confusion reigns taking the Nikkei 225 back to 3 week lows. The Rupiah (Indonesia) and Baht (Thailand) are weakening (bucking the 3-day weakness in the USD) and Indonesian (+10bps), Aussie, and Kiwi bonds are leaking higher in yield. In general, AsiaPac equities are holding modest gains but Singapore and Japan are taking it on the chin... S&P futures -5 from day-session highs.

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Frontrunning: October 2

  • U.S. Government Shut Down With No Quick Resolution Seen (BBG)
  • 12 House Republicans now say they’d back a ‘clean’ CR (WaPo)
  • Republicans’ 2014 Senate Edge Muddied by Shutdown Message (BBG)
  • Obama Shortens Asia Trip Due to Government Shutdown (WSJ)
  • Fed Said to Review Commodities at Goldman, Morgan Stanley (BBG)
  • Foreign Firms Tap U.S. Gas Bonanza (WSJ)
  • Behind Standoff, a Broken Process in Need of a Broker (WSJ)
  • Japan Awaits Abe’s Third Arrow as Companies Urged to Invest (BBG)
  • Microsoft investors push for chairman Gates to step down (Reuters)
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Someone Is Getting Very Nervous

Spot the odd 4-week bill auction out...

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RANsquawk PREVIEW: ECB Rate Decision - 2nd October 2013

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America Today: Obamacare vs The Affordable Care Act

Presented with little comment aside to note that perhaps the House should rename the amendments they propose to "defund" in order to gain a more popular position among the citizenry?

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