Bank Of America Site Down For Third Day In A Row
Who is charting Bank of America's Crash?
Bank Of America Charts The Four "Crash Landing" Systemic Endgames For China
While everyone's attention is focused on just what unconventional policy Benny and the Inkjets will pull out of their collective sleeves to prevent another financial implosion (fear not, something will appear), it is time to redirect once again to the copper plated elephant in the room, China, which last week became the target of a "Hard Landing" vendetta by Bank of America's David Cui (noted here). Well, the China strategist just fired a follow up shot with "Four systematic risks & potential for financial market turmoil." So, for all those who need one more nail in the "China Bubble" coffin here we go, first textually... "we have sensed that the financial markets in China have become increasingly unstable and that the risk of a hard landing is rising. In this report we outline four systematic risks that we believe have the potential to cause financial market turmoil: 1) private lending (a current issue); 2) property price correction (potentially over the next three to twelve months); 3) bank bad debt write-off and eventual recapitalization (potentially over the next two to three years); and 4) “hot money” outflows (event driven and highly unpredictable). Many of these risks are intertwined which is why we refer them as systematic risks, i.e. difficult to mitigate via diversification. As a result, we suggest investors remain defensive in their portfolio construction in the medium to long term (although we recognize that some short term tactical bounces in the market are possible after the recent sharp sell-off)." And, more importantly, visually...
Nothing For Money As Strips Aren't Free
The
US Treasury just issued $30bn four-week bills once again at the
outstanding rate of 0.00000% as the bid-to-cover did drop a little from
last week but remains on the same longer-term upward path of the last
three years. This is not anomalous, as we see below, that all T-Bills
out to 12/15/11 currently offer a negative rate - with most notably the
very short-term (less than one week) charging even more to store your
money (1.5bps to store our money in T-Bills for 1 week). The buyside demand declined as dealers dominated the bidding with almost $120bn and Direct bidders saw the lowest takedown since Jan10 on a relatively low bid size.US Treasuries Outlook: Overbought And Susceptible To A Large Correction
Despite being bullish on the US dollar, Faber does not reccomend treasuries,
noting that they are overbought and susceptible to a large correction. - *in
Seeking Alpha, form the Gloom, Boom & Doom Newsletter*
*ETFs: ProShares UltraShort 20+ Year Treasuries ETF (NYSE:TBT) iShares
Barclays 20+ Year Treasury Bond ETF (NYSE:TLT) *
*Marc Faber is an international investor known for his uncanny predictions
of the stock market and futures markets around the world.*
Stocks Are Oversold But That Does Not Mean They Can`t Go Lower
Yes, stocks are very oversold, but that does not mean they cannot go lower.
The dreadful price action in both Copper and the Shanghai Composite points
to new lows for the equity markets. After US stocks make a new low below
1100 on the S&P 500 (SPY), there could be a year-end rally followed by a
more meaningful decline into 2012. Investors should use any bounce in stocks
as an opportunity to reduce their equity exposure. - *in Seeking Alpha, from
the Gloom, Boom & Doom Newsletter*
Related: SPDR S&P 500 ETF (NYSE:SPY), ProShares UltraShort S&P500 ETF
(NYSE:SDS)
*Marc Faber is an int... more »
Investors Make The Same Mistakes Investing In Anything
Investors make the same mistakes investing in anything. They use too much
leverage. The great advantage of commodity investing is you can use enormous
leverage. The great disaster of commodity investing is you can use enormous
leverage. Everybody in the world has a story about a brother-in-law who went
broke investing in soybeans. But you don’t have to invest that way. - *in
CommodityOnline*
*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 Jou... more »
Here comes Q.E. 3 to Infinity and Beyond...
Watch Ben Bernanke Testify Before Joint Economic Committee Live
Bernanke
will testify before the Joint Economic Committee today to offer his
outlook on the state of the economy, governmental financial policy, and
federal spending priorities. Last time he testified on the Hill, the
Fed Chairman said the U.S. economy was showing signs of a
"self-sustaining recovery" but cautioned that another four to five years
may pass before unemployment levels fall to historic norms.
Presenting the semi-annual Monetary Policy Report provides an
opportunity for the Fed to update its view on the economic outlook
directly to Congress. Watch out for any notable keywords such as
"QE3-XXX", "Keynesian Paradise", "Turboprint", "Hyperinflation" and
last but not least "Gold is money."Welcome To The Bear Market
The
S&P fought reality valiantly, and after every other market in the
world entered a bear market long ago, reality won. The S&P 500 is
now over 20% lower from the highs, and we are officially in a bear
market. Gun to our head, and with an eye on where MS is trading, we are
going much lower. But even gun to our head we are unsure if the S&P
will enter triple digits first, or if that will be preceded by Morgan
Stanley "Benjamin Button-ing" its teenager status...MS 1 Year CDS Hit 800/875, Curve Massively Inverted
Ladies, this is getting scary. Someone is betting on the endgame for the house of Mack. We, for one, can't wait for this week's H.4.1 release to find out if not who, then how much was borrowed at the Fed's discount window...
Art Cashin On "The Day Ahead"
The Day Ahead - Here is an email that went out as daylight hit the East River:Unfortunately, markets have weakened further still. The questions raised about the stress test and the bank that it passed may linger through the day.Dexia, the Belgian bank alluded to in rumors yesterday now at center stage. Authorities climbing all over each other with guarantees and assurances. Even some talk of splitting into good bank/bad bank. Trouble here is that this bank was said to have passed the stress test with flying colors.Market unsettled by new talk that “official” haircuts may be set at 50% vs. prior 21%. Once again, markets unsettled by eroding confidence in financial markets rather than by a single event/entity. Traders see neither lifeboats or fire engines. What happens if a real crisis breaks out? Is there a plan? So, far looks like rerun of yesterday – worries and wariness rather than panicky selling. DAX -3%. FTSE & CAC -2%.
Europe - Political Fabrications Instead Of Economic Realities
The latest EFSF “collateral” package shows once again, just how wrong Europe has it. Dreams of Eurobonds should be relegated to the trash bin. Fantasies that EFSF will leverage itself up to save Europe should be discarded. The latest outcome of EFSF meetings should be enough to let everyone know that even the people with the money have no clue what to do, and the structure of compromise will never get anywhere. The Greek bond rollover is another example of an overly complex, unwieldy mechanism, that doesn’t do what it portrays. Until Europe is willing to address the reality of the situation and take some simple but painful steps rather than complex, unworkable ones, that sound good but do nothing, the problems will increase.Egan-Jones Downgrades Morgan Stanley From A+ To A, Negative Outlook
Synopsis: Questions about MS's French bank exposure and level of derivatives exposure. While June results were good, MS' French bank exposure (all asset and off balance sheet classes except derivatives) is estimated at $39B (57% of equity of $68B and 150% of market cap of $26B) of which interbank placements is believed to be a small component. These exposures are significant and unusually large as a percentage of capital. Of equal concern is the estimated $1.78T in notional value of CDS' on MS' books although EJR does acknowledge the netting effect (the net estimated exposure is $457M). The US is likely to provide MS additional support if needed, despite wind-down procedures contained in Dodd Frank. We are downgrading with a neg outlook.FINal(er) Countdown
UPDATE: MS just traded $11.99 -3.77% on the Egan Jones downgrade newsOvernight saw credit markets crushed overseas in Australia and Asia, Europe continue to sink into the abyss and now pre-market equities in the US are showing serious weakness with no sign of a bounce. We already discussed CDS this morning (which are all gapping wider and the curve inverting/flattening further, and the Waffle train just keeps on coming, now +35 at 303/313) but a quick look at pre-market stocks shows the pain in the TBTFs:
- BAC -2.7% at $5.38 (at 3/12/09 levels)
- MS -2.2% at $12.2 (at 12/03/08 levels)
- C -2.3% at $22.58 (at 3/16/09 levels)
- GS -1.6% at $88.6 (at 3/11/09 levels)
- JPM -2.1% at $28.05 (at 4/08/09 levels)
- WFC -1.6% at $22.8 (just above recent lows)
Belgium, Morgan Stanley CDS Hit Escape Velocity
We must have missed the moment when Jim Cramer defended Morgan Stanley today, but judging by the company's CDS which is +30 to a ridonculous 610/650, he must have said something positive. In fact, the bank's "outperformance" is only matched by that of Waffled which as we have been saying since Friday is going to meet Dexia about halfway. Today it is +23 to 290/300, the worst performer of any country in the world.Indian Silver Demand Leads to Supply Issues, Capacity Stretched, Higher Premiums - Asian Bullion Demand Remains Strong
Those continuing to be bearish on gold and misdiagnosing a gold bubble (for a variety of simplistic and ill thought out reasons – see Commentary) are ignoring the deeply held belief in gold as a store of value of some 3 billion people in Asia. They also ignore the small but growing number of buyers in the western world who are diversifying into gold leading to an increase in allocations to gold from a miniscule base. These buyers include hedge funds, banks, pension funds and most importantly central banks. These buyers continue to rightly focus on gold’s value rather than its price. Physical demand for silver remains high and is being reflected in a slight uptick in premiums. GoldCore have seen continuing coin and bar demand and physical buyers are not being deterred by the latest sell off on the COMEX market. Those buying silver continue to expect silver to rise to $50/oz and many expect silver to rise to over $140/oz which is the real record (CPI inflation adjusted) high from 1980. Demand from western buyers remains minimal as buyers remain a contrarian few with the majority of investors and savers having no allocation to silver whatsoever. However, this is not the case in Asia where both gold and silver are held in far higher esteem and appreciated for their wealth preservation qualities. Indian demand has been very significant in months and has accelerated in recent days after the sell off and tentative signs of a bottoming.European Liquidity Update: Horrible And Getting Worse
Don't expect any good news in a post that has "European Liquidity" in the headline. While Euribor-OIS up from 0.81 to 0.82%, still 7 bps below the 2.5 year record of 0.89% from September 23, 3M USD Libor grinds once again wider from 0.378% to 0.381%, 50th consecutive increase, as UBS now has the spotlight with a 9th consecutive rise in its rate from 0.411% to 0.416%. Credit Agricole continues to be troubling and widest at 0.4375%, up from 0.435%. But most disturbing is that the deposits with the ECB soared to a new multi-year high of €209 billion, up from the €200 billion yesterday which we noted. And while none of this is surprising, we had some out of leftfield news coming from Deutsche Bank which announced it had taken €250 million in Greece-related charges after it had proclaimed for months its exposure was negligible and saw no write down risk. DB also said it won't make a €10 billion profit this year as had been promised earlier. So much for "them" not lying to "us." The "us" response: DB CDS +15 at 224 bps at last check and moving wider, even as German CDS probes new record levels. At this point comparing 2011 to 2008 is no longer cool, but we will refer readers to this post from last night...
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