The Pain Trade: Market Sees 70% Chance Of More Fed Easing
Think the Fed will pump more today? You are not alone: an implicit 7 out of 10 market participants do so too (and have for the past 70 or so S&P points, urged by nothing more than hopes of more easing as economic data after economic data has come in worse than expected). Which naturally means the pain trade today will be one of disappointment. But fear not: everyone will be able to sell ahead of everyone else if and when the Fed disappoints. Or so the thinking goes. Others like Citi, Deutsche and now SocGen, believe that a real policy intervention will come in only following a market crash. Bottom line: nobody knows anything. Correction - we know one thing. Absent central bank intervention everyone now agrees that the economy would be a complete disaster, so at least we can stop pretending that the word "recovery" makes any sense.
BTFD...They hammer the price lower before the Fed meets...Keep Stacking...
Sentment: Hoping And Praying Bernanke Sees His Shadow And Six More Months Of NEW QE
Everything today is all about the Fed, which at 12:30 pm will release its standard statement. The publication of Fed officials' forecasts and Chairman Bernanke's press conference will follow at 14:00 and 14:15, respectively. Some, like Goldman are convinced the Fed will announce new easing measures, which could take the form of a new LSAP, more Twist as well as a lengthening of short-term rate guidance beyond 2014, potentially going as far as announcing a Flow-based form of QE, while others such as BofA are fairly certain nothing will happen. Then at 2:00 pm the Fed will release its new economic projections, in which it is roundly expected that the Fed will revise its GDP forecasts for 2012 and 2013 lower, and unemployment - higher. Finally at 2:15 pm Bernanke will address Steve Lies-man and a few other members of the fawning captured media. By then the market will be either much higher or much lower, although with about 5% of the recent market move driven entirely by pricing in of more QE, the risk is to the downside. In other words the hopium phase is over. It is now make or break for the Fed.Germany Lashes Out, Accuses US Of Hypocrisy
There are those (such as the entire world) who have in recent months ganged up on Germany, see "In The Case Of The World Vs Merkel, The Broke Prosecution Proposes Eurobonds Lite", and are now openly demanding that the German population shoulder even more of the broke continent's bailout costs, and not only that but implicitly foot the lowering of the French retirement age from 62 to 60. Nowhere is there any discussion of how Germany should go about achieving this: by raising its own retirement age to 100 maybe? Nor is there any discussion that Germany is now very actively engaged in bailing out Europe one day at a time to the tune of €2 billion each 24 hours via TARGET 2. Well, it was only a matter of time before Germany, having long kept radio silence, lashed out at its accusers. Spiegel summarizes: "Merkel was certainly in the hot seat, once again, as many nations pressed her to do more for the euro -- at a time when many Germans feel their country has already done too much." And finally the instigator of it all, TurboTaxCheat Tim Geithner, gets exposed: "It is rather hypocritical when the Americans and the British, whose own mountains of debt have reached a high point, try to lecture the Europeans. One number is sufficient to reveal what a bad tactic this is. At a time when the budget deficits of the US and Great Britain are about 8 percent, the euro-zone members have almost managed to bring their deficits as a whole down to 3 percent." And they are spot on: Europe may be going through a painful time but at least it is doing something to address its problems. America continues to rely on one simple, and very much transitory thing: reserve status. Newsflash: reserve status ends. And when it does: run.Watch the Front Line of The Economic Battle
Eric De Groot at Eric De Groot - 12 minutes ago
While the media focuses on changes in Fed policy, Europe, coalition
governments, and endless bailouts designed to buy more time etc, they often
ignore the front lines in the economic battle at the expense of fluff. The
front line battles are beginning to reflect a slowing global economy with
falling growth and consumer expectations. The bond market's confirmed
breakout to new highs on...
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Crop insurance a boon to farmers -- and insurers, too
Eric De Groot at Eric De Groot - 25 minutes ago
It's a system of socialized losses and privatized gains. Wall Street and
the bankers know something about this... Skewing farming to more risky
practices is a reason for concern, the critics say. If the bets pay off,
then the farmer wins. But if they do not, then the government program makes
up the losses so the farmer can bet again the following year. It’s a system
of “socialized losses and...
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Underpaid, underemployed and barely making ends meet
Eric De Groot at Eric De Groot - 25 minutes ago
What's playing out in Europe will eventually unfold in America. Headline:
Underpaid, underemployed and barely making ends meet Throughout the Great
Recession and the not-so-great recovery, the most commonly discussed
measure of misery has been unemployment. But many middle-class and
working-class people who are fortunate enough to have work are struggling
as well, which is why Sherry Woods, a...
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MF Global Customers "Get the Chance" To Auction Off Hopes For the Full Return of Stolen Funds
Frontrunning: June 20
- Prepare for Lehmans (sic) re-run, Bank official warns (Telegraph)
- Fed Seen Extending Operation Twist While Avoiding Bond Buying (Bloomberg)
- US Watchdog Hits at ‘Risky’ London (FT)
- G20 Bid to Cut Cost of Euro Borrowing (FT)
- Romney Says Rubio Being Examined as Possible Running Mate (Bloomberg)
- Hollande Says Worth Exploring ESM Bond Buys (Reuters)
- US Upbeat After Eurozone Debt Crisis Talks (FT)
- BOJ Members Say Japan Could Be ‘Adversely Affected’ by Europe (Bloomberg)
- China Steps Said to Grow Bond Market, Add Issuer Scrutiny (Bloomberg)
- How Asia Will Fare if Europe Cracks (WSJ)
Pasok's Venizelos Says "Greece Has A Government"
And off to largely irrelevant Greece, where former minister of virtually everything Venizelos has just announced that the country has a government.
- VENIZELOS SAYS CONDITIONS FOR COALITION BEING MET
He adds that the key issue will be to form a bailout renegotiation
team. In other words we have merely days before Germany says no and it
is back to the drawing board for the beggars who almost could be
choosers.
As Italy Comes Begging For A Semi-Bailout, Germany Says Non-Semi Nein (Without Conditions)
Two days ago, when noting that Italy is on collision course with
technical insolvency should its bonds remain at current levels for even
one more week, we wrote that "As Italy Hints Of Subordination, Did Rome Just Request A "Semi" Bailout?" Of course, yesterday's big market moving rumor was just this - namely that "supposedly" Germany had agreed to
provide the underfunded EFSF and non-existent ESM as ECB SMP
replacement vehicles, and implicitly to launch the bailout of not only
Spain but also Italy. This turned out to be patently untrue, as we
expected, despite speculation having been accepted as fact by various UK
newspaper and having taken Europe by a storm of false hope, leading
peripheral spreads modestly tighter (and Germany naturally wider). Of
course, even if Merkel were to allow the ESM/EFSF to effectively replace the ECB secondary market bond buying, which is what this is all about, nothing will
be fixed, and in fact it would lead to even more subordination and
more bond selling off of positions which are not held by the ECB or
ESM. But that is for the market to digest in 4-6 weeks as it appears
nobody still understands how the mechanics of the flawed European
rescue mechanism works. In the meantime, now that Italy has tipped its
hand, it has only one option: to push full bore demanding that someone,
anyone out there buy its bonds. Sadly, Germany just said nein. Again.
Forget EURIBOR And Basis-Swaps; EUREPO Curve Inversion Signals Major European Funding Stress
It
would appear that one-by-one the open-market indications of stress in
European funding markets are manipulated to the point of worthlessness.
As the provision of unsecured lending is for all intent and purpose
finished in Europe, LIBOR is a mirage and even cross-currency
basis-swaps (though modestly margined) have lost their 'signal' as
MRO/LTRO reduced the term-funding need. However, as recently highlighted
by @SoberLook, the
EUREPO curve - which measures how much banks have to pay to borrow,
when pledging or repo-ing assets, for loans - is not only
un-manipulated as of yet but is flashing very bright warning signals
that all is absolutely not well in European bank liquidity. The
'signal' that is clear is the inversion of this curve, which means
simply that it is significantly more expensive to repo (borrow) in the
ultra-short-term than for a much longer-term. This is likely due to the
banks' need to fund deposit outflows, thus requiring the banks to
'find' that cash (by 'lending' their assets as security for the loan).
The loss from the counterparty bank seizing your collateral if it
went broke is far higher over a longer-period and thus there is a very
strong preference to only repo overnight relative to 3 months, for
instance. This repo curve inversion signals a total lack of
trust among European banks (in even the shortest of tenor), no belief
in short-term 'bailout effects' lasting more than weeks, as well as a
huge demand for cash (repo) that suggests deposit outflows remain very
active.
There appears to be two perceptions of
Germany in the EU. One that caters to other voices and one that is
individualistic. This explains why the Merkel government says they will
do anything to save the euro, however, does very little. The answer why
this is happening is very simple. Putting Germany first might leave
Merkel isolated in Europe, but she would be very popular at home for
next year’s election.
Next…
Western Central Banks Print Money, Emerging Market Central Banks Buy Gold
http://seekingalpha.com
Western Central Banks Print Money, Emerging Market Central Banks Buy Gold
http://seekingalpha.com
While western central banks, like the Fed,
print currency to infinity while using their influence to paper down
the price of gold and silver, emerging economies like Mexico, Russia,
Turkey, and the Ukraine are increasing their holdings in gold. For
example, the National Bank of Kazakhstan plans to increase its share of
gold from 15 to 20 percent of its total reserves, further displacing the
euro as their debt crisis deepens. In short, one has a choice, follow
the corrupt Western bankers suicidal philosophy, or get physical like
the emerging markets.
The strongest evidence of the continued
chaos in Europe is a chart of the Spanish bond yields. Spanish bond
yields are now approaching 8%. Stephen Leeb, of Leeb Capital Management,
believes the world is heading toward a ‘de facto’ gold standard. In
terms of silver, Japan is just now putting in 3.2 gigawatts of solar,
which requires 400 tons of silver, and this is the first step.
Only the state of Wisconsin has 100% of
its public sector pension liabilities funded. 15 states, including
Texas, New York, and Florida have 80% or more of their pension
liabilities funded. Rhode Island, at 49%, and Connecticut, at 53%, bring
up the rear. Is it any real stretch that private pensions will be
targeted to take up the public pension slack?
This so-called recession, which is more
like an ongoing depression, has greatly impacted young households, those
households made up of people between ages 35 to 44. The average family
lost 35 percent of its household wealth, composed largely of home values
and stock investments. Those 65 years old and older saw their net worth
fall by 13 percent over the past five years.
Next…
Police To Hold Gun Turn-In Event This Weekend
http://chicago.cbslocal.com/2012/06/19/police-to-hold-gun-turn-in-event-this-weekend/Police To Hold Gun Turn-In Event This Weekend
Police, in Chicago, are using the lure of a
$100 gift card, provided by taxpayer money of course, to get guns from
the city’s victims err… citizens, while the criminal element, armed to
the teeth, will be able to take advantage of newly disarmed victims.
In first place is Max Keiser and Stacy
Herbert of the Keiser Report followed by Tyler Durden at Zero hedge. I,
personally, would like to have seen SGT Report, BrotherJohnF, or
Endlessmountain on the list; however, there is always next year.
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