Treasuries Snap Longest Ever Losing Streak
During the last 31 years of the US Treasury bond rally, the 10Y interest rate has never risen for 10 consecutive days and today's very modest 1.6bps rally ensures that will continue. Yesterday's weakness equaled the previous 9-days-in-row record from 6/26/06.
The rise in 10Y rates over this 10 day period equals the Oct 2011 jolt
in percentage terms as we hold at those 10/28/11 swing highs in rates.
The previous 8 times that 10Y rates have risen for 7 days or more, the
next 10 days have seen an average 16bps compression and next 20 days a
31.5bps compression (following the consecutive break). This of course
is wreaking havoc with mortgage rates as according to Bloomberg's
bankrate.com data, we are back above 4% for the 30Y fixed for the first
time this year and this week has seen mortgage rates jump their most in 16 months.$450 Billion In ZIRPorized Purchasing Power: Two Charts That Explain The Baby Boomer Dilemma
When it comes to predicting consumer spending patterns, especially those of the baby boomers who are traditionally reliant on fixed income (but lately have had to migrate back into the workforce, as retirement prospects diminish, in effect displacing the young 18-24 year old Americans where unemployment is now at a substantial 46%), the following two charts from today's David Rosenberg letter do a great job at explaining the schism between interest and dividend income. The former, as is well-known, has been crippled and is plunging courtesy of Bernanke's ZIRP policy, which makes cash yields on savings and fixed income instruments virtually negligible, and the latter, which while rising, has a long way to rise if it is to catch up to lost annuity potential. It is here that the primary tension for the Fed resides: it has to force investors to switch their mindsets from the capital preservation of fixed income, to the risky behavior of pursuing stock dividends. It is also here that we see the lost purchasing power of the US consumer: interest income is down $450 billion from 2007-2008 levels to roughly $1 trillion, while dividend income has risen to $825 billion, which is where it was at the prior peak. In other words, when all is said and done, Bernanke's ZIRP policy has eliminated $450 billion in purchasing power, even if he has succeeded in reflating the equity bubble. Yet while bonds at least have capital preservation optics, what happens to dividend stocks whose cash flow yields can be eliminated at the bat of an eye, if and when the next flash crash materializes, or the next financial crisis is finally too big for the central planners to control?
Powerful 7.9 Magnitude Earthquake Shakes Mexico City, No Tsunami Warning
Moments
ago we saw headlines flashing of a major 7.6 magnitude earthquake
swaying Mexico City. It turns out the earthquake was even stronger, and
according to the USGS is now classified as 7.9. From Reuters: "MEXICO
CITY, March 20 (Reuters) - A major 7.9 magnitude earthquake struck
near Acapulco on Mexico's Pacific coast, the U.S. Geological Survey
said on Tuesday. Earlier it had been reported at 7.6 magnitude."
Luckily, as Al Jazeera's Alan Fisher notes, "Mexican TV reports no major
damage in the State of Oaxaca" citing the local governor. CTRL+SPIN: The Bernank And The Fed Propaganda Tour Live
A few days ago we noted that the Fed's propagnda is slowly encroaching into the 8-12 classroom with "Fed To Take Propaganda To The Schoolroom: Will Teach Grade 8-12 Students About Constitutionality Of... The Fed"
in which the Fed's appointed class agenda would allow "students to use
their knowledge of McCulloch v. Maryland and the necessary and proper
clause to consider the constitutionality of the Federal Reserve System."
You know - just in case kids get ideas early on. And now that Grades
8-12 are covered, it is time to take the propaganda tour to college.
From the Fed: "In March 2012, Chairman The Bernank will deliver a
four-part lecture series about the Federal Reserve and the financial
crisis that emerged in 2007. The series begins with a lecture on
the origins and missions of central banks, followed by a lecture that
will discuss the role and actions of the Federal Reserve in the period
after World War II. In the final two lectures, the Chairman will review
some of the causes of, and policy responses to, the recent financial
crisis, focusing specifically on the actions of the Federal Reserve.
The lectures are being offered as part of an undergraduate course
Leaving the Board at the George Washington University School of
Business." Watch The Bernank as he shifts from the default CTRL+P mode to
CTRL+SPIN. Also, we are taking bets on how many times the Chairsatan
will use the words "Andrew" and "Jackson" in the same sentence: making a market at zero and under.Commodity Mauling Time
Funds are hammering nearly every single individual commodity futures market
lower in today's session for some reason, a reason as to which I am still
attempting to discover. There does not seem to be a safe haven, or "risk
off" trade occuring in any large degree mainly because the bond market is
trading nearly unchanged while the US Dollar is only up very slightly.
Stocks while lower today have moved off of their worst levels of the
session but the bloodbath is continuing across the commodity sector.
Evidently the computer algorithms have their panties in a wad and are
jettisoning ... more »
Throwing Cold Water On The Hot Air Coming From DC (Oval Office/Fed)
We've heard Obama and his handlers, plus the majority of Fed officials,
issue statements recently which state the economy is recovering, employment
is recovering, housing is recovering, etc. And they offer the highly
manipulated Government and industry-council generated data as evidence.
Note that it is now becoming widely acknowledged and accepted - even by
some mainstream media promoters - that the Government data is not credible.
Let's look at today's housing starts data for February, released by the
Department of Commerce: LINK. The headlines that stream across mention
that ... more »
Gold and Miners Will Bottom When Investors See No More Catalysts For Rally
Wave analysis suggest time and price are good. The money setup suggests the
D-wave decline ended, while invisible hand has been hooking the last few
traders off the precious metal train. Perhaps the long awaited money flow
"earthquake" will shake the resolve of the few remaining gold and silver
investors before the next big advance. Chart: Gold London PM Fixed Hi Eric!
Haven't mailed you in...
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content, and more! ]]
Closing IL facilities to cost at least 2,300 jobs
California opens the pink-slip door. Illinois follows. Who's next? New York, Florida, Wisconsin, Michigan, and so on. Headline: Closing IL facilities to cost at least 2,300 jobs SPRINGFIELD, Ill. (AP) - Gov. Pat Quinn's own documents suggest his plan to close state facilities would cost Illinois at least 2,300 jobs and $250 million in economic activity. So far, Quinn has filed economic... [[ This is a content summary only. Visit my website for full links, other content, and more! ]]
iFry?
As reported earlier, Consumer Reports has concluded its analysis of the New iPad's running temperature. The results, based on a live CNBC update:- New iPad runs up to 12 degrees warmer than the old iPad2
- New iPad warms up to 116 degrees
- This is not as hot as some of the warmest laptops which hit 120 degrees.
Mortgage Settlement? Not So Fast!
Mortgage
bondholders are threatening legal action over the $25 billion national
mortgage settlement, which will give the five largest servicers
credits for principal writedowns that the bondholders may be forced to
take. As American Banker notes, the investors
in those trusts were not a party to the settlement agreement, and now
they are objecting to being forced into taking losses - to the banks'
benefit - as a result of it. The government is forcing
investors to take losses even though they were not responsible for the
foreclosure process abuses that led to the banks' settlement with state
and federal officials. "The banks are trying to pay these fines with our money,"
says Vincent Fiorillo (of DoubleLine). Chris Katopis, the executive
director of the bondholder trade group, says it is considering its legal
options, including filing a friend of the court amicus brief or suing
servicers individually..."Banks are shifting their liability to first-lien investors that were innocent of robo-signing,".
Bondholders are especially concerned about writedowns from Bank of
America, which has privately securitized more than $285 billion worth
of mortgages originated by Countrywide Financial Corp.Are Big Crude Price Swings Coming?
Some curious headlines just out from the ICE via BBG:- ICE TO LIMIT BRENT, WTI PRICE MOVEMENT $1.25/BBL FOR 5 SECONDS
- ICE TO SET INTERVAL PRICE LIMITS ON CRUDE, GASOIL FROM APRIL 1
- ICE TO LIMIT GASOIL PRICE MOVEMENT $10 A TON FOR 5 SECONDS
3 Charts On The "Money On The Sidelines"
We
hear a lot of the impending flood of money on the sidelines that will
avalanche into the equity market to take us to Dow 20000 as retail
sells low and buys high. Besides the arguments over the generally
nonsensical argument of where the money comes from, who sold so you
could buy stocks and who bought your 'safe' vehicle so that you could
use that cash for 'risky' instruments, we note three interesting charts
from Nomura today on recent fund flows and technicals that suggest perhaps we should not all be holding our breath for the proverbial money-flow
(especially as we see outflows in the last week or so from some of the
real high-beta darlings of the rally such as high-yield bond ETFs).Obama Advisor, And Goldman Sachs Client, Gene Sperling Filibusters CNBC With "Shared Sacrifice" Speech In Response To Ryan Budget
Earlier we shared some perspectives on
the just released Ryan 2013 budget. Shortly thereafter it was the turn
of Obama aide and National Economic Council director Gene Sperling to
give his spin. In what can only be characterized as an epic filibuster
of none other than CNBC, Sperling spoke in length, literally, about
shared sacrifice, about how math fails to matter in a new normal (and
nominal) world, how trillions and trilions in underfunded welfare
benefits (which even Goldman sees as untenable) are really just a matter of perspective, but mostly about how net tax revenues running below debt issuance (as reported here yesterday) are 'viable.' We leave our readers to make up their own minds. We just want to add the following highlights from a Bloomberg October 2009 article, which just may provide some more color on where and what Mr. Sperling's true allegienaces are. Guest Post: Why We May Not See 4% GDP Growth For A Long Time
For
a third year in a row mainstream economists and analysts are once
again planting the seeds of hope for a return to stronger GDP growth.
The White House, if you look at their budget estimations, are banking
on it as part of their long term deficit reduction plan.
Unfortunately, it is highly unlikely that we will see growth in the
economy return to 4% for a very long time. Currently, the deficit
between real GDP and the CBO's estimated potential GDP, is at the
greatest deviation on record. However, that data point really doesn't
tell us much other than the economy is currently operating well below
its potential level. While most economists will point to the likely
culprits of employment, wages, industrial production and consumption as
the problem, which is correct, those issues are byproducts of the
50-Trillion pound Gorilla that sits quietly in the corner. That
seemingly invisible Gorilla is simply - debt.Greek CDS Settlement - 3 Wrongs Do Make A Right
One of the central premises of CDS is that the “basis” package should work.
An investor should be able to buy a bond, and buy CDS to the same
maturity and expect to get paid close to par – either by the bond being
repaid at par and the CDS expiring worthless, or through a Credit
Event, where the price of the bonds the investor owns plus the CDS
settlement amount add up to close to par. The settlement of the Greek CDS contracts worked well, but that was pure dumb luck. This
leaves playing the basis in Portuguese bonds and CDS as a much riskier
proposition than before Europe's PSI/ECB decisions - and perhaps
explains why at over 300bps, it has not been arbitraged fully away
- though today's rally in Portugal bonds suggests a new marginal buyer
which given the basis compression suggests they may be getting more
comfortable.Slowdown In Netflix February Traffic Blamed On The Weather
Last year, everyone blamed anything that came in even modestly worse than expected, be it EPS or economic data, on the occasional inclement weather, completely oblivious that that is precisely the reason for seasonal adjustments, and for forecasters to be paid seven digits - i.e., to anticipate various outcomes. So far this year we had not heard anyone accusing the near-record warm winter for much, especially since the data has been coming blisteringly hot (something which everyone from Goldman, to Bank of America, to David Rosenberg is convinced will cause a major "Cash to Clunkers"-like hangover in the spring and summer courtesy of front-end loaded consumer demand). Until now: the following Hudson Square Research report blames the deterioratin in Netflix traffic patterns on, you guessed it, warm weather.
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