The Austrian central bank keeps most of its 280 metric tons of gold reserves in the United Kingdom, Vice Governor Wolfgang Duchatczek was quoted as saying in the finance committee of the country’s parliament today, according to Bloomberg. Answering lawmakers’ questions, Duchatczek said 80%, or 224.4 metric tons of the metal was stored in the U.K., 17% or 48.7 metric tons in Austria and 3% in Switzerland, according to a summary of a closed-door committee meeting provided by the parliament. The reserve has been unchanged since 2007, Duchatczek was quoted as saying. The central bank has earned 300 million euros ($385 million) over the last ten years by lending the gold, he said.
With America shut for Thanksgiving today, what was going to be an abysmal volume day, coupled with the usual any news is good news levitation following the lowest volume day of the year, will be even worse. Sure enough, the overnight session started off with a bang, when in the vacuum of night, a lift everything algo sent the EURUSD soaring by 40 pips higher on no news. With the entire risk complex firmly anchored to the EURUSD pair as the key driver, it pushed risk across the entire market well higher to set the early session mood with the very first trade. Followed light trading and a gradual drift lower which could not be offset even with a China HSBC Flash PMI print of 50.4, up from 49.5 in October, and the first 50+ print in 13 month (to accompany the new political regime: after all, the US is not the only nation where economic data mysteriouly levitate with key political events). This continued until about Europe open, when the monthly release of European PMIs came out, which once again were confusing to say the least with France posting the biggest and most surprising pick up, after its Manufacturing PMI rose from 43.7 to 44.7, on expectations of 44.0, while the Services PMI increased from 44.6 to 46.1, well above the expected 45.0 print. Germany was less exuberant with manufacturing rising from 45.5 to 46.2, although the Services PMI dropped from 48.4 to 48.0, missing expectations of 48.3, sending the series to its lowest in 41 months.
Don't fry my twinkie. Might be dangerous, like turkey.
Happy Thanksgiving all, from Banzai7 Labs!
Green shoots, growth off a small base, and self-reported awesomeness notwithstanding, the crux of many investors' thesis for believing in a housing recovery is the fact that homebuilder stocks have risen so magnificently; after all the stock market is a 'discounting mechanism' right? (aside from September 2000 and October 2007) The funny thing is - we've seen this kind of 'rally' in homebuilder stocks before, and somewhat remarkably we are following its trajectory almost to the day. 284-days from the March 2009 trough, XHB (the homebuilder ETF) peaked and then lost 30% in the next 45 days. Today marked Day-285 of the current homebuilder rally (coincidentally running at around the same 120% annualized return and exhibiting similar short-squeeze tendencies). Add to that worrying analog, the third divergence between homeowner 'comfort' and renter 'comfort this year - each prior time ending in a rapid collapse in homeowner confidence; and we remain skeptical that the 'market' knows best in this case.
The Telegraph reports that George Osborne thinks big banks are good for society. Why would Osborne want to see more of something which requires government bailouts to subsist? Because that is the reality of a large, interconnective banking system filled with large, powerful interconnected banks. Under a free market system (i.e. no bailouts) the brutal liquidation resulting from the crash of a too-big-to-fail megabank would serve as a warning sign. Large interconnective banks would be tarnished as a risky counterparty. In the system we have (and the system Japan has lived with for the last twenty years) bailouts prevent liquidation, there are no real disincentives (after all capitalism without failure is like religion without sin — it doesn’t work), and the bailed-out too-big-to-fail banks become liquidity sucking zombies hooked on bailouts and injections.
“Ban” in the San Francisco sense....
When it comes to government bailout case studies, the past four years have plenty. One among them is the financial company jovially called Ally - a name which well-paid nomenclature consultants were convinced would inspire confidence and trust. And to an extent they were right - after all we are talking about a firm which several years ago had a far more unpleasant name: GMAC, short for General Motors Acceptance Corporation. It was GMAC which, as one of the various entities on the receiving end of involuntary taxpayer generosity in 2008/2009, received a $17.2 billion bailout. The reason for GMAC's Ally's collapse is that the firm was loaded up to the gills on various subprime and other NINJA auto-financing loans used to purchase cars made by that other spectacular collapse: General Motors, maker of such external combustion vehicles as the Chevy Volt. Over the past several months the Ally CEO, Michael Carpenter, decided to little by little start paying taxpayers back, having sold a Canadian unit to RBC in October for $4.1 billion, and its Mexican Insurance business to Ace Ltd for $865 million. Moments ago the firm just announced it would be selling its international auto-finance businesses, including its operations in Europe, LatAm and a 40% stake in its Chinese JV (a business it previously said it would not seek to divest), for a total of $4.2 billion. The buyer? Another previously bailed out company, and one which still counts the government as its biggest shareholder: General Motors. And so the vendor financing circle is now complete, with GM finally reuniting with its old captive finance units, or at least the international part of them, which were fully owned until GM sold 51% of it to Cerberus in 2006, after which everything went to hell.
2012 was a tough year for some European government bond markets (Spain +100bps). Even with the rallies of the last few months, we remain dramatically wider than at the beginning and primary issuance is becoming increasingly reliant upon domestic bank reacharounds and/or ECB handouts. UBS expects 2013 to be similar in terms of gross supply to 2012 (around EUR 772bn) and aggregate net supply to fall slightly to EUR 208bn. However, these modest improvements overall (driven by drops in France, Germany, and Holland gross issuance) hide the biggest concern. Spain's gross (and net) issuance is likely to rise to EUR 124bn in 2013 (up 20% over 2012!) and Italy's net supply will rise notably next year (even with significant redemptions). Portugal, also faces a very significant increase in net supply in 2013.
Occasionally history repeats. Sometimes history rhymes. Just One Year Ago, the market world was saved... Happy Thanksgiving (and Hope-taking)
S&P 500 futures saw the lowest non-holiday trading day volume of the year and the lowest average trade size of the year also but capped a four-day win streak (biggest in four months) with small gain. The overnight plunge in futures (on EUR weakness following the Greek #Fail) was entirely retraced - slowly but surely but once Europe closed, the US was dead. Treasury weakness and EUR strength (JPY weakness) were the correlated drivers of equity exuberance today, oil flip-flopped in its non-believing 'cease-fire' way (recoupling with gold on the week); Silver surged; and credit tended to track stocks but HY modestly outperformed (though HYG closed red). VIX traded with a 14 handle briefly but ended +0.3 vols at 15.4%. Stocks (especially the big bellwethers) tracked VWAP all afternoon as all but Johnny-5 had left the building. HP Bonds cracked, AAPL green, SPY green, HYG red, VXX green, volume negligible - that is all.
Massive Social Media War
- HOSTESS JUDGE APPROVES MOTION TO WIND DOWN COMPANY
- HOSTESS WINS APPROVAL TO CLOSE AND BEGIN SELLING ASSETS
Next up: the Twinkie economy.
For anyone interested, here is the presentation that Autonomy and its infamous banker, Frank Quattrone (currently of Qatalyst - a bank best known for "borrowing" the templates and stylesheets of the investment banks its current employees previously worked at - and previously of "extended Wall Street sabbatical" which was cancelled so he would bring such quality deals as the sale of Palm to HPQ and, of course, Autonomy to HPQ) used to pitch Autonomy to Oracle, which led to a less than hospitable response by multi-billionaire Larry Ellison.