Friday, October 12, 2012

The Bears Explain How The Rich Get Richer

In an attempt to break the now ubiquitous narrative that "its all about income tax rates", and to challenge the ridiculous new support for QEternity; 'The Bears' that brought you 'The Bernank' are back. In this cartoon, they explain how the bailouts made people like Warren Buffett far wealthier than they should be and exposes who actually benefits from all this QE. The Bears, The Buff-ate, and The Bernank - simply perfect.

A Dash Of Hair Transplant And Just Add Laughter

We always said that the presidential race in a country in which 40% of spending on wars, entitlements, interest on said debt, etc. is funded by debt (purchased mostly by foreigners and monetized by the Fed), is moot, and is merely one big tragicomedy designed to evoke nothing but laughter (especially since it is the creditors who call the shots). Today, we see that at least Joe Biden got the memo.

European Equities End Ugly Week With Credit Unchanged

The exuberant OMT-driven froth of the European equity markets appears to be fading. All major stock indices across the region ended the week red - with Spain worst down 3.3% and Italy down 2.2% (though as CNBC would say - off their lows). This looks like catching-down to European sovereign's less sanguine view of the world as Italy and Spain sovereign bond spreads end almost perfectly unchanged (having been up 15bps and 25bps respectively mid-week). Corporate and financial credit spreads outperformed equities on the week - ending unchanged also - with most of the move occurring today. Interestingly, the LTRO stigma is rising once again - as non-LTRO-encumbered bank credit spreads hit a 14-month low this week and the spread to LTRO-banks widens. Europe's VIX ended the week unchanged at 21.9% - thanks to a significant spike into today's close.

California Demands Business Insider Retract False Story On Jobless Claims Misreporting; Business Insider Refuses

After yesterday Zero Hedge first reported the reason for the surprising plunge in the past week's initial claims, which as the BLS explained was due to "a state" (whose identity despite all tabloid speculation to the contrary is still unknown) not reporting "some" figures, assorted blogs picked up on what has since been confirmed to be an incorrect report by Business Insider's Henry Blodget claiming that "Well, we're glad to say that we've finally gotten to the bottom of what happened" and that the state in question is none other than California (supposedly as opposed to Illinois to shut up those wacky conspiracy theorists). Turns out the site known best for its slideshow presentations (which will soon double down as advertisements) may have once again fibbed just a little, following an official demand by none other than California state Employment Development Department direct, Pam Harris, that BI retract its article. To wit: "Reports that California failed to fully report data to the U.S. Department of Labor, as required, are incorrect and irresponsible... It’s unfortunate this ‘reporter’ and others who repeated the article’s erroneous statements chose to speculate rather than report, failing to confirm this information with EDD." Sure enough, the 'reporter' in question replied, and it appears that Business Insider is better informed than California when it comes to matters such as these, and has refused to retract.

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Issa Wants Congressional Hearing On BLS 'Data'

Perhaps we are finally getting somewhere, though we suspect only traversing the toilet bowl, as the Chairman of the Government Oversight Committee, Darrell Issa, just blasted the BLS over the jobs data in a conversation with Greta Van Susteren on FOX Business. Issa demands a 'Hearing' because:
the way it's being done with the constant revisions, significant revision, tells us that it's not as an exact a science as it needs to be and there's got to be a better way to get those numbers or don't put them out if they're going to be wrong by as much as half a point.
We are more than happy to provide the factual data to support this Hearing - though we suspect Hilda Solis will be deeply offended that her PhDs' work could be questioned.

Farage Slams Nobel Peace Prize Farce As "Insurgency And Violence" Reign

We noted earlier the somewhat surrealistic decision to award the Nobel Peace Prize to the European Union (though entirely consistent it would seem given their previous 'Obama' decision) but now UKIP's Nigel Farage has weighed in with his 'boots on the ground' perspective of this farce. "You only have to open your eyes to see the increasing violence and division within the EU which is caused by the Euro project" he said, adding that "the awarding of this prize to the EU brings it into disrepute." We suspect that reputation is already 'diss'ed but analogizing the tragic imposition of a new flag on Yugoslavia, Farage concludes: "Rather than bring peace and harmony, the EU will cause insurgency and violence." We can only assume that Bin Laden's death forced the 'Nobel's to quick recount.

European Union Wins Nobel Peace Prize

Ladies and gentlemen, we bring you EUtopia (and an early case of Friday humor). " The European Union has been awarded the 2012 Nobel Peace Prize in a nod to the 27-member bloc's "advancement of peace and reconciliation," and to applaud its solidarity as it continues to work to contain the debt crisis hanging over the euro zone. The head of the Norwegian committee, Thorbørn Jagland, said the committee gave the award in an effort to encourage Europe to back away from the "extremism and nationalism" that led to major conflict in years past. "This is, in a way, a message to Europe to secure everything we have achieved and move forward," he said while addressing a packed crowd at the Nobel Norwegian Institute in Oslo on Friday. "Mr. Jagland said it is "up to the European Union" to decide what to do with the approximately $1.2 million in prize money that comes with the award. He also said the EU should decide how the award is ceremonially received." Some other news: Bernard Madoff Investment Securities has not won the Nobel prize in economics yet.

Turkey Scrambles Two F-16s To Syrian Border

For the first time since July, Turkey scrambled two F-16 fighter jets to the Syrian border following a Syrian military helicopter bombed the border town of Azmarin. The WSJ reports that the two fighters flew along the border shortly after 2pm local time following heavy fighting between rebels and Syrian government forces. Booming explosions and the rattle of machine guns around Azmarin could be heard Friday morning from the small Turkish border town of Hacipasa. One eyewitness said the Syrian attack helicopter retreated when the Turkish jets flew along the border. Turkey's move on Friday to scramble jets close to the fighting inside Syria comes amid a sharp escalation of tensions along the shared 565-mile frontier.

Goldman Closes Nat Gas Long, Says "Time To Take Profits"

Back when everyone had given up on natgas in April when John Arnold was liquidating the Centaurus Master Fund and everyone thought it was an indication of the collapse in nattie end demand (it wasn't), the general peanut gallery said the time of bidless gas is coming. It didn't. Instead, as we then said expected, and as Goldman recommended, it was the time to buy natgas. We are now nearly 100% higher from those April lows. For those who listened to ZH and Goldman, the time to be greedy is over, and as David Greely from Goldman says, it is now "time to take profits." Feel free to sell to all those other banks who are once again about 6 months late to the party.

Investing: Buying Cheap

Admin at Jim Rogers Blog - 2 hours ago
The reason you want to buy something cheap is so that you don`t have much risk; if you are wrong, you are not going to suffer too badly. Buying something cheap does not do you any good on its own; it might stay cheap for years. You`ve got to have a reason why it`s going to change and why something is going to get better. - *in Trading The World`s Markets - Interviews With The Great Global Investors * *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 ... more » 

Greece's biggest company flees, bottler CCH to Switzerland

Eric De Groot at Eric De Groot - 3 hours ago
Flight of capital from economic uncertainty is not some abstract concept confined to Internet commentary and the historical achieves. Headline: Greece's biggest company flees, bottler CCH to Switzerland ATHENS (Reuters) - Greece's biggest company, Coca Cola Hellenic, is leaving the country, the drinks bottler said on Thursday as its move to Switzerland and a London... [[ This is a content summary only. Visit my website for full links, other content, and more! ]] 

ABCD Cycle In Gold

Eric De Groot at Eric De Groot - 3 hours ago
Dear Roham & Insight Readers; While negative DI readings look ominous, they are nothing more than supply intended to slow the A-wave advance. The previous A-wave advances had similar ominous-looking setups that preceded shallow dips, not bone crushing declines. A-wave advances, following the A-B-C-D cycle, transition into B-wave declines. Another bone crushing... [[ This is a content summary only. Visit my website for full links, other content, and more! ]] 

There Is Inflation In The System But It’s Not Obvious

Admin at Marc Faber Blog - 7 hours ago
Some economists say that there is little consumer price inflation. But there is, because the money-printing has lifted asset prices like those for luxury property, art, equities or bonds. There is inflation in the system but it’s not obvious. - *in Emerging Markets* *Marc Faber is an international investor known for his uncanny predictions of the stock market and futures markets around the world.*

Consumer Confidence Soars To Highest Since September 2007, Biggest Beat Since 2005

In continuing the pre-election twilight zone data series, respondents to the UMichigan consumer confidence poll apparently have not a care in the world about the upcoming fiscal cliff, or record high gas prices in California for that matter, and are more confident than they have ever been in the past 5 years. With the final number printing at 83.1, well above the highest Wall Street forecast of 81.0 from DB's Joe LaVorgna of course, and 5 std deviations above the consensus forecast (a 7 year beat of expectations) of a decline to 78.0 from last month's 78.3, all one can do at this point is pull a Biden and just keep on laughing. The internal, while completely irrelevant as we have uncovered merely the latest doctored economic data set, joining the unemployment rate and the initial claims number, current conditions rose to 88.6 from 85.7, while it was expectations that set the mood, rising to the highest since July 2007 or 79.5, up from 73.5. And while last month it was the inflation expectations, both 1 and 5 year, that soared because apparently UMich was unaware these have to decline for "inflation expectations to be anchored" this time around respondents saw 5 year inflation decline from 2.8% to 2.6%, apparently confused that the only reason why expectations are soaring is because the Chairman promised to send future inflation soaring. But who cares about logic when massaging data.

Fink Trumps Rubin As Geithner's BFF

A mere three weeks ago we noted that Tim Geithner is preparing to transition to a Blackrock cubicle...

Today, it seems, the FT has finally got the memo as they note that Mr. Fink (Geithner's new boss?) trumped Mr. Rubin (Geithner's old boss?) as the most frequent 'can-I-phone-a-friend' call - speaking 49 times over 18 months (once every 11 days). We wonder if this is simply a 'rotation' discussion/interview process as Fink transitions to Geithner's little seat at Treasury and Geithner slides into his capacity as official guard of the Blackrock Stapler in the 3rd sub-basement.

Producer Price Inflation Higher On Spiking Food And Energy; Those Who Don't Eat Or Drive See No Price Increase

In a country in which nobody eats or drives any more, the Fed construct as September core PPI came in 0.0%, on expectations of a 0.2% increase. Of course, for those lucky few who still eat, or drive, or in rare cases eat and drive, saw Producer Prices rise by 1.1% on expectations of a 0.8% increase, which despite dropping from August's 1.7%, this was still the second highest monthly increase in the past year. Also, for those few who actually care about such trivia as food and energy prices, this was the 4th month in a row of higher than expected headline PPI. Luckily, in America, eating has now been hedonically adjusted to the functional equivalent of playing Apple's bestselling $0.99 iFood app.

Augason Farms Emergency Food Storage All-in-One Pails Kit - 1 year - (Google Affiliate Ad)

JPM Doubles Exposure To European Periphery In One Quarter

The last time a Primary Dealer decided to go all in on the Italian "recovery", MF Global went bankrupt. This time around the bank that apparently can't get enough of Italy (and to a smaller extent Spain) and its glorious taxpayer funded, bailed out future is none other than JPM, which according to its earnings presentation has seen its net exposure to Europe double from $6,3 billion to $11.7 billion, following a surge in Italian trading exposure. Surely this will end very well for the bank that only 5 months ago had to reshuffle every executive in its internal $300 billion hedge fund for massive IG9 CDX losses.

Frontrunning: October 12

  • OECD: Japan Public Debt in 'Uncharted Territory' (WSJ)
  • Germany holds firm on Greece as IMF pressure mounts (Reuters)
  • Schäuble and Lagarde clash over austerity (FT) - it would be great if someone actually implemented austerity...
  • Merkel hints at tax cuts for growth boost (FT)
  • Hollande Robbed of Growth Engine as Companies Cut Investment (BBG)
  • Romney Narrows Gap With Obama in Swing State Polling (BBG)
  • Sluggish Growth Seen Into Next Year (WSJ)
  • Softbank Founder Has 300-Year Plan in Wooing Sprint Nextel (BBG)
  • Singapore Forgoes Currency Stimulus on Inflation Risk (Bloomberg) - as does China day after day
  • Sharp Jabs Dominate Combative Vice-Presidential Debate (WSJ)
  • Japan and China Agree to Hold Talks on Rift After Noda Call (Bloomberg)

JPM Beats On Loan Loss Reserve Release Despite Drop In Trading Revenues And NIM, Surge In Non-Performing Loans

There is a lot of verbiage in the official JPM Q3 Earnings press release which directs to a bottom line number of $1.40, or $5.7 billion on expectations of $1.24, with revenue of $25.9 billion on expectations of $24.53 billion. The primary reason for the lack of disappointment: no major losses in Corporate from CIO, with corporate generating $221 million in Q3, up from a loss of $(1.777) billion in Q2. And then come the adjustments:  $900 million pretax benefit ($0.14 per share after-tax increase in earnings) from reduced mortgage loan loss reserves in Real Estate Portfolios; $825 million pretax incremental charge-offs ($0.13 per share after-tax decrease in earnings) due to regulatory guidance on certain residential loans in Real Estate Portfolios; $888 million pretax benefit ($0.14 per share after-tax increase in earnings) due to extinguishment gains on redeemed trust preferred capital debt securities in Corporate; $684 million pretax expense ($0.11 per share after-tax decrease in earnings) for additional litigation reserves in Corporate; Then there is a DVA loss of $211 MM in banking. Net-net, after taking into account all one-off adjustments, the Q3EPS was really $1.26. But for all the data fudging, and attempts to make the reported EPS non-comparable to the expected one, following an avalanche of one-time adjustments, the bottom line is this: revenues from trading dropped both sequentially and Q/Q while banking expenses rose, Net Interest Margin dropped to a new record low, even as the firm too a major $967 million loan loss reserve release on its loans to $22.8 billion, even as its total Non-Performing Loans rose by a whopping $1.3 billion to $11.370 billion, the largest quarterly jump in years! Just how JPM can justify such a major contribution to earnings coming from loan losses when NPLs have soared is unclear to anyone with a frontal lobe.

Today’s Items:

Pressure on Madrid to Accept Bailout
Since the S&P downgrade, Spain is under pressure from Brussels to accept a bailout.    The bastards at the European Central Bank have agreed to buy Spanish government bonds to help lower borrowing costs, but the government first needs to apply for the bailout.   If officials in the Spanish government are wise, they will look at Iceland, and not Greece, as the way to go.    Speaking of Greece…

Molotov Cocktails In Greece
Before you plan your next vacation, it is suggested you cross Greece, and perhaps Europe, off your list.    The Greek GDP has decreased 47 billion euros in the last 5 years.    Greek unemployment has reached 24.7% with youth unemployment at 55.4%.    Nothing makes rioting more likely when you have a bunch of young adults without any source of income.

Gold’s Final Move
Gold is going to keep going up until the US dollar is finished. It’s not really an appreciation in the price of gold, it’s a drop in the apparent value of currency.    We will see some real fireworks because the lack of availability of physical gold when major pension funds move into gold.   Just remember, because of the Silver to Gold Ratio, silver will go up faster; thus, after preparing, keep stacking physical.

GMOs and Pesticides Create Super-Pests
While GMO crops may be resistant to the current set of insects, Mother Nature is striking back with mutations of pests that are immune to pesticides and GMO affects.    So, how does one survive farming without GMO’s and Pesticides?    Simple…   Crop rotation, inter-cropping and residue management.

ATF Whistleblower Vince Cefalu Fired
Possibly violating the Federal Whistleblower Act of 1989, Vince Cefalu, who has worked nearly 25 years for the ATF, was canned for the reason of “lack of candor.”    He was the one who voiced concern about the illegal “Fast and Furious” operation that led to hundreds of deaths.    Those, who may have violated federal law in a vendetta against Vince at the ATF, should face Federal jail time without parole, and hopefully, in general population.

BLS Data Shows Labor Report is BS
3 things questions the validity of the Labor Report…
1. The drop in the percentage of workers in the labor force relative to the population.
2. The relative correlation between GDP and unemployment.    They should be negatively correlated.
3. Since 2010, GDP growth rate is higher than the productivity growth rate.    It should be the opposite.

What’s In Obama’s Pocket?
While Obama is in the Banker’s pocket, what is in Obama’s pocket?    It turns out that Obama’s lucky charms that he carries around are a Hindu God, a Masonic emblem, and a so-called “wedding ring” with the phrase “There Is No God Except Allah” inscribed on it since he was in law school.    Why do politicians have to be so weird?

The VP Debate
Both Biden and Ryan, unlike Obama, appeared knowledgeable, and confident, on topics presented to them.    With that said, a smirking and laughing Biden contradicted the State Department’s latest lie about the Libya attacks during the tense debate.    I almost felt sorry for the moderator with Biden talking down and being rude to her several times.     In many ways, this debate was a wash; however, Biden, interrupting 82 times, was the more condescending while Ryan appeared as the adult.

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

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