Who better to explain what is going on in Cairo to America's masses than Stephen Colbert. And yes, Jersey Shore analogies are most certainly included for comprehension's sake...
No surprise: blame the US government on the information black out. Shareholders, and the investing public of course, learn last. Our question: when did clients learn?
As we noted yesterday, during what we called Cairo's D-Day demonstrations, Friday may well have been the last chance for Egypt to push through with a resolute attempt to finally overthrow Mubarak. Because now the doubts set in... and the desire to get back to a normal life. Sky News reports, "As anti-Mubarak demonstrators continue their protests in Cairo's Tahrir Square, away from the area there are signs of growing divisions among their ranks." In this revolution of attrition, Mobarak may have been well aware of the time value of liberation enthusiasm. And now, two weeks after the start, people have realized they also have to eat (even if wheat has gone up well over 20% in the meantime).
The folks at Future Money Trends have released another comprehensive video clip which summarizes the key aspects of the gold price thesis (which should be all too clear to our readers, who have been following it since $800). At 6 minutes long, virtually anyone can afford to take the time and hear it out, which we certainly urge now that we once again have increasing chatter that QE3 is around the corner (those $4 trillion in deficit funding pieces of paper won't monetize themselves). That alone is sure to send gold again in play: after all the biggest jump in the precious metal last year occurred only after the "incredulous" ones realized that Bernanke was not at all kidding about his infinite dilution quest (yes, the Fed will do anything to save the banking masters).
The BLS: A History Of (Downward) Revisions, Or How The Department Of Truth Goosed Markets With Half A Million Fake Jobs In Two YearsSubmitted by Tyler Durden on 02/04/2011 19:50 -0400
Zero Hedge has previously demonstrated the improbable, for lack of a better word, upward bias in revising initial jobless claims applications. Today, we look at an even greater statistical problem at the BLS: that of Non-Farm Payrolls. Courtesy of today's full year revision announced by the BLS, and a granular sort by John Poehling, we have discovered that while revisions added a whopping 55k jobs in the years 2006-2008, NFPs have now been revised to remove 538k jobs in the 2009-2010 period. In other words, based on data revisions, under President Obama, America has suddenly created over half a million jobs less (even if all of them are part time) simply due to statistical adjustments. We won't even go into analyzing just how much worse the S&P would be trading if all those monthly "upside" NFP reports had reflected true and not completely fudged numbers. At an average 22.4K downward monthly revision for every single monthly NFP report in the past two years, we are 100% confident that not even Iosif Shalom Bernanke would be able to offset the market plunge that would ensue each and every of the past 24 months... if fundamentals were ever to be remotely meaningful again, of course.
The man who once actually had some credibility, and has over the past two years become, very deservedly so, the biggest one-sided propaganda joke on Wall Street, Joe "Snow" LaVorgna, is out with yet another career reputation killer note. In his commentary on the BLS, the Deutsche Bank cheerleader dares to go where not even the Comcast-GE schizos fear to tread, namely in the most ridiculed never never land of Green Shoots. Because heaven forbid seasonal adjustments take account for snowfall in the deep of winter. Have no fear it is all good, and just like that other administration rag Mark Zandi, it is all back end loaded, and as a result we will see a 250k pick up in February payroll, February showers excluded... and in fact, should the weather dramatically vary by more than +/-0.01 degree from the median temperature, all bets are off. They don't call it the priced to perfection, Tungstenilock recovery for nothing. But here is the killer: while saying don't believe the bad news from the NFP report, the curly haired, CNBC sideshow Jow says: "However, the sizeable and unexpected drop in the unemployment rate was legitimate." In other words - let's pick and choose the data points he likes from any economic report going forward, blame the bad ones on ridiculous things, and pray that people are so dumb to not see the utter contempt for their intellgience that infuses the entire "analytic" process.
Chris Martenson Interviews Joe Saluzzi on High-Frequency Trading: The Equity Market Is Now Controlled By The MachinesSubmitted by Tyler Durden on 02/05/2011 14:17 -0400
Joe Saluzzi, co-founder of Themis Trading LLC and outspoken exchange expert, is concerned with how high-frequency trading has brought the capital markets into uncharted - and dangerous - territory. "Things have changed," he cautions. With 50-70% of all trades being conducted by algorithms at micro-second time intervals, real human traders are increasingly challenged to understand how our markets actually work. "No longer do the technical patterns - that have lasted for years and years, and are written about all over - work anymore." In the following interview, Joe and Chris plunge into "dark pools" and other poorly-understood elements of our now-machine-dominated financial exchanges. The current system is fraught with risks of further "flash crash"-like disruptions, and at a fundmental level, feels a lot like sanctioned theft by the deep-pocketed institutions who can outspend on technology and speed. This is an important interview for anyone involved in trading (professionally or personally), as well as investors who want to know how today's markets truly operate.
I was sure that the 10,000 momentum-chasing hedge funds in Greenwich would have piled onto the short side a week ago after the indexes got shanked when the Egypt riots began. After all, all of them have made yet another New Year's Resolution to be the first one to catch the next bear market and make a killing shorting the next wave down. And be able hang out The Hamptons next summer bragging how "I nailed the top within one day". However, the tape whipped back around and a frenzy of buying resumed. When is the market going to finally top out?
Over the years we have not spared our praise for the Nasdaq: the one exchange to first legalize frontrunning aka Flash Trading, to actively promote churning via HFT erection-inducing liquidity rebates in stocks and options, to create novel and ingenious ways to skirt Rule 611, and, most recently, to overtake the NYSE as host for greatest number of fraudulent Chinese reverse-mergers, the Nasdaq has never kept a secret that it cares far more about its clients than the investing public. Yet little did we know that in addition to pervasive manipulation we can also add thorough security breach and compromise to the exchange's list of transgressions. According to the WSJ, "Hackers have repeatedly penetrated the computer network of the company that runs the Nasdaq Stock Market during the past year, and federal investigators are trying to identify the perpetrators and their purpose, according to people familiar with the matter." Now it is sadly ironic that the world's "electronic exchange" (whatever that means in a world devoid of any carbon-based traders) is the one that would succumb to an outside incursion. What, however, is punishable by even the most mentally retarded, transvestite midget porn-obsessed SEC minion, is that US investors have to learn that practically any stock transaction in the recent past may have been frontrun by illegal means (as opposed to just legal ones that are available to any one with a few Mahwah collocated Cisco machines), through a newspaper.
It was less than three years ago that oil went to $140 per barrel and the commodity index climbed over 3 standard deviations and 60% above its 4-year average. An extreme like that should statistically occur about once every century, but despite dropping below the 4-year average for half of 2009, we are now about 2.7 standard deviations and 50% above it, and still climbing. This is a big surprise and a big problem for global prosperity. Now, the turmoil in Egypt has lifted the fear component in the oil price as well. Furthermore, a deep political rift between the US, as Israel's protector, and the newly democratic but primarily fundamental Egypt and its allies in the Islamic world is a distinct possibility. Saudi Arabia could come under pressure. The most negative near term result of this split would be OPEC's refusal to increase oil output, despite the rising price, something similar to the situation after the Yom Kippur War in 1973. - John Taylor
Our administration in a nutshell: in the just released "Semiannual Report on International Economic and Exchange Rate Policies" by the Treasury, the conclusion is that while China isn't really a currency manipulator, which it obviously is via the CNYUSD peg, inasmuch as the US also is courtesy of the Hewlett Vissarionovich, "progress thus far is insufficient and that more rapid progress is needed." Win win for everyone, as the global FX attrition war continues (we lob inflation at them, they lob it back ten fold). In the meantime, the status quo is great and let's all pray that the global revolutions end with Egypt, which a month ago few even could point out on a map.
Yesterday, while we were listening to the Chairsatan(© Bill Gross), we made the following semi-serious realtime translation of Bernank's presentation to the sycophants' club: "Let me explain it to you: 9% unemployment: NFLX $300; 8%
unemployment: NFLX $500; 6% unemployment: NFLX $1000. Kapishe?" And while we were mostly joking in our correct interpretation of the Fed's massively wrong understanding of causality between the market and the economy, Nicholas Colas of BNY today took a comparable idea and analyzed what the level of the S&P should be for unemployment to get to a Fed acceptable level based on empirial data. We quote: "By our analysis of the last forty years of history for the S&P 500 and unemployment rates, in order to get to the Fed’s 8% target in 2012, the U.S. equity market needs to climb another 35% in 2011, putting the S&P 500 at 1755. That’s not our price target, but it just may be the Fed’s." Since this is most likely the entire "sophisticated" plan laid bare of one Iosif Vissarionovich Bernank, expect to see a complete elimination of volume as the mutual fund cartel continues with the never-sell collusion, and the only incremental buying is PDs with taxpayer money and HFTs' bid-bias fully compensated by rebates for providing the PDs with the "liquidity" they need to send stocks up another 350 points. Luckily, few if any care what the joke that is the stock market actually does.
Non-Farm Payroll day has traditionally been one of the top three most volatile and highest volume days each month. No more. If the primary scourge for the banking community has been the total collapse in market participation, leading to a drop in flow and commission revenues, then Q1 earnings will be a bloodbath. Today alone ES volume is 25% below average, and this is on the week's traditionally most active day. So once again we wonder out loud: is anyone left trading stocks at all, or has everyone now shifted to the far less manipulated FX, bond and commodity markets? And, following up with our second question: when will CDS trading for retail finally be approved? Obviously nobody wants to trade equities any more, and Goldman will be more than delighted to skim pennies off the top as OTC goes global.
Ok, someone needs to step in here before people get hurt... Well, more. The chart below is not of some biotech strategically bought by various CT hedge funds having just announced a successful obesity Phase 3 trial. It is corn: one of the most widely consumed commodities in the world. And while corn appears to be today's limit up commodity, elsewhere cotton has just limited down as a continuation of the recent ICE plundering, courtesy of the exchange's margin hike; rice, after touching on highs, has decided to drop aggresively, as have cocoa (never mind the Ivory Coast government vacuum) and coffee. This is the kind of environment in which companies that do not have commodity price hedges can go bankrupt in a span of months. Which reminds us to create a basket of companies that do versus those that do not have input price hedges. That could be one of the most profitable pair trades in 2011.