Thursday, November 10, 2011

Bernanke Knows He’s Powerless This Time Around

Phoenix Capital...
11/10/2011 - 12:19
  As far back as May 2011, Bernanke admitted the benefits of QE were less attractive. Now he’s not only admitting that asset bubbles exist (something Greenspan never admitted) but that Central...

Shifting To Short-Term Funding For EFSF Is A Sign Of Weakness

Comments from the EFSF's CEO Klaus Regling that they will issue short-dated debt to ensure they will be ready to help - for instance, Italy - is extremely worrisome and smacks of desperation in our view. Peter Tchir of TF Market Advisors agrees noting that shifting to shorter term funding for EFSF is a sign of weakness and creates real risk of contagion much sooner than if they stuck to the higher cost, but longer term funding programs. The dramatic widening in EFSF spreads that has occurred since some clarity on risk transfer, post EU summit, was made suggests market participants are extremely skeptical also.

CDU Escalates Plans For EU Treaty 'Adjustment': Wants Option For To Kick Habitually Broke Countries Out Of Eurozone

Yesterday we wrote that according to a Handeslblatt report, Angela Merkel is "investigating ways to enable countries to leave the Euro." Today Handelsblatt has a follow up with some very critical clarifications which change the equations of the European bailout all over again. Yesterday, the Handelsblatt reported that the CDU "wants to make it possible for European Union members to exit the euro area....A commission within the party, that is crafting a framework to be presented at a party meeting, has proposed allowing a euro member who doesn’t want to or isn’t able to comply with the common currency rules to leave the euro region without losing membership in the EU, the newspaper." In other words, the transition out would be "voluntary." So it is somewhat surprising that in under 24 hours we discovery that this proposal has just escalated substantially: according to the just released Handelsblatt update, "The CDU wants to change the EU treaties to not allow the departure of a debt-ridden country from the euro zone, but also their expulsion. From the request for the party on Sunday evening at Leipzig, by the Handelsblatt (Friday edition), the crucial word "voluntary" was deleted."

Fool Me Once, Shame On You

Dave in Denver at The Golden Truth - 46 minutes ago
Fool me twice, shame on me. Fool me three or more times shame on...insanity? I thought about this reading Ted Butler's latest newsletter discussing the MF Global situation and the problematic role of the CME and the CFTC in this financial catastrophe. Butler ends by saying, to paraphrase, maybe this is the event that will get the CFTC to crack down on the CME. Watching Butler year after year espouse hope and optimism for the eventual reform of our system and the restoration of Rule of Law and property rights with respect to our financial system is even more hilarious than watchi... more » 

Is It Risk On Yet?

Eric De Groot at Eric De Groot - 2 hours ago
The US equity market has moving higher since October 4th. This steady rally has many investors reallocating to stocks in anticipation of the Santa Claus rally and positive gains ahead in 2012. Perhaps they are right, but glaring negative divergences in trend force and momentum implies underlying weakness despite investors' new found confidence. This setup coupled with continued distribution in... [[ This is a content summary only. Visit my website for full links, other content, and more! ]] 

Hold The Euro Together And Reorganize

Admin at Jim Rogers Blog - 2 hours ago
It would be better off if we can hold the euro together and we reorganize. People are bankrupt and when people are bankrupt you might as well face reality. Reorganize the assets, competent people will come in and you start over from a sound base. - *in CNBC* *Jim Rogers is an author, financial commentator and successful international investor. He has been frequently featured in Time, The New York Times, Barron’s, Forbes, Fortune, The Wall Street Journal, The Financial Times and is a regular guest on Bloomberg and CNBC.* 

Fannie Mae taps $7.8 billion from Treasury, loss widens

Eric De Groot at Eric De Groot - 3 hours ago
This is old news, but depth of the money pit continues to shock even the most jaded observer. The credit machine behind housing is broken. The slow, seemingly endless decay in home prices reflects it. U.S. Median Home Price (MHP) And MHP to Gold Ratio Headline: Fannie Mae taps $7.8 billion from Treasury, loss widens (Reuters) - Fannie Mae, the biggest source of money for U.S. home loans, on... [[ This is a content summary only. Visit my website for full links, other content, and more! ]] 

Sovereign Debt: The Next Crisis

Admin at Marc Faber Blog - 5 hours ago
Latest video market update in Yahoo Finance. *Marc Faber is an international investor known for his uncanny predictions of the stock market and futures markets around the world.* 

If Greece Left The Euro It Would Be A Disaster For The Greeks

Admin at Jim Rogers Blog - 5 hours ago
If Greece left the euro it would be a disaster for the Greeks because they would go back to the same old ways. They would start printing money. No one would lend them money. Inflation would go through the roof and the Greek economy would get worse and worse. That`s not good for Greece. It`s not good for the world. - *in CNBC* *Jim Rogers is an author, financial commentator and successful international investor. He has been frequently featured in Time, The New York Times, Barron’s, Forbes, Fortune, The Wall Street Journal, The Financial Times and is a regular guest on Bloomberg and C... more » 

With Iran This And Iran That, Here Is The Weekly US Naval Update

Let's face it: with the Iranian invasion foreplay having gone on about 3 years too long, everyone is just waiting for the flashing red "GDP boosting" headline. But to know how close we are to I-day, there is one question needing an answer: where are the boats? Below we share the latest weekly update of US naval positioning, as usual courtesy of Stratfor. The chart is self explanatory: the 5th Fleet AOR is getting just a little too crowded.

Guest Post: What "Average Joe" Really Thinks

gallup-consumer-spending-110911Every day we are blugeoned with a variety of economic reports from various government agencies about the state of the economy.   Most of these reports have some form or another of "seasonal adjustments", speculations, estimations or just flat out "guesses" about what is going on in the economy.   What we tend to find out over time is that these numbers are generally overly optimistic during recessionary periods as we are in today. Today, we are going to look at three different polls from the Gallup organization on consumer spending, the economy and employment.   The Gallup organization has studied human nature and behavior for more than 75 years and focus on what people "think and feel" about various issues.   They employ many of the world's leading scientists in management, economics, psychology, and sociology, and other consultants to identify and monitor behavior. The key difference between Gallup and the various government agencies is that these polls are direct questionnaires to individuals and the responses are tallied and reported.   There are no adjustments, assumptions, guesses, etc.   In the famous words of Bill Clinton; "What"

We Are All FX Traders Today...

The correlation between SPX and EUR has been high, but it seems to have hit unprecedented levels today. All you need to know is where EUR is and you can pretty much nail where treasuries, SPX, and an assorted number of other assets are. Credit is also totally divergent from equities today once again.

Bonds Sell Off Following Very Weak 30 Year Auction

Minutes ago the Treasury auctioned off yet another block of $16 billion in 30 Year bonds. The auction was pretty horrible: the When Issued was trading at 3.155% when the press release hit that the bond cleared at only 3.199%, a huge 4+ bps tail for the longest duration paper. Internals were not pretty either: the Bid to Cover dropped from 2.94 to 2.40 and Dealers had to buy well over half again or 55.7% with Indirects taking a meager 28.4%, and the remaining 15.8% going to Directs, nearly half of the 29.5% from October. Obviously this is the inverse of what happened in Italy today, when the tail was a negative 150 bps and the 1 year Bill closed at just over 6% with the WI trading in the mid-7%'s. Perhaps the global banks, in an attempt to preserve the Ponzi one more time, pushed all their freely allocatable and repoable capital into Italy and had far less left for long US paper. Nonetheless, the yield at 3.199% was just the second lowest. We salute anyone who believes that as central banks are about to set off on a record printing episode to bail out Europe, that inflation will not rise. Needless to say, the weak auction pushed the entire treasury complex lower, as senn by the second chart of the 30 Year following the auction. With this auction, the refunding trio of issuance for the week is over and when all is settled on Monday, total US debt will be just shy of $15.1 trillion. We are so lucky that the Supercommittee is working up to snuff even as the next debt ceiling hike is rapidly approaching.

Bernanke Tells American Soldiers To Make Good Financial Decisions Even As He Routinely Bails Out Those Who Don't

Ben Bernanke is speaking in Texas to some soldiers and ther families in what is mostly a boilerplate presentation: he mourns the bubble economy, protects his policies and tries to deflect focus away from the Fed, just like the ECB, to the legislative. To wit: "it doesn't feel like the recession ever ended. The unemployment rate remains painfully high, and more than two-fifths of the unemployed have been out of work for longer than six months, by far the highest ratio since World War II. These problems are very serious, and we at the Federal Reserve have been focusing intently on supporting job creation. Supporting job creation is half of our marching orders, so to speak; the other half is controlling inflation." On Congress: "the Federal Reserve was never intended to shoulder the entire burden of promoting economic prosperity. Fostering healthy growth and job creation is a shared responsibility of all economic policymakers, in close cooperation with the private sector." Most interesting is Bernanke's attempt to get quite cozy with men and women in uniform: "soldiers who had taken the course were more likely to make smart financial choices, such as comparison shopping for major purchases, saving for retirement, and educating themselves about money management. They were less likely to make questionable financial decisions, like paying overdraft fees, taking out car title loans, and continually running credit card balances. Making good, well-thought-out financial decisions can make all the difference to your financial future." Like saving, yes? But with 0.001% deposit rates, just why should these brave men and women do anything "smart" choices: can't they simply do what the banks do every day and make dumb choices, instead knowing full well that you will bail them out. Will you bail out the soldiers of this country who follow in the banks' footsteps? Or do they need more weapons before they become too big to fail?


WTI Breaks $98 As Disconnect From Commodity Complex Widens

Having tracked each other almost tick-for-tick for much of the last few weeks, WTI crude has disconnected dramatically this week from the rest of the commodity complex. We mentioned the disconnect yesterday and see three potential reasons: 1) Unwinds from long EU risk hedges due to margin calls, 2) the escalation in the Iran-Israel shenanigans, and/or 3) the weakness of the IAEA report. It seems that after last night's dismal macro data from Europe that this is not the sign of growth that so many would like it to be - but has all the consumption-deflationary impetus we have become accustomed to.

Financial Weakness And French Distress As European Equities 'Stable'

A wonderfully orchestrated 1Y Bill auction in Italy and some clear 'help' from the ECB early on was enough to shift a heavy BTP market in a positive direction for the first time in a week. However, while headlines will be writ large with the 40bps compression in 10Y BTP spreads to bunds, the action in the last few hours of the day in French bonds, European financials, and higher beta credit were much more symptomatic of risk aversion than buyers coming back. Record wides in OATs and EFSF spreads as senior and subordinated financial credit is dramatically wider on the week. In the same way as yesterday, ES was exactly 'balanced' as Europe closed, having shifted back to VWAP as broad risk assets leave a slight positive bias though the selloffs in gold, silver, and copper (and AAPL) suggest some liquidation was underway - even as the dollar leaked lower a little from overnight highs.

S&P Explains How A Technical Error May Have Led Some To Believe That FrAAAnce Is Massively Overrated At AAA

Just out via S&P:
As a result of a technical error, a message was automatically disseminated today to some subscribers of S&P's Global Credit Portal suggesting that France's credit rating had been changed. This is not the case: the ratings on Republic of France remain 'AAA/A-1+' with a stable outlook, and this incident is not related to any ratings surveillance activity. We are investigating the cause of the error. Media Contact: Martin Winn, London (44) 20-7176-3740;
At least they did not find €55.5 trillion in the couch. In other news, it is good to see that now a hacker can singlehandedly wreak havoc to a $60 trillion bond market by finding a back door entry to the S&P turboserver. But at least we now know that the next time S&P downgrades someone we will first have to ask if the release was preapproved by Norton AntiVirus...

All You Need To Know About The Aptly Misnamed US "Supercommittee", Complete With Trading Cards

While Europe stubbornly refuses to get off the pedestal of daily "risk On-Off" headline news disinformation, the time has come to shift our attention to the epic misnomer which is the US supercommittee, or the unelected sub-branch of the legislative body which is supposed to find $1.2 trillion in cuts to enact the debt ceiling hike that Obama passed in August so that America can spend itself into the drunken sailor coma. Incidentally, the country has already issued $700 billion in debt since then, and by the end of the week, total US debt will be just shy of $15.1 trillion. So at least the "benefit" of the debt ceiling, pardon, debt target hike has been implemented, if not any of the mandated budget cuts that are supposed to offset this. Unfortunately, they won't, because as the attached supercommittee trading cards created by JPM's Michael Cembalest demonstrate, as well as the associated Q&A from Goldman explaining all one needs to know about the supercommittee, hell has a better chance of freezing over than these 6 republicans and 6 democrats coming to some agreement.

ISDA CEO Stepping Down

Wait, what's that? CEO leaving after his CDS-(non) triggering determination practices brought down the Eurozone? What a stunner:
Luckily, since this is a voluntary action, no CDS written on Voldstad will be triggered and thus no severance will be due and payable. Right? In all seriousness, this means that the idiotic no-trigger determination will be reversed right? We can't wait for the snarky post on the ISDA blog explaining this debacle.

Guest Post: Could the Euro Trigger A 2008-Like Crash? Si, Oui, Yes.

If we scrape away the ever-hopeful headlines predicting a new figurehead lackey or another vote will magically fix Greece, Italy, the euro, Europe's crumbling banks, etc., the global stock markets can be distilled down to one chart. And here it is: a see-saw with the U.S. dollar on one end and the euro and equities on the other. I know the mind rebels at such simplicity, and so does the entire buy-side Wall Street edifice: if it all boils down to this, then there really isn't much value added by the endless reams of fancy reports and analysis, is there?

Europe Recovery Rally Fizzles As French Bund Spreads Hit Record On Fresh Downgrade Rumor

So much for the half life of the latest European recovery rally. After the ECB is rumored to have bought €1.7 billion in Italian (70%), Spanish and Portuguese bonds this morning, spreads across the continent stabilized... however briefly. Since then, confirmed speculation of an Austrian downgrade and an unconfirmed rumor that Egan Jones and/or other rating agencies will put France on downgrade review has just sent the French(OAT)-Bund spread to new record highs. And so, the ECB just used up even more firepower to achieve absolutely nothing, especially since the market will now expect Draghi to buy double or €3.4 billion tomorrow, or else it will get very, very angry. In the meantime, we urge the ECB to promptly buy all French bonds it can. Wait, what's that, the ECB can't buy French bonds (yet)? Oh... Oops.

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