Bursting The Permabullish Bubble: 11 Out Of 13 Economic Indicators Have Missed

Back in early 2011, even as the global economy was at best flatlining, the one goalseeked explanation to justify a levitating stock market (which was rising solely due to the short-term effect of transitory QE2 liquidity), was soaring corporate profitability (which only lasted as long as companies could trim some residual SG&A fat; they have now cut into the bone in terms of layoffs). This time around, with corporate margins having peaked, there had to be some other validation to explain away the "narrative" of the latest bout of central bank infused stock market levitation: it just happened that this time it was once again that old faithful, and always wrong, justification - decoupling. After all one just has to listen to 5 minutes of CNBC to hear it taken for granted that the US economy is doing oh so swimmingly. Here is a newsflash for all the permabulls out there. It isn't. Not only that, but as David Rosenberg highlights, 11 of the 13 most recent economic indicators have missed consensus expectations, and one can demonstrate that the other 2 - car sales and jobs - have been simplistically manipulated into a favorable outcome. So now that the market is turning over, with Europe and China both solidly into contractionary territory, with Corporate profit margins turning over, and with US data missing virtually every print, how long until the permabullish validations all go up in smoke, and the one true source of stock market "nirvana" - cheap money - is once again in high demand from the central planning cabal. In turn, the Chairsatans of the world will do as requested, as they always do, however not with crude (the real one - Brent, not that Cushing-buffered substitate) at $125, and with the risk that Israel may attack Iran any day now, with or without the blessing of the Fed's Class A director.

Credit Suisse Publicly Announces Reopening Of TVIX Share Issuance, Hours After 'Private' Leak Crushes TVIX

For those curious why it is that the TVIX experienced a 50% plunge earlier today, as described here, perhaps the question should be directed to the SEC who may be better suited to answer just who, when and why had advance knowledge of Credit Suisse's announcement, after the close, that it would "reopen issuance of the TVIX." And since this is a rhetorical question, perhaps a better one is why does one participate in a market in which the fine print is always ignored, and is always used against the retail investor. Not that there is anything wrong with that of course - after all caveat emptor. Especially when none other than one of Ben Bernanke's favorite scholars on shadow banking (i.e., forced complexity) Gary Gorton said the following: "Liquidity requires symmetric information, which is easiest to achieve when everyone is ignorant. This determines the design of many securities..." Alas, when it comes to novel instruments such as levered ETFs that work as a closed end mutual fund hybrid, except when they don't, the only one ignorant is you, dear retail investor. Cost to your P&L: 50% in one day.

Harvey Organ’s Daily Gold & Silver Report 22.Mar.2012

from HarveyOrgan.Blogspot.ca:
Good evening Ladies and Gentlemen:
The bankers are definitely not enthused when they saw the high total open interest with respect to the silver comex. The raid was authorized with the intended goal to remove some silver leaves from the silver tree.
Also the lousy PMI report out of China suggesting a real slowdown there coupled with further PMI declines in Europe caused massive red in on all major bourses today. Bond spreads widened in Spain to levels before the LTRO was introduced whereby the Spanish 10 yr bond now yields 5.5% and the Italian bonds passed the 5% barrier.
Gold closed today at $1642.30 down $7.20 whereas silver the object of interest fell 58 cents to $31.32.
Let us head over to the comex and assess the damage.
Read More @ HarveyOrgan.Blogspot.ca

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Slowing Global Growth was the Theme Today

Trader Dan at Trader Dan's Market Views - 3 hours ago

Overnight news out of China and out of Europe detailing slower than expected growth was the catalyst that served to upset the apple cart of the equity market bulls in today's trading session. It also led to further hedge fund selling of commodities in general with the result that it even took crude oil lower. Copper was clocked for nearly a 2% loss on the trading day while Silver was actually down nearly 3% at one time during the session. Silver has broken down below both the 50 day and the 100 day moving averages on the Daily chart as the chart is decidedly bearish in this time fr... more »

Gold Outperforms As Stocks Drop and Volume Pops

For the third day in a row (equal most for the year), stocks fell, led by the broad high-beta sectors (as one would expect) with energy (suffering as WTI lost almost 2%), materials, industrials, and financials all down notably (with the majors dominating weakness in the financials - though still up significantly post-JPM-divi). Futures and cash volumes picked up from yesterday - nearing their average year-to-date but average trade size fell further equaling the lowest year-to-date. With the China news (and then Europe), it was AUD and JPY that dominated price action as JPY strengthened and AUD weakened leaving the USD tracking the EUR and ending very modestly higher on the day. Commodities faced another day of torment with Silver underperforming. Gold outperformed but was down on the day still as from mid-afternoon, the commodity complex crept higher as the USD stabilized.  Broadly speaking risk assets (CONTEXT) led the equity market lower into lunch and then stabilized this afternoon - holding stocks off from further deterioration. An up-day for HYG (the high-yield bond ETF) - seemingly on the back of HY-HYG arbitrage more than asset rotation - and the craziness in the vol complex (VXX vs TVIX) somewhat supported SPY on the day but we note that ES (the S&P 500 e-mini futures contract) was unable to break above its VWAP meaningfully the entire day. Treasuries sold off from early in the US day session but only very marginally as 30Y remains -4bps on the week while the rest of the curve is unch to 1bps lower in yield only.


 

A Natural Gas Reality Check

While T.Boone talks sense and gets to vent his frustration regularly on air, the sad reality is that although the obstacles for substitution to NatGas are not insurmountable, as Michael Cembalest notes we do not get the sense that an NGV fleet is imminent, even with very high gasoline prices. The best shale gas plays are the ones that involve finding liquids in addtion to (or instead of) dry gas. Given the price for coal, natural gas and crude oil per unit of heat/energy humans would stop using oil and gasoline and use more natural gas instead. But in the real world, in which Michael and you and I live oil and natural gas are not frictionless substitutes. As the EIA shows, oil is primarily used for transportation whereas natural gas is used mostly by industry and to create electricity. As a result, there is no substitution effect pulling up natural gas prices, particularly as more natural gas is being found in shale plays. But for shale investors, there are liquids that can be found in shale plays that are worth a lot more than dry gas: shale oil, and natural gas liquids. Shale oil obviously is valued based on oil prices, and natural gas liquids are valued close to oil prices as well. Whether over time natural gas can displace coal or be exported successfully to 'correct' the demand-supply equation is the question that remains but for now it seems a long way off and along with the normal operating risks, there is of course a broader issues of fracking - and what operation safeguards will need to be put in place to allay concerns in the future. The point is that demand possibilities are there but seem far off and while broadly the energy sector has been on a positive ride the last few years, we remember the lost two decades of underperformance during the 80s and 90s but it would seem should we 'dip' again in the global economy that integrated oils, drilling/services will underperform from their elevated levels.

The Bernank Lecture II Decrypted, Inflation 79: Deflation 0

The word 'inflation' dominated the words and thoughts of the propagandist-in-chief as he described the Fed's role in the global economy post World War II this afternoon. The 11,400 word speech contained a record-breaking 79 uses of the term 'Inflation' and exactly Zero uses of the word' Deflation'. Subliminally, we notice that the word 'might' is randomized in between the words 'Prices' and 'Inflation' and the words 'War' and 'Risks' are uncommonly tangential. We know in our hearts that the 8 uses of the word 'Paul' was Volcker-related but its proximity to the word ' bit' and 'inflation' leaves us questioning the deus-ex-machina that is Wordle and Bernanke. 'Monetary policy' and 'crisis' pop up a lot and it is evident that we have a 'financial economy' with the word 'Stable' only appearing 0.0015% during the speech.

The TVIX Debacle

UPDATE: TVIX has now perfectly recoupled with its underlying index (TVIXIV) after a week of HTB dislocation.
With the double-levered long Vol ETF TVIX down 30% in the face of a falling equity market and rising VIX, reality appears to have been suspended. The crushing divide seems driven by the fact that Credit Suisse halted share creation forcing the ETF to behave more like a closed-end fund and with its massive premium to NAV (thanks to extreme hard-to-borrow-ness), this compression makes some 'technical' sense. While the Vol ETFs are designed to track VIX futures not spot, we remain skeptical of these instruments (or the options on them in their wonderfully compound manner) and although CS has said this cessation of share creation is temporary, it definitely brings up significant operational risks for anyone considering trading these vol plays. The TVIX premium to NAV was huge at over 80% as it became hard-to-borrow and with today's action that premium is cut in half (and we assume NAV will rise given the pop in risk).

Guest Post: A Primer For Those Considering Expatriation

A growing number of Americans are frustrated with the way in which their economy has been managed and are becoming increasingly concerned about future measures the government may take to keep its coffers full. A question that is arising with increasing frequency is: does expatriation offer a viable protection to those concerned about a more financially-intrusive US system? The short answer is 'yes' but while it does offer a solution to ending one's obligations to pay US taxes - it's important to understand that it's not suitable for everyone. Mark Nestmann gives a great nuts and bolts breakdown of what's involved and what the benefits and risks are

Talking Metals with David Morgan 

David Morgan, founder of the Morgan Report, is often considered an authority on silver, but he considers himself a precious metals aficionado. More than that, he identifies himself as a teacher. Early on, Mr. Morgan put the brakes on our interview to make something clear. “Silver and gold are not my mission statements,” he said. “My mission is to teach and empower people to understand the benefits of an honest financial system. What we really need is a system where it is fair, honest, and transparent for everyone involved, from the poorest to the richest, and everyone between.” 

SIN: Why is silver better as a monetary metal than other options?

DM: This is my opinion, silver’s monetary aspects are as good as gold, or perhaps even better, because it’s been used more often, more places, for more transactions than gold ever has. It’s often said that silver is the poor man’s gold. Silver is also the merchant metal in history. When the free market has been able to determine what money is, the free market has gravitated to using silver much more often than gold.
SIN: If silver has been the free market choice, why do central banks now focus more on holding gold?
Read More @ BusinessInsider.com

Robert Prechter: Signs of an Impending Credit Implosion

Prechter sees the Stock Market in the process of topping
from Financial Sense:
Jim is joined this week on Financial Sense Newshour by Robert Prechter, President of Elliott Wave International. Robert sees signs of a potential credit implosion, with borrowing and spending contractions in many foreign countries, as well as in US states and municipalities. He believes that the commercial bank “lending machine” is out of order, and the investment bank “leveraging machine” is at risk.
Robert R. Prechter, Jr., CMT, began his professional career in 1975 as a Technical Market Specialist with the Merrill Lynch Market Analysis Department in New York. He has been publishing The Elliott Wave Theorist, a monthly forecasting publication, since 1979. Currently he is president of Elliott Wave International, which publishes analysis of global stock, bond, currency, metals and energy markets.
Click Here to Listen to the Audio

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Read More @ FinancialSense.com

Trade Rains on the Jobs Parade

from EuroPac.net:
Earlier this month the Labor Department reported that 227,000 new jobs were added to the economy in February, marking the third consecutive month of positive jobs growth. Many observers took the news as evidence that the recovery has taken hold in earnest, helping send the S&P 500 index to the highest level in nearly five years. However the very same day the Commerce Department reported that, after surging for much of the last year, the U.S. trade deficit increased to $52.6 billion for January, the largest monthly trade gap since October 2008. This second data set should dampen enthusiasm for the first.
Before the financial crisis banished the data to the back pages, America’s growing trade imbalances used to be a hot topic. From 2005 through mid-2008 those monthly figures almost always topped $50 or $60 billion, setting a monthly record of $67.3 billion in August 2006. But when the housing and credit markets imploded, attention was focused elsewhere. In any event, the faltering economy took a huge bite out of imports, pushing the trade deficit down 45% in 2009. Even those people who were still paying attention to trade assumed that the problem was solving itself.
Read More @ EuroPac.net

Rating Agencies Found to be Falling Short According To EU Regulator

Credit rating agencies Moody’s, Standard & Poor’s (S&P) and Fitch have been told to improve internal processes or face possible enforcement from the European Securities and Markets Authority (ESMA).
by Jonathan Russell, Telegraph.co.uk:
A hard hitting report flowing from the first examination of the credit rating market by the regulator found the companies were deficient in seven areas. These included staffing levels, transparency, internal control functions and the length of time dedicated to making ratings decision.
The report will come as a major concern to the three agencies. However, it should offer some cheer to national Governments, including Germany, France and Greece, all of whom have criticised ratings agencies over recent decisions.
The agencies have also faced criticism in the UK from the Treasury Select Committee (TSC) for failing to spot problems in the months leading up to the financial crisis of 2007 and 2008.
Read More @ Telegraph.co.uk

Cashless Society Is Totalitarian Dream

from Wealth Cycles:

In a recent Slate article, the author asks the question, “Would the United States save money by switching to a cashless economy?”
Reading the replies alone is more revealing than the contrived article, which seeks to condition the population for an ongoing attempt at a transition away from cash.
One reader asks, “Will the tooth fairy leave a debit card under the child’s pillow?”
The social implications of relinquishing the last vestige of liberty, personal control over one’s labor, as represented by one’s paycheck, are grave and manifold.
Read More @ WealthCycles.com

Bernanke’s Banking Misdirection

from The Daily Bell:
Ben Bernanke tells EU to clean up banks … Federal Reserve chairman Ben Bernanke has exhorted Europe’s leaders to take further action to beef up banks and help southern Europe claw its way back to health, warning that the world financial system is not yet on a sound footing. Strains in global financial markets “continue to pose significant downside risks”, said Bernanke. – UK Telegraph

Dominant Social Theme: You’ve got to get your banks in better shape, the way they are in the US.

Free-Market Analysis: This is surely a dominant social theme – that banks can be seen as healthy due to so-called stress tests. The whole idea is that the paper money reserves held by banks must be adequate to surmount any larger financial downturn.
This is part of a larger dominant social theme of the power elite, that central banking economies have banks or even money in the normal sense. In the modern world, money is anything but “normal.”

Read More @ TheDailyBell.com

The One Chart That Says It All

by Charles Hugh Smith, Of Two Minds:
Depending on debt to fuel nominal growth leads to an economic death spiral.
Sometimes one chart says it all. Here is a chart of the S&P 500 (a broadly based measure of the U.S. stock market) in a ratio with total consumer credit, courtesy of frequent contributor Chartist Friend from Pittsburgh.
Charted against consumer credit, the S&P 500 (SPX) collapsed after the 2000 dot-com bubble burst and has been tracing out a descending channel since then.
Read More @ OfTwoMinds.com

Dollar Strength Temporary: Is it a Result of Record Debt ?

from GoldSilver.com:
Amazing what a week will do—apparently, the dollar is much more valuable today. But in reality, this temporary dollar strength can not be predicated on the U.S. advancing in the accumulation of the largest debt in the history of the world. To those with common sense, an unsustainable debt is obviously a problem—but for some, an ever-expanding debt isn’t a problem—it’s a reason to celebrate.
The reason it is not a problem, from the perspective of a select few, is that without an ever increasing debt, we have monetary deflation (The nemesis of those who conjure currency) causing institutional insolvency and bank failures. Stop-gap measures such as suspension of mark-to-market accounting and GAAP standards helps in the short run. But debt expansion and a larger supply of currency is the solution.
This is why you see the “two-party system” both perpetuate large debt expenditures, such as socialized healthcare, the welfare state and war.
Read More @ GoldSilver.com

Bank Stress Test Not Based Upon Reality

by Bob Chapman, The International Forecaster:
Even then, you should ask the question that Anat Admati, a Stanford University finance professor, has been pressing: Why would we let banks reduce their capital in the face of so much financial and economic uncertainty around the world? If you leave shareholder equity on bank balance sheets, it still belongs to shareholders. Let it stay there as loss-absorbing capital in case the world turns nasty again.
Reducing bank capital, according to Admati and her colleagues, doesn’t help the economy. Bankers like lower capital levels because their pay is based on return-on-capital unadjusted for risk. Shareholders are willing to go along either because they don’t understand the risks of thinly capitalized and therefore highly leveraged businesses, or they expect to share in the downside protection that will be provided by the government…
Make no mistake: Lower equity at big banks means higher expected losses for taxpayers down the road. Don’t let anyone fool you into thinking that banking crises are costless…
Read More @ TheInternationalForecaster.com

Rogers: ‘I Hope That the Chinese Market Collapses So I Can Buy Shares’

Jim Rogers, Rogers Holdings CEO & chairman, explains his bullish outlook on grains and China; how he views a global slowdown as a buying opportunity; and why he would buy gold on a dip.

 

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