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You Want The Truth? You CAN Handle The Truth!
From Peter Tchir of TF Market Advisors
You Want The Truth? You CAN Handle The Truth!
I’m not sure exactly when it happened, but Europe has finally starting dealing in the truth.
Draghi can’t point out the limits of sovereign debt purchases often enough.
The EU, usually happy to let completely false rumor after false rumor to drive the markets, took the time to quash the idea of EFSF and ESM being increased in size. Not just, once, but twice, as Merkel has said it on the 13th, and it came out after yesterday’s conference call.
They even took the time to point out that they hadn’t been able to agree on 85% agreement. That could easily have been buried or ignored, but yet they chose to highlight it after their call yesterday.
Finally, they even went ahead detailing the relatively puny IMF/Central Banks bailout fund. The fund was disappointingly small at €150 billion, rather than the €200 billion that had been expected. The UK is out, but so are Portugal, Ireland, and Greece. Those 3 not being in makes sense, but this is the first time that I can remember that the EU gave us the numbers straight. Usually they would have announced the big number with caveats about various “stepping out countries” and “yet to be ratified” countries. Estonia, which has no debt, is not going to participate. Again, makes sense, but is a step away from the EU making everything sound bigger and grander than in the past.
I’m not really sure what any of this “truthfulness” means. While the EU, IMF, and ECB have done a horrible job dealing with the crisis, they are not stupid nor are they quitters. So why suddenly stop the spin and deliver the more harsh reality? Has Merkozy finally decided to stop being the bull in a bullfight? Every time the market waved a red cloth in front of them (telling them what they needed to do), they failed to deliver or the market failed to respond. Have they decided to take a step back and work on a plan that they may have the resources to implement?
I remain completely convinced that we are far from the endgame in Europe and the ultimate solution will involve restructuring, debt forgiveness, and massive dilution at the banks. But there is something about this focus on the truth and the willingness of the EU/ECB to embrace negative news that seems like a set-up. Is this all part of a plan to allow the ECB to print? Is it setting up for a renewed effort with the EFSF? Does the IMF have something up its sleeve?
It feels like they are trying to create bearish sentiment, that they are purposely lowering expectations. Longer term, I believe those lower expectations are warranted, but in the short term, are they planning on catching the market short to get more bang for the euro on some new announcement? The strongest seasonality effect we see would be from the closing on Wednesday until the market opens after Christmas. That strong seasonality, coupled with reduced expectations, and an extraordinarily thin market, could be an ideal time to launch a new program or refurbished existing one. China may be finally concerned enough about their own economy that they relent and lend their name (and money) to some plan.
Last week we were extremely bearish, and for the first time recommended buying puts if you insisted on being long. We are more neutral right now in terms of direction, but are becoming convinced we may have a large move in the near term. Logic dictates that the move is down to 1100, but the gut says 1300. So at these levels, to remain short, we think buying some short dated calls makes sense. We continue to like Europe more than the US as the “decoupling” has already been priced in and both the Euro and European stocks can outperform. I can’t tell if I’m just bitter, but the fact that the mainstream analysts are falling all over themselves to be bearish now, makes me think that trade has run its course, at least for a little while.
While stocks have been debating whether anything Europe is doing will work, the Italian and Spanish bonds have been behaving well. Totally manipulated of course, but an encouraging sign for the market, especially for those who believe the banks will buy some additional sovereign debt with ECB money. That plan makes no long term sense, but may be enough in the short term to stem the tide. Greece will have to default in the end, but now they have bought themselves some time until their next big bond maturity. If nothing else, we have learned that the market has a “unique ability” to ignore problems if they aren’t immediate.
The worst part about BAC’s plight is that it debunks the myth that you can invest from your bathtub. I was all set to pitch that trading strategy, but now that Warren wishes he had taken a shower and not bought BAC, it will be hard to convince anyone that the “Eureka” moment is a valid strategy. I am hopeful that some of the pain in BAC is coming from the potential that they are negotiating a settlement with MBIA. It would make sense for BAC to come to an agreement before year end, especially since MS already settled. I think this would be very positive for MBI and wouldn’t be the worst thing that BAC could do. We like MBIA, but wouldn’t touch BAC here.
HY seems like it could continue to perform well. HYG and JNK still seem to have gotten ahead of themselves, but the premium to NAV has reduced to a tolerable level, especially with the bond market catching a bid, and dealers having virtually no inventory. HY17 might be an even better play, as it has underperformed, and the “decompression” trade seems incredibly crowded. Any sign of spread compression, coupled with the continued decent US economic data, could cause a quick run on that trade, so I like HY17 better than HYG or JNK right now.
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Not your junker but would you really expect anything else from a Squid tentacle?
As you know, his "solution" of Eurobonds have been my prediction from the begining. Europe must catch up with England's, America's, and Japan's monetization capabilities before the cental bankers can have their synchronized diving.
PS: Peter does a great job. I enjoy his stuff. Thank you.
Via Ransquawk:
'Bundesbank's Dombret says printing money to solve fund states solves no problems and monetary financing would endanger ECB's independence'This won't be settled soon, I agree with Pete. Bundesbank is in a struggle with Goldman & Co. over the ECB presently. Bb and Germans in general, are not going to be a push-over.
Release.. surrender.. submit.
http://i42.tinypic.com/ndaf0n.jpg
OMG
I hope that doesn't mean Gold-backed Eurobonds.
If that's their game , then ade Europe's Gold .... unless they reprice it to ca. EUR 4500 /Oz. of course.
Maybe that is why Schaeuble warned the UK ... "join us or you'll be in trouble" .. or words to that effect.
UK has "only" 300 tons IIRC ... thanks to Gordon !
The rest of Europe has about 9000 !
Never fear, Eurobonds will be backed only by the ability to issue more bonds. That is to say, the ability to inflate the debt away to essentially nothing.
According to Mario, all you Europeans have to do to make this work is give up what is left of your sovereignty.
We are not obvious either.
What is the ESM: http://www.youtube.com/watch?v=EPcWHBPYOSU
It's not false rumor, it's cleverly crafted propaganda. The technique, used often by con men/women, is to lie about everything, making up the most outrageous stuff while testing the mark (victim) to see just how much the Con can get away with. When the Con is caught, he/she reverts to telling the truth for a while which gets him/her back into the confidence of the mark. The mosaic becomes a very strong puzzle of lies and truths mixed in together.
The EU is now desperately trying to get credibility back. It won't last long. The few teaspoons full of truth will soon be mixed with gallons of bullshit/lies/rumors. It's all they know. JMHO
http://en.wikipedia.org/wiki/Confidence_trick
One of the simplest ways to identify pathological liars is to catch their lies. It is comparatively easy to do this because these liars tend to change their stories frequently. One day they may say something and the next they may change the facts of the same. A pathological liar may not be able to keep a record of the stories that he/she has fabricated as per his/her imagination. Which then becomes easy to catch.
Symptoms of a Pathological Liar
http://www.buzzle.com/articles/symptoms-of-a-pathological-liar.html
The way they go about it may not be pretty. The ESM structure just show how tactless everything is atm. However, given Europes diversified portfolio of countries, cultures, languages and mindsets a REAL union is hard to get done democratically, but the result of an incurred one might be good for Europe in all possible ways. I am a proud european, but with two world wars stemming from our shores or inland to be more precise and numerous other meaningless conflicts. For a greater good, unity would be preferred. That it also would be good for european trade is another plus. I say, bring on the eurobonds and the Union. Go EUROPE!
Aw, no mention of who this posting was sponsored by? DB or JPM?
Hybrids CLOs gonna explode...
Regarding Merkozy finally working on a true solution that would appease the markets my brain asks "what would Kyle Bass say to this" and I believe he would say "bullshit".
The definition of insanity as described by Einstein is:
Agreed; 3 year LTRO is just bullshit and it will only provide momentary relief!
Yeah, the 300pt. rally in the Dow is just caused by a few silly people. And BAC is trading at $5.14 on 145 million shares volume; imagine that, 145million people who don't believe a word that Tyler Durden Says; what is this world coming to?
One share per shareholder? Wow, that really would be liquidity.
By your logic, 145 million people would have also sold their BAC stock today. Last I heard, there are still two sides to every trade.
I was just gonna say that. Also note the cost of trade - in and out $2 :-)
Where do they get these idiot trolls?
Have you noticed the recent jump in numbers here and elsewhere? That, and Paul being avoided like the plague after Iowa is making me paranoid.
...on 145 million shares volume; imagine that, 145million people...
He's probably counting the soon to be diluted common stock shares before they do the reverse split to keep it above $5 bucks
A quick glance at the Dow volume shows exactly that.... Asshat.
(Am I doing this right?)
the 4 week US T-bill rate of 0.000% is simply reflecting the risk out there in being long: 0.000%
/snark
And there is your reason why they want the fear in the market. It doesn't cost government a penny to borrow and spend.
Y'all remember last Friday when Daddy P (Big Bob Pretcher was all excited that Bucky was breaking out to new 12 month highs!) My response was that "Bucky about to get a whoopin". See Friday link
http://oahutrading.blogspot.com/2011/12/usd-bucky-about-to-get-whoopin.html
Whose your Daddy? It ain't Bob Pretcher. He had awesome calls that no one had (practically no one) but you can't be wrong for a decade at a time, not even 2 months. And driving people to "maximum leverage" and then setting an ES stop at 1260 made him and disciples the perfect target.
Then draw the bears in again with a steep drop that most miss (they get short at the bottom), and then stall out Santa, then Whoopin' time. Fundamentally, I am quite bearish (just saying I don't count Celente in the group of realists, sorry MISH either -can't be 100% bear every day, and Celente did get his gold stolen at Mf'ers inc). Here are the currency pictures.
http://oahutrading.blogspot.com/2011/12/called-bucky-whoopin.html
Here is the new currency charts, 3 biggies
if you read his Conquer the Crash, he states that gold will not pass $400.00
yeah what a stud that Prechter is
Talk about market manipulation. "Let's wait until the market is short and thinly traded and come up with some other BS rumor/solution to give the illusion that the markets are strong!"
All they're doing is starting the roller coaster as high as possible.
Y'all remember last Friday when Daddy P (Big Bob Pretcher was all excited that Bucky was breaking out to new 12 month highs!) My response was that "Bucky about to get a whoopin". See Friday link
http://oahutrading.blogspot.com/2011/12/usd-bucky-about-to-get-whoopin.html
Whose your Daddy? It ain't Bob Pretcher. He had awesome calls that no one had (practically no one) but you can't be wrong for a decade at a time, not even 2 months. And driving people to "maximum leverage" and then setting an ES stop at 1260 made him and disciples the perfect target.
Then draw the bears in again with a steep drop that most miss (they get short at the bottom), and then stall out Santa, then Whoopin' time. Fundamentally, I am quite bearish (just saying I don't count Celente in the group of realists, sorry MISH either -can't be 100% bear every day, and Celente did get his gold stolen at Mf'ers inc). Here are the currency pictures.
http://oahutrading.blogspot.com/2011/12/called-bucky-whoopin.html
Here is the new currency charts, 3 biggies
why MBI? there are 20000 other stocks.
'I remain completely convinced that we are far from the endgame in Europe and the ultimate solution will involve restructuring, debt forgiveness, and massive dilution at the banks.'
Debt forgiveness? Really Pete? Anyway, I'm sure that won't have unintended consequences should it happen which it won't. Another 'hugs instead of war' assumption that often costs people. Less naivete than your usual, so +1 for that.
Why is the world still trading stocks? The only people that seem to have any real skin in the game are the investing firms that need trillions and trillions of dollars in bail outs.
Whats the point of propping up a profit driven system with an unlimited budget?
Could it be they've run out of bullshit?
no, they just recycle shit over and over, it's legal :P
It's most legal in London. This is the City's economic strategy - they have a monopoly on bending illegal financial activity into legal financial activity.
Bombshell a go-go bitchezzzz. Its the latest craze. Everybodys doing it like the Loco motion
they give the masses the truth and then the masses can't handle it and beg for QE...........problem , reaction , solution....
Just received a snailmail from Blackrock, they informed me that my monthly return on my Ready Assets Trust was .0000000006 per share. Not really enough reward for the risk of breaking the buck.
Started a frantic search to see which of my brokerage accounts had a MM holding and closed the account. You can tell a broker to hold cash and not to invest in MM but their systems will override.
Blessed are the meek for they will inherit the earth. But will they stay meek?
Hey Gromit, I'm assuming your post was sarc but I wanted to post a straight up reply. MM are at risk of breaking the buck. Cash does not exist unless its in your hand. Otherwise its a book entry against a 20% reserve requirement at a bank i.e. a deposit. If this reserve is depleted in a bank run, then ostensibly FDIC is your backstop. Unless, that fails if 9 trillion in deposits go puff. So find a broker who has an FDIC insured MM. I believe there are several but one is Linsco Private Ledger. That would be the second best to holding physical cash. Now the real question is beyond short term liquidity why would you need/want cash... buy something >> bread, bullets etc., PM, land as you cash (store of value) position.
I will stay meek until I am not
No I'm in deadly earnest. Every broker I do business with has written instructions to maintain cash balances and not to "sweep" into MM.
After MFG even that isn't enough, gotta get all cash balances at brokers under FDIC at banks either too small to F up or too big to fail..
And the hell with supposed FDIC on MM at your broker. Wouldn't trust that either.
This article has very little to do with the truth.
The truth is that growth possibilities are dwindling rapidly. The truth is that the entire fiat based ponzi is predicated on growth. The truth is that growth has already been over promised and under delivered. The truth is that assets are over valued and pledged 40 times over for loans to make bets on hypothetical future growth. The truth is that if we remove the 'money' from the system and try to live on our 'assets', we are done. The truth is that the illusion of growth is just that, an ILLUSION! The truth is that wealth creation in resources and real assets is decreasing, which translates into negative growth regardless of the amount of fiat pumped into the system. The truth. What the hell do we know about truth? What the hell do we even care about the truth so long as our perceived standard of living increases year after year? That's the rub. Our standard of living is about to take a shit bath, and only then will we go searching for 'truth'. At which point, it wont matter - the truth just becomes a blame game.
Yea, yea we know.
But what most of us have been asking The Team from day one is; in your devinitive wisdom please define 'the timeline' which you stake your claim upon.
The devil's in the details.
From the article, "If nothing else, we have learned that the market has a “unique ability” to ignore problems if they aren’t immediate."
As long as you commit to believing in an illusion, it can last a very long time. Thousands of years sometimes.
For those who choose nnt to believe, the NDAA will help you to understand..
"Those who control the present control the past. And thoose who control the past control the future." - Orwell.
"The liberties of our country, the freedom of our civil Constitution, are worth defending at all hazards; and it is our duty to defend them against all attacks. We have received them as a fair inheritance from our worthy ancestors: they purchased them for us with toil and danger and expense of treasure and blood, and transmitted them to us with care and diligence. It will bring an everlasting mark of infamy on the present generation, enlightened as it is, if we should suffer them to be wrested from us by violence without a struggle, or to be cheated out of them by the artifices of false and designing men."
-- Samuel Adams
I think the truthfulness is coming from two directions.
First is the Germans who don't want to be the guarentors of last resort, like everyone is pushing them to be.
The second is the ECB. What needs to be remembered is that these are career bureaucrats. The last thing a bureaucrat wants is to lose his job. And the easiest way to lose your job is to do something stupid. But before you can do something stupid, you need to make a decision. And the way that I read the ECB is that they are trying to avoid making a decision - actually they are trying to aviod making any decision, like the black plague.
But if you notice the behavior of the French, they are acting emotionally - as alway, and rather irrationally. I still can't figure out why they would attack the UK knowing full well that they need the UK to pony up 30+b Euro into the IMF scheme.
And I dont' think it's good cop, bad cop routine :)
I agree it CYA time and every man for himself. Nobody wants to be a defendant at the Hague in a few years time.
Peter, really, all these plans and bullshit are planned by the politicians to suck in the bears. PLEASE, GIVE ME A FUCKING BREAK
THE MARKET MAKES THE NEWS, NEWS DOESN'T MAKE THE MARKET
I thought you would have known better Peter.
Cicero: "Mendaci neque quum vera dicit, creditur" (a liar is not to be believed even when he speaks the truth)
After planning this crisis for at least 2 centuries, the masters of the universe are not about to grant debt forgiveness, not after incrementally enslaving a majority of the world's population. They are so,so close to the ultimate totalitarian fiefdom.
To paraphrase: "printing by any other name is still printing". If you are not keeping score, the FED is already at QE 3.75, twisting and swapping in the wind.
they must know that something is about to break somewhere else, muni's prehaps and then the money flows back to europe as the least worse, japan? any bad news elsewhere gets them off the hook for a while, this market can only consentrate on one thing at a time
y
It sounds like that to me, also see the confidence game comment above.
Could it be that they will allow Greece to leave eurozone soon?
greece needs to leave....default and leave...or leave and default
the only real solution to the crisis is to dramatically reduce the debts (either honestly restructure or write-off or dishonestly inflate out of the debts)
The truth today is the bears are getting their lungs squeezed out through their a-holes
The truth for last 12 years is the bulls have been getting Raped with inflation and dollar devaluation.
yes, yes, yes, SP is at same levels as 12 years ago, wake up, it's not