Ambrose Evans-Pritchard: Europe's money markets freeze as crisis builds in Italy, Spain

Ambrose Evans-Pritchard: Europe's money markets freeze as crisis builds in Italy, Spain

 

 

 

Harvey Organ, Tuesday August 2, 2011

Gold hits Record Level rising to $1654.00 USA/silver follows suit/Italian bonds hit 6.22% as money markets freeze

 

 

 

 

Red Alert

Posted by : Bruce Krasting

Post date: 08/02/2011 - 20:37

It's getting hot out again. Especially on Wall Street.

 

 

Quaintance And Brodsky On "Change We Can Belive In" Or The Coming "Monetary" Revolution

That the two heads of QBAMCO, Lee Quaintance and Paul Brodsky, have traditionally been in the non-conformist camp is no secret. They are two of the fund managers who will, when all is said and done, save and probably increase their clients' purchasing power (we won't call it money because money's days in its current version are numbered), unlike the vast preponderance of momentum chasing sheep who only find solace in their great delusion in even greater numbers (aka the ratings agency effect: "we may be wrong, but we will all be wrong"). In their latest letter, the duo does not uncover any great truths but merely keep exposing ever more dirt in the grave of the current monetary system. They also make short shrift of all the neo-Keynesian hacks who pretend to understand the fault-lines of modern monetary theory: "We would argue a system built upon unreserved bank credit expansion is inequitable, regressive, opaque, the source of asset boom/bust cycles and the root of virtually all the financial, economic and political chaos we are experiencing today. We assume this is in the process of being more widely intuited by global societies. Those that understand monetary identities are best prepared to shift wealth in advance of the necessary de-leveraging that must take place to restore equilibrium." Just as interesting is their observation that the 10 Year only trades where it does (2.6%) due to the ability of the big market players to lever up their return by 10, 20 times. Devoid of all theoretical textbook mumbo jumbo, they may well have hit the nail on the head: "the majority of bond investors driving marginal pricing such as primary dealers, hedge funds and central banks are quite a bit more leveraged. We would argue the Note is not trading at 49 because levered investors have incentive to collect 25% or more in current income (2.74% x 10 or 20) while awaiting their annual bonus or performance fee (or, in the case of the Fed, propping up the economy)." Translated: take away infinite leverage (thank you ZIRP) and the 10 year would be priced more fairly around 12.13% (dollar price of $49.20). Needless to say, their observations on gold, which this week borrow heavily from David Rosenberg are spot on. In a process first used by Dylan Grice, the QBAMCO duo defines the...

Moody's Sells Out As Usual: Leaves US At AAA, Puts Outlook On Negative Not To Appear Overly Corrupt Or Incompetent

As that uber-sycophant, Mark Zandi (who has yet to be right about one thing in his entire career), put it so well a few days ago, when discussing the deal that will bring the US to 110% debt/GDP within a year "I'm not in the rating agency... but listening to what they have to say, I think this would be sufficient... but this is substantive and should avoid a big downgrade." Sure enough, the former Moody's top "economist" certainly knows his own, and as of several minutes ago Moody's has confirmed it will not touch America's AAA rating. However, it will put the rating outlook on negative. That should shut them up. Full report of how to sell out like the best of them is attached. And the kicker: "Moody's has also confirmed the Aaa ratings of certain US government-guaranteed bonds issued by the governments of Israel and Egypt, which had been on review for possible downgrade as a result of the review of the US government's bond rating." Well at least America's direct protectorate states (as opposed to its indirect ones) can sleep well.

China Boldly Goes (Again) Where Moody's Has Never Gone Before, Downgrades US From A+ To A, Outlook Negative

As was predicted last week, China's rating agency Dagong, unlike its worthless western counterparts, has come through on its threat to downgrade the US in the event a subpar debt ceiling deal was hammered out. As Xinhua reports, 'Dagong Global Credit Rating Co. said Wednesday it has cut the credit rating of the United States from A+ to A with a negative outlook after the U.S. federal government announced that the country's debt limit would be increased." Confirming that not being branded a NRSRO is the only thing that allows a rater to still think straight (and not in terms of lost client revenue if one goes ahead and tells the truth), Dagong's decision was spot on: "The decision to lift the debt ceiling will not change the fact that the U.S. national debt growth has outpaced that of its overall economy and fiscal revenue, which will lead to a decline in its debt-paying ability, said Dagong Global in a statement." So while Moody's, which is now certified as the laughing stock of the sheep herd (sorry Mark Zandi, you will never be promoted to anything in this administration - we promise you), pretend that all is well and that the only thing better than $14.3 trillion in debt is $16.8 trillion, China demonstrates what happens when a rating agency actually knows how to do addition and/or long division.

Step Right Up: It's HFT Whack-A-Mole Time

For those who thought the crocodile algo or the fractal HFT patterns were crazy, you ain't seen nothing yet. Earlier today, Nanex caught arguably the most berserk HFT algorithm yet captured on film, or jpeg as the case may be, in the trading of Earthlink stock shortly after hours. What happened next is one for the ages... Because it certainly will not make it to the regulators. In essence, we had our first spotted appearance of the Whack-A-Mole algorithm, which allowed one, if one is fast enough, and incidentally one isn't, as all the bids would be cancelled at the same time as they were sent out, to make free money on a 10% trading spread between the bid and ask. Gone is any pretense of an NBBO, gone is any pretense of an orderly market: it is the wild, electronic, and nanosecond west out there.





More "Change You Can Believe In"...

Food Stamp Use Surges By Most In Years As Alabama Foodstamp Recipients Double In May

It appears that GDP data revisions are not the only thing that the administration enjoys fudging with in order to make the Chinese ministry of Truth seem like a real ministry of truth. After last month the data for April food stamp recipients indicated the we may, just may, be reaching an inflection point in the foodstamp participation following a mere 60 thousand jump in those receiving Supplemental Nutrition Assistance Program (SNAP), today's just released data confirmed that the BLS and BEA may have had a hand or two when determining this latest data series. Because the just announced jump in foodstamp usage of over 1.1 million is entirely out of the blue, and as the chart below shows, is the highest single monthly jump in Foodstamp participation since mid 2009, when eligibility requirements were adjusted. Yes, that's 45.8 million people (obviously an all time record) living on foodstamps which amount to the whopping $133.80 per person (an increase of $0.54 M/M) and $283.65 (an increase of $1.29) per household. Obviously, annualizing the latest monthly rate of 1.1 million people, it means that over 13 million Americans will live on about one third what the cheapest iPad costs in about a year. But wait, there's more. Digging into the numbers reveals something pecuiliar: virtually the entire surge in monthly SNAP participation is due to one state alone: Alabama, which saw those living on foodstamps jump from 868K to 1.762MM. That's 36% of Alabama's population.

What Happens If The U.S. Gets A Sovereign Credit Downgrade?

Posted by: EconMatters

Post date: 08/02/2011 - 22:38

It is premature to say something like "If U.S. debt is downgraded, will anyone care?" thinking the markets should have priced all this in, because there will be consequences to pay.  

The New World Order of Global Sovereigns: When Corporations Have Better Credit Rating

Posted by: EconMatters

Post date: 08/02/2011 - 22:29

Regardless whether one or more of the Big 3 agencies would deal a credit downgrade to the U.S., the CDS market has already spoken.

Jim’s Mailbox

August 2, 2011, at 10:59 am
by Jim Sinclair 

Hello Jim,

I’ve received numerous calls today of a congratulatory nature towards you and your Gold price prediction 10 years ago. Our people don’t worry about the timing as much as they worried about the direction. The calls are coming in to say “Thank You Jim” for your guidance and direction in a world where few can be trusted. Onward and upward we go till Gold is put in its rightful spot; backing a currency a world of investors can trust.

Your pal,
CIGA JB Slear

Gold train leaving largely empty, and silver short squeeze is possible, Davies says

 

 

Fed may weigh more stimulus amid slow recovery

 

 

Paul proposes bill to cancel $1.6 trillion in U.S. debt to Federal Reserve

Submitted by cpowell on Tue, 2011-08-02 21:36. Section: Daily Dispatches

By Pete Kasperowicz
The Hill, Washington, D.C.
Tuesday, August 2, 2011
http://thehill.com/blogs/floor-action/house/174953-rep-paul-introduces-b...
U.S. Rep. Ron Paul on Monday introduced legislation that would lower the federal government's debt by canceling the roughly $1.6 trillion in debt held by the Federal Reserve.

Guest Post: Five Things You Need to Know About the Economy

At any point during the recent negotiations in Washington over the debt, did you seriously think for even a second that the U.S. was about to default? Of course, in time the U.S. government (along with many others) will default. However, they are highly unlikely to do so by decree or even through the sort of legislative inaction recently on display. Rather, it will come about through the time-honored tradition of screwing debtors via the slow-roasting method of monetary inflation. Yet most people still bought into the latest drama put on by the Congressional Players – a troupe of actors whose skills at pretense and artifice might very well qualify them for gilded trophies at awards banquets. Instead, rather than glittering statuettes, these masters of the thespian arts settle for undeserved honorifics and the pole position at the public trough. Followed by lifelong pensions. But to the heart of the current matter, do I think that the latest antics out of Washington will have any more lasting effect on the trajectory of the economy than what I had for breakfast this morning (raw oats with a dab of maple syrup, milk, a sprinkling of strawberries, and half of a banana, sliced)? Absolutely not. Sorry to say, but the trajectory of the economy at this point is well established, and closely resembles that of a meteor streaking through the night sky. What’s left of the solid matter of the nation’s accumulated private wealth is fast being burned off by an unstoppable inferno of government spending, inevitably leading to an earth-shaking crash.

 

 

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