Monday, August 29, 2011

How The Economy Quietly Entered A Recession On Friday, And Why The GDP Predicts A Sub-Zero Nonfarm Payroll Number


While the key market moving event from last Friday may have been Bernanke's Jackson Hole speech which merely left the door open to future QE episodes, the most important event from an economic standpoint was the first GDP revision Q2, which dropped from preliminary 1.3% to a sub stall speed, in real terms, 1.0%. What is just as important is that as the following chart from Bloomberg demonstrates, the YoY change in real GDP, which is now at 1.5%, is a slam dunk indicator of recession: "Since 1948, every time the four-quarter change has fallen below 2 percent, the economy has entered a recession. It’s hard to argue against an indicator with such a long history of accuracy." Bernanke agreed that "growth has for the most part been at rates insufficient to achieve sustained reductions in unemployment." And while Bernanke is shifting dangerously into Greenspan territory with the open-ended interpretation of his statement, another thing that is more actionable is the observation that virtually every time real YoY GDP has dropped below 1.5%, this has led to a negative nonfarm payroll number. Granted, the result may not be as shocking as what the Philly Fed implied vis-a-vis this Friday's NFP, but we believe a subzero print in the August labor report will convince the three Fed holdouts that the time for yet another monetary intervention is here (Arab Spring part deux consequences be damned).

 

 

 

2010's Post-Jackson Hole No Volume Levitation Has Begun: ES Volume 50%+ Below Average

One simple flowchart describes today's action: If Low Volume => Levitation, the same we had seen repeated over and over and over between August 2010 and March 2011. And to think that the combination of two insolvent Greek banks into one insolvent Greek bank was sufficient to catalyze this move, despite yet another day of bad economic news confirming that the economy is now in a recession. Fear not: the worse it gets, the likelier Bernanke is to announce QE3 on September 21. And if not then, there is November 2. And if not then, there is December 13, and so on. Bernanke may never have to announced QE3 - he just has to keep dangling the carrot before the market that one day, soon, he just may follow through on his promise/threat. In other news, expect CNBC to trot out David Tepper soon to explain the logic of it all yet again.





Goodbye Bank Of America Settlement

Oops:
  • FDIC OBJECTS TO BANK OF AMERICA MORTGAGE-BOND ACCORD
  • THE REASON FOR THE OBJECTION IS THAT THE FDIC DOES NOT HAVE ENOUGH INFORMATION TO EVALUATE THE SETTLEMENT
Time to sell the other half of that China Constricution Bank stake... And Merrill... and Countrywide (goodluck), and pretty much anything else that is not nailed down. But don't worry: it's a liquidity, not a capital issue, or something. In other news, the Buffett "Eureka alert" is on BathCon 1.






Harvey Organ, Monday, August 29, 2011

Minor Raid on silver and Gold/Huge problems with French bank Societe Generale


Good evening Ladies and Gentlemen: It has been the custom of the bankers, these past several months, to whack gold and silver following expiration of options of the gold and silver contracts. The reason of course is to try and discourage the owners of these options from putting up the 100% of the contract price and taking delivery. It never ceases to amaze me the childish games these doorknobs





The Advent Of Beijing Lebensraum: Chinese Tycoon Plans To Buy 0.3% Of Iceland

Over the past decade China has been stuck in an inventory stockpiling and mercantilist process tolling mode, even as it has been posturing about expanding its middle class. Well, the Chinese empire may be finally hinting at what the "next steps" may be. FT reports that Chinese real estate tycoon and former Chinese Central Propaganda Department official Huang Nubo, has struck a deal to acquire 300 square kilometers of "wilderness in north-east Iceland where he plans to build an eco-tourism resort and golf course." That, at least, is the party line. Nobody however is buying it: "Opponents have questioned why such a large amount of land – equal to about 0.3 per cent of Iceland’s total area – is needed to build a hotel. They warned that the project could provide cover for China’s geopolitical interests in the Atlantic island nation and Nato member." And after securing a landing area equidistant from Europe and the US, China will next proceed to purchase bits and pieces of Greece, Spain, Ireland, Portugal, etc. After all, the nouveau-IMF piper ultimately always demands his price for keeping the western world ponzi alive and running for a few more months.





Warren Buffett's Philosophy On Investing In Banks

In light of last week's surprise announcement of Buffett's bailout redux of Bank of America (the first one being Goldman back in 2008), and following today's even more surprising objection by the FDIC which threatens to scuttle the Bank of Ameria settlement and force Bank of Countrywide Lynch to raise far more capital, pushing Warren to double down on his investment throwin more good money after bad, especially if the legal case moves from an Article 77-friendly NY state court to Federal, here are the philosophical thoughts from the Berkshire's oracles contained, in his "Collected Writings", on his desire to put money into banks.





The Average Layman Wonders What So Special About Banks That Pros Want To Buy Their Stock?
Reggie Middleton
08/29/2011 - 16:22
Quick answer, "Nothing!" Pros are just wrong, plain and simple. When you're long only, you only have to lose less than the next guy. You don't necessarily have to make any money. Remember that. 

RANsquawk Market Wrap Up - Stocks, Bonds, FX etc. – 29/08/11

ETC RANSquawk A snapshot of the US Afternoon Briefing covering Stocks, Bonds, FX, etc.
Market Recaps to help improve your Trading and Global knowledge





Jim Sinclair’s Commentary

September 7th is an important date as the German constitutional court will decide on Berlin’s participation in Eurozone bailouts. Basically, this will determine whether Germany will bail out the euro.

Jim’s Mailbox


Jim,

Just wanted to let you know that we’ve also released the popular conversation James Turk and you had with subtitles:

In Spanish:
http://www.youtube.com/watch?v=T8hBe24aeoA&feature=channel_video_title

In Chinese (Simplified):
http://www.youtube.com/watch?v=WNKQre3Fk7U&feature=channel_video_title

In Chinese (Traditional):
http://www.youtube.com/watch?v=HOklfOlYQn0&feature=channel_video_title


Very soon we’ll also release a version with French subtitles.

Kind regards,
Paul Buitink
www.GoldMoney.com




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