Euro Gap Down Confirmed In Premarket Trade

At the Friday close, there was a spurt of rapid EUR selling at the close, taking the currency to the lowest since January 2011, at 1.3367. It turns out it was not a fat finger - with a spate of traditionally euro negative news over the past 48 hours, most notably yet another negative Greek deficit revision which will make the Troika's job that much more difficult in justifying the need to fund the next IMF bailout payment, the EURUSD is now even lower premarket at 1.3344. With the rumormill thoroughly exhausted, and with nobody in Europe having any credibility left whatsoever, we fail to see what can catalyze a move higher before the Asian open, which will likely not be a pretty way to start the final quarter of the year.

 

 

Greece To Miss Budget Deficit Targets, As Usual, While Qatar Prepares A Bailout Pennies-For-Gold Swap

As the Greek parliament meets to finalize huge public sector job cuts, Reuters is reporting that Greece will miss the deficit targets set in its EU/IMF bailout this year and next... We would say "again" but at this point "as usual" makes far more sense, Why this should come as a surprise to anyone is beyond us but the next steps by the Troika (as again and again targets are not met and yet still bank-extending-and-pretending-funding is provided) will be fascinating as they switch from carrot to stick and back to carrot perhaps. Assuming, of course, the "wildcat strikes" at any and all government institutions by government workers about to be sacked, allow Troika member access at some point in the near to long-term future. Although using numbers conceived on napkins as a replacement will be nothing new to either Greece, Eurostat or the Troika. Add to this the comment from the Deputy Leader of the CSU (one of Merkel's tri-party coalition) that Greece would find it easier to recover outside the currency bloc and rhetoric remains high, as do expectations for an inverse surge in the EURUSD at open in a few hours. The biggest winner: Qatar which just snuck in some recycled petrodollars into Greece, which will last the kleptocorrupt government about 1 week, in exchange for Greek gold.

Out Of The "Hard Landing" Pan And Into The "Crash" Fire - Are Things About To Get Even Worse For China?

Over the past week one of the more hotly debated and market moving topics was the resurgence of speculation that China may be on the verge of a "hard landing." To a large extent this was driven by renewed concerns that the country's debt load, especially at the local government level, will be a substantially greater hindrance to growth and hence, concern than previously thought. This was paralleled by concerns that Chinese growth will likely slow down substantially more than previously expected, even as inflation remains stubbornly high. The result: a move wider in Chinese CDS in the past week whose severity was matched only by a similar move around the time of Lehman, when the world was widely seen as ending. Concerns that delusions about decoupling are precisely that (courtesy of 3 out of 4 BRICs printing a contractionary sub-50 ISM also led to the biggest drop in the Hang Seng index since 2001, after it tumbled 22% in Q3 as fears that a Chinese slow down would impact all developing economies with an emphasis on East Asia. Yet if a Hard Landing is all it took to disturb the precarious balance in which China always somehow always ride off into the sunset having rescued the entire world, we wonder what would happen if the market started expressing concerns that a Hard Landing is the optimistic case, and nothing short of a Crash Landing may be the baseline. Because according to the Economist, which informs us of a very troubling development out of China in which foreigners may be about to face a new entitlement funding tax for all domestic workers beginning October 15, and hence a surge in overall labor costs, then a "Crash Landing" may well be in the cards for the world's biggest marginal economy.

Man Vs Lemming: Survival Of The Fittest To Be Tied

In his latest edition of "The Privateer", Bill Buckler has an enlightening 'compare and contrast' between that one species that will every so often engage in acts of such sheer stupidity, it will blindly follow the herd, oblivious of the near certain resulting doom, right over the cliff, and lemmings...

Credit Dislocated, Again

We have discussed the dynamics of the credit-equity-vol relationship for many months in the hope that it broadens investment horizons and opens traders' eyes to a bigger picture of global risk appetite. Following (and understanding) the debt-equity relationship has proved, in general, a very useful instrument in an investor's toolkit and Barclay's Capital this week points to just how dislocated European credits are relative to stocks (having underperformed) and while we may not be quite as exuberant as them in the call to add credit exposure here (as we see more structural than cyclical concerns ahead), we cannot argue that on a relative-value basis. However, arguments for significant re-allocation from bonds to stocks simply do not make sense (from both valuation and risk perspectives) - no matter how many times Pisani tells us so.

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I sure hope you are buying your share...

There was another big sales report from the U.S. Mint to cap off the month. They reported selling another 4,500 ounces of gold eagles...500 one-ounce 24K gold buffaloes...and 460,000 silver eagles. Baring any further update on Monday, total sales for September are as follows: 91,000 ounces of gold eagles...13,000 one-ounce 24K gold buffaloes...and a whopping 4,460,500 silver eagles, which is the second largest sales month for silver eagles in all of 2011...to date.

Year-to-date, the U.S. Mint has used 843,500 ounces of gold in their gold eagle program...132,500 ounces of gold in their 24K gold buffalo program...and an eye-opening 33,411,500 silver eagles.

The desperation of the global monetary powers that be are reaching such heights that they are willing to perform any fiscal or monetary form of atrocity to (they hope) hold things together. Meanwhile, on the paper investment markets, the participants are literally at their wits end. And whenever that happens, their "faith" in the "system" is all they have left to sustain them, so they retreat to the US Dollar and US government debt paper. After all, if THAT folds up, so will the system. - Bill Buckler, Gold This Week, 01 October 2011