China Moves To Further Marginalize Dollar: Offers CNY-Denominated BRIC Loans

Today we observed how as the US is considering releasing crude from its Political, pardon Strategic Petroleum Reserve, China was doing just the opposite. Now, in a further step confirming that China is acting as a much more rational capitalist power, and is rapidly encroaching on the "reserve" status of the sacrosanct USD, the FT writes that China intends to extend renminbi loans to other BRIC nations in "another step toward the internationalisation of its currency." To those following the stealthy Chinese incursion into currency markets as a dollar alternative, this is not news: already we know that China and Japan have bypassed the dollar entirely and now engage in direct bilateral trade using JPY and CNY (even as most other nations in Asia have developed bilateral agreements to transact in a non dollar basis). This is merely the latest incremental step which will see China become the dominant player in the currency arena, and further puts to doubt the fate of the US Dollar as the default currency. Of course, the market will not acknowledge any of this until the developing (i.e., non-insolvent world) is transacting entirely with US intermediation. And at that point, the US will be merely another Zimbabwe case study, where it can print all the money it wants to fund its deficit, and the only ones who care will be wheelbarrow manufacturers.

 

The Bears Explain The Price Of Gas (Special GOP Primary Edition)

In their own inimitable manner, the two bears are back to take on gas prices. Dismissing the higher demand thesis, concerns of the lack of supply, instability in the Middle East, and of course speculators (the same ones who were blamed for financial stocks' deterioration), our favorite speakers-of-the-truth point to what is the only relevant factor - the falling dollar. The Bernank once again stars for his schizophrenic perspective of asset price rises. Enjoy.

Monetary Double Talk Beyond MOPE

March 7, 2012, at 1:36 pm
by Jim Sinclair 

Dear CIGAs,

This would be a hat trick because it assumes the Fed would borrow back funds they have created by good ole debt monetization. It assumes there is no purpose to QE in the first place. It is monetary double talk beyond MOPE or maybe MOPE at a spiritual level. It is an attempt to intellectually cloud the process and to give plausible believability to PR lies.

Once you buy the bond via monetization the deed is done. It ends there. If you drain then you have done the reverse.

This is a statement that says we will step on the gas and then equally apply the brakes which means you go absolutely nowhere. It is a statement that is total gobbledegook to deflect the fact that QE is going to infinity. It is a statement that only those who do not understand monetary science might give credibility to.

This is a damned lie which belongs more out of intelligence agencies than a body claiming transparency. This is why there is no practical way out of this mess as it offers no solution to anything whatsoever.

Jim

Fed said to weigh new form of bond buying By Greg Robb, MarketWatch
WASHINGTON (MarketWatch) — Federal Reserve officials are mulling a new type of quantitative easing that will attempt to boost the economy without accelerating inflation, according to a report published Wednesday.
Analysts said the new approach would allow the Fed to move despite high oil prices.
Under the new approach, the Fed would print new money to buy long-term mortgage or Treasury bonds but effectively tie up that money by borrowing it back for short periods at low rates, according to a story in The Wall Street Journal.
This “sterilized” quantitative easing, would use reverse-repurchase agreements to keep the money from flowing to bank reserves.
Markets reacted to the report, with stocksSPX +0.70%  advancing to their strongest level of the day. Commodities also rose.
Economists said that Fed Chairman Ben Bernanke seemed to back away from more quantitative easing during two days of testimony before Congress last week. Financial markets have been unsettled since Bernanke’s testimony.
Republicans in Congress have been urging the Fed not to undertake any more quantitative easing, arguing that it would lead to higher inflation eventually.
Richard Gilhooly, U.S. director of interest-rate strategy at TD Securities, said the new sterilized QE would allow the Fed to buy more assets with an eye towards keeping inflation expectations low.
“This would be dollar supportive and would be negative for risk assets such as gold,” Gilhooly noted in an email to clients.
Many analysts do not think the Fed would be able to engineer another round of asset purchases unless inflation stays low in coming months.
Most Fed watchers do not expect the central bank to announce any new program at its March 13 meeting.
More…

Equities Recover 38.2% Of Sell-Off As Credit Underperforms

Volumes were above average today but well below yesterday's blockbuster as average trade size also pushed higher as we levitated in stocks (ignoring the afternoon rollover in credit markets - which closed at their lows of the day). ES (the e-mini S&P 500 futures contract) rallied (initially on 'expected' jobs data then a veiled QE-reference from the WSJ) to recover the wondrously mystical 38.2% of the last few days sell-off before limping slightly lower into the close. Financials wentr from worst (yesterday) to first (today) but oinly recovered a fraction of their losses as all sectors ended in the green today. Broadly speaking riskj assets drifted up with stocks (led by stocks) but closed in almost perfect CONTEXT by the end of the US day session as Treasuries limped begrudgingly higher in yield (though the curve flattened modestly), FX majors were relatively stable but JPY weakness pushed FX carry up supporting risk overall, and commodities leaked gently higher (outperforming USD's modest weakness on the day) as Silver and Oil outperformed on the day (with the latter back above $106). Gold limped back up to $1685 (juiced by the WSJ QE story) but Silver's high beta exuberance dominated that. Ahead of NFP tomorrow it seems like little real rerisking occurred today and the fact that credit underperformed and implied correlation diverged from VIX tells us that under-the-covers, protection was more bid than embracing risk.

Gold Daily and Silver Weekly Charts

more »

 

SP 500 and NDX Futures Daily Charts - Bounce Day Ahead of Greece and Payrolls

more »

 more »

Complexity Hides Silver's Invisible Hand

Eric De Groot at Eric De Groot - 1 hour ago

The invisible hand shoves silver down the elevator shaft in plain sight but remains largely hidden by complexity. Proponents of efficient market hypothesis probably shouldn't click on the chart below. Chart: Real Silver Lease Rates (1-Month LIBOR less 1-Month SOFO) and London PM Fixed Silver Price Special Donation To Insights Contribute to Insights By March 10th, One Silver Eagle Will Be... [[ This is a content summary only. Visit my website for full links, other content, and more! ]] more »

 

 

It's All In The SPIN, Baby!

Dave in Denver at The Golden Truth - 3 hours ago

* 'Tis but thy name that is my enemy;* * Thou art thyself, though not a Montague.* * What's Montague? it is nor hand, nor foot,* * Nor arm, nor face, nor any other part* * Belonging to a man. O, be some other name!* * What's in a name? that which we call a rose* * ... more » 

Ultimate Carry Trades - AIG, MF Global, and LTRO

We know how AIG and MF ended, as of yet we don't know how LTRO will end. Lots of "carry" trades have worked out well, but when they don't, the result is pretty ugly. Now we are seeing margin calls from the ECB starting to occur and we noted yesterday that MtM losses will start to evolve in some of the carry trades as risk is unwound very recently - perhaps we are getting a sneak peek at the cause of the next vicious cycle crisis.

January Consumer Credit Surges As Government Blows Student Debt Bubble To Epic Proportions

One look at the just released consumer credit data would make one believe that the US consumer is getting back into it and the velocity of money is finally starting to ramp up: after all the headline January number came at a whopping +$17.8 billion on expectations of +10.5 billion. Nothing could be further from the truth.  As the first chart below demonstrates, January revolving credit, as in that used on one's credit card, actually declined by $2.9 billion compared to December, and was back to $800.9 billion: the first decline in 4 months as consumers spend less following an already weak holiday season. Yet offsetting this was an absolutely massive surge in Non-revolving credit, i.e., mostly student debt, which soared by $20.7 billion in the month, the highest sequential jump in this category in history, leading to a very misleading print of a major increase in credit. For earlier observations on the soaring student loan bubble see here. And it gets worse: when spread by sources of credit, the only place where credit came from was the US government, which funded a near record $28 billion, all of it going into student loans, even as every other source of credit declined in the month! If this is not the most blatant gaming of headlines, we don't know what is. But yes, America's lucky students get ever deeper into debt slavery, only to realize upon graduation that there are no jobs that pay high enough to allow them to pay off this debt. Thank you uncle Sam - may we have another bubble.

Tim Price On One Of The Most Overlooked Aspects Of The Financial Crisis

An engineer, a biologist and an economist are washed ashore on a desert island. After a few days without food they are starving. Eventually, they stumble on a can of beans on the beach. They spend a few minutes considering how they might feed themselves. The engineer is the first to speak: "We could hit the can with a rock until it opens." The biologist counters, "We could suspend the can in a seawater solution and wait for erosion to work its magic." The economist is last to contribute: "Let's just assume we have a can-opener." OK, so it's not the funniest joke in the universe. But it has the ring of truth.

Thomas Stolper Releases Much Anticipated Note

Unfortunately it is not a EURUSD recommendation to be faded and generate 10 out of 10 anti-Stolper trades. However, the Goldman strategist, who has likely taken to following new FX glory boy Alex Hope, takes a look at recent strength (and weakness) in FX carry strategies and finds (rather correctly) that this strength seems driven by little more than a broader rally across risk assets in general. As we have been pointing out, the correlation across our CONTEXT basket (which includes FX carry) has been relatively high both up this year and down very recently, and Stolper discusses whether to fade or follow FX carry strategies and when they do and don't work. His unsurprising conclusion being that FX carry can only continue to rise if broad risk assets rise (and vice versa). Somewhat ironically he remains light on tactical recommendations, preferring to watch - nice way to earn a bonus if you can get it.
 

iDisappointed

Update: the Official name of the iPad 3 is ... "The New iPad" - probably means "Awesome Table Thingy" was taken by another Chinese maker.
AAPL just went red for the day and we note NFLX is also down 2.5% now on the day, as business models proceed to start cannibalizing each other in a world in which consumer cash is actually, gasp, finite. In other news we expect the formal name of the iPad 3 to be revealed as "iECB Collateral" in which case watch as the stock price soars and the company's market cap moves to match the ECB's $4 trillion balance sheet once Europe's taxpayers are forced to bailout not only Greece but the biggest hedge fund hotel of all time. That. Or wait until the Bank of iSrael to lift all offers all the way through the iNBBO. One thing is certain, however: due to its edibility, the iPad3 will surely be sterilized.

Apple Algos Keeping Close Watch On All Flashing, Red Headlines Coming Out Of Tim Cook's Mouth

Apple share price dropped modestly (around $4) as Tim Cook took the stage but has levitated back up as he mentions...
*APPLE SAYS SIRI WILL BE COMING TO JAPAN
*APPLE NEW APPLE TV HAS NEW USER INTERFACE, GOES ON SALE MARCH 16 FOR $99, NEW APPLE TV HAS 1080P SUPPORT
*APPLE HAS SOLD MORE THAN 55 MILLION IPADS SINCE ITS DEBUT
*APPLE NEW IPAD HAS SIMILAR BODY AS PREVIOUS MODELS, 9.7 INCH SCREEN, AND RETINA DISPLAY, HAS NEW A5X CHIP, FOR QUAD-CORE GRAPHICS

The Death of The PIIGS Illustrated

Yesterday we pointed to the fundamental reason for Europe's angst - that of dramatic imbalance across nations finances. Today we look at the implications of the growing concerns at sustainability of the Euro-area itself. Deposits are fleeing the PIIGS at ever faster rates, growth remains a dream as PMIs for most of the PIIGS trend towards (or are at) record lows, and despite all the liquidity provision of the two LTROs, credit extension to the real economy dropped once again. The Greek PSI remains front-and-center from a headline perspective but yesterday's dismal Euro macro data combined with the reality of these three factors appears to be increasingly repriced into sovereign credit spreads as CDS drag manipulated bonds wider in the last week.

Wall Street's Knee Jerk Responses To Hint Of More QE

We shared our thoughts on the implication for more possible QE, sterilized or not, earlier, as did the market: why is risk higher, and with it the threat of inflation, if the Fed is doing perfectly innocuous sterilized easing? Maybe because it does not matter if the Fed intervenes sterilized or unsterilized, as long as the Fed intervenes, period? Now we present the knee jerk reaction of several Wall Street experts, all of whom are about as confused about this development, which is neither here nor there in terms of actually achieving any of the Fed's goals, as we are.

Our "Let's Pretend" Economy: Let's Pretend Student Loans Are About Education

We have a "let's pretend" economy: let's pretend the unemployment rate actually reflects the number of people with full-time jobs and the number of people seeking jobs, let's pretend the Federal government borrowing 10% of the GDP every year is sustainable without any consequences, let's pretend the stock market actually reflects the economy rather than Federal Reserve monetary intervention, and so on. We also have a "let's pretend" education/student-loan game running: let's pretend college is "worth" the investment, and let's pretend student loans are about education. There are three dirty little secrets buried under the education/student-loan complex's high-gloss sheen: 1. Student loans have little to do with education and everything to do with creating a new profit center for subprime-type lenders guaranteed by the Savior State. 2. A college diploma's value in the real world of getting a job and earning a good salary in a post-financialization economy has been grossly oversold. 3. Many people are taking out student loans just to live; the loans are essentially a form of "State funding" a.k.a. welfare that must be paid back. We've got a lot of charts that reflect reality rather than hype, so let's get started. Despite all the bleating rationalizations issued by the Education Complex, higher education costs have outstripped the rest of the economy's cost structure. Funny how nobody ever asks if there is any real competitive pressure in the Education Complex; there isn't, and why should there be when students can borrow $30,000 a year?

Oil Implications And Fed Policy

Oil is battling hard with Greece to top the tail-risk-du-jour in financial markets recently. As Credit Suisse notes, the US economy so far seems to have shrugged it off as 'gasoline-sensitive' economic data for Feb have ignored the price rise for now. The extreme (warm) weather may be shielding the economy from the effect of these higher energy costs, as are consumers habituation with relatively high prices, and while CS remains more sanguine than us on energy's negative impulse they set forth some useful implications (rules-of-thumb) for what oil means for gas prices, headline inflation, real disposable income, and GDP growth pointing to $150 Brent as a critical threshold for the economy (or equivalently $4.50 retail gasoline prices). Of course, Fed policy precedents and implications are necessarily situational as the hope for this being a 'temporary' situation but the circular reaction to the consequences of any growth drag will merely exacerbate the situation. Was Bernanke's recent less unconditional dovishness an implicit effort to 'tighten' expectations and manage the war-premium out of oil prices?

Please consider making a small donation, to help cover some of the labor and costs to run this blog.
Thank You

I'm PayPal Verified