Submitted by Tyler Durden on 11/30/2011 - 16:09
China Iran
Fast forward to 2:08: "It is puzzling to some that Major
General Zhang Zhaozhong, a professor from the Chinese National Defense
University, said China will not hesitate to protect Iran even with a
third World War... Professor Xia Ming: "Zhang Zhaozhong said that not
hesitating to fight a third world war would be entirely for domestic
political needs...." And don't forget Russia, which recently said it is preparing to retaliate against NATO and has put radar stations on combat alert: "Russia is another ally of Iran, with similar policy to that of China. Toward Iran."
Watch, and please forward the entire video, for an explanation of how
China is approaching the situation not only in Iran, but a perspective
of how they view the western "threat", as well as what tensions they
face domestically.
So much for engineered stock market "rallies" and global "bailouts" - per the latest ICI update,
we can now confirm that no matter how or what the market does, retail
investors have firmly decided that the ridiculous market volatility is
simply too much for most, and have withdrawn another $3.7
billion from domestic equity funds, and have now taken out money for 14
straight weeks ($44 billion) since the US debt downgrade (but,
but, the S&P barely lower), or 31 weeks ($130 billion) if one
ignores the statistically irrelevant blip of a $715mm inflow on August
17. Perhaps instead of trying to fabricate a makeshift price for the SPX
which nobody believes any more, the Fed should focus on moderating the
insane volatility which is the primary reason preventing any normal investors from putting cash into stocks. And yes, $6.2 billion went into bonds, despite the record low yields. Said otherwise, retail investors have withdrawn $214 billion from domestic equity mutual funds since the beginning of 2010. Put a fork in stocks: America's infatuation with the stock market is officially over.
Today's tremendous rally in equities was well supported by broad risk assets initially, but as financials took off this afternoon to end the month down only 4.8%, CONTEXT remained less exuberant.
The 6.2% rally in financial stocks today was not so evident in
corporate bond-land where we saw net-selling overall. Copper slipped
well off its highs of the day but ended very well as Oil was only able
to match USD weakness on the day while Gold and Silver outperformed
(with the former touching $1750). VIX was a popular topic as it
dropped below 30% but we note that implied correlation did not drop
from the open suggesting macro-hedges remained more bid than
underlying sentiment might suggest. IG credit outperformed (relatively
speaking) which seemed more a squeeze move into the month-end close but
HY's move was impressive as an early afternoon fade in HYG reverted to
end at its highs. Equities and Credit ended back at 11/14-15 levels
with IG and HY ahead of equity.
As
the central bankers and political leaders of the
'supposedly-developed' world sit back in their chaise-longues sipping
mojitos at a job-well-done for today's mindless rally on the back of a
slightly lower cost of funds in a facility that already existed but was
hardly utilized, perhaps they will cough a little at Nigel Farage's (the cantankerously correct MEP from The UK) comments today. Describing the process of 'bribing' Croatia to join the EU as a 'bent, corrupt, and distorted' effort,
he remarks that he has never seen this kind of pressure. It is
remarkable, he notes in an undeniably intelligent-sounding English
accent, that after only 20 years out of the former Yugoslavia, after such a long period of seeking independence, they are now voting to rejoin a 'new Yugoslavia' - a failing political experiment. Perhaps, Van Rompuy and friends would be better spending the money on more mojitos for their friends at the Fed and PBOC?
Investors Clinic: Jim Rogers on Metals and Other Commodities, CNBC video. *Related: ELEMENTS Rogers Intl Commodity Index - Agriculture Total Return ETN (RJA), United States Oil Fund LP ETF (USO), iShares Silver Trust (ETF) (SLV), SPDR Gold Trust ETF (GLD) * *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.*
We noted early the lackluster improvement in the EUR-USD cross-currency basis swap, especialy compared to its trend and previous crisis scenarios. Peter Tchir, of TF Market Advisors,
puts today's central bank actions into context relative to the
underlying problems being faced in Europe and covers the implications of
some of the headlines that may have slipped past in the middle of the
rally-fest. We were down over 1% on futures overnight specifically because the EFSF was a failure and banks were downgraded (belatedly) by S&P. No one is talking about EFSF right now. The IMF denial and now the Italian 'deal' is also off the table. Back on the table is "treaty changes".The swap line announcement seems largely symbolic
in that changing the rate to 50 bps instead of 100 bps is not a game
changer, and the basis-swap's previous bailout reaction offers less hope
this time around.
Whether
its non-confirming volumeless rallies in stocks, hard-to-find
collateral, sovereign risk, counterparty risk, USD funding stress, GDP
growth dislocations, EM credit dispersion, or equity market
outperformance, Nomura's EEMEA FX and Fixed Income team has a little for
everyone in today's '10 Things We Did Not Know'. Today's
obvious risk-on knee-jerk-response rally is perhaps not so broadly
supported even as Ben's promise trumps a totally failed Grand Plan.
Would it really hurt you, to help support our efforts to keep you informed?
Fast forward to 2:08: "It is puzzling to some that Major
General Zhang Zhaozhong, a professor from the Chinese National Defense
University, said China will not hesitate to protect Iran even with a
third World War... Professor Xia Ming: "Zhang Zhaozhong said that not
hesitating to fight a third world war would be entirely for domestic
political needs...." And don't forget Russia, which recently said it is preparing to retaliate against NATO and has put radar stations on combat alert: "Russia is another ally of Iran, with similar policy to that of China. Toward Iran."
Watch, and please forward the entire video, for an explanation of how
China is approaching the situation not only in Iran, but a perspective
of how they view the western "threat", as well as what tensions they
face domestically.For The First Time In History, Fed Will Buy AND Sell Treasurys At The Same Time On Friday
Following today's unprecedented POMO failure due to "system difficulties" (one would hope the Fed's POMO machine does not start and stop every time someone pulls the plug from the socket), Brian Sack's team (not to be confused with the PWG team of Eric Mindich) had to reschedule the literally failed auction. As it turns out, the first opportunity to sell $8-$8.75 billion in 2013 bonds is on December 2. And unlike the December 21 "reverse" POMO which is due to take place at 1:15pm, the rescheduled bond sale will instead occur at its usual time of 10:15-11:00am. Ironically, this is also the time when the Fed will be buying $2.25-$2.75 billion in 2036-2041 bonds. In other words, for the first time ever on Friday the Fed will be literally selling and buying bonds (although selling 4 times more than buying) at the same time. If this is not the pinnacle of deranged monetary policy which does not even attempt to offset monetization by a few hours, then nothing ever can be.14th Consecutive Week Of Stock Outflows: Retail Refuses To Go Back Into Stocks No Matter What Market Does
So much for engineered stock market "rallies" and global "bailouts" - per the latest ICI update,
we can now confirm that no matter how or what the market does, retail
investors have firmly decided that the ridiculous market volatility is
simply too much for most, and have withdrawn another $3.7
billion from domestic equity funds, and have now taken out money for 14
straight weeks ($44 billion) since the US debt downgrade (but,
but, the S&P barely lower), or 31 weeks ($130 billion) if one
ignores the statistically irrelevant blip of a $715mm inflow on August
17. Perhaps instead of trying to fabricate a makeshift price for the SPX
which nobody believes any more, the Fed should focus on moderating the
insane volatility which is the primary reason preventing any normal investors from putting cash into stocks. And yes, $6.2 billion went into bonds, despite the record low yields. Said otherwise, retail investors have withdrawn $214 billion from domestic equity mutual funds since the beginning of 2010. Put a fork in stocks: America's infatuation with the stock market is officially over.Market "Inverse-Plunges" But Not Everyone Happy
Today's tremendous rally in equities was well supported by broad risk assets initially, but as financials took off this afternoon to end the month down only 4.8%, CONTEXT remained less exuberant.
The 6.2% rally in financial stocks today was not so evident in
corporate bond-land where we saw net-selling overall. Copper slipped
well off its highs of the day but ended very well as Oil was only able
to match USD weakness on the day while Gold and Silver outperformed
(with the former touching $1750). VIX was a popular topic as it
dropped below 30% but we note that implied correlation did not drop
from the open suggesting macro-hedges remained more bid than
underlying sentiment might suggest. IG credit outperformed (relatively
speaking) which seemed more a squeeze move into the month-end close but
HY's move was impressive as an early afternoon fade in HYG reverted to
end at its highs. Equities and Credit ended back at 11/14-15 levels
with IG and HY ahead of equity.Ron Paul Statement On The Fed's Bailout Of Europe
Rather than calming markets, these arrangements should indicate just how frightened governments around the world are about the European financial crisis. Central banks are grasping at straws, hoping that flooding the world with money created out of thin air will somehow resolve a crisis caused by uncontrolled government spending and irresponsible debt issuance. Congress should not permit this type of open-ended commitment on the part of the Fed, a commitment which could easily run into the trillions of dollars. These dollar swaps are purely inflationary and will harm American consumers as much as any form of quantitative easing.Nigel Farage Slams Supposedly-Austere EU For Bribing Croatia To Join The 'Bent, Corrupt, And Distorted' Part
As
the central bankers and political leaders of the
'supposedly-developed' world sit back in their chaise-longues sipping
mojitos at a job-well-done for today's mindless rally on the back of a
slightly lower cost of funds in a facility that already existed but was
hardly utilized, perhaps they will cough a little at Nigel Farage's (the cantankerously correct MEP from The UK) comments today. Describing the process of 'bribing' Croatia to join the EU as a 'bent, corrupt, and distorted' effort,
he remarks that he has never seen this kind of pressure. It is
remarkable, he notes in an undeniably intelligent-sounding English
accent, that after only 20 years out of the former Yugoslavia, after such a long period of seeking independence, they are now voting to rejoin a 'new Yugoslavia' - a failing political experiment. Perhaps, Van Rompuy and friends would be better spending the money on more mojitos for their friends at the Fed and PBOC?Monthly Gold Chart - Closing Price Only
I still marvel when looking at these charts at those who continue to
denigrate gold and particularly those who deny it is a safe haven.
While we all know that the official government CPI numbers are a fantasy,
it is still rather interesting to see where gold has run into overhead
resistance based on this inflation adjusted chart.
You Know How You Get To Carnegie Hall?
Practice. After practicing short term gold and silver forecasting for10
years, I tend to shy away from posting my short term views on here because
it only leads to readers busting my balls when my calls are wrong. It's
safe to assume that - in general - my longer term outlook (3-5 years) is
for at least $200-300/oz. silver. Likely higher but that's what I'll go on
record publicly with.
Having said that, I do believe that the silver market - after the vicious
manipulated take down that took silver from $50 in April to a recent
intra-day low of $26 and change on Sept 26, I am conf... more »
Crude Oil prices - Collateral Damage
Once again the WTI crude oil market is testing the psychological $100
level. After mounting a huge rally over the last two months that took price
from down near $75/bbl to over $100/bbl, crude prices retreated as fears
surfaced concerning the ongoing crisis in Europe. While tensions with Iran
have kept prices from tanking, it is a given that crude oil was not exempt
from risk aversion trades and fears of an overall global financial slowdown.
However, as traders have begun anticipating action by the Central Banks to
deal with this crisis, crude has floated back up again. Today's spik... more »
Fundamental Spark for Silver and for Gold?
Today's actions by the Fed, in concert with 5 other Central Banks, plus the
move by China to lower bank reserve requirements 50 basis points, the first
time they have done so in three years, has provided today's fireworks
across the commodity and equity marks. It is RISK ON time once again for
the hedgies.
I mentioned in my analysis of the COT report yesterday, that the metals
needed some sort of fundamental spark to break them out of their respective
trading ranges. Perhaps we have that, at least for today, in the form of
easing of liquidity concerns. That is unclear to me at this ... more »
Investors Clinic: Jim Rogers on Metals and Other Commodities
Investors Clinic: Jim Rogers on Metals and Other Commodities, CNBC video. *Related: ELEMENTS Rogers Intl Commodity Index - Agriculture Total Return ETN (RJA), United States Oil Fund LP ETF (USO), iShares Silver Trust (ETF) (SLV), SPDR Gold Trust ETF (GLD) * *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 Basis Swap Perspectives
We noted early the lackluster improvement in the EUR-USD cross-currency basis swap, especialy compared to its trend and previous crisis scenarios. Peter Tchir, of TF Market Advisors,
puts today's central bank actions into context relative to the
underlying problems being faced in Europe and covers the implications of
some of the headlines that may have slipped past in the middle of the
rally-fest. We were down over 1% on futures overnight specifically because the EFSF was a failure and banks were downgraded (belatedly) by S&P. No one is talking about EFSF right now. The IMF denial and now the Italian 'deal' is also off the table. Back on the table is "treaty changes".The swap line announcement seems largely symbolic
in that changing the rate to 50 bps instead of 100 bps is not a game
changer, and the basis-swap's previous bailout reaction offers less hope
this time around.Iran To Take 'Necessary Measures' In Reaction To UK Embassy
Just headlines via Bloomberg from the Iran Foreign Minster Mehr:This as Germany, Italy, and now France also call back their Ambassador from Iran.*IRAN SAYS U.K. DECISION TO CLOSE EMBASSY IS `HASTY'
*IRAN WILL TAKE `NECESSARY MEASURES' IN REACTION, MEHR SAYS
MBIA Soars Following BTIG Initiation With $22.50 Target
It is no secret that MBIA has long been one of our favorite longs (and by longs it is really a contrarian bet on various bad things happening - our latest piece can be found here). Today, we are happy to see that BTIG has come out with an initiating coverage report on the name following virtually all the same logic we presented two months ago, only with a price target that makes even us blush: $22.50. To wit: "We are initiating coverage of MBIA with a BUY rating and a $22.50 price target which equates to a 1.0x multiple of 2012E year-end stand-alone adjusted per share book value of National ($26.26) less the holding company net debt per share ($3.73). Our valuation is based on our view that if MBIA is able to resolve the fraudulent conveyance and Article 78 cases challenging its transformation either through a settlement or a court judgment, the value of National will flow up to the holding company and to shareholders.... Given our view that the challenges to MBIA?s transformation will be resolved through a settlement and that its shares could nearly triple in a post-announcement short squeeze, we believe MBIA offers one of the market's most compelling risk-reward propositions. Following almost four years of uncertainty during which its status as a viable entity has been in question, MBIA appears closer to resolving the various challenges it faces, unlocking the value of National Public Finance Guaranty Corporation – the company?s public finance unit – to the benefit of shareholders, and resuming its role as one of the last remaining players within that industry." and the kicker: "We would note that the large short interest in the stock relative to its float - 28.5 mm shares short versus a float of 140.4mm shares – combined with highly concentrated institutional ownership could set the stage for a dramatic short squeeze as short sellers might have to scramble to find shares to cover." Remember: "Is MBIA A Volkswagen-Like Short Squeeze Candidate?" Mmhmm.JPM Explains The Novel Feature In Today's Fed Liquidity Swap Line Expansion
As JPM's Michael Feroli, he move to cut the Fed's swap lines rate from OIS+100 to OIS+50 should not come as a surprise: it was already in the works, the only question is when it would be enacted. As it so happens it was decided on Monday, and was announced today after unfounded rumors of a potential bank failure in Europe became apparent. There was however a twist: "The new foreign liquidity swaps, whereby the Fed can offer euros, yen, loonies, pounds or swiss francs to US banks, is a novel step and a curious feature of today's announcement. The Fed's official statement is that these are being implemented as a "contingency measure." There are no plans to make these operational in the near term, but are apparently being set up as a backup plan in the event of a worsening in global financial conditions." What this means remains unclear but the Fed never changes policy without reason. Which then begs the question: while everyone is focusing on foreign bank lack of USD liquidity, should the real focus be on US bank lack of foreign currency liquidity?Egan Jones Downgrades France From AA- To A; Negative Watch, Sees Debt/GDP Rising From 91% to 117% By 2013
Only the first of many French downgrades, this time by the rating agency which is always ahead of the pack. "Disastrous trend and the worst has yet to come. Over the past two fiscal years, the Republic of France's debt has grown by 21% from EUR1.32 trillion to EUR1.59 trillion. Meanwhile, FYE GDP declined slightly from EUR2.13 trillion as of 2008 to EUR1.93 trillion as of 2010...For the most part, over the past 18 months France has been exempted from the rise in funding costs. However, as the crisis evolves, we expect that France will be pressured. The deterioration in France's credit metrics combined with the needed supported for France's banks are likely to pressure the country. A major catalyst is likely to be the year end financials for France's banks; watch for a significant support program to be announced over the next couple of weeks."Is The Risk-On Rally Real?
Whether
its non-confirming volumeless rallies in stocks, hard-to-find
collateral, sovereign risk, counterparty risk, USD funding stress, GDP
growth dislocations, EM credit dispersion, or equity market
outperformance, Nomura's EEMEA FX and Fixed Income team has a little for
everyone in today's '10 Things We Did Not Know'. Today's
obvious risk-on knee-jerk-response rally is perhaps not so broadly
supported even as Ben's promise trumps a totally failed Grand Plan.Would it really hurt you, to help support our efforts to keep you informed?
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