Budget Deficit

Daily US Opening News And Market Re-Cap: April 4

More pain in Spain has been the theme so far in the European morning as poor auction results across three lines has resulted in significant widening in the 10-yr government bond yield spreads over benchmark bunds with the Spanish 10yr yield up some 24bps on the day. In combination with this the latest Germany Factory orders also fell short of analysts’ expectations and as such the lower open in bund futures following yesterday’s less than dovish FOMC minutes has been completed retracted and we now sit above last Friday’s high at 138.58.

Daily US Opening News And Market Re-Cap: April 3

European cash equities are trading in the red heading towards the US session, with particular underperformance in the periphery as financials continue to remain the biggest laggard. The EU session so far has consisted of downbeat commentary in regards to both Ireland and Portugal. An EU/ECB report noted that, Portuguese debt is now predicted to peak at 115% of GDP in 2013 and that contraction in 2012 is likely more pronounced than thought. Elsewhere, the Irish Fiscal panel said Ireland may need extra budget cuts to reach its 2012 target and 2012 growth has weakened. In terms of economic releases the UK observed a stronger than expected reading on its Construction PMI hitting a 21-month high, which saw some brief strength in GBP.

10 'Facts' That Should Worry Europe's Equity 'Fiction'

As the first day of the quarter brings new money and new hope for global asset allocators, Credit Suisse has shifted to a more negative 'underweight' stance to European equities. Laying out 10 reasons for their displeasure, they dig into the details a little with a positive view on domestic German equities and the broad DAX index (and USD earners) while notably negative on France and Spain in general (with Spain expected to underperform Italy). Varying from too much complacency on the resolution to the crisis, to political flash points, valuations, and relative economic momentum. This smorgasbord of anxiety-inducing 'facts' may well prove enough to topple the 'fiction' of a liquidity-levitated equity market - that credit seems to have already realized. Most notably the five factors that need to be 'fixed' before the Euro crisis is resolved, and the under-estimation of the de-leveraging required in the periphery, leaves mutualization of debt as the game-changer that still seems a long-way off. The complacency angle seems the most relevant to us - and we see equities once again pull away from any sense of reason indicated by the sovereign, financial, and corporate credit market, this complacency becomes more and more dangerous.

Daily US Opening News And Market Re-Cap: April 2

European cash equities are seen mixed as the market heads into the US session, with the DAX index the only bourse to trade higher at the midpoint of the European session. European markets were seeing some gains following the open after the weekend release of better than expected Chinese manufacturing data, however the main price action of the day occurred after some European press reports that the Bundesbank had stopped accepting sovereign bonds as collateral from Portugal, Ireland and Greece garnered attention, however the Bundesbank were quick to deny reports and state that it continues to accept all Eurozone sovereign bonds. Following the denial, participants witnessed a slight bounceback, but failed to push most markets into the green.  Data releases from Europe so far have been varied, with outperformance seen in the UK Manufacturing PMI, beating expectations and recording its highest reading since May of 2011. However, the French manufacturing PMI came in below expectations, weighing on the CAC index as the session progresses. A further release from the Eurozone has shown February unemployment coming in alongside expectations recording a slight increase from January to 10.8%.

Frontrunning: March 30

  • Greek PM does not rule out new bailout package (Reuters)
  • Euro zone agrees temporary boost to rescue capacity (Reuters)
  • Madrid Commits to Reforms Despite Strike (FT)
  • China PBOC: To Keep Reasonable Social Financing, Prudent Monetary Policy In 2012 (WSJ)
  • Germany Launches Strategy to Counter ECB Largesse (Telegraph)
  • Iran Sanctions Fuel 'Junk for Oil' Barter With China, India (Bloomberg)
  • BRICS Nations Threaten IMF Funding (FT)
  • Bernanke Optimistic on Long-Term Economic Growth (AP)

Spanish Bond Yields - Who's A "Natural" Buyer Of The 10 Year

There are relatively few natural buyers of Spanish long dated bonds here. Fast money is likely caught long, and it will take a potentially reluctant ECB and some already overly exposed Spanish institutions to step up and stop the slide. It may happen, but many of the policies that “bailed out” Greece created very bad precedents for bondholders, and some of those are coming home to roost, as is the understanding that LTRO ensures that banks can access liquidity, but does nothing to fix any problem at the sovereign level.

The Sesame Street Jobs 'Recovery'

After deconstructing the labor report for signs of false positives, Michael Cembalest of JPMorgan, sees muddle-through data in the US as sustaining a below trend growth rate - noting his belief that the US economy would not withstand a withdrawal of stimulus (read promise of liqudity to come) right now. While not as ebulient as many on the street, the JPM CIO sees a US job market that is gradually getting better - as is spending. However, what keeps him up at night is the budget deficit (as we noted very specifically last night). Critically, jobless claims have just crossed a threshold that in the past has signaled risk-on is primed to pay-off as the business cycle becomes self-sustaining but at the same time, the budget deficit is at massively 'different-this-time' levels. As he notes: "But as Big Bird used to say, one of these things is not like the other: the US primary budget deficit which supports this recovery is a bigger now", and so the US economy had better improve markedly in order to merely 'pay-the-freight'. "I lose a lot of sleep over this, but I don’t know a lot of other people that do."

Will Apple Announce "The Dividend" Tomorrow?

Minutes ago Apple announced that first thing tomorrow it will "host a conference call to announce the outcome of the Company’s discussions concerning its cash balance. Apple® will not be providing an update on the current quarter nor will any topics be discussed other than cash." As a reminder, Apple has just about 100 billion in cash. Everyone expects a dividend. So what happens when everyone finally gets what they have been expecting for so long? Will it mean the end of the growth phase and the advent of the "MSFT" anti-growth curve? Also, which bank will claim the commission for advising Apple on how to spend a cash amount that while nearly a third of Greek GDP, is less than half of the US February budget deficit (in other words, Apple could fund just 12 days of the US spending burn rate in February)? Finally, was the pre-election administration at all involved in the making of this decision - remember the company was expected to announce a cash-related decision a month ago, and nothing happened. Why now? All shall be revealed tomorrow at 9 am.

"Welfare" - The Great Delusion

We have long argued that at its core, modern society, at least on a mathematical basis - the one which ultimately trumps hopium every single time - is fatally flawed due to the existence, and implementation, of the concept of modern "welfare" - an idea spawned by Otto von Bismarck in the 1870s, and since enveloped the globe in various forms of transfer payments which provide the illusion of a social safety net, dangles the carrot of pension, health, and retirement benefits, and in turn converts society into a collage of blank faces, calm as Hindu cows. Alas, the cows will promptly become enraged bulls once they realize that all that has been promised to them in exchange for their docility and complacency has... well... vaporized. It is at that point that the final comprehension would dawn, that instead of a Welfare State, it has been, as Bill Buckler terms it, a Hardship State all along. Below we present the latest views from the captain of The Privateer on what the insoluble dilemma of the welfare state is, and what the key problems that the status quo will face with its attempts at perpetuating this lie.

Will Hungary Be The Next Iceland? PM Orban: "Hungarians Will Not Live As Foreigners Dictate"

When it comes to being a NWO debt slave, one can accept their fate demurely and bent over, like a conditionally habituated dog electroshocked into perpetual submission just as the banker elites like it, with threats that the world would end the second one dared to change the status quo (see Greece), or one can do something about being a debt slave. Like Iceland. And then rapidly proceed to be the best performing economy in Europe. And reading some of the latest news out of Hungary, which has to count its lucky stars is not stuck in the inflexible nightmare that is the mercantilist Eurocurrency union, gives us hope that we may soon witness the next sovereign rebellion against the banker yoke. The WSJ reports: "Hungary's premier fired a new broadside in the country's running battle of wills with the European Union, saying that Hungarians should be free to make their own laws without interference from Brussels.  Speaking to a large crowd of supporters celebrating the anniversary of a 19th-century Hungarian revolt against Austrian rule, Prime Minister Viktor Orban said: "Hungarians will not live as foreigners dictate." This has promptly generated the anticipated response from European unelected dictator Barroso, who minutes ago said that Hungary's Orban doesn't get democracy. Oh, we think he does. What he doesn't seem to get, or like, is existence in a banker-governed technocratic, klepto-fascist state, in which the peasantry is merely an intermediary vessel for asset confiscation by insolvent banks. Like Greece... which however already is the butt of all jokes of personal submission to a foreign oppressor, so there is no dignity in kicking a dog that is down.

Fitch Revises UK Outlook To Negative From Stable, Keeps Country At AAA

In keeping with the tradition of waking up to reality with a several month delay on downgrades (if being the first to upgrade insolvent Eurozone members), here comes Fitch, to boldly go where Moody's went long ago.

  • UNITED KINGDOM L-T IDR OUTLOOK TO NEGATIVE FROM STABLE BY FITCH
  • FITCH AFFS UNITED KINGDOM AT 'AAA'; REVISES OUTLOOK TO NEGATIVE

As a reminder, UK consolidated debt/GDP is... oh... ~1000%

CBO Hikes 2012 Budget Deficit Forecast By $97 Billion In One Month, Sees $1.17 Trillion In Funding Shortfall

What a difference a month makes: back on February 7, the CBO released its first forecast for the 2012 budget deficit. The number then? $1.08 trillion. Just over a month later, the CBO has released its amended budget deficit. The bottom line this time around: an increase of just under $100 billion, or $1.171 trillion. Since this number is still about $150 billion less than the President's own scoring, or $1.33 trillion, expect even more revisions. And why not: this is simply debt that nobody will ever repay, and in exchange the money, which is finally flowing through the bottom line at least to the banks (JPM shareholders thank the US Treasury) will proceed to pad if not the middle class, then certainly banker bonuses.But not all is bad news: by 2022, the CBO, which has a pristine track record of predicting one decade into the future, sees a $186 billion reduction in total deficits compared to January. Let's not forget that b then Greece will have negative debt/GDP ratio.