The Previously Unthinkable Becomes A Planned Event
12/20/2011 - 20:45
Retail Fooled Again As Goldman Cash Desk Sees Better Long-Only Selling All Day
Once again, the momo and retail "traders" gets ripped off by the whales who take advantage of vacuum tube inspired momentum and retail bag holders praying for a few days that will make their year. From Goldman EOD market commentary: "Up, up, and away for stocks today. Europe gets the party going, and the music keeps playing for the US. The flow on our cash desk actually skewed to better selling – decent long-only selling (consumer staples and information technology) vs. small hedge fund buying (info tech and energy). ETF desk was better to buy, but only moderately so. SPX 1260 (200d) still the level to watch above – held twice in June, sliced through in August, been a consistent top in October, November, and December. SPX closes up 36 at 1241 (+2.98%)." And incidetnally as was noted here minutes ago, "Strange to see EURUSD and SPX decouple so sharply, but year-end brings funny things." Translation: thank you dumb money stock investors - without you the Putnams of the world would have nobody to sell to.Gold Takes Out 200DMA...The Other Way
"Gold
again proves it is not the safe haven many had hoped for, breaking the
200-day moving average, the first time since 2009 and signaling that
prices may drop to US$1400/ounce." So begins a post by a "market
strategist" from Roubini Global Economics
as of less than a week ago. Well, since as the chart below shows gold
just took out the 200-DMA, this time in the opposite direction upside,
having proven the recent drop was nothing but a buying opportunity as was suggested by the non-Ph.D. community, we assume that using the author's logic, gold has proven that it is in
fact a safe haven, and that since it is not going to $1400 it can only
go to infinity.... Or is that us taking liberties with our lack of an
economics Ph.D. a little too far?Risk on Trade/stock market rallies/Gold and silver rise/LTRO in full swing
Harvey Organ at Harvey Organ's - The Daily Gold and Silver Report - 6 hours ago
Good
evening Ladies and Gentlemen:
Today the risk trade was on and as such the stock markets around the
globe rallied big time on no news whatsoever. Gold finished the comex
session at $1615.60 up $21.38 on the day. Silver rebounded 73 cents to
$29.50. We are not finished yet with all of our gold and silver bashing
by our illustrious bankers.
Let us head over to the comex and see how trading
Time To Jump On Board The Gold Train - It's Warming Up To Leave The Station
Dave in Denver at The Golden Truth - 9 hours ago
After an 8 month price correction that has been mistakenly taken to be a
new bear market by those who are clueless, like Dennis Gartman, it appears
that the gold bull is kicking at the gate:
*Interestingly, so many people are bearish on gold right now and looking
for a collapse in the price of gold. They don’t understand what is
happening in the physical market. The bullish fundamentals I just
described to you have enormous implications* - London bullion trader
Here's the short interview which is the source of that quote: LINK It is
a must-read and the report of large "entiti... more »
As US Decouples From World, Stocks Decouple From USD
UPDATE: ORCL missed. $8.8bn Rev vs $9.23bn exp., 54c EPS vs 57c exp. - Stock -9% AH
With ES (the e-mini S&P futures contract) managing to pull over 40 points off overnight lows (bringing back memories of the 11/30 global bailout rampfest), we saw correlated risk assets disconnect one by one as the day proceeded. First to leave the party was FX carry (or more simply the USD) just before Europe closed. Then Gold stabilized and stopped accelerating and credit markets also went only gently higher/stable in the afternoon. Oil kept on lifting with stocks - helping Energy stocks lead the way (up over 4% on the day) - but even Oil went flat within an hour or so of the close. The only other asset that seemed to be correlating and self-reinforcing was the Treasury complex - most specifically the 10Y and the 2s10s30s butterfly but it was the former that had the highest correlation overall and kept going right to the end. Volume did die away towards the end but surged right at the close as average trade size picked up and ES started to roll over a little - pros selling into the close? Who knows but there was little else supporting ES up here on the day and with the 'news' ahead on LTRO take-up - maybe better safe than sorry.
Revisiting The "Nuclear Option": Will The Fed Buy European Bonds?
Nearly two years ago, we first breached the topic of the Fed's nuclear option: the possibility (or is that likelihood) of the Fed stepping out of the continental US and proceeding to monetize European bonds. Back then we noted: "One thing learned over the past year is that everything is a distraction for something else, and that something else, quite usually without failure, ends up being the Marriner Eccles building on Constitution Avenue in D.C. What we refer to is disclosure from a paper written by none other than the Maestro Jr, in 2004, titled "Conducting Monetary Policy at Very Low Short-Term Interest Rates" (oddly appropriate). In this paper, Bernanke discusses not only the possibility of purchasing corporate assets (bonds and stocks), but emphasizes that one other security class which the Fed may be inclined to acquire under conditions such as those today, and has an explicit authority to do so, are foreign government bonds." The specific text referenced was the following: "In simple terms, if the liquidity or risk characteristics of securities differ, so that investors do not treat all securities as perfect substitutes, then changes in relative demands by a large purchaser have the potential to alter relative security prices. The same logic might lead the central bank to consider purchasing assets other than government securities, such as corporate bonds or stocks or foreign government bonds. (The Federal Reserve is currently authorized to purchase some foreign government bonds...)" So the question then becomes: with the ECB stubbornly refusing (for now) to proceed with outright monetization, and with its balance sheet already surpassing all time records as noted earlier (see below), coupled with tomorrow's LTRO which as discussed over the weekend will be a "Risk On" attempted failure, even if providing a brief relief rally in the interim, not to mention the complete lack of any long-term viability plan out of the Eurozone (EFSF failure due to lack of demand; IMF bailout plan failure due to the UK's veto and the circular joint and several funding by Italy and Spain of an Italian and Spanish bailout), will it be, once again, the Fed which at the end of the day will have to, by covert pathways or otherwise, be forced to step in and monetize European bonds: the so called Nuclear Option? Providing the latest thoughts on the topic is SocGen's Aneta Markowska...Guest Post: The Corruption Of America
The numbers tell us America is in decline... if not outright collapse. I say "the numbers tell us" because I've become very sensitive to the impact this kind of statement has on people. When I warned about the impending bankruptcy of General Motors in 2006 and 2007, readers actually blamed me for the company's problems – as if my warnings to the public were the real problem, rather than GM's $400 billion in debt. The claim was absurd. But the resentment my work engendered was real. So please... before you read this issue, which makes several arresting claims about the future of our country... understand I am only writing about the facts as I find them today. I am only drawing conclusions based on the situation as it stands. I am not saying that these conditions can't improve. Or that they won't improve. The truth is, I am optimistic. I believe our country is heading into a crisis. But I also believe that... sooner or later... Americans will make the right choices and put our country back on sound footing.Fed Issues Update On Dodd-Frank Framework, Director Responsibility And Annual Stress Tests
The Fed just released its 'framework' for thinking about planning to implement their proposals to take notice of the Dodd-Frank rules. There is little if any detail in here but the main points, via Bloomberg headlines from the 173 pages of admittedly well structured, but unclarifyingly disappointing prose are as follows:- *FED BOLSTERS TOOLS FOR AVERTING COLLAPSE OF BIG FINANCIAL FIRMS
- *FED REGULATIONS FOCUS ON CAPITAL, LIQUIDITY, STRESS TESTS
- *FED RULES TARGET RISK MANAGEMENT, REMEDIATION, CREDIT RISK
- *FED PROPOSES `TRIGGERS' TO `EARLY REMEDIATION' OF WEAKNESSES
- *FED RULES TO LIMIT FIRMS' CREDIT RISK TO A SINGLE COUNTERPARTY
- *FED RULE REQUIRES BANK DIRECTORS TO APPROVE LIQUIDITY RISK
- *FED: FIRMS MUST ANNUALLY HAVE STRESS TESTS, PUBLICIZE RESULTS
5 Year Prices At Another Record Low Yield
Today's 5 Year bond auction merely confirmed what we already knew from the 1 month Bill auction (and recurring negative yields thereof), namely that heading into year end everyone is scrambling for the "safety" of uncle Sam. The auction priced at a fresh record low yield of just 0.88%. In other words people will collect less than 1%/ year to hold US paper for 5 years. Naturally, the market is telegraphing that either it either does not buy any optimistic views about the LT economy, or, far more likely, is betting that very soon Bernanke will extend the ZIRP promise well beyond mis-2013 as Bernanke is left with no choice but to push the risk free security further and further to the right, and force everyone to chase every more duration, and go into risky assets to reflate if not the economy, then at least the stock market. Otherwise, the Bid To Cover dropped to a 4 auction low of 2.86, although above the 12 auction average of 2.83%, with Directs, Indirects and Dealers taking down 9.1%, 50.6% and 40.3%, respectively. Oddly enough, following yesterday's collapse in 2 Year Indirect interest, today foreign buyers, who tendered a total of $22 billion at a 79% hit rate, once again took down more than half the auction, and the highest since August 2010's 50.8%. Overall, this is merely more year end liquidity shennanigans, as equities experience a short squeeze, while credit parks all the money it can find in the safest paper. What this means for tomorrow's LTRO tender interest is still unclear.
Bill Gross: Enjoy The Santa Rally - The Hangover Is Coming As "US Is Not An Island"
Update: Payroll Tax Extension Vote Fails; Motion Moves To Conference
Update: Payroll tax extension vote fails, as expected:HOUSE HAS VOTES TO REJECT SENATE TAX PLAN; VOTE CONTINUING
Watch as the house votes on the Senate proposed two-month payroll tax extension, coupled with a motion to go to conference.
Guest Post: 2011: The Last (Debt-Consumerist) Christmas in America
The death throes of the debt-based consumerist lifestyle are already visible beneath the glossy propaganda of "rising revenues this Christmas season." Those revenues were obtained by selling goods at below cost, in the absurd hope that income-strapped, over-indebted consumers would make profitable "impulse buys." As Mish has documented, the "impulse buys" are being returned even before Christmas to the tune of hundreds of millions of dollars. The Fed is desperately attempting to re-inflate the debt bubble by lowering interest and mortgage rates and buying up all sorts of semi-toxic/impaired debt. What the Fed dreads is the reality we all feel and see: fear of the future due to diminished wealth and insecure incomes. If your assets have fallen in value, you feel poorer because you are poorer. Borrowing more at any interest rate will not make anyone feel wealthier. People who fear their income may plummet due to layoffs or their hours being cut are not in the euphoric mood to borrow more, and banks which cannot dare to lose more money loaning to people who will default have cut off credit to millions of previously rabid consumers of debt. Ask yourself this simple question: how much stuff could people buy if they could only spend surplus cash, after all their expenses and debt servicing payments were paid in full?
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