Nielsen

Modern Portfolio Theory (MPT) is broken. That is how we interpret Niels Jensen's (Absolute Return Partners) latest missive as he draws a concerning line between the number of managers who rely sheep-like on the diversifying 'artifacts' of MPT in a new normal world of undiversifiable systemic risks. The shifts in intra- and inter-asset class correlations (both long- and short-term) have been incredible both in terms of direction change and magnitude - for example (as Nielsen notes) - In the 2000-03 bear market commodities were an excellent diversifier against equity market risk with the two asset classes being virtually uncorrelated (+0.05). Nowadays, the two are highly correlated (+0.69). This shift to a risk-on / risk-off world, fed by central bankers, makes the empirical Sharpe ratios of olde and track records of your favorite balanced-fund manager entirely useless for any investor seeking protection from not just volatility risk but ultimate risk - the permanent loss of capital.

• Bundesbank’s Weidmann Says ECB Shouldn’t Overstep Mandate (Bloomberg)
• Hollande and Monti Vow to Protect Euro (FT) - be begging Germany to death
• Monti Calls French, Finns to Action as Italy Yields Rises (Bloomberg)
• not working though: Banking license for bailout fund is wrong: German Economy Minister (Reuters)
• Switzerland is ‘New China’ in Currencies (FT)
• Regulator Says no to Obama Mortgage Write-Down Plan (Reuters) - tough: there will be socialism
• Gauging the Triggers to Fed Action (WSJ)
• When domestic monetization is not enough: Azumi Spurns Calls for Bank of Japan to Buy Foreign Bonds to Curb Yen (NYT)
• Indonesia’s July Inflation Accelerates on Higher Food Prices (Bloomberg) - remember: the Deep Fried black swan
• China Manufacturing Teeters Close to Contraction (Bloomberg)
• Spain Introduces Regional Debt Ceilings to Achieve Budget Goals (Bloomberg) - yes, they said "budget goals"

In the past 24 hours, some readers have been surprised to learn that as Jeff Reeves of InvestorPlace states, total Q2 CNBC viewership as calculated by Nielsen, has tumbled to to the lowest it has been since Q3 2005. This merely confirms that the trendline in our periodic observations of CNBC traffic was more than merely seasonal or VIX-related: it has been one long secular decline, peaking in the quarter of Lehman's demise and down hill ever since.

Something funny happened when last August CNBC hired access journalist extraordinaire Andrew Sorkin to spiff up its 6-9 am block also known as Squawk Box: nothing. At least, nothing from a secular viewership basis, because while the block saw a brief pick up in viewership driven by the concurrent (first of many) US debt ceiling crisis and rating downgrade, it has been a downhill slide ever since. In fact, as the chart below shows, the Nielsen rating for the show's core 25-54 demo just slid to multi-year lows. And as NY Daily News, the seemingly ceaseless slide has forced CNBC to start panicking: "CNBC insiders tell us executives at the cable business channel are “freaking out” because viewership levels are down essentially across-the-board, particularly with its marquee shows, “Squawk Box” and “Closing Bell." “Their biggest attractions have become their biggest losers,” says one TV industry insider familiar with the cable channel’s numbers. According to Nielsen ratings obtained by Gatecrasher, from April 2011 to April 2012, “Squawk Box” is down 16 percent in total viewers and 29 percent in the important 25-54 demographic bracket that advertisers buy." Yet is it really fair to blame the slide of the morning block's show on just one man?

Over the past several months, starting with the great US stock market surge back in October 2011 which was not paralleled by virtually any other index in the world (and especially not Spain which recently breached its March 2009 low), there has been a great deal of speculation that just because the US stock market was doing "better", that the US economy has by implication "decoupled" from Europe. Well, as yesterday's GDP number showed in Q1 the economy ended up rising at a pace that was quite disappointing, but more importantly, which even Goldman admits is due for a substantial slow down in the coming months. And ironically, in the past 6 months it was not the Fed, but the ECB, that injected over $1.3 trillion in the banking system. One would think that this epic "flow" of liquidity from the central bank would result in a surge in the only metric that matters to 'Austrians', namely the expansion in money (or in this case the widest metric officially tracked on an apples to apples basis - M2). One would be very wrong. Because as the chart below shows, while US M2 has soared from the 2009 troughs, money "movement" in Europe has barely budged at all.

• There is no Spanish siesta for the eurozone (FT)
• Greece over halfway to recovery, says PM (FT) - inspired comedy...
• Sarkozy Trims Gap With Rival, Polls Show (WSJ) - Diebold speaks again
• IMF’s Zhu Sees ‘Soft-Landing’ Even as Property Slides: Economy (Bloomberg)
• Obama Uses Lincoln to Needle Republicans Battling in Illinois (Bloomberg)
• Three shot dead outside Jewish school in France (Reuters)
• Osborne Seeks to End 50% Tax Spat With Pledge to Aid U.K. Poor (Bloomberg)
• Monti to Meet Labor Unions Amid Warning of Continued Euro Crisis (Bloomberg)

Markets appear to be tentatively recovering some of yesterday’s heavy losses, recording modest gains so far this morning. Comments made overnight by the German finance minister as well as senior officials from the Greek finance ministry may have mercifully given market participants some hope as they are confident the Greek PSI deal will be completed by the deadline tomorrow evening. The DAX index has underperformed the other European equity indices in recent trade following the release of some disappointing factory orders data for January, with markets expecting an expansion of 0.6%, however the reading came in at -2.7%, moving DAX stock futures into negative territory. WTI crude and Brent have also retraced some of their losses made earlier in the week following a drawdown in US gasoline inventories reported last night as well as a generally weak USD index in the FX markets today. Markets are awaiting US ADP employment change later in the session, as well as the weekly DOE oil inventories casting further light on the US energy stocks.

A week ago we presented an excerpt from Credit Suisse's most excellent piece "The Flaw" - merely the latest in one of the best overviews of the neverending Greek soap opera by William Porter. Yet every soap opera eventually ends. Although when it comes to Nielsen ratings, the denouement is usually a whimper. In the case of Greece, it will be anything but. Yet listening to the daily cacafony of din from Europe's leaders, who are likely more clueless than the average reader as to what is really going on, one may be left with the impression that there is a simple solution to the problem, and Greece may be "saved... in hours." It can't. In fact, as of today, Porter's s conclusion is: "we are left with a sense that the probability of delivering the largest default loss in history in a disorderly way on or before 20 March has increased relative to doing so in an orderly way."

As of Q3 2011, the citizens of less than 20% of the countries involved in Nielsen's Global Consumer Confidence, Concerns, and Spending Intentions Survey were on average confident in their future economic confidence. Not surprisingly, Nic Colas of ConvergEx points out, six were in Asia, the least confident were in Eastern and Peripheral European nations, and furthermore overall global consumer confidence remains 9.3% below 2H 2006 (and 6.4% below Q4 2010) readings as the global economy still has a long way to get its 'mojo' back. Colas points to the fact that 'confidence is an essential lubricant of any capitalist-based system' and one of the key challenges that worst hit Europe (and other regions and nations) face is capital markets that are assessing the long shadow of the Financial Crisis of 2007-2008 and the ongoing European sovereign debt crisis impact on the world's Consumer Confidence.

It has been a busy weekend for Wall Street, which has been doing all it can to spin the S&P downgrade in the best favorable light, although judging by the initial EURUSD and EURJPY reaction, so far not succeeding. Below we present a quick report written by Goldman's Lasse Nielsen on why in Goldman's view the downgrade's "impact is likely to be limited" and also the quick notes from an impromptu call MS organized for institutional clients (which had just two questions in the Q&A section, of which only one was answered - it appears virtually noboby believes that global moral hazard will allow anyone to fail at this point, so why bother even going out of bed).

No surprise in the only economic indicator of the day: The September National Association of Home Builders/Wells Fargo Housing Market Index declined from 15 to 14, missing expectations of an unchanged print, and at a 3 month low, although as the chart below shows, it is really just humming along the generational bottom with no threat of increasing any time in the near future. As the report demonstrates, sentiment was worse in 3 out of 4 regions, in Northeast at 15 vs August’s 17, in the West at 12 vs 15, and in the South at 15 vs 17; in Midwest 11 vs 10. That said, we are confident this will surge shortly, as soon as the President announces details of his plan to tax millionaires, which assuming we have hyperinflation shortly (remember: that debt won't inflate itself) means pretty much everyone.

According to the Handelsblatt, while the majority of the members of the ECB's shadow council - an unofficial panel, independent of the ECB/Eurosystem, and comprising fifteen prominent European economists drawn from academia, financial institutions, consultancies, companies and research institute - supported an unchanged policy the bias is increasingly shifting to one of easing. This comes on the heels of Trichet's idiotic decision, just like in 2008, to start hiking rates in several months ago (ridiculed extensively on these pages and elsewhere) which not only ended up costing Europe its common currency much faster than had it merely kicked the can down the road, but could very well be the last bad decision by the ECB: should Greece be kicked out of the Eurozone as a result of this decision, the ECB is over. It is therefore not surprising that not only is the shadow council scrambling to undo 5 months of bad decision making by the ECB, but the bankers on the council, particularly RBS, PIMCO, RBS (RIP by the way), Barclays and Tudor and HSBC are either expressing an easing bias or outright pushing for a 50 bps cut. Alas, this is too little too late. And the irony is that once the Fed proceeds with QE3, and commodities surge again, the ECB will really be helpless as the continent's core redlines even as the Periphery remains terminally insolvent (ignoring for a minute the inflationary elephant in the room that is China). So will Trichet disgrace his already discredited central banker career by pushing a rate cut before he is swept out of the corner office by Mario Draghi, or will the former Goldmanite Italian become the most hated man in Germany soon, after he proceeds to ease, even as Germany still experiences Chinese inflationary re-exports. The answer will be all too clear in just a few months.

Two and a half years after consistently and methodically exposing one conspiracy after another (and by the way, once it is proven to be a fact, it is no longer a conspiracy), we were stunned to find that the biggest conspiracy theory is none other than... Zero Hedge. "Zero Hedge, for example, is one that lots of hedge funds look at, lots of money managers look at, and the guy that runs it has their ear. Now I'm not saying that he is not doing his own proprietary work, but, people like to plant stories in there. [cue ominous silence]." TA DUN DUN. Gee - one does learn something new every day. Also, to anyone who still doesn't get it, please send your dodecatuple secret "plant" stories to plant@zerohedge[.]com along with your non-refundable payment made in physical gold Zimbabwean dollars, to be delivered to our paper street headquarters. We certainly would prefer it if the drop man is Bank of America's James Mahoney.

• Debt talks begin critical phase (Reuters)
• Obama and Boehner Advance Toward Deal to Cut Deficit  (WSJ)
• Democrats Balk at Potential U.S. Debt-Limit Deal (Bloomberg)
• Debt Ceiling Uncertainty Puts States at Risk (NYT)
• Chinese manufacturing set to contract (FT)
• Questions on Holdings at the Fed (WSJ)
• China Banking Regulator Steps Up Risk Controls on Local Government Loans (Bloomberg)
• IEA calls halt to emergency oil release (FT)
• EU leaders agree €109bn Greek bail-out (FT)
• EU May Accept Greek Default as Crisis Fight Intensifies (Bloomberg)
• The Lesser Depression (Krugman)
• Barnier seeks to soothe UK over banks (FT)

All news by www.thetrader.se