US Taxpayers About To Be Saddled With Another European Bailout Courtesy Of AIG 

Submitted by Tyler Durden on 06/09/2011 11:08 -0400

Just when one thought every imaginable taxpayer bailout scheme had been seen, experienced and in many cases, forgotten, here comes AIG once again. The specifics come from Deutsche Bank's Joshua Shanker initiation of coverage report on AIG (naturally with a Buy rating, $34.00 target price), where within the fine print he notes: "the company believes there may be bargains available from buying RMBS securities from European banks seeking better positioning under Basel III requirements. " Prudently, he adds: "We note that increased yield, in this regard, also carries with it increased risk." Translated this means that AIG is about to do for European banks what the ECB so far has been unwilling and/or unable: namely to transfer the risk associated with European banks' massive ongoing exposure to the continuously collapsing US housing market back to the US taxpayer, in the form of AIG, which was bailed out once, and which will certainly be bailed out again, when the time comes.

 

Hathaway Confirms Gold to Trade in the Five Digits

June 9, 2011, at 7:37 am
by Eric King 

Dear CIGAs,

With a continuation of gold and silver volatility, today King World News interviewed one of the great ones, 40 year veteran John Hathaway of the Tocqueville Gold Fund.  When asked about the volatility in both gold and silver Hathaway had this to say, “We’re in a shakeout now and frankly it isn’t as scary as the one in 2008, but I think there’s no foundation whatsoever for solid, robust economic growth and that’s the realization the markets are coming to.  I think we’re past the point of no return.”
Click here to view the full interview…





Why holding precious metals into a market sell-off can make sense
By: Peter Cooper

Robert Shiller: "Economy Is At A Tipping Point... A 10-25% Slump In Home Prices Would Not Surprise Me At All" 

Submitted by Tyler Durden on 06/09/2011 10:18 -0400

The latest soundbite that should certainly add a few extra points to the S&P now that trading has reverted back to the bizarro zone is the most recent warning from Robert "Case-Shiller" Shiller who said that another 10-25% drop in real home prices would not surprise him at all... or anyone else for that matter except for all those who saw the "official" housing bottom back in 2009.

A Classic Technical Signal: China Breaks Down 

Since "the China Story" is the foundation of global growth, demand for commodities and ultimately, stock market profits, when China's stock market breaks down it behooves us to pay attention. Technical analysis offers a number of tools to help us chart the past and present and calibrate probabilities of what might happen in the future. Much of the time there are no clear signals, and chartists can lose their way trying to discern patterns and trends which may or may not pan out in the future. One classic pattern is a flag or pennant (a.k.a. a wedge). The psychology behind the pennant is rather transparent. Lower highs reflect a decline in Bullish enthusiasm and buying pressure, as every "buy the dip" fails to match the previous dip-buying. he direction of China's market has been decisively signalled: breakdown. In technical analysis, it doesn't get any better than this. 

Guest Post: QE2 - The Bernanke Chronicles 

Submitted by Tyler Durden on 06/09/2011 10:27 -0400

So our Federal Reserve Chairman, with a supposedly Mensa level IQ, declares that prices have risen due to demand from emerging markets. He also declares that US economic growth will pick up in the 2nd half of this year. He then declares that inflation will only prove transitory as energy and food prices will stop rising. I know I’m not a Princeton economics professor, but if US demand increases due to a recovering economy, along with continued high demand in emerging markets, wouldn’t the demand curve for oil and commodities move to the right, resulting in even higher prices? Ben Bernanke wants it both ways. He is trapped in a web of his own making and he will lie, obfuscate, hold press conferences, write editorials, seek interviews on 60 Minutes, and sacrifice the US dollar in order to prove that his economic theories are sound. They are not sound. They are reckless, crazy, and will eventually destroy the US economic system. You cannot solve a crisis caused by excessive debt by creating twice as much debt. The man must be judged by his words, actions and results.

Details Of €120 Billion Greek Bailout Send EURUSD Higher 

Submitted by Tyler Durden on 06/09/2011 09:51 -0400

Wondering what lit a fire under the EURUSD? Wonder no more, courtesy of Reuters:

• New bailout for Greece likely to total about EUR 120bln according to Eurozone sources
• New bailout may comprise EUR 30bln from private sector, EUR 30bln from privatisations, up to EUR 60bln from EU/IMF
• Remaining loans from initial Greek bailout would be disbursed alongside new bailout, according to Eurozone sources

And yes, as predicted the final amount will be far greater than previous expectations of under €100 billion.

Another Spirited Goldman Sachs Defense Brought To You By... Goldman Sachs 

Submitted by Tyler Durden on 06/09/2011 09:43 -0400

We have already noted our amusement at Sorkin's inaccurate and dictated defense of Goldman's housing short position previously (apparently the DCF expert has absolutely no understanding of such concepts as DV01, delta, gamma, capital structure priority, gross vs net notional, and exposes so many other misconceptions that we will simply wait for the official Goldman 8K to come out, as opposed to this unofficial one, before issuing out full debunking of any Goldman defense). One thing we did not note, however, that needs disclosure, is the glaring conflict of interest in ARS' puff piece. As Taibbi pointed out, it is none other than Goldman who is a critical backer of Sorkin's Dealbook. To wit: "Barclays Capital, Goldman Sachs, Sotheby’s and Tata Consultancy Services are charter advertisers for the relaunch of DealBook." Indeed, it is perhaps time to have a disclaimer at the end of every article that there is substantial squid pro quo involved in namesdropping-for-brownnosing modus operandi. But even that is nothing compared to the latest attempt to glorify those who perform god's work on earth. Below is a snapshot of FierceFinance's spirited defense of Goldman Sachs. The author mocks the concept of Sorkin as an apologist for those who enjoy seeing their name in a good light in the NYT and on HBO: "Sorkin might be accused of trying to bolster his base with his report--Wikipedia describe him as "an apologist for Wall Street/Goldman Sachs." I kid you not. But Sorkin makes a lot of sense when discussing how one unit in a very large company may be hell-bent on shorting the market even as another unit in the same company may be stuck with certain securities." It is not the ongoing misunderstanding of previously noted concepts, but the actual advertisement as part of the piece. Once again, we see that only those who directly get funding from Goldman Sachs would be willing to destroy their credibility by coming to its defense.

Has Bloomberg Stopped Tracking Constant Upward BLS Initial Claims Revisions? 

Submitted by Tyler Durden on 06/09/2011 09:27 -0400

Regular Zero Hedge readers are aware of our consistent noting how in the past several years, the BLS has relentlessly imposed an guaranteed upward bias to prior initial claims revisions, to the point where it has become a statistical farce (today's upward revision of last week's number from 422K to 426K being just the latest indication). It is thus to our surprise and disappointment to find that even Bloomberg has ceased to keep track of prior revisions: one wonders if the BLS may have had some close conversations with the only media which back in 2009 dared to challenge the Bernanke Put.

April Wholesale Inventories And Sales Another Miss 

Submitted by Tyler Durden on 06/09/2011 10:09 -0400

And another signal of economic slowdown: Wholesale Inventories, that wonderful plug for generic "growth" was unable to keep up with expectations, rising only 0.8% in April, below consensus of 1.0% and down from an upward revised March number of 1.3% (1.1% previously) meaning that Q1 growth may be revised higher at the expense of Q2. Even bigger was the miss in wholesale sales which plunged from 2.9% in March to just up 0.3%, well below consensus of 1.2%. Yet since today is one of those bad news is good news days, expect the Dow to close up triple digits. From the release: The U.S. Census Bureau announced today that April 2011 sales of merchant wholesalers, except manufacturers’ sales branches and offices, after adjustment for seasonal variations and trading-day differences but not for price changes, were $393.5 billion, up 0.3 percent (+/-0.5%) from the revised March level and were up 14.4 percent (+/-1.4%) from the April 2010 level....Total inventories of merchant wholesalers...were $447.2 billion at the end of April, up 0.8 percent (+/-0.4%) from the revised March level and were up 13.8 percent (+/-1.2%) from a year ago." Lastly, the inventory/sales ratio was unchanged from March, coming at 1.14. 

Corn Prices Near Record On Plunge In Corn Stocks, China Use Surge, Tightest US Corn Supply Levels In 15 Years 

Submitted by Tyler Durden on 06/09/2011 10:50 -0400

So much for transitory inflation as corn prices are again pennies of a fresh all time high. Earlier today an update by the USDA showed that corn stocks will come in much lower than expected at the end of the 2011/12 marketing year at just 695 million bushels: this is far lower than the analysts consensus of 771 million bushels. The spring weather was blamed for the drop: "cold, rainy spring and flooding cut U.S. corn plantings by 1.6 percent, will reduce the harvest by 2 percent and will keep U.S. corn supplies at their tightest level in 15 years through the fall of 2012, the government said on Thursday." Another factor for the record price: surging China demand: "USDA also forecast a hefty increase in corn use by China -- up 8 million tonnes, or 5 percent, this year and up 13 million tonnes, or 8 percent, in 2011/12. China will draw down its stocks rather than import corn, USDA said." Just like in China where record droughts have been replaced with deadly floods, the weather continues to be unusually volatile, not just in the US: "Besides plaguing the eastern Corn Belt, rains and floods have slashed the rice crop by 5.5 percent since May, USDA said. Drought in the Southwest would reduce the cotton crop by 1 million bales, or nearly 6 percent, to 17 million bales, and the rice crop, at 199.5 million hundredweight, would be the smallest in four years." This is probably the latest data the market needed to completely ignore today's worse than expected initial claims data, and go into full "Inflation: ON" mode. In other news, expect Obama to announce the launch of an Adverse Weather Task Force investigating speculative movements in air masses momentarily.




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