Scramble From European Insurers Accelerates: ASSGEN, Allianz CDS Soar

Less than two weeks ago, when reporting on the news that Fitch has finally woken up to the reality that European insurers, already massively pregnant with European bonds, are the next shoe to drop, something we have been saying since 2010, we said, "For once, Fitch took the words right out of our mouth, and in the process reminded us that the time of the stupendously named ASSGEN CDS (357 bps, +41 today) is here (for our previous coverage on Generali, read here, here and here)." We also added: "And just because we like to live dangerously, we believe the time has come to knock on the door of the grand daddy of all: Pimco parent, German uber-insurer Allianz, where the crisis will eventually hit like a ton of anvils if and when things really get out of control." Here is the first trade update, 12 days later: Generali is 100 bps wider, Allianz is 40 bps. So as traders stock up on even more default protection to the companies which are certainly not too big to fail (ALZ used its trump card with the EFSF as CDO squared idea... and failed), we urge them whatever they do, to not tell Bill Gross to look at the soaring default risk of his parent company.




BTFD...

So, Wait, Gold Is NOT Outperforming Stocks By 23% YTD?

Listening to all the mouth foaming commentary out of assorted TV channels and economics professors which have apparently suddenly woken up from their deep hibernation regarding the imminent death of the gold market, one could be left with the impression that gold was wiped out, collapsed, imploded and will never rise again. After all: what does it really bring to the table aside from complete lack of monetary dilutability and a safe haven to hundreds of trillions in derivative counterparty risk (in its physical form that is, as Celente recently found out), not to mention a hedge to human idiocy as Kyle Bass said a few days ago? Well nothing really... So we were shocked, shocked, when we ran a simple chart comparing the performance of gold and the S&P Year to Date to discover that outperforming by a margin of about 23% is... gold? Huh. But wait, the real safe haven are bonds many would say. After all, the US has no counterparty risk and it has prudent fiscal and monetary authorities. So how do they compare? Well, as of today: flat, with gold actually outperforming modestly. That's right - gold and the US long bond, even following the recent "drubbing" in gold have generated the same price return. So... what were we talking about again?

Thank You (Anti) Whitney Tilson For The One Soaring Product Today

While pervasive asset liquidations are dragging everything lower, stocks and gold included, one thing is doing amazingly well and is up over 7% intraday and nearly 36% in the past 5 days. The "thing" is, naturally, the Anti-Tilson ETF: the pair trade of being long GMCR (Tilson's vocal short) and short NFLX (Tilson's legendary flip flop). Just like theStreet did an amazing job of being the contrarian indicator du jour, so Tilson continues to be the market's most valuable (counter) indicator.

Jefferies: The Fed Should Print... In Europe

One could be forgiven for suspecting a hint of self-preservation in a research note by the firm that faces the most intense pressure given its apparent European sovereign exposure but Jefferies' strategist David Zervos' note today seems extreme in many ways. With the sanctity of the known world at risk, Zervos describes the group-think of sado-fiscalism that has invaded German minds and how the Fed is the only one left with the 'bazookas' big enough to get the job done. Besides, he notes, we did not spend all that money on the Marshall plan just to have Europe blow up the world again!

Sarkozy Reminds Market Of Geopolitics, Says Iran Nuclear Program "Serious And Urgent Threat"

Luckily the market is all stable and stuff and can handle the prospect of a potential Iran war.

• SARKOZY WRITES LETTERS CONCERNING IRAN'S NUCLEAR PROGRAM
• SARKOZY SAYS IRAN'S PROGRAM IS A 'SERIOUS AND URGENT' THREAT
• SARKOZY SAYS NEW SANCTIONS WOULD FORCE IRAN TO NEGOTIATE

Now where is that weekly US naval update...

Cramer's TheStreet On Imploding FMCN From 8 Hours Ago: "Upgrading From Hold To Buy"

This has to be an almost as epic call as Dick Bove's upgrade of Lehman days before its bankruptcy.

FMCN Halted Over 60% Down

Update 2: FMCN has now been halted 3 times. Dick Bove does NOT have a buy recommendation on the name
Update: Trading has resumed: modest dead cat bounce on short covering
It took the market only an hour or so to realize what is going on with FMCN. To those who shorted the stock outright - congratulations. To those who are long puts - you may be out of luck. The stock may reopen some time in 2012, long after puts have expired.

Rosenberg Debunks The Stupidity Of The Masses

While we spend a lot of our time pointing out critical factors driving the reality of our markets and economies, today's note from David Rosenberg, of Gluskin Sheff, provides a spot-on and unarguable description of what every one of your favorite long-only strategist, sell-side economist, and hope-heavy CNBC anchor told you would happen - and hasn't! Then Rosie goes on to compare Italy to Lehman in a not so flattering light.

Safety Scramble Leads To Record High Bid To Cover In $35 Billion 2 Year Auction

Little to be said about today's $35 Billion 2 Year auction: it was nothing short of a complete scramble for cover in a piece of paper that comes due just around the time of the Fed's guaranteed ZIRP interval of mid-2013 (which will likely be extended). The result: an all time record high Bid To Cover of 4.07, the highest since records started being kept back in 1993. The yield was 0.28%, inside of the 0.285% When Issued level trading at 1pm. Yet notably, Dealers took down just 46.53% of the auction, the lowest since October 2010: this compares to 54.16% for the LTM period, and 52.57% for the prior auction. This is not unexpected considering the Primary Dealer issues in the aftermath of MF Global. Indirects stepped up and took home 42.24% of the final allocation - the highest since February 2010. Directs were in line at 11.24%, just below the LTM average of 14.30%. Overall, nothing says price stability like 0.28% on 2 Year paper. And so much for the Fed's attempts to sell the short end of the curve via Twist.

$52.5 Billion In Virtually Free US Bank Debt Due Next Month

We were one of the earliest to raise concerns about the future impact of the maturing TLGP debt that was 'given' to the bank-holding-companies in the middle of the crisis three years ago. December is the first month with very significant maturities as more than $52bn comes due, with $14.9bn next week alone. The banks face at least two major problems from this debt maturing: 1) It is sizable and primary markets seem unlikely to be able or willing to soak up such large issuance without significant concessions, and 2) The extremely low cost of funds for this debt means that rolling into market rates will drastically impact earnings (as interest expenses jump - should fundamentals matter again). BAC faces $3.6bn maturing, MS $3.75bn, and JPM $7.55bn next week alone.

Muddy Waters Releases 80 Page Report Disclosing Latest "Strong Sell" Target: Focus Media (Nasdaq: FMCN)

If Sino Forest is any indication, the $3 billion market cap company is about to have a B -> M market cap transition. The reason: Muddy Waters just said FMCN could be the next Olympus: "FMCN has been fraudulently overstating the number of screens in its LCD network by approximately 50%. This is similar to China MediaExpress Holdings, Inc. (OTC: CCME), which we reported is a fraud on February 3, 2011. We therefore question whether FMCN’s core LCD business is viable."  From the report: "Muddy Waters rates Focus Media Holding Ltd. (NASDAQ: FMCN) shares a Strong Sell because of significant overstatement of the number of screens in its LCD network and its Olympus-style acquisition overpayments. The $1.1 billion in write-downs from its acquisitions exceed one-third of FMCN’s enterprise value, making FMCN’s acquisitive behavior more destructive than Olympus’s to shareholder value. FMCN insiders have sold at least $1.7 billion worth of stock (two-thirds of FMCN’s enterprise value) since FMCN’s IPO. At the same time, the insiders and their business associates further enrich themselves by trading in FMCN assets, while costing FMCN shareholders substantial sums of money."

Guest Post: Super Complacency Means Printing Will Commence Post-Election

We believe that the Super Commitee’s lack of action portends for inaction by our government until the 2012 election is concluded. We also believe, that no matter who wins the printing presses are gearing up. There are two scenarios we are looking at though a political prism. Our conclusions are digital. First of all and of major importance , we believe it is in the GOPs interest to have the economy be in its worst shape possible going into the election. It is their method to be the party of no to Obama’s ideas. And it is their method to be the party of “tax cuts” to actual suggestions. This is essentially what came out of the Super Committee. The GOP wanted tax cuts, the Dems did not. Thus deadlock continues. Therefore nothing will happen until post election. And post election, the dollar will get decimated. Post election will create an environment wherein risk assets rise again. There will be Good Inflation (Stocks, Stocks, and more Stocks) and bad inflation (oil, gold and grains). Wall Street wins as fees from the never ending asset ping pong makes investors migrate their holdings from one class to another. Remember those Golden Crumbs that fall off the bonds when they are sold, from Bonfire of the Vanities?

Market Commentary From Monty Guild

November 21, 2011, at 2:00 pm
by Monty Guild 

We Are Removing Our Buy Recommendation On Emerging And U.S. Markets

German Chancellor Merkel has a new plan to reduce sovereignty for certain European nations. This will be a long involved political process and the fight over its implementation will be bad for Emerging Markets and for U.S. Markets.

IShares MSCI Emerging Market Index	10/24/2011	SOLD	-0.8%
U.S.	10/24/2011	SOLD	-1.6%

For more commentary visit www.GuildInvestment.com

In The News Today

November 21, 2011, at 10:44 am
by Jim Sinclair 

Jim Sinclair’s Commentary

A run when it focuses on financial entities can only be stopped by QE. There is no other tool in any central bank toolbox that is effective.

For actions there are consequences.

The Run On Europe Begins, As Global Investors Head For The Hills… Henry Blodget | Nov. 20, 2011, 9:11 AM
Until recently, the concern about Europe was mostly theoretical–a potential train-wreck that would occur if/when the world’s lenders decided that the continent’s problems extended beyond the basket case known as Greece to Europe’s "core."
Well, that concern is no longer theoretical.
It’s happening.
The world’s lenders are increasingly deciding that it’s better to be safe than sorry, and they’re pulling their money out of Europe.
As a result, the borrowing costs of many European countries are rising fast. And so are inter-bank lending rates, because the second huge problem with the Euro-train-wreck is that Europe’s banks have Euro debts coming out of their ears.
(When bond yields rise, the market value of existing bonds drops, so any bank that owns the debt of any European country is suffering huge embedded losses. The banks don’t mark these losses to market, so you can’t see them on the balance sheet, but they’re there.)
Last week, Italian borrowing costs soared over 7%, which has been viewed as a sort of Rubicon level. Spanish yields hit nearly 7%. And French "spreads" over German bonds expanded sharply.
More…





Jim Sinclair’s Commentary

Arab Spring has many more surprises for the MOPE media commentators.

Violent Protests in Egypt Pit Thousands Against Police By DAVID D. KIRKPATRICK and LIAM STACK
Published: November 19, 2011


CAIRO — A police action to roust a few hundred protesters out of Tahrir Square on Saturday instead drew thousands of people from across Egyptian society into the streets, where they battled riot police officers for hours in the most violent manifestation yet of growing anger at the military-led interim government.
More…





Jim Sinclair’s Commentary

Coming soon to the scene of Western finance.

Lawmakers Trade Blame as Deficit Talks Crumble By ERIC LIPTON
Published: November 20, 2011
WASHINGTON — With the hours ticking away toward a self-imposed deadline, Congressional leaders conceded Sunday that talks on a sweeping deficit agreement were near failure and braced for recriminations over their inability to reach a deal.
The stalemate was the latest sign of partisan deadlock in Washington, which members of both parties do not expect to lift until the 2012 election has clarified which party has the upper hand.
Barring an unexpected turnaround before Monday’s deadline, the failure of the special Congressional deficit committee will be the third high-profile effort to fall short of a deal in the last 12 months, including a bipartisan deficit commission and talks last summer between President Obama and Speaker John A. Boehner.
By law, the special Congressional committee’s inability to reach an agreement will trigger $1.2 trillion in automatic spending cuts over 10 years to the military and domestic programs, to start in 2013.
As time wound down to a Monday night deadline for an agreement, Capitol Hill lacked the frenzied negotiation typical of a Congressional race to beat the clock. Instead, many members — well aware that Congressional approval ratings are near historic lows in polls — seemed resigned to the fact that Democrats and Republicans remained far apart on major budget issues, especially tax increases on the affluent, which Democrats insist must be part of any deficit solution and which Republicans oppose.
More…

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