You can't say I didn't tell you it was gonna happen! At this point, anyone who doubts the onslaught of Android is in sheer denial. My last post on Wikileaks highlighted the possibilities truly distributed computing such as Android promises in the form of making it virtually impossible to censor any type of web site or publication, ex. Wikileaks. Keep in mind such a feat would be quite difficult with iPhones.
...Just live in Spain. With millions of Option ARM mortgages still coming due in the next two years in the US, the Fed's ongoing push to drop mortgage rates has only made the problem worse, and instead of people refinancing out of adjustable rate mortgages into fixed, with the opportunity cost being so little, if any, the whammy of rising interest rates on home values upon Option ARM expiration will only exacerbate the triple dip in home prices once the ARM cliff hits some time in 2012/2013. Yet it seems that this final recourse to extend and pretend the housing bubble is only now coming (a tad too little too late) to those European countries which are already bankrupt and will do anything and everything to prevent reality from appearing. Behold the BBK Euribor+0.35% 5 Year Option ARM 50 year mortgage with an LTV of up to 100% (but only if you can be enslaved early on: the mortgage is only open for people 18-35). And just in case you can't actually afford Euribor+ 0.35%, that's factored in too: you have the option of not paying for years.
A Look At The Upcoming Week's European Events, Straight From The Establishment Propaganda Horse's MouthSubmitted by Tyler Durden on 12/05/2010 11:16 -0500
Goldman's Erik Nielsen looks at the immediate European future, is flummoxed by all the end of world calls (bank runs, Ireland rejecting budget, austerity riots everywhere), and sees a future so bright he just has to wear the kind of shades that only a multi-million dollar bonus can buy (especially after Goldman upgrades all banks and its own bonuses by about 10%). After all his colleague Hatzius, despite all the facts and data, just upgraded US GDP. It now appears that just like Moody's 5 years ago, Goldman's excel spreadsheets crash when one input a negative growth assumption. Arguably these are the same spreadsheets that Tim Geithner used to prepare his taxes.
In a sad twist of fate for Comcast, its recent business channel acquisition, which numerous independent reports have alleged has become nothing but a prattling brown-nosing drone for the administration, spewing forth an endless barrage of mindnumbing propaganda, is seeing an ever increasing plunge in its viewership (which arguably validates said independent reports) which in November dropped to 47 in the demo, a 36% slide from a year earlier. Nowhere is this more obvious than in what's left of the audience of the original CNBC icon: Maria Bartiromo. The once jet-setting, and now merely setting money honey, whose Closing Bell slot starts at 4PM, has stooped to having the dubious reputation of being in possession of the weakest 25-54 demo among all of CNBC's November viewership, at just 41K per Nielsen's, a massive 51% drop from November 2009, and a 11% drop from October, it seems CNBC's ever sparser viewers have decided that even icons have a useful shelf life. But that's ok: we are confident that once the next round of CNBC "business rationalizations" takes place shortly once the NBC Universal transaction formally closes, the $ Honey will be able to fall back on the proceeds from her latest bestseller: "The Weekend That Changed Wall Street: An Eyewitness Account", which since publication on September 7, has blitzed almost to top of the charts and currently languishes in the much coveted spot #10,655 of bestsellers.
It's time for a shirt: "Irish bondholders got a bailout and all the EURUSD managed was a measly 35 pips higher." It seems the currency vigilantes are calling the bluff in JC Trichet, and tomorrow Portuguese bonds will be next on the bidless brigade, further validating that the IMF's, just like the Fed's, primary mandate is to rescue insolvent bankers everywhere there is a taxpayer population that can be raped. But back to the EUR: at last check the currency was trading well inside 1.33, and only about 2.2k pips from Thomas Stolper's 12 month target of 1.55. Not to begrudge anything to Tom: after all, post QE4 he will certainly be spot on (the only question is how long it take Blackhawk Ben to get us there), but we wonder if another Goldman luminary got the memo. To wit: in an interview with the Telegraph, Jim "BRIC" O'Neill told Kamal Ahmad that "the eurozone must embark on a significant round of fiscal and political harmonisation if the euro is to survive...there are elements of the black swan concept that seem rather applicable
to the EMU story" and if that wasn't clear enough, he added that the "euro should carry a "risk premium" and that it was over-valued by at least 10pc." Bottom line, according to O'Neill the "fair value for the euro is €1.20 against the dollar and anyone buying it 10pc above that is not very sensible." Uh.... What? Did Wikileaks intercept the memo from Thomas Stolper sent out just this November 25, in which the chief currency strategist said: "Overall, we believe the EUR/$ remains very much on track for the projected trajectory of 1.40 in 3mths as well as 1.50 and 1.55 in 6 and 12 months." And like that, Goldman has all bases covered. Of course, seeing how the outcome is binary, Goldman has just discovered the Schrodinger currency: per the bank that rules the world, the euro is now both alive and dead at the same time.
Goldman's Thomas Stolper joins Erik Nielsen with an updated, and painfully bullish, Euro forecast: "our baseline is that these risks will not escalate much further." As Stolper is the guy who has successfully top.ticked.every.single.move in FX, it is time to call the undertaker (the profit margins on a coffin the size of Europe will be sufficiently high no matter the input cost of lumber). Not surprisingly then Stolper follows up: "we believe EUR/$ remains very much on track for the projected trajectory of 1.40 in 3mths as well as 1.50 and 1.55 in 6 and 12 months." Recall that Stolper came out with his upward revised EURUSD forecast just before the pair topped out in the low 1.40s (which was shortly after he scrapped his 1.15 target just after the eurozone stopped its implosion last time around after the Stress Test lie and QE2 rumors started). In other words, we just doubled down on our bet that John Taylor is once again spot on. What is unsaid here is that Goldman expects the world to start pricing in QE3 imminently, and punish the USD: "one question we face very often is about the viability of Eurozone
growth with EUR/$ at 1.55. Our answer is that we really believe in broad
USD weakness." At the end of the day, as we have claimed for over a year, the key dynamic is between the race of USD and EUR to devaluation: on one hand via outright currency printing and on the other via a continental disintegration. The one thing that many are forgetting, is that the faster a European crisis unwinds, the bigger the European banks' funding needs for dollars due to record FX asset-liability mismatch (and now, due to the dollar serving as a carry funding currency). In other words, the worse Europe gets, the doubly-faster that the Fed will need to print reserves to keep the dollar low. All that is a long-winded way to say that we anticipate Stolper will revise his EURUSD forecast lower within a month, once Goldman's ex-prop-now-"client facing" desks have accumulated enough USD positions.
Goldman's Erin Nielsen is early in his weekly outlook report which however will not catch anyone by surprise. Somehow the Goldman strategist looks at recent economic data coming out of Europe, which even CMA said was indicative of a start of a double dip, and calls these "great macro numbers" - this kind of stunning subjectivity used to get analysts fired in the past; now it gets you promoted to partner; oh well, you can get the man out of the bias but you can never get the bias out of the man and all that. Furthermore, despite Germany making it expressly clear than any future bailouts will hinge on restructuring, Nielsen is adamant that this too is a misread: " I strongly disagree with some of the aspects of what has been reported in the press today as being the German proposal, particularly as it relates to making a future rescue conditional upon debt restructuring." Well, Erik, there is the German people, and there is your opinion. q.e.d. The balance of the note is filled with the same traditional permabullish fluff, which would have forced those who followed Nielsen's always rosy advice to incur irreparable P&L damage. But since the man has a verbiage quota to fill (regardless of content quality), and skeptics to amuse, we are confident he will have a long and prosperous career at Goldman. In the spirit of thanksgiving: we thank you Erik for providing countless hours of naive amusement.
Erin Gone Broken Bank: The 2nd EMU Nation That Didn’t Need a Bailout Get’s Bailed Out Within Months, Next Up???Submitted by Reggie Middleton on 11/22/2010 08:24 -0500
Exactly was we predicted in the beginning of the year, Ireland is the 2nd Euro nation that didn't need a bailout to get bailed out! Now that some may start taking this seriously, I go through a quick history of how we got to this point and prep for an intense analysis of how the contagion will unfold, how ugly the haircuts (that nobody needs, of course) will get, and who may be the next domino to fall.
After Greek CDS went offerless, and is about to pass 1,000 bps following news of Austria's defection from the EU rescue fund over Greece's endless lies, now we get the next defector: Finland, who it appears is opposing an Irish rescue. This is not too odd, since Finland actually has a viable banking system whose viability does not depend on the generosity of Irish and European taxpayers. What this means, however, is that European unity is finally coming apart at the seams.
We don't care (from an investor standpoint) IF the game is rigged, as long as we understand HOW it's rigged so we can play along at home.
Who would have thought it only takes for PIIGS spreads to go back to all time records, and for Ireland and Portugal to be hours away from joining Greece in the bailout corner, for Goldman's Erik Nielsen to turn bearish again. To wit: "if investors are running for the door out of fear of being the last one left behind, then there’ll be a liquidity crisis (as there would be for anyone with a financing need), and they’ll need help." Way to stay ahead of the curve Erik. The problem is that while the economic reality below the surface cracks and collapses, investors are largely ignoring the perpetual words of optimism from Europe's politicians, and sellside cheerleaders (which begs the question - is it time to take this Goldman acknowledgment of reality as a buying opportunity?). What happened in Greece may have been brushed under the carpet for a few months, but the policy response there, which is identical to what is happening in Ireland and Portgula now, i.e., blatant lies, has left those holding relevant securities with a bitter taste in the mouth. And now, unlike before, the possibility of holder haircuts is distinctly on the table. Which is why we expect that before the Asian open, there well may be some key news out of Ireland (and/or Portugal)- no matter how much Nielsen believes that Ireland is not in a solvency crisis, with Bund spreads in the 700 range, no matter how much prefunding the government has, it will be irrelevant and will create yet another toxic debt spiral. The biggest threat is not so much to Ireland, which supposedly has its cash needs met through mid 2011, but contagion hitting other European countries, which do have solvency issues, yet have been spared the liquidity hammer so far. And with Italy CDS also hitting record highs, look for the core to start crumbling as everyone, especially Chiswick's perpetual optimist, to appreciate the gorgeous mushroom cloud over the European periphery.
Goldman Calls For Bail Out Of Portugal And Ireland So Everyone Can Go Back To Buying Amazon And EbaySubmitted by Tyler Durden on 11/10/2010 09:47 -0500
The more things are bankrupt, the more things stay the same. Evidence #1: Goldman's FUG (Francesco U. Garzarelli) sends a letter to clients in which he implies that Europe should promptly add Portugal and Ireland to its list of wards of the state, so that the Dow can go back to targeting 36,000 on short notice. Apparently this latest European nuisance (punctuated by the Irish Bund spread passing 600 bps) is too much for Goldman strategists, who are perplexed by this stunning inability of the ECB and EMU to grasp that in this market where the only buyer of everything are Central Banks and no market risk is supposed to exist, that Europe still has refused to step up to the plate and debase their currency by a few hundred bips. And after all, the only reason the EURUSD is trading where it is, is so that it has a whole lot of buffer room to fall.
Futures are still on fire, following a much stronger than expected manufacturing reading in China. As Bloomberg reports: "A purchasing managers’ index released by the logistics federation rose to 54.7 from 53.8 in September, with input prices climbing the most in six months. A second PMI, from HSBC Holdings Plc and Markit Economics, jumped to 54.8 from 52.9." What is less known is that European PMIs also jumped across the board. As Erik Nielsen points out below UK, Norway, Turkey and Russia all reported stronger than expected PMI readings. Nielsen tries to make the case that even a 1.40 EURUSD is not sufficient to bring Europe down as somehow this is the new goldilocks. We completely disagree, and so will the ECB once the dollar is pushed strongly beyond the 1.40 barrier on Wednesday. Lastly, all eyes are now on US ISM to be reported later, with a consensus estimate of 54. It will be somewhat confusing if in the race to devalue the fastest, every single economy ended up growing. Not to mention somewhat incredible. But if confirmed, it will only give further impetus to debase currencies, as the last resort of economic growth is validated as "working." Which of course will mean more strength for assets that can not be printed out of thin linen.
The most amusing email this morning sent around the trading desk community comes from the otherwise perpetually jovial Goldman Europe strategist Erik Nielsen. The email subject is simple enough: "Bad news out of Portugal." And the news is bad.
A shining example of "the chicken of the egg" type of analysis has emerged courtesy of Goldman's FX and European economic teams. As we disclosed first a few days ago, the Goldman FX guys raised their 12 month EURUSD forecast from $1.38 to $1.55. Obviously, Erik Nielsen economist group has now decided to cut Europe GDPs across the board, with only Italy and France getting hit in 2010, and pretty much everyone in 2011: total projected Europe GDP has now declined from 2.2% to 1.8% in 2011. Of course, this would mean immediately that the EUR currency should decline in the future, as this projection is realized, resulting in GDP growth again. Will the Goldman FX team (which incidentally once again top ticker the pair with sublime perfection) then adjust its EURUSD target lower taking account to weaker GDP projection, only to be followed by the economists raising their GDP, and so far to infinity... Catch 22?