Monday, September 10, 2012

Goldman On The Fed: Perception Over Substance

Perhaps never a more truthful 'lifting-the-veil' paragraph has been written by the squid as the following discussion of just what NEW QE will consist of and what it will achieve; sad that our economy market has come to this.
"The form of any return to QE is less clear. The issue is not so much whether the Fed buys Treasuries or agency mortgage-backed securities; we are pretty sure that any new program would be primarily focused on agency MBS purchases. These should have a somewhat bigger per-dollar effect on private-sector demand and are probably less controversial with the public than Treasury purchases. They can be framed as help for homebuyers to achieve the American Dream, which sounds better than help for the government to run large budget deficits."

Stockman: "Ron Paul Is Right: The Fed, And The Lunatics That Run It, Are The Heart Of The Problem"

Former Reagan OMB Director David Stockman was 'allowed' on CNBC this morning - much to their chagrin now we suspect - and espoused his own brand of truthiness, starting with this epic tirade: "Ron Paul is the only one who is right about the Fed, and the Fed is the heart of the problem. They have destroyed the capital markets and the money markets; interest rates mean nothing; everything is trading off the Fed and Wall Street isn't even home - as it's now a bunch of computers trading word-clouds emitted by this central banker and that" In this environment, he goes on, everyone is being given the wrong signal - i.e. the Ryan/Romney campaign is abnout restoring vibrant capitalism; how can you do that when the financial markets are dead - the lifeblood of a capitalist system. And that is the problem today: "The Fed (and the lunatics that run it) are telling the whole world untruths about the cost of money and the price of risk." Must watch clip.

Europe's Most Parabolic Chart Resumes Climb As German TARGET2 Claims Rise To Just Shy Of $1 Trillion

Perhaps one of the best advance indicators of the market respite that took place in August was the slowdown in Bundesbank TARGET2 claims, which until then had been rising at an exponential pace, only to see its first monthly sequential decline since 2011, dropping €1.4 billion. Now that August is gone, and the vacation that brought Europe to a merciful halt is over, the time to resume sucking Germany dry in order to fund current account (and other) deficits is back, and sure enough the just reported Bundesbank August update of TARGET2 claims shows that the increase is back. At a record €751.4 billion (or just shy of $1 trillion at today's exchange rate), Germany funded the periphery, mostly Spain with record €415Bn in liabilities, Italy with a record €280Bn, Greece at €105Bn, via the transfer of public risk to private sector benefit (sunk "public" Buba costs are a concurrent benefit to the German export sector) to the tune of over €1 billion each work day, with a total monthly increase of €24 billion in August. Look for this number to resume its astronomic rise as the periphery realizes its inventories needs restocking and that it needs to import German stuff using Bundesbank liabilities that will never be satisfied.

FBI Arrests Trenton Mayor

"Trenton makes, and the world takes", but the mob has dibs on everything. And by mob we mean the city's mayor, who in collaboration with a convicted sex offender, were just arrested by the FBI. At least we now have a reason why jobs in New Jersey are "confirming" the stock market "recovery."

Debt Collectors Cash In as Students Struggle to Repay Loans

Eric De Groot at Eric De Groot - 2 hours ago
One man's bust is another man's boom. Stripe away the emotions and it's as simple matter of cause and effect. Headline: Debt Collectors Cash In as Students Struggle to Repay Loans At a protest last year at New York University, students called attention to their mounting debt by wearing T-shirts with the amount they owed scribbled across the front — $90,000, $75,000,... [[ This is a content summary only. Visit my website for full links, other content, and more! ]] 

It's All About the Debt (Stupid)

Eric De Groot at Eric De Groot - 2 hours ago
Summary: Federal debt held by foreigners as a percentage of GDP (FDHBFINGDPR) rose from 9.9% to 15.8% to combat the economic slowdown of 2001-2003. (chart) As Jim Rogers states in the video below, the economic slowdown from 2007 to 2009 was far worse than the previous contraction (2001-2003) because the debt burdened had increased substantially. FDHBFINGDPR had risen to 16.5% by the... [[ This is a content summary only. Visit my website for full links, other content, and more! ]] 

The Market Is Getting A Little Tired Of This

Admin at Jim Rogers Blog - 2 hours ago
It’s not an opportunity to make money for me. This is not good for the market and it’s not going to last. Every three or four months they (euro zone politicians) have a summit and they say: Ok guys, everything is ok now. The market goes up. But we’re getting a little tired of this and the market is getting a little tired of this. - *in CNBC* *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 Times and is a regular guest on... more » 

Chicago teachers strike for 1st time in 25 years

Eric De Groot at Eric De Groot - 2 hours ago
Welcome to the real world where austerity measures intended to balance budgets generate consequences. Headline: Chicago teachers strike for 1st time in 25 years September 10, 2012 (CHICAGO) (WLS) -- For the first time in more than two decades, Chicago Public Schools teachers are walking off the job. The teachers are hitting the picket lines Monday instead of going to classrooms,... [[ This is a content summary only. Visit my website for full links, other content, and more! ]] 

CNBC Video: Buy These to Prepare for Coming Collapse

Admin at Marc Faber Blog - 4 hours ago
In this "Squawk Box" excerpt, "Gloom Boom & Doom Report" editor Marc Faber tells Joe Kernen that even though he expects an eventual collapse for the global financial system, there are some assets that can be purchased as protection. Related: Johnson & Johnson (JNJ), McDonald`s (MCD), Procter & Gamble (PG) *Marc Faber is an international investor known for his uncanny predictions of the stock market and futures markets around the world.* 

Commodities: We Are A Long Away From The End Of The Bull Market

Admin at Jim Rogers Blog - 4 hours ago
The bull market in commodities will end some day – but some day is a long way away. - *in CNBC* Related: United States Oil Fund LP ETF (USO), SPDR Gold Trust ETF (GLD), iShares Silver Trust ETF (SLV) *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 Times and is a regular guest on Bloomberg and CNBC.* 

Euro Zone Will Pay A Terrible Price

Admin at Jim Rogers Blog - 4 hours ago
These guys have been saying the same old garbage for a long time. It’s not a game-changer – it’s good for the market for maybe a month. The debt keeps going higher and higher and eventually we’ll all going to pay a terrible price. - *in CNBC* *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 Times and is a regular guest on Bloomberg and CNBC.* 

As The Euro Tumbles, Spaniards Look To Gold

The unremitting deterioration of the eurozone’s sovereign debt landscape continues to fuel uncertainties about the longevity of the euro as a hard currency. Such uncertainties are not only leading to capital flight from the EMU’s periphery to the core and destabilizing markets worldwide, but they are also beginning to frighten southern European savers into seeking refuge outside their 10-year-old currency. Such is the case of Spain – the latest tumbling economy to threaten the euro’s survival. As the crisis deepens, there is still a window of opportunity for Spaniards to turn to gold as a means to protect their wealth against the risks of increased foreign exchange volatility, forced re-denomination, or even a total currency collapse.

NYSE Reports 50% Drop In August Stock Trading Volume

Last August, a 400 point move in the DJIA was the norm. This August, a 50+ point drop in the second coming of the "Balls to the Wall" DJIA was the green light for sheer market panic. While unknown if it is the cause, or effect, of this collapse in volatility, the NYSE just reported that August cash volumes imploded by exactly 50% from last year, one thing is certain: for banks, which no longer make money on net interest margin courtesy of ZNIRP, and $1.6 trillion in inert reserves, the bulk of which are used to buy TSYs, then promptly repo them back to the Fed and use the cash proceeds to buy 200x+ P/E stocks, imploding stock volumes mean only one thing - a collapse in revenues and profits, terminations of entire divisions, collapse in tax revenues for the US Treasury, an increase in deficit, the need for more debt issuance, and a green light for the Fed to monetizing even more supply. And just to avoid the noise from "unseasonal" Y/Y comparisons, in August total ADV dropped by 12.6% from July. ETF volume imploded by two thirds from last year, and 14% from last month. Cue the financial earnings forecast reductions ahead of Q3 results.

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Will The Baltic Dry Bounce Off Satan's Bottom?

Dante would be proud; the Baltic Dry Shipping Index has now plunged through at least eight levels of hell on its way to record lows as it drops to 666 today. This is the lowest since Feb 2012's Chinese New Year lows and is a stunning 55 percentage points lower than the normal seasonal shift in the global aggregate trade indicator (and down 69% from its Oct 2011 swing high). Whether its over-supply, under-demand, or too many Chinese New Years, it is unarguably the next level of hell for the global economy - that will surely bring all the bottom-callers out as this time is different.

Are The Krimson Karlsruhe Knights About To Say Ni-en?

On Wednesday the German constitutional court, aka the KKK (Krimson Kardinals Of Karlsruhe, any association with other acronyms is purely accidental), will decide if Europe stays or goes. There is some possibility Karlsruhe may delay the September 12 decision even further, following a new complaint by a Merkel conservative, Peter Gauweiler who said in a statement on Sunday the fund should not be ratified unless the ECB rowed back on its plans to make unlimited purchases of sovereign bonds, since that he said, posed a major risk to Germany's own national budget. The Constitutional court is expected to opine on this latest hurdle today or tomorrow at the latest. However we doubt it. So what does the binary outcome ahead of Wednesday look like? Here are some Wall Street pundits opining. Curiously, while the market is also pricing perfection as the outcome to this event, there may be gray skies forming.

There Must Be Some Way Out Of Here

There is a Transfer Union underway in Europe. While Germany has tried to avoid this at all costs, Europe, has found a clever way of implementing such a program and keeping it under the radar from the German citizens. In Greece, Spain, Portugal and Italy the ECB has implemented a program where the sovereign guarantees some bank’s bonds. The bank then pledges them as collateral at the ECB and gets cash. The bank then turns around and lends the money back to the sovereign nation and provides liquidity and economic sustenance. The Transfer Union is completed as Germany guarantees 22% of the ECB and the European Central Bank is nothing more than a conduit to lend money to the various nations. This contrivance is also not sterilized so that the ECB is, in fact, printing money. In a very real sense the ECB is the only fully operational part of the European construct at present as the European Union does not have the “political will” to carry out its mandate.

Gold In Euros Touches New Record High At EUR 1,360 Per Ounce

Gold has risen to new record highs in euro terms overnight in Asia when gold consolidated on last week’s 3% gains and rose above €1,360/oz for the first time.  Significant consolidation has been seen in the last year between €1,200/oz and the previous record high at €1,359.01/oz. This record high was seen almost exactly a year ago on September 9th 2011. Gold is being supported by the unrest in South Africa which continues to destabilise the mining sector. Gold Fields said this morning that some 15,000 workers were still on strike at one of its gold mines outside of Johannesburg. The tally of workers on strike at the West Section of the KDC Gold Mine is about 3,000 higher than last week. All production at the mine has been brought to a standstill. With the US job growth contracting significantly in August, investors see that the Fed will be inclined to announce QE3 at this week’s policy meeting on the 12th & 13th. US gold futures and options climbed to 6-month high 144,775 contracts in the week ended September 4, according to data from the U.S. Commodity Futures Trading Commission. Gold ETF’s grew to a record high of 72.125 million ounces on Friday. Also, Hong Kong's July gold shipments to China was almost double on the year and exports for the first 11 months were greater than 2011, suggesting China will overtake India as the world's top gold consumer.

Daily US Opening News And Market Re-Cap: September 10

Stocks in Europe traded lower throughout the session, as market participants reacted to another round of weak data from Asia. In particular, China’s imports fell 2.6% on the year in  August vs. Exp. 3.5%, underpinning the need for policy easing measures from the People's Bank Of China. Some of the weakness in equity space was also attributed to profit taking following last week’s gains. Spanish bonds continued to benefit from the ongoing speculation that the government will seek a full scale bailout. As a result, SP/GE 10y bond yield spread is tighter even though there is an outside chance that the constitutional court vote in Germany will delay this. On the other hand, IT/GE and NE/GE bond yield spreads are wider, reflective the upcoming issuance, as well as elections. EUR/USD and GBP/USD, both seen lower on the back of touted profit taking, as well as pre-positioning into near-term risk events mentioned above. Commodity linked currencies are also weaker, weighed on by the weaker data from China, which also showed that imports of crude oil hit a 22-month low. In terms of notable stocks news, Glencore said it will not improve its offer for Xstrata after the company raised offer for Xstrata to 3.05 from 2.8.

Frontrunning: September 10

  • China Output Growth Slows as Leadership Handover Looms (Bloomberg); Weak China trade data raises Beijing spending stakes (Reuters)
  • Italy Q2 GDP revised down to -0.8% year-on-year on weak domestic demand (Economic Times)
  • Troika disagreed with €2 billion in Greek "cuts" (Reuters)
  • No Greek bottom in sight yet: Greek IP, Manufacturing Output plunge compared to year earlier (WSJ)
  • France's Hollande sees 2013 growth forecast about 0.8 pct (Reuters), France plots tax hikes of up to 20 bln euros (Reuters)
  • Euro Crisis Faces Tests in German Court, Greek Infighting (Bloomberg)
  • Geithner sells more AIG stock (FT)
  • Japan infuriates China by agreeing to buy disputed isles (Reuters)
  • Euro crisis to worsen, Greece could exit euro: Swedish FinMin Anders Borg (Economic Times)
  • ‘Lead or leave euro’, Soros tells Germany (FT)
  • German MP makes new court complaint against euro plans (Reuters)
  • Obama super-Pac in push to raise $150m (FT)

Preview Of The Action-Packed Week Ahead And Overnight Recap

Suddenly the delicate balancing of variables is once again an art and not a science, ahead of a week packed with binary outcomes in which the market is already priced in for absolute perfection. Per DB: We have another blockbuster week ahead of us so let's jump straight into previewing it. One of the main highlights is the German Constitutional Court's ruling on the ESM and fiscal compact on Wednesday. On the same day we will also see the Dutch go to the polls for the Lower House elections. Thursday then sees a big FOMC meeting where the probabilities of QE3 will have increased after the weak payrolls last Friday. The G20 Finance Ministers and Central Bank Governors will meet on Thursday in Mexico before the ECOFIN/Eurogroup meeting in Cyprus rounds out the week on Friday. These are also several other meetings/events taking place outside of these main ones. In Greece, PM Samaras is set to meet with representatives of the troika today, before flying to Frankfurt for a meeting with Draghi on Tuesday. The EC will also present proposals on a single banking supervision mechanism for the Euro area on Tuesday. If these weren't enough to look forward to, Apple is expected to release details of its new iPhone on Wednesday. In summary, it will be a good week to test the theory that algos buy stocks on any flashing red headlines, no longer even pretending to care about the content. Think of the cash savings on the algo "reading" software: in a fumes-driven market in which even the HFTs no longer can make money frontrunning and subpennyiong order flow, they need it.

Today’s Items:

Israeli EMP Attack Could Throw Iran ‘Back to Stone Age’
Israel might attack Iran by using electromagnetic impulses (EMP) that could cripple the country by shutting down its electronics. Although the weapons are non-lethal, their affect of shutting down water pumps, cars and other necessary machinery would kill a great deal of people and throw the entire nation into a panic situation. With the country in a total meltdown, it will make it easier for US led forces to come in and get the gold.

Italy Has No Plans to Access European Central Bank Bond-Buying Plan
Italian Bankster puppet Mario Monti, talking out his backside, stated that he is not expecting Italy to access the European Central Bank’s new bond buying scheme.   The obvious reason is because the German media has hit back at the ludicrous plan that threatens Germany’s own fiscal house.   It appears that there are many who do not want the bailout… for now.   Will Italy be forced into this bond buying scheme or increase the Value added tax?   Well, there goes that bear walking into the woods again.

White House to Miss Deadline for Report On ‘Fiscal Cliff’ Budget Cuts
In an ostrich like move, the White House obviously wants to put off the horrific news of what areas the $109 billion in cuts mandated by the Budget Control Act of 2011 that will go into effect on January 1st, 2012, will come from.   Of course, if that is not bad enough, just think of the $440 billion in across the board tax hikes, that will go in effect on the same date.   And this does not include the multiple huge taxes from Obamacare.   In addition, many of the economically destructive stimulus and bailouts packages passed over the years also stops by January 1st.   Sounds like the happy new year will be a blast folks.

Does Explosion in Food Stamp Spending Contribute to Higher Food Prices?
Food stamp usage, by Americans, has hit 46.7 million, or nearly 1 in 7.   At an average cost of $134 per recipient, is costing the government about $75 billion a year.   Like government subsidized education, is food stamp spending contributing to higher food prices?  The bear returning to the woods  with toilet paper now.

Gun Sales Surge
Smith & Wesson stock is zooming.    The possible reason is an Obama bounce as the firearm maker boosted its outlook for the rest of the year.    Speculation has focused on fears, based on both Obama and Romney’s own comments, of a coming regulatory crackdown on gun ownership.    In short, Obama could be the best gun and ammo salesman of the decade.

Are You Better Off? 40 Statistics That Will Absolutely Shock You
Here are a few…
1. Both political parties supported TARP and auto industry bailouts.
2. Both political parties support the unconstitutional Federal Reserve.
3. Both political parties support the unconstitutional Patriot Act.
4. Both political parties support the unconstitutional TSA.
5. Both political parties support the unconstitutional National Defense Authorization Act.
In short…    Both political parties are bad for America.

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

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