Deutsche Bank Tells Clients To Put "Risk Off" Trades Ahead Of December 9 Summit, On Hopes Market Sell Off Will Shock ECB Into Printing
While our assessment that the latest and certainly not greatest European summit due this Friday will be yet another dud (confirmed by today's Merkozy non-statement which took both Eurobonds and the ECB off the table), we are surprised to learn that none other than Deutsche Bank has once again joined our call that the market continues to get ahead of itself, in the process making life for the ECB that much harder. As BBG reports, Deutsche Bank's Dominic Konstam has advised clients to re-establish risk-off trades ahead of the December 9 summit. In his note he adds: "We think the current track of European policy is not credible in that austerity ultimately undermines the banks, increasing the need for recapitalization and asset liquidation, and threatening a vicious circle." And therein, as noted over the weekend, lies the rub: European banks are desperate for a longer-term solution (not the Fed's FX swap band aid), which can only come if and only if the ECB relents and starts printing. This however, will not come as long as the stock market keeps diverging from broad risk indicators, and rises purely on hope and a career risks Santa rally. In fact, as DB today confirms, it makes the case for the ECB (or Fed for that matter) to print that much harder, which considering there is no additional fiscal stimulus coming either in the US (thank you congressional gridlock) or Europe (thank you Germany-imposed austerity), means only additional monetary easing can do anything to push markets higher out of the recent trading range. Alas, we doubt any of the momentum chasing algos caught once again reacting to the market, will care much about this, and instead once the inevitable Risk Off day once again comes - which it will: it's mathematically certain - will simply accentuate the downside move as one side of the boat moves to the other at the same time.Fear And Bloating Redux In Italian Bonds
While
there is no arguing with the strength in Italian bond prices, yield
(now less than 6% again), and spreads (cash and CDS) over the last week
or so, there is a rather ugly and similar-looking precedent from only
five months ago that is making managers nervous. It seems that the hope
is this time is different as we remember the three-step reaction to
the summer's efforts to bailout the eurozone as fear gave way to hope
which inevitably became reality. BTP prices are trading at levels which
were viewed as precipitous in the summer and warranted massive
intervention (the ECB announcements) and obviously spreads and yields
reflect similarly the market reaction to any and every stick-save.ISM Services Misses - Worst Since January 2010
Expectations
for ISM Services (services as in the sector that accounts for 70% of
US GDP) were for expansion to keep the decoupling dream alive.
Unfortunately, those dreams are dashed for now as the data prints its
worst level in 23 months. The biggest driver of this drop was the employment sub-index which cliff-dived from 53.3 to 48.9 (a contracting print). The composite manufacturing and services PMI also dropped notably.ECB Buys €3.7 Billion In Bonds Last Week, Total Now €207 Billion: All Eyes Turn To Tomorrow's Sterilization Procedure
In a less than surprising turn of events, last week the ECB "only" bought €3.7 billion in peripheral bonds, which was to be expected considering the Fed announced the global FX liquidity swap rate cut on Wednesday morning providing a quite visible hand to push yields lower at least briefly, so in essence the ECB only had to keep the market up for half the required amount of time. Far more importantly, the total amount of bonds now carried on the ECB's books is €207 billion. This is important, because as readers will recall the ECB failed to sterilize an amount lower than this, or €203.5 billion, last week, with just €194.2 billion in bids submitted. Naturally, with the total cumulative amount increasing every single week, the likelihood of future sterilization failures only gets bigger and bigger. We will find out if the European banks parking a near record amount of cash with the ECB as of today, will result in a second failed sterilization in a row tomorrow and just how favorable the market will approaching this particular latest flashing red light around 7 am Eastern tomorrow.
Assured Guaranty (AGO) Initiated With $35 Target At BTIG
A week ago, BTIG upgraded MBIA on the same thesis we had noted two months prior. Today, it is AGO's turn, on virtually the same assumptions and the same thesis as MBIA. To wit: "We view Assured Guaranty?s equity as deeply undervalued at current trading levels and anticipate that as the fears that have depressed its share price abate and the viability of its business model becomes more apparent, it will gravitate toward its intrinsic value. Consequently, we believe investors who can appreciate that Assured?s risk profile is overstated, and that its ability to generate profitable new business is understated, could realize outsized returns. We are initiating coverage of Assured Guaranty with a BUY and a $35 price target which is based on a 0.75x multiple of the company?s 2012E year-end stand-alone adjusted per share book value of $48.56. We believe some discount to adjusted book value is appropriate, for while we view the AGO?s portfolio exposures as manageable, they nevertheless present the potential for some loss of value. AGO trades at 0.23x the company?s 3Q11 adjusted per share book value. We believe the market reacted appropriately in providing AGO?s stock with a boost last week after Standard & Poor?s announced that the company would maintain its vital „AA? rating, particularly when the company?s ongoing efforts to boost capital appear to have given the rating staying power. However, we also believe that the stock price does not come close to reflecting what the removal of the rating overhang could mean for AGO as the only currently functioning monoline, and that last week?s price action may presage much larger gains ahead." And while AGO does not have the massive short overhang which could lead to an explosive short squeeze when unleashed, the underlying thesis is quite credible.All The World's A Stage
We can’t help but feel that we are watching a performance this week. It feels like the actions, the meetings, and the statements are all very scripted. It seems reasonably clear which ending they are going for, but many of their actions also fit the “alternative” ending so it remains imperative to be cautious. We will go through the motions of the planned scripts. Many will shake their heads as the markets respond, but sooner or later (probably sooner), even those who fell for the media blitz will realize nothing is resolved. The problems are bigger than ever, and we will have to revert to a new plan. A plan that will have far less ability to contain the problem than it would now, because too many resources will have been wasted again. Any sense that the photo op scene at the end of the week is going to be cut, then get ready for a huge sell-off. If they cannot create the photo op at the end of this week, we will hit new lows.Euro Soars On Merkozy Announcement Of Full Agreement... But No Euro Bonds - Live Press Conference Webcast
Here come the latest headlines from the Sarkozy-Merkel press conference:- SARKOZY CITES COMPLETE AGREEMENT WITH GERMANY REACHED
- FRANCE, GERMANY SEEK TO PREVENT REPEAT OF CURRENT CRISIS
- FRANCE, GERMANY WANT `NEW TREATY' FOR EU
- AUTOMATIC PENALTIES BACKED FOR BUDGET VIOLATORS, SARKOZY SAYS
- SARKOZY SAYS PREFERENCE IS FOR TREATY AMONG 27 EU COUNTRIES
- PEAN MONETARY FUND BACKED, SARKOZY SA
- EURO BONDS ARE `IN NO CASE' A CRISIS SOLUTION, SARKOZY SAYS
Is the World Spinning Out of Control?
Greg Hunter’s USAWatchdog.com
Dear CIGAs,
More Europe bailout news. Last week, the world was elated with news that the Federal Reserve and five other central banks got together to prop up Eurozone banks drowning on sour sovereign debt, but the crisis is far from over. The latest scheme is for countries to trade sovereignty over their budgets in return for more bailout money. The Sunday Times is reporting the ECB is putting together €1 trillion that will be used for a “colossal” intervention in European bond markets. The paper goes on to say, “The cash injection will only be carried out if leaders can agree on handing over more fiscal control to the EU and for strict controls to be imposed on nations struggling to control their debts.” (Click here for more.) Ann Barnhardt, an outspoken commodities brokerage owner who shot to notoriety because she closed her doors in the wake of the MF Global bankruptcy, says it will take much more than €1 trillion. Barnhardt thinks the MF Global implosion and coordinated action by central banks is an early sign of systemic failure approaching. In an interview last week, she said, “Europe is done. Europe is mathematically impossible. It cannot be saved. You even want to make a start at trying to bail out Europe, we’re talking $25 trillion JUST TO START…we’re in excess of $100 trillion to bail out Europe.” (Click here for the entire interview from Barnhardt.)
You think the $100 trillion number is a little high? That is the exact same number that came out of the World Economic Forum in Davos Switzerland at the beginning of the year. (Click here for more on that story.) While Barnhardt thinks the entire commodities market has been “destroyed” and a collapse is near, an article on Jesse’s Café American speculates a coming gigantic confiscation scheme is in the works. The story says, “At some point a ‘black swan’ event, or perhaps something the classical world would have simply called ‘nemesis,’ is going to knock the US futures market off its foundations. The government and exchanges will seek to force a solution on market participants through the de facto seizure of positions and accounts, with a settlement dictated by the Banks. MF Global looks like a dry run for that much larger default.” (Click here for more from Jesse’s Café American.)
Another ominous view of the EU was reported by NewsMax.com on Friday. The story said, “Bank of England Governor Sir Mervyn King has told banks to get ready for a Eurozone collapse, according to The Courier newspaper in the United Kingdom. . . . “Maybe it won’t break up, maybe it will continue in various forms, but maybe there will still be questions of default.” (Click here for the complete story.) The default probability was echoed by Nigel Farage, Member of the European Parliament, who said Sunday the big intervention spearheaded last week by the Fed spells trouble. Farage said, “I think what it tells you is there must be, there just has to be, some very major banks that are teetering on the edge of collapse.” (Click here for more from Mr. Farage from King World News.)
Economist John Williams from Shadowstats.com said in his latest post, the downfall of the European Union is not near as troublesome to the world as a collapse of the U.S. dollar. Williams said, “In contrast, the deliberate debasement of the U.S. dollar, and the unwillingness or inability of the U.S. government to address its long-range insolvency, promise an ultimate collapse of the U.S. currency that will leave the U.S. dollar absolutely worthless to its holders. The hoopla out of the major central banks, on November 30th, over renewed coordinated global efforts at maintaining banking-system liquidity, suggested a rapidly deteriorating circumstance. Further, the continued lack of meaningful growth in either the U.S. broad money supply measure, or in domestic bank lending, remains suggestive of deteriorating banking stability in the United States.” (Click here to go to the Shadowstats.com homepage.)
More…
Dear CIGAs,
More Europe bailout news. Last week, the world was elated with news that the Federal Reserve and five other central banks got together to prop up Eurozone banks drowning on sour sovereign debt, but the crisis is far from over. The latest scheme is for countries to trade sovereignty over their budgets in return for more bailout money. The Sunday Times is reporting the ECB is putting together €1 trillion that will be used for a “colossal” intervention in European bond markets. The paper goes on to say, “The cash injection will only be carried out if leaders can agree on handing over more fiscal control to the EU and for strict controls to be imposed on nations struggling to control their debts.” (Click here for more.) Ann Barnhardt, an outspoken commodities brokerage owner who shot to notoriety because she closed her doors in the wake of the MF Global bankruptcy, says it will take much more than €1 trillion. Barnhardt thinks the MF Global implosion and coordinated action by central banks is an early sign of systemic failure approaching. In an interview last week, she said, “Europe is done. Europe is mathematically impossible. It cannot be saved. You even want to make a start at trying to bail out Europe, we’re talking $25 trillion JUST TO START…we’re in excess of $100 trillion to bail out Europe.” (Click here for the entire interview from Barnhardt.)
You think the $100 trillion number is a little high? That is the exact same number that came out of the World Economic Forum in Davos Switzerland at the beginning of the year. (Click here for more on that story.) While Barnhardt thinks the entire commodities market has been “destroyed” and a collapse is near, an article on Jesse’s Café American speculates a coming gigantic confiscation scheme is in the works. The story says, “At some point a ‘black swan’ event, or perhaps something the classical world would have simply called ‘nemesis,’ is going to knock the US futures market off its foundations. The government and exchanges will seek to force a solution on market participants through the de facto seizure of positions and accounts, with a settlement dictated by the Banks. MF Global looks like a dry run for that much larger default.” (Click here for more from Jesse’s Café American.)
Another ominous view of the EU was reported by NewsMax.com on Friday. The story said, “Bank of England Governor Sir Mervyn King has told banks to get ready for a Eurozone collapse, according to The Courier newspaper in the United Kingdom. . . . “Maybe it won’t break up, maybe it will continue in various forms, but maybe there will still be questions of default.” (Click here for the complete story.) The default probability was echoed by Nigel Farage, Member of the European Parliament, who said Sunday the big intervention spearheaded last week by the Fed spells trouble. Farage said, “I think what it tells you is there must be, there just has to be, some very major banks that are teetering on the edge of collapse.” (Click here for more from Mr. Farage from King World News.)
Economist John Williams from Shadowstats.com said in his latest post, the downfall of the European Union is not near as troublesome to the world as a collapse of the U.S. dollar. Williams said, “In contrast, the deliberate debasement of the U.S. dollar, and the unwillingness or inability of the U.S. government to address its long-range insolvency, promise an ultimate collapse of the U.S. currency that will leave the U.S. dollar absolutely worthless to its holders. The hoopla out of the major central banks, on November 30th, over renewed coordinated global efforts at maintaining banking-system liquidity, suggested a rapidly deteriorating circumstance. Further, the continued lack of meaningful growth in either the U.S. broad money supply measure, or in domestic bank lending, remains suggestive of deteriorating banking stability in the United States.” (Click here to go to the Shadowstats.com homepage.)
More…
Preppers Who Have Guns, Ammunition, 7 Days of Food Can Be Considered a Potential Terrorist
There Is An Obvious Slowdown In The Chinese Economy
CNBC video interview, December 2011.
Related ETFs, iShares FTSE/Xinhua China 25 Index ETF (FXI)
*Marc Faber is an international investor known for his uncanny predictions
of the stock market and futures markets around the world.*
In The Investment World There Is No Such Thing As Safe
I have never heard of a safe haven as in the investment world there is no
such thing as safe.
Even if you own cash, the question is what kind of cash? If you owned
Icelandic króna two or three years ago you might have thought you were
sitting pretty. You would be holding cash and earning high interest at the
same time. You would have gone bankrupt. - *in Investment Week*
*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 T... more »
]
by Gary North, LewRockwell.com:
Higher education in the United States was transformed by Rockefeller money, beginning in 1902: the General Education Board. The GEB made grants to colleges only if they hired Ph.D-holding graduates of a handful of universities, which alone granted the Ph.D. This way, the universities could indirectly take over the rest of the colleges, which were mostly church-related. The strategy worked.
Rockefeller’s academic empire included the University of Chicago, which he founded. From the turn of the 20th century, the University of Chicago’s department of economics repudiated the use of gold in monetary affairs.
Milton Friedman earned his Nobel Prize for a book researched mainly by his co-author, Anna J. Schwartz: A Monetary History of the United States (1963). Born in 1915, she still works full time. In the Wikipedia entry for her, we read:
Read More @ LewRockwell.com
Higher education in the United States was transformed by Rockefeller money, beginning in 1902: the General Education Board. The GEB made grants to colleges only if they hired Ph.D-holding graduates of a handful of universities, which alone granted the Ph.D. This way, the universities could indirectly take over the rest of the colleges, which were mostly church-related. The strategy worked.
Rockefeller’s academic empire included the University of Chicago, which he founded. From the turn of the 20th century, the University of Chicago’s department of economics repudiated the use of gold in monetary affairs.
Milton Friedman earned his Nobel Prize for a book researched mainly by his co-author, Anna J. Schwartz: A Monetary History of the United States (1963). Born in 1915, she still works full time. In the Wikipedia entry for her, we read:
Read More @ LewRockwell.com
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