FX Markets Bracing For Major Event

Last night we noted that OandA will shut-down trading on Sunday ahead of the market-moving events surrounding the Greek election (as it seems they are unwilling to take the agency risk and potentially counterparty risk on a large gap). Nowhere is this more clearly priced into the market than the short-dated FX option market. EURUSD 1 week implied vol is at its greatest premium to realized vol ahead of this weekend than at any time in the last three-and-a-half years. The last time the level of short-dated vol was near this high (in absolute and relative terms) was December 9th 2011 and EURUSD fell 400 pips in the next few days.

It's Precious Metals Smack Down Time

It would appear the BIS gold trading team is back from their cappuccino break.







I’m sure many of you may be asking yourselves, “Well, how likely is this counterparty run to happen today?”

Posted by : Reggie Middleton

Post date: 06/14/2012 - 07:48

As Predicted Last Year, The French and the Greeks Are In A Race For The Biggest Bank Run! Each stock showcased has led the drop as well...

A Blueprint to Kill JP Morgan’s Alleged Massive Manipulative Position in the Silver Futures Market 

Posted by: smartknowledgeu

Post date: 06/14/2012 - 05:28

SemGroup in 2008 and the London Whale in 2012 have given the people a blueprint to kill JP Morgan's alleged massive manipulative position in the silver market.

 

European Bailouts: Absurd Economics And Absurd Morality

Admin at Jim Rogers Blog - 7 minutes ago

The way the system should work is when you fail, you fail, and competent people are required to come in reorganise the assets. What we are doing in the West now is taking assets from the competent people, giving them to incompetent people, and saying 'now you compete with the competent people with their money'. It is absurd economics and it is absurd morality. - *in Investment Week* Related ETFs: iShares MSCI Spain Index ETF (EWP) *Jim Rogers is an author, financial commentator and successful international investor. He has been frequently featured in Time, The New York Times, Barro... more » 

Don't Follow The Weak Hands

Eric De Groot at Eric De Groot - 1 hour ago

The exodus from stock mutual funds resumes as investors pull out $3 billion in June 2012. There's a reason why the public is referred to as the weak hands behind closed doors. They often sell when they should be buying and vice versa. Are the strong hands buying in size as the public sells? Not quite. The better long-term entry points often coincide with statistical extremes of emotion... [[ This is a content summary only. Visit my website for full links, other content, and more! ]] 

Alan Greenspan on U.S. Debt

Eric De Groot at Eric De Groot - 3 hours ago

Read between the lines: A mixture of excessive debt spread across the Western economies and zero political will to restrain deficit spending has the potential to send the US and global economy down the path of slow growth and currency-induced cost push inflation. The combination was 'stagflation' in the 1970's. Greenspan also suggests that investors increasingly wary of perpetual,... [[ This is a content summary only. Visit my website for full links, other content, and more! ]]

Peripheral Stocks Pump As Spanish Bonds Dump

Italy, Spain, and Greece saw their stock markets rally today (with Greece dramatically so - though what exactly is 10% of nothing?). The rest of European stocks are underperforming as equities broadly deteriorate towards credit markets' already less sanguine shifts. In the last hour or so equities and credit did rally modestly into the EU close but investment grade credit remains near one-week wides as stocks remain range-bound. Spanish bonds (cracking over 7% yields) diverged significantly today as Italy managed to rally modestly close to close. Spain's 10Y spread to bunds has risen 90bps from its opening rally on Monday morning and over 55bps from Friday's close (and Italy +22bps on the week).; but Italian stocks are down 3% on the week and Spain up 1.85% on the week. It all makes sense if you blur your eyes and put your fingers in your ears. EURUSD managed to get back over 1.26 (as gold and silver dumped this morning) as we suspect we are seeing more repatriation flows (and TSYs tumbled this morning) but with Swiss 5Y rates almost 5bps negative, Europe remains teetering.

The Absurdity Continues: Fed Buys 30 Year Bonds Two Hours Before Treasury Sells 30 Year Bonds

Yesterday we noted the supreme absurdity of having the Fed buy 10 year Bonds two hours before the Treasury sold 10 year bonds (which obviously priced at terrific terms as there was a $4 billion hole created courtesy of the Fed if only for 2 hours). Today, the lunacy continues. The Fed has just bought $2 billion in 30 year bonds just two hours before the Treasury sells $13 billion in 30 year paper. The ponzi has become so glaring they don't even care to hide it any longer.

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Slovenia Is Spain: Is Another European Country's Bank Bailout On The Way?

Has the Spanish bank bailout set a precedent for all other insolvent EMU member countries to follow? Of course. The only question is when is the stigmata of demanding a bailout (which Europe now has no choice but to grant courtesy of set precedent, be it via ESM or otherwise) less relevant than national pride, than preserving one's banking sector, and preferably preempting the kinds of bank runs that pushed Spain to demand a bailout in the first place. For one small Eurozone member country the answer may be if not now, then very soon. Slovenia's Dnevnik asks a simple question: "How serious is the situation of Slovenian Finance - are we on the way of Spain?" The answer, in not so many words: very likely yes.

Why A European Banking Union Is Far From Imminent

The implicit risk transfer from periphery to core - and loss of sovereignty this assumes - that is inherent in any banking union (or Euro-FDIC) is not just a stumbling block for the Germans, Finns, and Brits; without fiscal integration it is a non-starter (which no matter how much chatter or 'coming soon'-phrases we see, is not occurring within weeks/months given the Treaty changes and ratification required). Stratfor's Adriano Bosoni does an excellent job of summarizing the short- and long-term hurdles and implications of what so many of the 'poor' nations are calling for (and yet seem not to comprehend). The proposals all involve a transfer of funds from the center to the periphery and all involve a loss of national control of different aspects of their economy. The ceding of authority to unelected officials in Brussels that will be required may seem like a compromise the desperate Spanish leaders (for example) are willing to take in the short-term. In the long-term, the loss of control over the budget and banking sector would leave the nations under the authority of an external force - a concept that threatens the very existence of the nation state as we know it today. This key contradiction between EU integration and national sovereignty undermines the European project from its foundations.

With Egypt On The Verge Of A Military Coup And Martial Law, Art Cashin Issues A Warning

"The most important election this weekend may have nothing to do with the Eurozone - at least directly. The election in Egypt may change the face of the Middle East. The implications to Israel, Iran and Saudi Arabia are enormous. Will the most populous Arab nation become a theocracy? This will be some weekend."

Bob The Bear Is Briefly Bullish... Before Things Go Boom

My stop loss over the next 4-6 weeks while I expect this risk-on phase to play out is simple: a weekly S&P close below 1267 would for me be very bearish and likely change things. But as mentioned, instead I expect to see markets struggle with headlines and volatility, but ultimately climb the wall of worry up towards 1400, perhaps 1450 S&P....
And then?...  My forecast for this extremely bearish risk-off phase over late Q3 and Q4 is that the S&P500 trades below the low of last year, perhaps as low as 1000 +/- 20. The iTraxx Crossover index should over that period widen from around 550/600bp (my end July/early August risk-on target) out all the way to certainly 800bp, and more likely closer to 1000bp. And we should see core bond yields rally hard – I expect 10yr UST yields to rally from my 2.35%/2.45% end July or early August target, all the way down to 1.5%, maybe even lower.

Charting The Generational Shift In Equity Risk Appetite

The topic of deteriorating volumes in equity trading has not been far from our thoughts for a few years now but BTIG's Dan Greenhaus has one of the more explicitly clear and sobering charts of this trend today. Whether you see this as a signal of a lack of trust in our capital markets, an investor-class burned by multiple sigma events occurring weekly, an increasingly binary set of scenarios that leave investors clueless, retiring boomers demographically unwinding the 30 year rip, savings draw-downs as income stagnates, or more simply just a generational shift in attitudes towards risk appetite/tolerance; the absolute value of stocks traded is for the first time in a generation diverging rapidly lower as stocks levitate on central bank largesse. It leaves the question: who is the incremental buyer and how sustainable is their presence?

Bond 'Parishioners' Are Leaving The Euro 'Church'

Mark Grant has been on Wall Street for thirty-eight years now. You may claim brains and brilliance and the best investment committee this side of Alpha Centauri but he can smell the napalm in the morning and his nostrils are jumping as if infused by pepper gas. It was in the spring of 2010 that he concluded that Spain was going to get put in “time out” and put it in black and white. Yesterday as Moodys downgraded Spain by three notches to just above junk and likely today the Spanish banks will feel the pain and as the yield on the Spanish ten year is just under 7.00% the heat is on and the stove has been turned up to high. The Italian 10 year yield is 6.25% now and financial markets operate as a matter of faith and it is obvious that the parishioners are leaving the church. There should be no surprise that Greece and Spain and Portugal and Ireland keep asking for money and it should not shock anyone that many clever schemes have been postulated to try to get Germany’s money and it should also not surprise anyone that Germany mouths all kinds of nice and polite phrases to object but in the end Germany will keep rejecting any plot that will lessen their lifestyle.

Initial Claims Miss Big, People Falling Off Extended Claims Soar To 135K, CPI Plunges Most Since December 2008

Another economic data point, another preview of the coming NEW QE (and if Goldman is right, the perpetual NEW "Flowing" QE). Initial claims print at 386K, a number which will be revised to 390K next week, a swing and a miss to expectations of 375K, and not even the mainstream media will be able to come up with tits token idiotic headline that claims decline because they did not, even relative to last week's revised 380K from 377K. This is the 22nd expectations miss in the last 25 reports. Continuing claims also miss expectations of 3270K, printing at 3278K. But the biggest surprise to some (not ZH readers who were warned that 700,000 Are About To Lose Their Extended Jobless Claims Benefits), a massive 135K people fell off the Extended and EUC claims as the 99 week cliff hits more and more. Recall that last week 105K dropped of extended claims. This means that in the past two weeks alone 240,000 people no longer collect the last possible form government unemployment benefits, the most in a two week period since December 2010!. We can only hope they are fat enough to collect the new normal stimulus check: disability.

The Definitive Lesson In "New Normal" European Geography

For your definitive documented "X is not Y" atlasing needs.

Greek Stock Market Soars On Speculation Tsipras Bluffing

Something amusing happened in today's global capital markets: while European bond markets, especially in the periphery, are sliding following the Spanish downgrade and the Italian bond auction, one market has soared: that of Greece, which is up nearly double digits (not all that meaningful when you are at 20+ year lows), and whose bankrupt and deposit-free banks are up 20%. Which in turn is pushing US futures higher despit the Spanish record yield. What has caused this spike? Nothing but more political rhetoric and jawboning. Specifically, overnight Kathimerini reported that "Stefanos Manos, the leader of the small liberal party Drasi, claims that leftist SYRIZA will not scrap Greece’s bailout if it comes to power because it is the only way it can guarantee salaries for its supporters in the civil service." Well, yes. Tspiras never said he will scrap the bailout. He merely said that he will end the memorandum in its current format. The decision then, and as always, would lie with Germany and the ECB, what to do about this latest Nash Equilibrium defection. In other words, the ultimate decision-maker was never Tsipras, and in fact even ND's Samaras has repeatedly said he would renegotiation the terms of the Greek bailout. But in this centrally-planned, robotically-traded market, confusion over cause and effect is to be widely expected.

Frontrunning: June 14

• Greek Banks Under Pressure (WSJ)
• France Seeks Eurozone Stability Package (FT)
• Germany Dashes Eurozone Expectations (FT)
• Geithner Says European Leaders Know They Must Do More (Bloomberg)
• In Athens, Party Aims to Delay Austerity (WSJ)
• Rajoy Battles ECB for Loans; Monti Appeals for EU Action (Bloomberg)
• Nokia Slashes 10,000 Jobs, Cuts Outlook (WSJ)
• H-1B Visas Hit the Cap, Sending Companies to Plan B (Businessweek)
• Swiss National Bank Vows to Defend Currency Floor (WSJ)
• Euro Crisis Deeper With Moody’s Downgrading Spain, Cyprus (Bloomberg)
• When all else fails... Truckers As Leading Indicator Show Stable U.S. Economic Growth (Bloomberg)

 

Spanish Bank Borrowings From ECB Surpass Italian, As Italy Sovereign Debt Hits Record €1.95 Trillion

Below we present two more charts for your rubbernecking pleasure. First, we observe the just released data showing Spanish bank borrowings from the ECB: at €287.8 billion, this was a €24 billion increase from April, €235 billion from a year earlier, and the highest ever. More importantly, as can be seen on the first chart below, for the first time since June of 2011, Spanish bank ECB borrowings increased to more than those of Italy, which at just €272.7 billion rose a mere €2 billion from April month (to a new record as well). In other words, both Italy and Spanish banks are now spurned by counterparties everywhere, but Spain's a little bit more than Italy's. Yet before Italy gloats, it bears reminding Italy that its own offsetting factor, and where it is weakest, its insane public debt, just hit a new record high of €1.95 trillion, pushing the country's debt to GDP ratio well into the 120%+ range.

Italy Sells €4.5 Billion In Bonds As Yields Soar

There was a time in 2011 when every European auction, particularly those in Spain and Italy, was followed with great interest due to a morbid fascination that it may well be their last. In 2012 this time has come much faster than last year. Earlier Italy sold a total of €4.5 billion in 3, 7and 8 year bonds which was at the top end of the range of expected issuance. The problem was in the unsustainable yields this debt sold for:

• €3 billion in 2015 bonds, B/C 1.59 vs 1.52 in May 14, yield soared to 5.30% vs 3.91% a month ago
• €627 million in 2019 bonds, B/C dropped from 2.27 on April 27 to 1.99; yield soared from 5.21% to 6.10%
• €873 million in 2020 bonds, B/C dropped from 2.08% on May 14 to 1.66%, yield soared from 5.33% to 6.13%

 

Spain's Unlucky Number Seven

Spanish downgrade aftermath: SPG at 7%. Well, not quite 7%.... 6.998% as of 5am Eastern. A new record. We give it a few hours before 7% is breached once the news hits that Moody's has cut Spain's three biggest banks by 1-3 notches as explained yesterday. Also, CDS at a record 611 bps is not helping either.
 












Today’s Items:

First…
Italy May Have Two Weeks Tops
http://www.zerohedge.com

Italy already is where Spain may be heading.  The relatively good news is that Italy has avoided the real estate bubble capable of bring down the banking system.  With that said, with Italy heating up, expect more money to be transferred to so-called safe havens like the U.S. Dollar.

Next…
More Rich Chinese Buy US Property
http://www.ft.com

According to a report published by the National Association of Realtors, China and Hong Kong are the second largest group of foreign buyers of homes in the U.S. With so many vacant cities in China, one can easily guess why they are bringing their money over here. The 23 percent, or $7.3 billion, increase may be because they want hard assets when financial crash of currencies, hit.

Next…
US Could Outproduce Russia, Saudi Arabia in Oil and Gas
http://www.france24.com
http://205.254.135.7

The U.S. is seeing a dramatic surge in oil and gas production and could overtake the world’s biggest producers, Russia and Saudi Arabia, in another decade.  Of course, there is one little problem.  The last refinery built was in 1977, and even with the upgrades to existing refineries, the U.S. still needs to ship the oil elsewhere to be refined.  Also, keep in mind; this isn’t because of government policies. It’s despite them.

Next…
Best U.S. Senate Banking Committee Money Can Buy
http://www.zerohedge.com
http://finance.yahoo.com

Members of the U.S. Senate Banking committee, that are investigating JP Morgan, have received $877,798 in bribes err. contributions from JP Morgan.  So, will these paid off Senators forgive Jamie Dimon when he said he was sorry.

Next…
Those Who See Will Survive The Coming Monetary System Collapse
http://www.dollarvigilante.com

The vast majority of people are asleep and blind to the reality of what is going on around them.  Hardly anyone sees the brick wall the entire western world is headed for at breakneck speeds.  When the US dollar and, with it, many nation states collapses, many people will be in shock. How much time is left?  It is better to be prepared over a year before the collapse happens, as opposed, to one minute after. There’s never been a more important time to have your eyes open.

Next…
Killing Grandma Is Cool?
http://endoftheamericandream.com

In a growing chorus of perversion, many “intellectual elite”, via the press, believe that most elderly people should not have the same access to medical technologies as young healthy people.  They even go so far as to want to deny lifesaving medical treatments for children with special needs. In fact, these bastards are trying to glorify pulling the plug on grandma.  What’s next? Take grandma out into the field and shoot her if she broke her hip?

Next…
Internet Bill of Rights
http://www.youtube.com

In some good news, a bill is being introduced in the U.S. Senate, by two Senators who were critical to the defeat of SOPA; so that, digital citizens will have the right to a free uncensored internet.  Of course, expect an array of excuses from Obama, and his cabal, to kill this great legislation.

Finally, Please prepare now for the escalating economic and social unrest. Good Day

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