Sarkozy: Europe's "Liquidity Run" Has Begun Because There Is An Unsolvable $30 Trillion Problem

No, not that Sarkozy. His half-brother - the one who actually can use a calculator. In an interview on CNBC, the Carlyle group head had the temerity to tell the truth, the whole truth, and use math - that long-forgotten concept which one has to scour various backwater blogs to rediscover - to explain nothing but the truth which is that Europe needs many more trillions than either the EFSF or the ECB can afford to give. Actually, we take that back. The ECB can inject the needed €3-5 trillion, but after that concerns about localized episodes of (hyper)inflation, especially now that Kocherlakota has confirmed that the transmission mechanism between bank reserves and inflation may be broken, will be all too justified. In the meantime, Sarkozy on Europe math fail: "The math i'm working with is very simple. In the US banking sector, we had 3 trillion of wholesale funding that needed to be stabilized, got stabilized by the implementation of TARP which saw the US treasury buy $212 billion worth of preferred in the banking sector to stabilize that $3 trillion, give our banks the time to work through hair problem their problem assets. In Europe, that $3 trillion is $30 trillion. so if you multiply the $212 by 10, you get the $2.12 trillion. In my view, the issues on the European banks are bigger than the issues on the books of the US Banks. So if you want to stabilize that $30 trillion and in my view it's not that you want to, it's that you have to, you do not have a choice, you're going to have to be at least at 2.1 trillion and i suspect it may need to be more." Q.E.D. - there, the math wasn't that difficult, was it?

Aircraft Carrier CVN-77 Parks Next Door To Syria Just As US Urges Americans To Leave Country "Immediately"

Yesterday we reported that the Arab League (with European and US support) are preparing to institute a no fly zone over Syria. Today, we get an escalation which confirms we may be on the edge. Just out from CBS: "The U.S. Embassy in Damascus urged its citizens in Syria to depart "immediately," and Turkey's foreign ministry urged Turkish pilgrims to opt for flights to return home from Saudi Arabia to avoid traveling through Syria." But probably the most damning evidence that the "western world" is about to do the unthinkable and invade Syria, and in the process force Iran to retaliate, is the weekly naval update from Stratfor, which always has some very interesting if always controversial view on geopolitics, where we find that for the first time in many months, CVN 77 George H.W. Bush has left its traditional theater of operations just off the Straits of Hormuz, a critical choke point, where it traditionally accompanies the Stennis, and has parked... right next to Syria.

Mini Flash Crash? ES Plunges By 2 Standard Deviations In 5 Minutes

The last 5 minutes of today's somewhat tempestuous day saw a rather dramatic plunge in ES on very heavy volume which could easily be flash-crash-worthy in its description. Having tested VWAP a number of times during the day and been unable to make any progress above it (suggesting program selling was active), the final desperate straw broke the camel's back into the close as ES dropped 1% in less than 5 minutes as volume dwarfed the rest of the day with machines fighting each other to exit at a reasonable price. Furthermore, the drop in ES was very much standalone as other risk assets did not correlate instantly and only started to drop after a delay led by equities plunge. ES is holding these losses after-hours at a steady 1160. Where's Waddell & Reed when we need them?

As Expected, Ireland Is First To Demand Debt Relief In Greek Bailout Aftermath

When we commented on the October 26 European "EFSF Bailout" which has since been long forgotten, the one take home message from the embedded 50% cut in Greece debt is that "this means that Portugal, Ireland, Spain and Italy will promptly commence sabotaging their economies (just like Greece) simply to get the same debt Blue Light special as Greece." This was followed up by a post that half confirmed or thesis: "Bloomberg notes that Ireland has not even waited for the ink to be dry before sending out feelers on just what the possible "rewards" may be: "Greece’s failure to cut spending and boost revenue by enough to meet targets set by the European Union and International Monetary Fund prompted bondholders to accept a 50 percent loss on its debt. While Ireland won’t seek debt discounts, the government might pursue other relief given to Greece, including cheaper interest payments on aid and longer to repay it, according to a person familiar with the matter who declined to be identified as no final decision has been taken." There is one very important addition here: "While Ireland won't seek debt discounts" yet." A month later, the "yet" is "now."

Thanksgiving Tally: Lunatics And Hacks Win As Gold Up 19.3% YTD; S&P Down 7.5%

To some, only "Lunatics and Hacks" believe in gold and a system based on real money. To others, one look at the chart below showing the relative performance of gold and the S&P YTD is enough to determine who the lunatic and hack truly is.

HYG Plummets The Most In Almost 2 Months As Credit Leads Risk Lower (Again)

The message of the market has been very clear the last week or two and we have been actively discussing it - the hope that was priced into equity markets is being discounted back to the reality that was always priced into credit markets. HYG, increasingly liquid, accessible, and actively traded has become the weapon of choice for hedgers and shorts and once again today it dramatically underperformed. IG credit also underperformed as we suspect the relatively low cost of carry made it an attractive macro-overlay into a long weekend of possibilities. Commodities in general converged back on the inverse of the USD performance of the week, down around 1.5% (with the exception of Copper which is -4% on the week as China hopes fade). Equity weakness was generally supported to the downside by CONTEXT's broad basket of risk assets - especially as TSYs rallied aggressively in the afternoon following the record 7Y auction. AUD remained the ugly duckling of the week in FX land (as carry was unwound) but EUR's slide was the biggest driver of DXY's strength as it gained around 1.3%. Evidently very few wanted to go home long into this weekend and ES dumped into the close ending the week -4.5% or so with a major volume surge at the very end.

Is Europe The Grinch That Stole Thanksgiving?

In case you were wracking your brain for the last time it seemed so dismal in the equity markets during such a thankful and rejoiceful week, well its at least 10 years ago! This week's displeasing  equity move is the worst of the last 10 years - beating 2008 to the downside which managed a late recovery. 2002 had the best performance and just in case someone tries to sell you on the recovery this week, the average performance from 11/18 to 11/24 over the past 10 years has been a rather lackluster -0.2% - admittedly better than the -3.8% the S&P is currently looking at. Who are we to thank for this?
Perhaps - Happy Thanksgiving ECB?

Goldman's Sigma X Hints Who The Next Contagion Target Is

Five months ago, when Italian yields were still tame in the 3% ballpark, and not 7% where they are today, we suggested that based on trading patterns and overall volume in Goldman's dark pool, Italy may be about to experience a "Greek episode." Days later we were proven right as Italian yields and spreads started their relentless move wider, with only those who had access to Sigma X being able to get an advance whiff of what was about to happen. Well today we are happy to report that the German diversion may have worked: the truth is that nobody appears to care about Germany. Instead what everyone does seem to care about, is the nation with the greatest combined debt (government, corporate and household) to GDP in the world. Yup. The UK.

Germany Sells 150,000 Troy Ounces Of Gold In October... But Not Why You Think

Earlier this morning the anti-gold brigade was foaming in the mouth on the news that the German central bank had for the first time in a year sold gold. As it turns out they were half right: the bank indeed sold gold: a 'whopping' 150,000 toz or about $250 million worth... But not in the open market, and not even to natural buyers of physical like Sprott and everyone else not infatuated with voodoo theories of infinite repoability of debt. They sold it to the German ministry of Finance... to mint commemorative coins. Coins which we are now confident will be promptly mopped up by the general public. Following the sale Germany will be left with a modest 109,194,000 troy ounces, enough to allow the country to gladly tell Europe to do some anatomically impossible things and to fall back to a hard asset baked currency if and when it should so desire.

Major US Financials Cracking: CDS Rerack

UPDATE: BofA +37.5bps to 480bps - record wides.
As financial equities are underperforming so we are also seeing the major US banks widening in CDS land - closer and closer to record wides in the case of BofA (with 20bps of its Oct11 intraday wides) and GS (beyond Oct11 wides but below 2008/9 wides). Their credit curves are also inverting further as equity catches up to recent weakness in credit which has seen almost constant derisking since the start of November.

Record Low Yield At 7 Year Auction, Second Highest Bid To Cover Ever Sends Total US Debt Over $15.1 Trillion

As the panic from the busted German 10 Year auction earlier has settled, the money has gone to the last "safe" place for fiat (until the world wakes up to the fact that the "US is not Germany" and comprehends that it actually is) and flooded today's final of the week $29 billion 7 Year auction. The auction was a massive success: it priced at 1.415%, the lowest yield ever, and well inside of the WI which was trading at 1.44%. Not only that but the Bid To Cover soared from 2.59 to 3.20, the second highest ever except for May's 3.24. The internals were a little shaky, with Directs taking down a record 18.85%, and Indirects responsible for 39.88% (the balance going immediately to repoing Dealers). Still there is no denying it: when the panic is palpable, the last safe place for the time being are US bonds. And with that auction, total US debt, which was at $15.042 trillion, has now been pushed above $15.1 trillion a few days after we passed $15 trillion for the first time ever, once the $60 billion in new debt issued this week settles. As a reminder, the debt ceiling currently is at $15.194 trillion, which means there is about two auctions worth of issuance left before the US has to deal with the whole temporary debt ceiling hike all over again - luckily it will be merely a Senate vote (democrat controlled), so there will be no full blown scandal. The scandal will come soon enough.

Egan Jones Does Not Back Off On Jefferies, Warns Will Cut Again "Without A Major Deleveraging"

Following the earlier spirited defense of JEF by Oppenhemier and outright bashing of Egan Jones, Sean Egan fires right back. "Synopsis: Prior reports excluded projections because of the skewed financials relating to the FYE change; a more granular liquidation analysis is avail. upon request. JEF needs to raise equity (i.e., $1B) AND deleverage to reduce its 9.5+% LT yield. JEF's total debt to capital is 90.4% vs. 67% for IBKR, 62% for RJF and 43% for GFIG. GS and MS have ratios near 88% but they are significantly larger and should have some federal support via their banking charters. Furthermore, MF's freezing and shortchanging client funds have increased scrutiny of other medium-sized brokers. Raising $1B in new equity and reducing assets by $5B would reduce total debt to capital to only 86%. Watch the cost and availability of funding. We will cut without a major deleveraging."

Uncle Sarko Kindly Demands Your Independence

After the smart Sarkozy spoke earlier, it is now time for the not so smart one to express what many are increasingly branding as Fascist intentions of forced cohesion:

• SARKOZY SAYS EURO ZONE MUST FURTHER INTEGRATE
• SARKOZY SAYS TROUBLED EURO COUNTRIES DIDN'T UNDERTAKE REFORMS
• SARKOZY SAYS EURO ZONE MEMBERSHIP IMPLIES OBLIGATIONS
• SARKOZY SAYS EUROPE'S FUTURE REQUIRES CONVERGENCE

In other words, please hand over your sovereignty to France and the rest shall be ok.

Europe Closes At Day's Lows As Sovereign Curves Invert

European equities marginally outperformed credit markets on the day but both ended dreadfully as markets went bidless into the close. Ending the day the lows, having retraced over 75% of the 9/23 to 10/28 swing rally, equity and credit markets are well into bear market territory as sovereign risk morphs back into financials and on into corporates. Sovereign spreads may look 'optically' marginally improved if one focuses merely on the 10Y levels, but a little more digging shows that almost without exception sovereign spread curves all bear flattened considerably today with the short-dated risk rising dramatically relative to mid maturities as jump risks become more and more of a concern.

European Liquidity Downgraded From Ice To Carbonite

Chatter across European trading desks, since confirmed by the EBA, is that medium- and long-term funding in Europe is now completely frozen. With Rehn still in denial and pointing to the problems in US and China, it seems things just got a little more desperate. Basis swaps at crisis levels, FRA-OIS at crisis levels, European GDP-weighted sovereign risk at all time highs, Belgium and Austria dislocating today, and EURUSD cracking through 1.3350.

Franklin D. Roosevelt's 1942 Thanksgiving Proclamation - Kipling's Caution to the Empire

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Gold Daily and Silver Weekly Charts - Post Option Expiration Gut Check Doesn't Stick

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SP 500 and NDX Futures Daily Charts - Out on the Lows

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Have A Great Thanksgiving Holiday

Dave in Denver at The Golden Truth - 4 hours ago

I wanted to post an excerpted commentary from Richard Russell, which I sourced from Ed Steer's Gold and Silver Daily. Richard Russell has been "doing" the markets for longer than most of us have even been alive. An expert in the Dow Theory theory and stocks in general, in the last few years he's been shifting his investible assets into physical gold. He understands as well as any of us the degree to which fiat currencies globally are being destroyed by greedy bankers, disasterous Government fiscal policies and - foremost - accelerating corruption and fraud. Here's Russell's comm... more » 

 

I Am Long Commodities And Currencies

Admin at Jim Rogers Blog - 4 hours ago

I'm long commodities and currencies, because if the world gets better, the shortages in commodities will make sure I make money; if the world economy doesn't get better, I'd rather own commodities because they're going to print money. - *in CNBC, earlier today* *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.* 

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Copper Futures Retreat on U.S., China Data

Eric De Groot at Eric De Groot - 5 hours ago

The wolf pack will cull any investor/trader that assumes risk-on without confirmation from Dr. Copper. Caution is still warranted until copper exhibits signs of accumulation. Copper (JJC) And Copper Diffusion Index (DI) Headline: Copper Futures Retreat on U.S., China Data NEW YORK—Copper futures fell amid pressure from a stronger dollar and downbeat economic data from the U.S. and... [[ This is a content summary only. Visit my website for full links, other content, and more! ]] 

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Pigs 'R' Us - The Wall Street Groupon IPO

 

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Silver continues to be at the mercy of the risk trades

Trader Dan at Trader Dan's Market Views - 6 hours ago

Silver rallied yesterday on news about a proposed IMF plan to aid Europe. That took equities higher, the Dollar lower and the metals up for the ride. Today that is yesterday's news as the pitiful German bond auction sent investors fleeing out of everything they bought yesterday and rushing back into the Dollar once again. Down goes silver, crude oil, copper and just about everything else on the planet. All you need to know about silver is contained in the following two charts. The first is the Continuous Commodity Index. The second is Silver. Note how eerily similiar the two charts... more » 

I Am Short Stocks (US Technology, Emerging Markets And Europe)

Admin at Jim Rogers Blog - 6 hours ago

I am short american technology stocks, I am short emerging markets stocks, not China, I am short european stocks. - *in CNBC Asia, earlier today* *ETFs, iShares MSCI Emerging Markets Index ETF (EEM), Technology SPDR ETF (XLK)* *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.*

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