Currency Wars - Iran Banned From Trading Gold and Silver

Reuters report that the EU has agreed to freeze the assets of the Iranian central bank and ban all trade in gold and other precious metals with the Iranian Central Bank and other public bodies in Iran. According to IMF data, at the last official count (in 1996), Iran had reserves of just over 168 tonnes of gold. The FT reported in March 2011 that Iran has bought large amounts of bullion on the international market to diversify away from the dollar, citing a senior Bank of England official. Currency wars continue and are deepening. Many Asian markets are closed for the Lunar New Year holiday which has led to lower volumes. Of note was there was an unusual burst of gold futures buying on the TOCOM in Japan, which has helped the cash market to breach resistance at $1,666 an ounce.  Investors are also waiting for euro zone finance ministers to decide the terms of a Greek debt restructuring later today.  This would be the second bailout package for Greece.

Goldman Tells Clients To Short US 10 Year Treasurys

As of a few hours ago, Goldman's Francesco Garzarelli has officially told the firm's clients to go ahead and short 10 Year Treasurys via March 2012 futures, with a 126-00 target. While Garzarelli is hardly Stolper (and we will have more on the latest Stolpering out in a second), the fact that Goldman is now openly buying Treasurys two days ahead of this week's FOMC statement makes us wonder just how much of a rates positive statement will the Fed make on Wednesday at 2:15 pm. From Goldman: "Since the end of last August, we have argued that 10-yr US Treasury yields would not be able to sustain levels much below 2% in this cycle. Yields have traded in a tight range around an average 2% since September, including so far into 2012. We are now of the view that a break to the upside, to 2.25-2.50%, is likely and recommend going tactically short. Using Mar-12 futures contracts, which closed on Friday at 130-08, we would aim for a target of 126-00 and stops on a close above 132-00." As a reminder, don't do what Goldman says, do what it does, especially when one looks the firm's Top 6 trades for 2012, of which 5 are losing money, and 2 have been stopped out less than a month into the year.

EURUSD Sliding On Anti-Rumor From Europe - Headlines "No More Money To Greece From Eurozone, IMF"

This is not the rumor that the central planning doctor ordered. This time from Dow Jones:

• No Intention By Euro Zone, IMF To Give More Money To Greece, Say Dow Jones Sources -DJ
  
• Major Greece creditors made clear EUR130 bn bailout loan "won't be increased by a single euro" - DJ

It remains to be clear if Greece will even get the €130 billion loan still, but that is a different story. EURUSD, and stocks, not happy.

EURUSD Passes 1.30 On Early Rumor Greece, IIF Reach Agreement

When we predicted on Thursday that the most recent record number of EUR shorts would take the EURUSD over 1.30 on Friday following a spurious rumor that the IIF and Greece had reached a deal, it turns out we were one work day off. As it happens, the EURUSD has just taken out 1.3000 following an FT Deutschland report that Greece and the IIF have reached a broad agreement. It would be funny if only it wasn't so predictable. The source- unidentified government officials. Either way, it appears this will be the on again, off again rumor that drives risk today, since there are no fundamental economic news. Per Bloomberg, banks and EU, IMF, ECB still trying to agree on coupons, so it actually is not a deal but hey, who cares. Coupon for the new, long-term debt after the voluntary haircut should be somewhere above 4%. Troika still pushing for a 4% ceiling. Deal may be concluded in next few hours. Top level talks were interrupted Saturday, continued Sunday by “experts”. Troika experts want to calculate today if Greece can still meet the goal of cutting total debt to 120% of GDP by 2020. And so on. Of course, since just one hold out hoping for "legal arbitrage" and par recoveries, will force the retroactive implementation of CACs, which in turn will trigger CDS, which in turn will force a subordination of debt claims, all of this is moot.

The ESM/EFSF Bluff

Both EFSF and ESM rely primarily on guarantees which we know Most European politician think is as valuable as toilet paper, so why not provide more?  The ESM does have some paid in capital, but the plan is for minimal paid in capital and maximum usage of guarantees. It is a distraction from their failure to leverage EFSF or to get new (non European bank) funding from the IMF.  It's not a solution, barely even feasible. In the end there are only a couple of guarantors that matter and the rest is circular.




If You Like O.J. Stock up on some frozen concentrate today...

The Machines Are Back On As Randolph And Mortimer Stage Epic Comeback - OJ Trading At All Time High

As of today, Orange Juice has just hit an all time high price of $223.25 (this time on talk of an import ban in Brazil but who really cares), and has returned a jaw-dropping 32.4% YTD, or 7,032% annualized. This is the biggest 4 day surge since October 2006, and for all intents and purposes, essentially the biggest ever. Needless to say, Randolph and Mortimer Capital LLC is back up and running, and has been forced to limit investor inflows due to unprecedented interest in this asset class, which, yes, you can eat (a little freeze drying may be required in advance). At this rate, bottle service of Dom P at 1Oak will cost less than a small container of Tropicana.

Rand Paul Detained In Nashville For Refusing Full Body Pat Down

Over Two Thirds Of All Hedge Funds Are Under Their High Water Mark

For an update on the sad state of the hedge fund industry, we go to the FT which confirms what we had been reporting every week in 2011 courtesy of the periodic HSBC hedge fund industry report, namely that less than one third of all hedge funds in 2011 paid material bonuses to their employees (or if they did, they better have done it without the knowledge of their LPs), because "more than two-thirds of hedge funds are below their high water mark., the point at which they are able to charge investors performance fees." And since performance fees, or the 20 in the "2 and 20 part", is where the discretionary component of analyst, trader and PM compensation comes from, it is safe to say that the bulk of hedgies did not have a good year in 2011. And, in fact, for many the anger goes far back: "It can be a long way back. Credit Suisse calculates that 13 per cent of hedge funds have not earned any incentive fees since at least 2007. Most of these are small funds with assets of less than $100m, which struggle to retain staff without the income available from performance fees." One such fund was of course Citadel which after its abysmal performance in 2008 only managed to climb above its high water mark in the past week for the first time since 2007. And while this is not really news, what is far more curious is that according to Credit Suisse hedge funds have resumed levering once again.

Why Are Greek Credit Event Swaps Still In The Mid 60s?

As we wait for more IIF announcements about the Greek Private Sector Involvement (PSI), Greek CDS remains bid above 60 points up front.  For a contract that is about to be "worthless", this seems to have a lot of value. Why would Greek CDS still be so well bid? Whether it is stubbornness, stupidity, or more simply a reality check on the IIF's negotiating power (just how many bonds do they speak for?) and the future unsustainability of Greek debt anyway, it seems that an impressive immediate exchange of all Greek debt with at least a 50% notional reduction, 30 year maturity, and low coupon is pretty well priced in (away from actual Greek bonds that is). Anything less is likely to disappoint the market as the realization that nothing is fixed sinks in, and that this may not even take near term "hard default" off the table (this PSI is a default no matter how it is spun even if it isn't a Credit Event).

Chart Of The Day: By 2109 Everything Will Be "Sustainable"

Long-time readers of Zero Hedge know that the application of Birinyi's ruler to any trend (traditionally the market, but anything works - after all extrapolating the future courtesy of a few data points is the new killing it) has long been a "favorite" topic of ours. So is media spin in the form of certain "hit" keywords, such as "transitory", "better than expected", and of course "sustainable." Which is why were are delighted when we can combine both concepts into one post, or in this case, chart, which today comes courtesy of xkcd.com, which plot the incidence of the word "sustainable" in English text, and comes up with some amusing predictions, such as that by the year 2109, at current trends, every sentence in the English language will consist solely of the world "sustainable" used over and over.

Americans Are Deleveraging, But Not Because They Want To

As comparisons between US and European debt to GDP levels and the finger-pointing of who is deleveraging more continues, McKinsey notes (in their quarterly Debt and Deleveraging article) that there may be a light at the end of the tunnel for the US as private-sector deleveraging has been rapid since 2008. However, reading on a little, we find that the light at the end of the tunnel may well be the front of the oncoming train of financial distress as some two-thirds of the 4% ($584bn) in US household debt deleveraging is from defaults on home-loans (and other consumer debt). Of course, with homebuilder stock prices surging (notably rather dramatically relative to lumber or ABS/CMBS), consensus has once again agreed that the bottom in housing is in. McKinsey's initial forecast that the pent-up foreclosures and implicit deleveraging will bring us back to trend by 2013 seems like a pipe-dream and we tend to agree with their more conservative perspective that reversion in household debt will not be to trend but to pre-credit-bubble levels, implying a 22% further reduction (or a couple more trillion dollars of defaults).

One Day Ahead Of State Of The Union Address, American Dissatisfaction With Economic, Political Issues At Record

As Obama takes the stage for tomorrow's State of the Union address, in which, among other things, he probably will not announce that the US debt limit is effectively $16.4 trillion, or 107% of GDP and rising, he faces a very unhappy audience: one which according to Gallup has seen its dissatisfaction with economic and political issues hit record levels. Among the Gallup observations: "As President Barack Obama prepares his annual address to Congress, Americans are broadly dissatisfied with the state of the nation in several specific issue areas, with satisfaction down sharply in some cases since January 2008. However, three issues -- the nation's economy, the size and power of the federal government, and the moral and ethical climate in the country -- fit both of these unwelcome criteria." And with the only response the administration has in the past three years consisting of either printing more money which sends all assets, especially energy, higher in price, or fiscal stimulus of which 90% and more is lost due to inefficiencies and corruption, we don't see satisfaction rising any time soon.

Lightning Hits Again: Latest Anti-Stolper EURUSD Fade Closed Out With 317 Pips Profit In Two Weeks

Just as certain as death and taxes, fading Goldman's FX "Strategist" has once again made everyone rich. Back on January 6 when the 0.000-batting FX guru said "With considerable downside risk in the short term, within our regular 3-month forecasting horizon, the key questions are about the speed and magnitude of the initial sell-off. If we had to publish forecasts on a 1- and 2-month horizon, we could see EUR/$ reach 1.20. In other words, we expect the EUR/$ sell-off to continue for now as risk premia have to rise initially." To which our response, naturally was: "In yet other words, if there is a clearer signal to go tactically long the EURUSD we do not know what it may be. We would set the initial target at 1.30 on the pair." Needless to say, following Stolper's recommendation, the EUR barely dipped further, and as of this morning has soared above 1.3000, helped not least of all by the record EUR IMM shorts we have been highlighting for weeks. With this, we now close our latest fade-Stolper trade at a profit of 317 pips. This is the 8th out of 8 closed and profitable "anti-Stolper" trades posted on Zero Hedge.

Greek Deal - "Rumor Off"

The "risk on" phases lasted a whole 3 hours (thank you FT Deutschland for forcing the latest EURUSD short squeeze round). And now, for the other side:

• CYPRUS FINANCE MINISTER NOT SURE GREEK RESTRUCTURING WILL BE CONCLUDED THIS WEEK
• EVERYTHING IS OPEN ON GREEK DEBT TALKS - CYRPUS FINANCE MINISTER

As expected. As further expected, look this rumor to be refuted, confirmed, refuted, and finally confirmed at least 10 more times before the end of the day, even as hedge funds are preparing to file papers.

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