Chicago PMI Plunges To Lowest Since November 2009, Biggest Miss To Expectations Since September 2009
... the only question is whether the number,which printed at 56.2, down from 62.2, and missing expectations of 60.0, is horrible enough to send stocks soaring. Based on some of the core numbers it may be: the headline nuimber was the worst since November 2009, the miss was the biggest since September 2009, Production of 57.1 was the lowest since September 2009, New Orders slide to 57.4 from 63.3, Supplier deliveries lowest since September 2011, and so on. The only good print was employment which mysteriously rose from 56.3 to 58.7, just in time for the NFP print to come really, really ugly. On, and Joe LaVorgna was at 61.0: way to earn that bonus Joe. ISM downward revisions to come. But not from Joe- look for upward revisions there. Finally, comment #6 from the PMI respondents says it all: "Despite all of the rhetoric to the contrary, it looks like the air got let out of the balloon."
Equity Valuation: It's All Downhill From Here
While
in 'normal' times the commonly held view is that P/E ratios tend to
fall as real interest rates rise, as we recently pointed out here,
the relationship is highly non-linear and nowhere is this
regime-dependence more evident than in the following chart from Morgan
Stanley. Empirically, the current interest-rate regime (the 2-3%
10Y) is as good as it gets and whether rates rise or fall from here,
equity valuations are likely to drop. The market rarely trades at the average multiple, though the current market trades at near average levels currently (not cheap as many would like us to believe).
Of course, as Morgan Stanley notes, there are a number of other
drivers but on a long-term basis and top-down, equity valuations have a
hard hill to climb to prove its different this time.Today’s Items:
Stephen Leeb, Chairman & Chief
Investment Officer of Leeb Capital Management, believes that the S&P
downgrade of Spanish Debt to is one more sign that Europe is on a
terrible track. People are being told that the remedy for economic
distress is to spend less; however, inflation is making that impossible…
People need to eat. China is buying gold because they know what is
happening and that is why it is not important to price gold, or silver,
in terms of dollars and paper anymore. Keep stacking.
From the S&L debacle to MF Global,
fraud is becoming an everyday part of finances in the West. There are no
more ethical gate keepers for the public trust… Only hired hands for
the elite. How long before ponzi schemes like Social Security and the
Dollar are exposed? It will come sooner than later.
As a consequence of all the wars, more
than 110,000 troops are on prescribed amphetamines, antidepressants,
sedatives or others. Remember, doctors who prescribe these pills to
civilians tell them not to drive, yet; soldiers are handed these pills,
given a gun, and sent back into the battle field.
Not good.
Not good.
Next…
25 Horrible Statistics About The U.S. Economy That Barack Obama Does Not Want You To Know
http://endoftheamericandream.com
25 Horrible Statistics About The U.S. Economy That Barack Obama Does Not Want You To Know
http://endoftheamericandream.com
Here are a few…
1. The percentage of Americans that own homes is dropping rapidly as home prices continue to fall like a rock.
2. Under Obama, the number of long term unemployment has increased from 2.6 to 5.3 million.
3. The average duration of unemployment in the United States is about three times of that in the year 2000.
4. Household incomes has declined by 7.8 percent since December 2007.
5. The Federal Reserve bought up about 61 percent of all government debt in 2011.
1. The percentage of Americans that own homes is dropping rapidly as home prices continue to fall like a rock.
2. Under Obama, the number of long term unemployment has increased from 2.6 to 5.3 million.
3. The average duration of unemployment in the United States is about three times of that in the year 2000.
4. Household incomes has declined by 7.8 percent since December 2007.
5. The Federal Reserve bought up about 61 percent of all government debt in 2011.
While the fabricated Gross Domestic
Product expanded at a lightning pace of 2.2%, businesses still do not
want to invest in the U.S. This because of a lack of consumer demand as
more and more people go beneath the poverty line. Instead, businesses,
are investing in developing nations, like India. Of course, there are
the tax rates as well that drive businesses away.
Goldman Sachs backed Mitt Romney may have
locked up the Republican nomination with is victors on the East coast,
however, Ron Paul’s supporters, who make up some of Romney’s delegates
are not giving up. Santorum’s supporters are taking a second look at Ron
Paul rather than vote for Romney’s delegates. This sounds like a recipe
for revolution within the Republican party when the national convention
rolls around.
Whether HAARP, or other reasons, make no
mistake, there are just too many natural strange things going on around
the world. In ancient times, the sight of a comet usually foretold great
changes – usually bad; however, how does this compare to the following…
Animals falling dead or acting weirdly, the sun having tornadoes –
which never were seen before, meteor showers, hostile weather, and loud
noises from the sky? You decide.
Invisible Hand Pushing At Silver Again
Eric De Groot at Eric De Groot - 2 hours ago
Silver, a smaller and less monetary-driven market than gold, feels the
effects of the invisible hand more violently than gold. A falling lease
spread composite since late March reveals the hand's reemergence around
$31.75. Negative lease spreads tend to reverse into weakness unless the
trend becomes uncontrollable. Chart 1: Silver Lease Spread Composite (SLSC)
and Silver Price,...
[[ This is a content summary only. Visit my website for full links, other
content, and more! ]]
The Invisible Hand Executes The Weak Gold Policy
Eric De Groot at Eric De Groot - 1 day ago
Gold and silver's surging diffusion indices (DI) illustrates strong accumulation into weakness since 2011. Statistically concentrated readings above 60, either single or clustered, reveals the presence of of what is often referred to as the invisible hand on Insights and what Jim recently described as the weak gold policy. We also have a weak gold policy, which is not to depress the price of... [[ This is a content summary only. Visit my website for full links, other content, and more! ]]
What Is The Consequence Of Printing Money That Nobody Wants?
By definition, we cannot shrink our way back to the sort of growth required to service the West's accumulated debts. Something has to give. That something will ultimately be social and political disorder on a continent-wide basis, particularly as the taxpayer becomes increasingly frustrated in his obligations to fund the rapidly growing and untenable costs of Big Government. Such disorder is almost universally feared-- by politicians, by markets, by institutions. As the London-based marcoeconomic research consultancy Capital Economics recently commented: "The last thing that the markets need right now is increased political uncertainty at the heart of Europe at a time when the economic outlook is already bleak..." The only reasonable response to this is: tough. If social and political disorder is what it takes to shift an unsustainable status quo in which vampire banks and clueless bureaucrats suck the life out of the productive economy, bring it on.Quantifying The Big Five Canadian Banks' $114 Billion Bailout
“…we have not had to put any
taxpayers’ money into our financial system in Canada, nor do I
anticipate that we’ll be obliged to do so.”
—Jim Flaherty, Minister of Finance
“Without wanting to appear arrogant
or vain, which would be quite un-Canadian... while our system is not
perfect, it has worked during this difficult time, I don’t want the
government to be in the banking business in Canada.”
—Jim Flaherty, Minister of Finance
“It is true, we have the only banks
in the western world that are not looking at bailouts or anything like
that...and we haven’t got any TARP money.”
—Stephen Harper, Prime Minister
Dallas Fed Plunges Negative. Biggest Miss In 10 Months
While
the Dallas Fed Manufacturing Index tends to be a little less of a
headline-maker than many of its macro-data peers, today's dismal report
is worth paying attention to. The index turned negative for the first
time this year, dropped to its lowest level in 7 months and missed expectations by the largest amount in 10 months. The drop from +10.8 to -3.4 is also the largest sequential drop in 11 months.
Only the inventories sub-index rose (hardly a bright spot) as
Production, Number of Employees, New Orders, and Capacity Utilization
all plunged and the average workweek fell for the first time in months.
The US decoupling myth continues to come apart at the seams and the
likelihood of more easing (extreme or not) seems to be rising by the day
- because that has worked so well in the past.Larry Summers Resumes Exercises In Pontificating Sophistry
Over the weekend, just because apparently someone really needed content at any cost (in this case zero), we got a new intellectual stillborn from none other than the man who more than anyone is responsible for the global economic collapse the world has been in for the past 4 years, and from which it is nowhere even close in escaping. The man of course is Larry Summers, who first crushed global finance, then Harvard, and finally Obama's economic platform, whom the FT saw fit to give the chance to pontificate on such concepts at growth and austerity, because apparently, growth through austerity, whereby banking sector debt is written down in parallel is not growth, but there is some subsegment of "growth", heretofore unknown, that Europe has not tried before, and will instead focus on that going forward. To paraphrase Lewis Black: don't think about that sentence too hard, or blood will shoot out of your nose.The New-Normal Class Warfare: Old Vs Young?
While
the most commonly held perspective on the aging demographic in the US
is a retiring Boomer generation that is increasingly risk-averse
(rotating to fixed income) and in desperate need of a growing segment of
the healthcare pie, it appears that this may not be the entire
picture. The data shows, via UBS Larry Hatheway, that in fact asset
preferences do not change much by age cohort and therefore is not the
driving reason behind a secular rotation out of stocks per se (as
opposed to more simple reasons such as mistrust) and more notably the perception of an increased longevity could actually incentivize older investors to extend investment horizons
(whether in stocks or fixed income). There does, however, remain a
clear correlation (intuitive rather than causal if one is splitting
hairs) between equity valuations (P/E ratios) and the older cohort (implying expectations of dropping equity valuations). Critically though, it appears from the data that older investors are not more risk averse. There is one further issue that is quietly emerging and that is US fertility data which points to an 'eventual' rejuvenation of US society
- which could eventually shift the demographic influence back in the
opposite direction. The simple take-away is that while old people
continue to desperately cling to wealth preservation in their
longer-than-expected lives, with their notably higher-than-average net
worths, there will be an increasing pressure to stealthily tax part the aged of their wealth to cover the costs of a growing and even more state-dependent youth demographic that is emerging. Forget the 99% versus the 1%, it appears the new and more clearly-defined class warfare could well be the old versus the young.A House of Cards aka Un Castillo de Naipes
May had arrived in Spain. It was not, however, the May of years’ past but a Spring that was somehow devoid of warmth and of joy. The flowers had begun to blossom but they were gnarled, deformed, as if the land was reflecting the mood of the people. It seemed as if the Devil had arrived in Spain and, having conducted his Inquisition, was loosening various punishments upon the country based upon the confessions that he had witnessed. The Cathedrals appeared to have been defaced, the bones of the Saints were pocked with mildew and the once dazzling Crosses in the churches were inlaid with some type of worm that had not been seen before. Sadness, like a thick band of fog, had descended upon the coastline and it moved inward untouched by any wind or plea to God for Salvation. The malfeasance of what Spain had brought upon herself was about to be bourne and the hope of any other conclusion was now but a faint prayer remembered in our winter memories. The Piper has arrived from Hamelin; and Spain, like so many before her, will be forced to pay.Savings Rate Rises From 4 Year Low As Spending Tumbles, Income Boosted By Government Transfer Receipts
While
expectations for today's March Personal Income and Spending were for a
rise of 0.3% and 0.4%, which if confirmed would have pushed the 3.7%
savings rate to the lowest since 2007. Instead we got a reversion, with
Income rising 0.4%, higher than expected, while Spending printed at
0.3%, the lowest since December 2011, just below expectations, and
tumbling from February's 0.9% print, the biggest slide since August
2011. In real terms, spending was up 0.1% and income up 0.2%. The data
also confirms that at every moment somewhere in the world, people are
laughing at Joe LaVorgna, whose forecast of a 0.6% rise in personal
spending was just 50% off. Most importantly, the surprising inversion
between spending and income, pushed the savings rate from 3.7% to 3.8%,
just shy of 4 year lows, and the first increase in 2012, although well
below the 4.9% savings rate in March 2011, which means that
increasingly the consumer is tapped out. When one takes away the impact
of the record warm winter (of which March data was still part of), it
becomes quite clear that unless Joe Sixpack is charging everything,
then Q2 GDP will be a very big disappointment.Interactive Map Of Europe's Recessionary Tide
As noted earlier, and in the aftermath of both the UK and Spain officially double dipping, very soon a majority of Europe will be submerged under the latest recessionary tide which has already engulfed Spain, UK, Greece, Italy, Portugal, Ireland, Belgium, Denmark, Holland, Czech Republic, and Slovenia. The primary wildcard remains Germany, although there is a more than 50% chance that following some very weak PMI data, the country will follow up its already negative Q4 GDP print with another decline, officially pushing the European growth dynamo into recession as well (as for France which reps and warrants that everything is great, it is not as if anyone actually believes those numbers, especially after Hollande becomes president in one week). For everyone who wants to track the European double dip tsunami in real time, the following interactive chart from Reuters is just for you.
2030: The World In Five Graphs
The following are from a report published last week by the European Union’s Institute for Security Studies (ISS). They’re projections that assume today’s trends will continue in one direction only — which may not be the case.
Daily US Opening News And Market Re-Cap: April 30
All major European bourses are trading lower with the exception of the DAX, which holds just above the open by a modest margin. Adidas ranks among the top performers in the German index, following the report of a strong set of sales figures, contributing to the positive trade. Spanish concerns continue to build up as Standard & Poor’s took ratings action on 16 of the country’s banks, downgrading the notable names of Banco Santander and BBVA. Although the move was not a surprise as this is the usual procedure following a sovereign downgrade, both Santander and BBVA, along with the IBEX are in negative territory. The Bund is seen higher amid a generally risk-off theme to markets this morning. Volumes have been relatively light, however a slight pick-up has been observed in recent trade, grinding the security upwards in the last hour or so. EUR/USD continues to experience weakness and now trades close to a touted option expiry of 1.3200, as traders seek the safety of the USD across a number of currency crosses.Give Austerity A Chance: Growth Spending Failed
The
markets may decide to play along with the renewed talk of growth and
the death of austerity, but it is shocking how quickly writers and the
media have latched on to the idea that growth will somehow save us and
that the entire problem is the fault of austerity. Although it seems
like it has been around for awhile, austerity is fairly new. I don’t
think Greece even got nailed with austerity until May of 2010. In
September 2010 when EFSF and ESM were first officially launched,
Portugal and Ireland were both contributing members. The first time
austerity was mentioned in Spain and Italy had to be the summer of
2011, if not later? Until that time, I assume growth was part of the
policy of most countries? I find it hard to believe any country
engaged in an anti-growth policy? Was not every policy in Europe, up
until at least 2010 if not beyond, actually a “growth” policy? Why did
they fail to create enough growth to stop the debt crisis? Ah, that is
the other problem. It isn’t just growth that is needed, certainly not
to comfort the bond market, it is growth that surpasses the amount
spent (borrowed) to create it.BTFD...
Funds Cut Positions In Gold By 4% And Silver By 20% - Gold Positions At 3 Year Low
CFTC data from Friday showed that money managers
cut long positions on Comex gold futures and options in the week ended
April 24 to the lowest level in more than three years. Managed funds
slashed 2,225 long positions, or bets prices will rise, and added 2,450
short positions, or bets prices will fall. The managed-fund net long
position was cut by 4% and now represents around 10.7 million troy
ounces of gold. This took their net position down 4% to 107,600 long
contracts, from 112,275 long contracts. That's the lowest in CFTC data
since the week ended Jan. 20, 2009. The low in January 2009 corresponded
with the low in the gold price for 2009 - monthly low of $807/oz -
prior to seeing gains which saw the gold price rise more than 50% to
above $1,200/oz in late November 2009 (see chart below). A similar
price gain would see gold rise from $1,663/oz today to $2,494.50/oz in
the coming months. Also of note is the fact that large commercial
traders have greatly cut back their short positions in gold and
especially in silver. This has often been a sign of a bottom and
suggests that they do not expect gold and silver to fall much further.
In Comex silver futures and options, these traders added 248 long
contracts and 2,883 short contracts. This reduced their net long
position by 20% to 10,756 contracts, from 13,390 contracts the previous
week. The net silver position represents around 53.7 million troy
ounces of silver.
Frontrunning: April 30
- Only the cattle cars are missing: Greece opens detention camp for immigrants as election looms (Reuters)
- China really wants that Iran oil - China mulls guarantees for ships carrying Iran oil (Reuters)
- U.S. eyes testy China talks, Chen backer expects Chinese decision (Reuters, FT)
- Possible arsenic poisoning probed in death of coroner's official (LA Times)
- Europe’s Anti-Austerity Calls Mount as Elections Near (Bloomberg)
- Law firm Dewey dumps executive; talks with rival end (Reuters)
- Greek bank appeals for fresh equity (FT)
- Banks seek to put pressure on small rivals (FT)
- Obama falls short of meteoric expectations abroad (Reuters)
Previewing This Week's Key Macro Events
Goldman summarizes what to look forward to in the next few days, when once again fundamental will be ignored and all attention will be on the ECB. "The Week ahead will be dominated by global PMI and US labour market data as the two key releases. A few central banks meetings are on schedule, but market consensus suggests clearly that that ECB will not change its policy, while the RBA will likely cut interest rates by 25bp. There are also central bank meetings in Columbia, Thailand and the Czech Republic. The impact of these events on the FX markets, in particular the key activity data, will mainly be driven by the usual risk-on/risk-off mechanics. Moreover, with cyclical data generally weakening, chances are that risk-off currencies could perform relatively better this week. Some additional Yen strength is therefore possible, as well some under-performance of pro-cyclical currencies. The AUD may be worth some particular attention with the RBA meeting this week and the Chinese PMI - both key drivers of the currency."European Money Up, Loans Down; Or Why The LTRO Is Still A Failure
One of the more mythical aspects of the LTRO, at least during its conception, is that the ECB repo operation would facilitate the diffusion of credit and loans to the broader population (and only subsequently was it made clear that the LTRO was there merely to prevent the disorderly insolvency of European banks). Alas, today's liquidity update from Europe shows that absolutely nothing is happening as planned, because even as broader money may have picked up, loans are once again declining.
ECB Deposits Rise To Most Since Early March
There was a time in late 2011 and early 2012 when people kept track of cash deposited with the ECB with great interest as it showed just where the latent money in the Eurosystem is going, or rather wasn't (and receiving 0.25% from the ECB in exchange for the 1.00% funding cost to borrow LTRO repos from the ECB, an inverse carry trade if you will). Subsequently it was shown that there is at least one liquidity rotation before the money reenters the ECB, as Spanish and Italian banks were busy buying up sovereign paper (now at a P&L loss since the onset of LTRO 1, never mind 2, and as noted earlier, with haircuts on Spanish paper about to go up by another 5%, the toxic liquidity spiral is about to resume), and that the bulk of the cash actually came in from "Northern" Europe where maturing risk paper was not rolled and instead was dumped with Mario Draghi. One thing is certain: this money was not re-entering the broader economy, but who cares about the people any longer. Well, it may be time to start caring about the ECB daily deposit update, because as of Friday, €793.6 billion was deposited with the ECB - an increase of €2.2 billion overnight, €18 billion compared to a week ago, and the highest since the €816 billion deposited on March 13.
Spain Officially Double Dips, Joins 10 Other Western Countries In Recession
The good news: Spanish Q1 GDP printed -0.3% on expectations of a -0.4% Q/Q decline. Unfortunately this is hardly encouraging for the nearly 25% of the labor force which is unemployed, and for consumers whose purchasing habits imploded following record plunges in retail sales as observed last week. The bad news: Spain now joins at least 10 other Western countries which have (re) entered a recession. Per DB: "Spain will today likely join a growing list of Western Developed world countries in recession. Last week the UK was added to a recession roll call that includes Greece, Italy, Portugal, Ireland, Belgium, Denmark, Holland, Czech Republic, and Slovenia. Debt ladened countries with interest rates close to zero have limited flexibility to fight the business cycle and this impotency will continue for many years." Alas, the abovementioned good news won't last: from Evelyn Hermman, economist at BNP - "The Pace of Spain’s economic contraction may increase in coming quarters as austerity measures bite more sharply." Of course, it is the "good news" that sets the pace each and every day, as the bad news is merely a further catalyst to buy, buy, buy as the ECB will allegedly have no choice but to do just that when the time comes. And something quite surprising from DB's morning comment: "If it were us in charge we would allow more defaults which would speed up the cleansing out of the system thus encouraging a more efficient resource allocation in the economy at an earlier stage." Wait, this is Deustche Bank, with assets which are nearly on par with German GDP, saying this? Wow...
The Next Circle Of Spain's Hell Begins At 5% And Ends At 10%
Three weeks ago we discussed the ultimate-doomsday presentation
of the state of Spain which best summarized the macro-concerns facing
the nation and its banks. Since then the market, and now the ratings
agencies, have fully digested that meal of dysphoric data and pushed
Spanish sovereign and bank bond spreads back to levels seen before the
LTRO's short-lived (though self-defeating) munificence transfixed global
investors. However, the world moves on and while most are focused
directly on yields, spreads, unemployment rates, and loan-delinquency
levels, there are two critical new numbers to pay attention to immediately - that we are sure the market will soon learn to appreciate. The first is 5%. This is the haircut increase that ECB collateral will require once all ratings agencies shift to BBB+ or below (meaning
massive margin calls and cash needs for the exact banks that are the
most exposed and least capable of achieving said liquidity). The second
is 10%. This is the level of funded (bank) assets that are
financed by the Central Bank and as UBS notes, this is the tipping point
beyond which banks are treated differently by the market and
have historically required significant equity issuance to return to
regular private market funding. With S&P having made the move to
BBB+ this week (and Italy already there), and Spain's banking system
having reached 11% as of the last ECB announcement (and Italy 7.7%), it
would appear we are set for more heat in the European kitchen -
especially since Nomura adds that they do not expect any meaningful
response from the ECB until things get a lot worse. The world is
waking up to the realization that de-linking sovereigns and banks (as
opposed to concentrating that systemic risk) is key to stabilizing
markets.
While
Greece has had its fair-share of EURs funneled to it and through it
over the course of the last year or two, it appears they have now
created their first 'internal' bailout as things go from bad to worse.
As 
by SGT
After writing my essay “
“If
I were reincarnated, I would wish to be returned to Earth as a killer
virus to lower human population levels” -Prince Phillip, Duke of
Edinburgh
PETERSON AIR FORCE BASE, Colo. – The North American Aerospace Defense
Command and U.S. Northern Command will conduct a major exercise, ARDENT
SENTRY 2012, focused on Defense Support of Civil Authorities, May 2 � 9,
2012.
Bill
Black is a former bank regulator who played a central role in
prosecuting the corruption responsible for the S&L crisis of the
late 1980s. He is one of America's top experts on financial fraud. And
he laments that the US has descended into a type of crony capitalism
that makes continued fraud a virtual certainty - while increasingly
neutering the safeguards intended to prevent and punish such abuse. In
this extensive interview, Bill explains why financial fraud is the most
damaging type of fraud and also the hardest to prosecute. He also
details how, through crony capitalism, it has become much more prevalent
in our markets and political system. A warning: there's much revealed
in this interview to make your blood boil. For example: the Office of
Threat Supervision. In the aftermath of the S&L crisis, this office
brought 3,000 administration enforcements actions (a.k.a. lawsuits)
against identified perpetrators. In a number of cases, they clawed back
the funds and profits that the convicted parties had fraudulently
obtained. Flash forward to the 2008 credit crisis, in which just the
related household sector losses alone were over 70x greater than those
seen during the entire S&L debacle. So how many criminal referrals
did the same agency, the Office of Threat Supervision, make?
The question puzzling currency markets is why the EUR is so strong. While we have argued that during
the risk-off period of the last month or so post-LTRO2 (before
Tuesday) EURUSD strength appeared to be driven by repatriation flows
and balance sheet reduction, new information over the last couple of weeks driving the expectation that growth will be weak enough in the US to keep US policy very stimulative for a nice long time, we tend to agree with Steven Englander of Citigroup who argues that it looks very much as if QE3/Fed-stimulus anticipations are behind the EUR relative strength recently.
Indeed the recent USD weakness is pretty much across the board,
suggesting that it is less EUR attractiveness than USD unattractiveness
that is driving the EUR’s gains. That said, I think the buzz around
various euro zone measures to help out banks and ease the rigidities of
the fiscal compact is also helping support the EUR by reducing tail
risk, but right now the USD/Fed is the bigger story. Back of the envelope math based on the Fed/ECB balance sheets and EURUSD implies the market expects around $700bn of QE3 and given swap-spread differentials there appears to be little liquidity premium to reduce this expectation.
China
is preparing to avoid U.S. sanctions on Iran by paying for oil with
gold. Not only that but, as Forbes contributor Gordon Change also
mentions, China has already been bartering with Iran to get a hold of petroleum
using among other goods, Chinese washing machines, refrigerators, toys,
clothes, cosmetics, and toiletries. The barter trade works, but Iran
needs cash too - hence Gold. Thus, the leadership in America in
its infinite stupidity has actually accelerated the demise of the U.S.
dollar as the world’s reserve currency. In a similar move on a more micro level, the government of Spain in a similar desperation has banned the use of cash transactions above 2,500 euros. How do you think citizens are going to respond to this? People are already in the streets. Everything is going to go black market and to a barter system.
It will happen country by country as governments get increasingly
desperate and the authoritarian clamp down continues. It will happen on
an increasing level until all of these house of cards bureaucratic
states fail and something new is reborn - just as 
When
even Pisani is questioning the fundamental-less QE3-addicted rally, it
is perhaps self-evident that volumes were lagging today and stocks
gave up most of their gains to end fractionally higher in the S&P
500 e-mini futures. Stocks peaked at the open of the US day-session
after an overnight ramp that started in the depths of the overnight
session (3amET) as auctions and data became so bad that traders adjusted
their odds of a central-banker injection which seemed to spur
wholesale buying of gold, stocks, selling of the USD (but also selling
of US Treasuries - which did not fit with the QE meme). Gold continued
its debasement rally after the US day-session as stocks sold back off
as GDP composition weakness became clear. As we pushed into the
European close, stocks rallied back to catch up with Gold's performance
on the day and then sagged for a quiet low volume afternoon that saw
the ES drop back below 1400, below its opening levels as Gold held above $1660. Treasuries limped
around in another narrow range day ending a fraction lower in yield
but off their best levels of overnight (where 10Y got down to 1.88%).
Whether it is discounting Fed easing or EUR repatriation, USD weakness was broad today but JPY and AUD strength was relatively equal providing little carry-driven strength to support stocks. VIX warbled
above and below 16% but ended back above as the term structure of vol
continues to leak flatter. A solidly green week for stocks, accompanied
by falling volumes and average trade size has seen the nominal value of
the S&P 500 almost overtake Silver for best-performing asset YTD
(after Silver's post LTRO2 collapse). Copper outperformed Gold and Oil on the week
- though they managed to more than double the implied move from USD's
weakness (-0.5% on the week). The lack of financials in today's push
along with only modest energy, industrials, and materials follow through
suggests investors are losing hope rather quickly with the QE chatter and the slide into the close did nothing to stay anxiety.
In perhaps the most courageous (and now must-read) speech ever given inside the New York Fed's 
While
many will remember 1982 for its disco and the movie E.T., it is
perhaps best known by an investing public as the end of a 16 year
secular bear market. The 10% decline from 1966 was better, however, than
the 38% loss from 1937 to 1941 and the 80% loss from 1929-1932 but
together this triumvirate make up the secular bear markets. Luckily, as
IceCap's Keith Dicker notes, for most of the investment industry they
can gloss over these extended loss periods and instead focus on the
long-run secular bull markets (cue Jeremy Siegel). However, he points
out that unknown to many and ignored by the rest, "we are in the
middle of another long and dragged out Secular Bear Market which has
seen investors lose 7% since the year 2000 - that's 12 years of hopes
for nothing." Understanding secular markets and how they
transition from BULL to BEAR is perhaps the most rewarding investment
perspective you won’t hear from anyone else. While financial markets
continue to yo-yo with our retirements, the truth is, the next Secular BULL Market is not quite ready to perk its head up just yet
as Dicker addresses P/E ratios during inflationary and deflationary
periods summing up his view of the world rather succinctly: "As
central banks continue to bail out banks and countries, they implicitly
create an investment culture whereby failure is rewarded and success
is taxed to reward those who failed."
Americans consume 20 million barrels of oil per day and 
The
balance sheet recession diagnosis of many of the world's developed
nations remains among the clearest explanation linking the failure of
textbook monetary policy to the dismal multipliers, transmission
mechanism breakages, and sad reality of a recovery-less recovery.
Whether you agree with Richard Koo's traditional but massive Keynesian
fiscal stimulus medicinal choice is a different matter but the Nomura
economist delineates the three problems (two macroeconomic and
one capital flow) exacerbating the eurozone crisis and notes that
"bulls have gotten ahead of themselves". Noting that the
central bank supply of funds may help address financial crises but
cannot resolve problems at borrowers, and that authorities have never
admitted they were wrong, Koo stresses the three key reasons that bullish speculation on eurozone is premature
- monetary accommodation's ineffectiveness when the private sector is
deleveraging, active fiscal retrenchment by the core when fiscal
stimulus is the only plus for aggregate demand, and Japanese and US
lagged-examples of that dash any short-term hope that structural reforms
will lead to growth. Even his solution to the European debacle - one
of financial repression limiting the sale of government bonds to each nation's own citizens
- while retroactively limiting a nation's largesse seems to only lead
to the inevitable Japanification we have discussed at length. In the
meantime, Koo appears far less sanguine than the markets about the
prospects for anything but further demise in Europe (and the US).
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