European banks prepare for worst, hoard cash.

Gold and Silver advance/Euro breaks to the upside/No Greek deal

Harvey Organ at Harvey Organ's - The Daily Gold and Silver Report - 27 minutes ago

Good evening Ladies and Gentlemen: Today's commentary is will short as I have arrived home late today. The price of gold rose by $14.30 to $1678.  Silver also rose by 59 cents to $32.24. I would like to caution you that we have the FOMC meeting results on Wednesday and Thursday is the dreaded options expiry.  So be careful as our bankers surely raid around these events. Let us head over to the

80%+ Immediate Downside To Par For New Greek "Fresh Start" Bonds

One of the funny things about the proposed Greek debt exchange offer is that, at least according to most recent fluid rumor, the cash coupon ceiling on the "post reorg" bonds, as dictated by the European finance ministers, will be 4% (hedge funds want more). So let's assume 3.5% for argument's sake. Perhaps the fact that the cash coupon of the US 30 Year note is roughly the same is somewhat concerning, because call us skeptical but Greek credit quality may be just a little worse than that of America - something which should be obvious to most. Except for European leaders of course. But that's fine - one can define cash coupons to be anything. After all the only thing that matters for bonds is yield, which Greece appears to have forgotten is determined by coupon and price. So since the Greek Debt/GDP will still be over 120% according to another set of rumors (after all, only a small portion of the country's debt is really getting impaired), it is 100% safe to say that in 30 years Greece will still go bankrupt. So let's say it deserves a comparable yield to its current 30 year bonds, which are priced to yield about 23%. We are being a little generous and estimate the fresh start bonds will yield 20% post break. Which means that according to a generic bond yield calc, the price on the fresh start bonds post reorg will be... 17.9 cents of par, or immediate losses of over 80% the second these bonds break for trading from par. 

Greek Debt Deal Rejected As S&P Begins European Bank Downgrades

At least they were kind enough to wait until the close:

• EURO ZONE FINANCE MINISTERS REJECT OFFER OF GREEK PSI REACHED WITH PRIVATE BONDHOLDERS, ASK NEGOTIATORS TO CONSIDER COUPON ON NEW GREEK BONDS BELOW 4 PCT-EURO ZONE SOURCES - RTRS
• EURO FALLS VERSUS DOLLAR AFTER EURO ZONE FINANCE MINISTERS REJECT GREEEK PSI OFFER

Translation: Greece demands that the coupon on its fresh start 30 Year bonds to be below 4%, or roughly in line with US 30 year paper. Good luck guys!
But, but, Marathon promised... And making things even worse, here come the long overdue European S&P bank downgrades

• CREDIT LYONNAIS CUT TO A FROM A+ BY S&P
• BNP PARIBAS OUTLOOK NEGATIVE BY S&P; OFF WATCH NEGATIVE :BNP FP

Sarc-o-bot (that's Sarcasm, not Sarakozy) screaming: "This is all priced in. Buy buy buy."

Citadel Is Pleased To Announce It Is Now Officially An Executive Headhunter, And A Travel Agency To Boot

You know, just in case that whole investment banking, equity research, high frquency trading, hedge fund thing does not work out, Citadel always has a plan B - to become an executive headunter. From Ken Griffen's annual letter: "We actively follow the careers of countless individuals across the competitive landscape in the interest of finding people who will strengthen our team and enhance our performance. Our talent database contains over 150,000 resumes, of which approximately 25,000 were added in the past twelve months. When recruiting for a given position, we often construct our short list from a pool of more than 100 highly qualified candidates. The decision making process for new hires often extends beyond the traditional interviews."And in case that fails, the company will become a certified travel agent: "Consider these statistics: in 2011, the Global Equities team traveled more than 3,500 days, on more than 1,600 trips, conducting 9,000 meetings with 2,000 different companies." Impressive stuff, and just shows you what one has to do when "expert networks" are no longer part of the picture. Then again the "whole hedge fund thing" may work for just a little bit longer: "We are pleased to report that Citadel Wellington LLC (“Wellington”) and Citadel Kensington Global Strategies Fund Ltd. (“Kensington”) have generated net returns in excess of 20 percent for 2011." Which means that Citadel has passed its high water mark for the first time since after 2007 and can actually collect performance fees and pay bonuses for a terrific job well done: victory!

10 Good And Bad Things About The Economy And Rosenberg On Whether This Isn't Still Just A Modern Day Depression

Two things of note in today's Rosie piece. On one hand he breaks out the 10 good and bad things that investors are factoring, and while focusing on the positive, and completely ignoring the negative, are pushing the market to its best start since 1997. As Rosie says: "The equity market has gotten off to its best start in a good 15 years and being led by the deep cyclicals (materials, homebuilders, semiconductors) and financials — last year's woeful laggards (the 50 worst performing stocks in 2011 are up over 10% so far this year; the 50 best are up a mere 2%). Bonds are off to their worst start since 2003 with the 10-year note yield back up to 2%. The S&P 500 is now up 20% from the early October low and just 3.5% away from the April 2011 recovery high (in fact, in euro terms, it has rallied 30% and at its best level since 2007)." Is there anything more to this than precisely the same short-covering spree we saw both in 2010 and 2011? Not really: "This still smacks of a classic short-covering rally as opposed to a broad asset- allocation shift, but there is no doubt that there is plenty of cash on the sidelines and if it gets put to use, this rally could be extended. This by no means suggests a shift in my fundamental views, and keep in mind that we went into 2011 with a similar level of euphoria and hope in place and the uptrend lasted through April before the trap door opened. Remember too that the acute problems in the housing and mortgage market began in early 2007 and yet the equity market did not really appreciate or understand the severity of the situation until we were into October of that year and even then the consensus was one of a 'soft landing'." Finally, Rosie steps back from the noise and focuses on the forest, asking the rhetorical question: "Isn't this still a "modern day depression?" - his answer, and ours - "sure it is."

Volume Crashes As Stocks End Unchanged

Amid the lowest NYSE volume of the year (-24% from Friday - OPEX) and pretty much the lowest non-holiday-period volume in 9 years based on Bloomberg's NYSEVOL data, ES (the e-mini S&P 500 futures contract) ended the day almost perfectly unchanged underperforming 5Y investment grade and high-yield credit indices on the day as both moved to contract tights (their best levels since early August last year) even as their curves flattened. There has been lots of chatter about how the steepening of the short-end of the European sovereign bond markets (Italian 2s10s for instance) is a sign that all-is-well in the world again, well unfortunately the flattening of the short-end of US IG and HY credit markets sends a rather less positive signal than headlines might care to admit (as jump risk in the short-term remains 'high' relative to bullish momentum in the medium-term). At the same time, vol markets are showing extreme levels of short-term complacency as 1m VIX is almost at record low levels relative to 3m VIX (and diverging today from implied correlation). Broadly speaking , risk assets rallied into the US day session open only to sell off into the European close (with Sovereigns leaking back the most). The afternoon saw risk rallying as the path of least resistance appears to be up all the time there is no news. Stocks ended well off their highs of the day, in line with broad risk assets, as TSY yields rose 3-4bps higher, Oil and Copper 1.5-1.75% higher (outperformed) while Silver and Gold hugged USD weakness at around a 0.5% gain from Friday's close.





Kinsley: About Rising Inflation, Please Remain Worried.

Is America Really De-Leveraging?

Dave in Denver at The Golden Truth - 1 hour ago

*Reeeaaally?* I've been noticing a lot of reports in the media - especially Wall Street cheerleader telecasts like CNBC and Bloomberg - that make the claim that America and Americans are de-leveraging. This particular spinmeister claim really bugs me because it's so easy to fact-check. But it's not just the media. Zerohedge featured a report published by the consulting firm, McKinsey & Company, which makes the case that Americans are reducing their debt load. Those who went to top business schools know McKinsey as being the most sought after place to go if you want to work in a... more » 

 

Gold Chart and comments

Trader Dan at Trader Dan's Market Views - 2 hours ago

Gold has made it into a formidable resistance level near $1680 which has served to bring out some heavy selling, just as expected seeing that a breach of this defensive line by the bulls will set the market for a run to $1700 and higher. Gold bears can read the charts just as we can and understand what will bring in the momentum buyers if they fail to hold it here. If the recent price advance falters here at this critical zone, then we will see a setback towards $1650 - $1645 initially followed by a bit deeper drop to $1620 or so if the dip buyers are a bit sluggish in making their ... more » 

 

Silver runs right into a Resistance Zone and then halts

Trader Dan at Trader Dan's Market Views - 3 hours ago

Just as if on clue, Silver bulls came out of the gate bucking high and hard but were unable to throw the bears who have dug in at the exact spot on the chart which says they should. Take a look at this chart which I posted last week and which is still applicable after today's trading session. Notice how silver shot up throw that "formidable resistance zone" near $32.50 but then faded to close almost right on the line instead of solidly above it. Still, the bears dodged that bullet only by the slimmest of margins as the market put in a strong close to end the session, although it h... more » 

 

Gold Daily and Silver Weekly Charts

more »

SP 500 and NDX Futures Daily Charts - Wobbly Day - VIX Recumbent

Difference Between Streamlining the Military and Isolationism

 

 

Juan Ramón Rallo and Alasdair Macleod Talk About the Spanish Economy, Gold and Silver

Supreme Court Rules Warrant Needed For GPS Tracking

Egon Von Greyerz: Gold Breaking Out, Will Hit New All-Time Highs

from King World News:
With gold attacking the critical $1,680 level and silver remaining strong above $32, today King World News interviewed the man who told clients in 2002, when gold was $300, to put up to 50% of their assets into physical gold. Egon von Greyerz is founder and managing partner at Matterhorn Asset Management out of Switzerland. When asked about the recent action in gold, von Greyerz said, “Sometimes we get lucky with our calls. I called the bottom of gold when we talked around the end of December. When we spoke last week I said it looks to me like silver is going to break out here and this is exactly what is happening. This is very good action and it’s as we expected.”
Egon von Greyerz continues: Read More @ KingWorldNews.com

Goldman Previews The Fed's Statement, Plays Down Expectations Of A "Dovish Surprise"

As widely expected by Zero Hedge, barely a few months after the arrival of former Goldmanite Mario Draghi to head ECB, the ECB's balance sheet exploded by nearly $1 trillion. Naturally, such is the way of central banks infiltrated by tentacles of the squid: no surprises. Which brings us to the first Fed meeting of 2012 and its public manifestation: the FOMC's January 25 statement. As is well known, while the Goldman addition to the ECB is a recent development, its agent at the Fed, the head of the FRBNY Bill Dudley has been there for a quite a while - in fact ever since the tax-challenged Mike Judge character impersonator left to become Treasury Secretary. As was suggested on Zero Hedge, it was the meetings of Bill Dudley with Goldman's Jan Hatzius at the Pound and Pence, and of course elsewhere but these are the only public recorded ones, that have shaped monetary policy more than anything. In other words, if anyone can predict, not to say define, US monetary policy, it would be Jan Hatzius. Below are his just released "thoughts" on what to expect on Wednesday. What is odd is that whereas a month ago Goldman was convinced that an LSAP version of QE was imminent, now the firm has become substantially less optimistic. Is it time to manage down expectations? To wit: "Given the improvement in the economic indicators and the easing of financial conditions that has occurred in the meantime, we believe it is less central now. While Fed officials are certainly not targeting a tightening of conditions, we doubt that they will "bend over backwards" to deliver a dovish surprise relative to current market expectations." So just how much QE3 is priced in if Goldman is already doing disappointment damage control. Or did Goldman finally wise up and realize that the only effective Fed statement is the one that surprises. So if Goldman does not publicly expect QE3, and we do in fact get a notice thereof, it will have an immediate knee jerk reaction on risk, and of course, Gold. These and many more questions shall be answered at 12:30 pm on Wednesday.

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