Some very curious thoughts ahead of tomorrow's FOMC announcement from none other than Citigroup: "There is a strong view in markets that 1) the Fed have to do a big QE, given the expectations that have been built up, and 2) the added liquidity will have a marginal effect. Taken together this raises the risk that the assets that will benefit are those sensitive to liquidity, such as money substitutes and Treasuries, rather than assets that are sensitive to real business cycle expansion." Money substitutes = gold
Instead of waffling on for an hour about all the wonderful things that Europe will become as a stronger world power if only everyone can just get along, give up sovereignty, and bow to Barroso, Daniel Hannan sums up perfectly what 'should' happen in order for some closure and resurrection to occur in the dis-union.
Bill Gross Sells $30 Billion In Treasurys In August As Total Return Fund Cuts Government Exposure By Over A Third
While others were buying TSYs in the month of August on hopes of frontrunning the central printer, and expectations that Bernanke's NEW QE announcement will lead to even more flattening in the curve (even though as we explained there is only $650Bn in free 10-30 year private sector inventory available in the entire market), Bill Gross, via PIMCO's flagship Total Return Fund, was busy selling. So busy in fact that over $30 Billion in US paper was dumped to unwitting investors, resulting in the move wider by the 10 Year paper which at auction earlier today priced at a multi-month high yield. As a result at the end of August, PIMCO's total Treasury exposure was just 21% of total AUM, the lowest since August 2011. And what did Pimco do with the proceeds? Nothing - it merely satisfied its margin cash position, which plunged from -18% to -6%.
Once upon a time we thought that literally throwing cash out of rapidly moving objects was a privilege strictly reserved for Fed chairmen. Not any more. Moments ago, a car chase in South Los Angeles went horribly right, when two bank thieves who managed to find a Bank of America branch which actually had cash in it, and robbed it, proceeded to throw cash out of the moving car as it was being chased by a cohort of cops. Since the getaway car happened to be a Volvo, they naturally failed to get away, but not before they became local Robin Hood-type heroes to the massive gathering of gawkers all of whom would appear gainfully employed if only they were not just standing there, doing nothing, and hoping to steal the already stolen money in a major LA intersection at 11:30 am local time on a Wednesday. At least we now have the first two joint candidates to take over the BOE's soon to be vacant governorship.
German Constitutional Court OK's ESM but with conditions/ESM cannot be issued a banking license/ gold and silver raided/
Perhaps no better example of the two camps of perspectives on the market's performance and the Fed's expectations was on display this afternoon on CNBC. In the 'we need some destructive asset clearing in order to get back to any sort of growth trajectory and the Fed is feeding an inflationary monster with its band-aid upon band-aid money-printing' camp is Peter Schiff; while the other side of the investing octagon is Ron Insana who sees a '100% rise in stocks as evidence of something and that the Fed must do something, anything in order that we avoid the reality under the surface of a deleveraging deflationary world economy'. We are not sure of the winner as the shouting became too much to bear - but nevertheless the vociferous nature of the two combatants (each proclaiming their #winning-ness) shows the bifurcated world in which we live.
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perceived to be taking undue advantage of external support, the more explicit conditionality is likely to be demanded. This would add to any existing tensions, given Spain’s opposition to conditionality. This is disappointing partly because it is avoidable if Spain were to accept the external support on the terms currently available. Spain will have the opportunity in the coming weeks and months to demonstrate that it wishes to avoid these incipient risks. But we, like Goldman, continue to believe that some of the incentives created by Mr Draghi's preparedness to act could prove difficult to resist- and will thus delay any real game-changer that is priced in.
Broadly speaking, risk assets were not as dismal as equity markets today - holding on near the highs for much of the day. The late day surge higher in AAPL - that dragged everything higher - was a recoupling to risk-assets on the day as volume surged and average trade size picked up significantly. AAPL ended up at the record-high day's closing VWAP (around $672) perhaps suggesting some algo-driven liftathon to enable the bigger boys to exit the heavily-weighted-in-the-index name - and right in front of Bernanke's big day tomorrow, it seems odd - other than short-covering squeezes - to be positioning this heavily long. HYG once again soared (playing catch-up to HY credit spreads), VXX tumbled into the close as VIX dropped following the ESM decision (though was not as ebullient as stocks ahead of tomorrow's NFP). Treasuries just kept leaking higher in yield (now 5 to 30Y yields higher by 5-10bps on the weeks) - and crushing the spread to MBS. The USD was stable most of the day after early weakness, on EUR strength after the ESM decision, was unwound. A bump-and-dump in commodities ended generally unchanged aside from Silver which had its own mysterious flash-crash soon after the US day session close. Credit tracked stock generally on the day and was quiet. S&P futures take out (after-hours) the highs of the day/year/four-years (as contracts rolled). Need Moar QE.
Yesterday, news broke that the US government has awarded a whopping $104 million to convicted felon and former inmate Bradley Birkenfeld. It was a big headline and you likely saw the news… but it’s worth a deeper look. Because if there is one story that neatly summarizes what is wrong with the US these days, it is the case of Mr. Birkenfeld.
If this is what 0.3-0.6% of US GDP (according to JPMorgan) looks like, then the US is truly in desperate need of not only QE3, but 4, 4S and 5. Also, since it is not on the front, we can only assume the "Samsung Inside!" sticker is on the back.
- NEIN - "No country in Europe" can hope for the ECB to "fire up the money printing press," Schaeuble says. Germany "will make sure that it doesn’t happen"
- NEIN - *SCHAEUBLE SAYS ECB DOESN'T HAVE MANDATE TO FINANCE STATES
- NEIN - *SCHAEUBLE SAYS ESM CAN'T HAVE BANKING LICENSE
We have long discussed the rapid rotation of credit growth from housing and credit card to auto loans and now student debt as the US is not deleveraging in reality at all. A recent report from the Kanasas City Fed notes that in the last 7 years, student loan debt has grown at a staggering 13.9% annual rate. This rise in debt has been accompanied by a notable rise in the percentage of delinquencies (over 10.5% and 8.8% over 120 days past due) as the complex web of the student loan market structure strangles hope for many willing learners. The clear message is that student loans present problems for some borrowers, though, at the same time, the analysis suggests that student loans do not yet impose a significant burden on society from their fiscal impact - even though rather stunningly the Federal government is now 93% of the market. We would add that high student loan debt and its associated payment burdens have left many wondering if the value of a college education outweighs the costs - especially as we note that less than 40% of borrowers are under 30 and more than a third still owe in their 40s.
4GS Botox Turbo 5
- APPLE IPHONE 5 ADDS FIFTH ROW OF ICONS TO HOME SCREEN
- APPLE IPHONE 5 WEIGHS 20 PERCENT LIGHTER THAN IPHONE 4S
- APPLE IPHONE 5 HAS SAME WIDTH, TALLER SCREEN
- APPLE SAYS NEW A6 CHIP IS 2X FASTER CPU, 2X FASTER GRAPHICS
Finally, the most important question - when is the iPhone 6 (with the purchase funded by the iBank captive leasing arm) coming?
unmemorable 10 year reopening. At 1.764%, the high yield was a tale to the 1.760% When Issued, and the highest yield since May 2012. The Bid To Cover also was also rather weak, at 2.85, well below the TTM average 3.07. Internals were also unspectacular with Indirects taking down a well below average 36.2%, compared to 41.94% avg in the past 12 auctions, Dealers taking down 52.2%, and Directs responsible for the rest or 11.6%. All in all very much a run off the mill auction, which takes us two thirds of the way to raising a net $28 billion in new debt this week, and closing just why of $16.1 trillion in debt (yes, it does seem like we just crossed the $16,000,000,000,000 barrier yesterday).
Reuters: U.S. money funds add euro zone debt in August) can be so different from reality?
There has been a lot of bluster this week that tail-risks have been removed from Europe (thanks to The Dreme) and now ESM ratification can continue to hold up Europe's insolvent states. Europe's equity markets continue to lift (though slower and slower), Europe's VIX has fallen again (post ESM decision), Europe's credit spreads continue to compress and squeeze tighter, and sovereign bonds rally - at the short-end. The one fly in the ointment - is that the last three days have seen very little movement in Bond yields for Spain, Italy, and France - only Germany's 10bps yield decompression has been the driver of perceived risk changes for the periphery. EURUSD is now 1 sigma rich to its swap-spread fair-value model - which is unusual. It seemes -just as in the US MBS market - the rumor has been bought, as stocks in Europe also leaked lower from the ESM announcement time spike.
Income, Poverty, and Health Insurance Coverage in the United States." The key number everyone hones in on in this report - the number of America living in poverty - is already well known courtesy of foodstamp data. Per the Census bureau this number was 46.2 million Americans in 2011 or "after 3 consecutive years of increases, neither the official poverty rate nor the number of people in poverty were statistically different from the 2010 estimates." Actually this statement is quite wrong as the foodstamp data speaks a very different story, but it is an election year, and most people are mathematically challenged. Either way of looking at it, 15% of the US population living in poverty is hardly a statistic to be proud of, regardless who is president. Which brings us to a second point: when looking at the wealth dispersion by percentile, Wharton economist Justin Wolfers commented that "The rich just keep getting richer." Actually, based on the Census data he was looking at this also is wrong, as the underlying series shows that both the household income of the uber-wealthiest 95th percentile, as well as the income spread between the 95th and 10th percentile, over the past 5 years has actually been going down. In fact, the average income of the richest disclosed percentile is $186,000, or the lowest since 1999. So yes, the rich may be getting richer, but it certainly is not based on Census data, which shows that the wealth of the top percentile has been not only flat but modestly declining for 12 years.