Renewed European Fears Send CHF Soaring, Force Swiss National Bank To Defend EURCHF 1.20 Floor
And
like that, Europe is broken again. Following a spate of negative
European data (what else is there), including a miss in German
industrial production as well as a miss in UK manufacturing output, all
eyes are again on Spain, especially those of the bond vigilantes, who
have sold off the sovereign European bond market, sending the
Spanish-Bund spread to over 400 bps for the first time since December
2011. The main reason today: a Goldman report saying Spain will unlikely
meet its 2012 and 2013 budget targets, as well as JPM Chief Economist
David Mackie saying Spanish government "missteps" have raised questions
about its credibility, making investors reluctant to purchase Spanish
debt. Stress has returned to periphery, if it broadened into bank
funding markets more LTROs would be forthcoming; if that “failed to hold
yields at an appropriate level” Spain may need assistance from the
EFSF/ESM and the IMF. Euro area unlikely to return to stability in
sovereigns without some burden sharing; nominal growth likely to stay
below borrowing costs, making fiscal targets “all but impossible to
achieve”. UBS piles in saying Spanish banking stresses still haven't
been addressed. Finally, a big red flag is that market liquidity is once
again starting to disappear, and as Peter Tchir points out, Main is
now being quoted with 3/4 bps bid/ask spread, all the way up to 1 bps
spread. In other words, as we have been warning for weeks, the period of
fake LTRO-induced calm is over, and the market is demanding more
central planner liquid heroin. The question becomes whether Europe has
even more worthless collateral in exchange for which the ECB will
continue handing out discount window money in sterilized sheep's
clothing. Yet nowhere is the resumption in risk flaring more evident
than in the Swiss Franc, where the EURCHF all of a sudden broke through
the critical 1.20 SNB floor, which was set back in September 2011, the
day gold was trading at its all time high. Said otherwise, everyone is
once again scrambling for safety. And since they can't get it in the
CHF, it is only a matter of time, before gold resumes its ascent as the
paper currency alternative that sent it to its all time highs late last
summer.LTRO #Fail And Two Types Of Credit Losses
Two
weeks ago we noted that all those banks that 'invested' in Spanish and
Italian 'Sarkozy' carry-trades post LTRO2 are now under-water on their
positions (on a MtM basis). The last week or so has seen this
situation deteriorate rather rapidly with Spanish yields now backed up all the way to mid-November levels (and notably Spanish equities below their November lows) removing all the LTRO-exuberance leaving all Spanish banks under-water on their carry trades
(should they ever have to MtM). At the same time, the critical aspect
of LTRO (that is reliquifying tha banks to avoid the credit contraction
vicious cycle that was beginning) has also failed. LTRO-encumbered banks now trade with a credit spread on senior unsecured (but now hugely subordinated) paper of 305bps on average (compared to non-LTRO-encumbered banks trading at 180bps on average) - back up near January's worst levels and almost entirely removing any of the tail-risk-reduction expectations that LTRO was supposed to provide.
As Peter Tchir notes, there are two types of credit losses -
default/restructuring (Greece and soon to be Portugal/Spain et al.) and
bad positioning (or forced selling as risk becomes too much to bear -
Spanish Govt/Financial credit) - these two sources of self-fulfilling
pain are mounting once again. The simple truth is that without
endless and infinite LTRO (or printing) funding for banks there is not
enough demand for Europe's peripheral junk (as the Spanish
auction highlighted) and the lack of performing collateral means the
next stage will be outright printing (as opposed to a veiled repo loan)
and that fact is beginning to creep into US financials as systemic contagion spreads.
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Corzined Marvell Muppets Sue Vampire Squid
Pay close attention because this could be a record-breaking amount of mauling ever attempted by the colossus of client care as Goldman shows it does not discriminate between millionaire and billionaire Muppets. In a bizarre story in CNN Money, we are told that two billionaire 'married' executives of Marvell Technologies - MRVL (no, not the comic book though that would be spectacular) are suing Goldman for what initially appears to be a straight-forward alleged fraud of unauthorized transfer of ownership of their MRVL shares to Goldman's internal fund to enable more borrow availability for shorts (1 Corzine-ing). But the story gets better. The executives, upon the advice of another Goldman broker were advised to take levered long positions in competitor NVDA's shares (which GS was allegedly selling out of its own book - 2 Corzine-ings) only to very rapidly face significant losses when the company missed and the stock dropped notably (3 Corzine-ings). Then, GS sends the MRVL execs margin calls on that position (4 Corzine-ings) and unwilling to accept the MRVL shares as collateral due to its low share price (5 Corzine-ings), forces the former MRVL executives to sell their MRVL shares (6 Corzine-ings) to meet cash calls - all the while remembering that GS had transferred the ownership in order that they could allegedly have more of this hard-to-borrow stock to short (7 Corzine-ings). What's more, the couple's suit alleges that Goldman and a hedge fund run by Goldman were buying MRVL's shares at the same time the firm was forcing Sutardja and Dai to sell (8 Corzine-ings). Both NVDA and MRVL's shares have since more than doubled from their late 2008 lows. The couple claim they lost more than $100 million because of their forced sales and general Muppet massacre.
Do not, however, feel too bad for these two Muppets as Sutardja and Dia are not without controversy themselves. In 2008, MRVL paid a $10 million fine to settle allegations from the SEC that the company backdated the options it paid out to its executives. As part of the settlement, Dai, who was once Marvell's COO, paid a personal fine of $500,000 and was barred from being a director or officer of a publicly traded company for five years.
If
you spend your day listening to mainstream financial media you could
be forgiven for believing that things have never been better for
corporate balance sheets - exceptionally high levels of cash and
fortress-like conservatism for example. However, in the trenches of
reality, from a high-yield and investment grade credit market
perspective (and perhaps this is why credit markets are expressing considerably more concern than equities still) there are three trends that point to deterioration and far-from-Nirvana cash-flow protection that should be paid close attention to.Art Cashin On Bernanke's Secret Banker Meeting To Keep Europe Afloat
Last week Mario Monti, like a good (ex) Goldmanite, did his best to buy what Goldman is selling, namely telling anyone gullible enough to believe that the "European crisis is almost over." Funny then that we learn that just as this was happening, Ben Bernanke held a secret meeting with the entire banker caretel, in which discussed was not American jobs (seasonally adjusted or otherwise), nor $5 gas, but... helping European with its debt crisis. But, but... Mario said. In the meantime, European spreads are back to late 2011 levels.Goldman Raises Tomorrow's NFP Forecast From 175,000 To 200,000
If Goldman's recent predictive track record is any indication, tomorrow's NFP will be a disaster.Gold: I Expect The Price To Decline
I expect the price to decline and when that happens I will buy more. - *in
a conference in Bucharest*
*Jim Rogers is an author, financial commentator and successful
international investor. He has been frequently featured in Time, The New
York Times, Barron’s, Forbes, Fortune, The Wall Street Journal, The
Financial Times and is a regular guest on Bloomberg and CNBC.*
We Will Have A Massive Wealth Destruction Somewhere Down The Line
Somewhere down the line we will have a massive wealth destruction that
usually happens either through very high inflation or through social unrest
or through war or credit market collapse. Maybe all of it will happen, but
at different times.* - in CNBC*
*Marc Faber is an international investor known for his uncanny predictions
of the stock market and futures markets around the world.*
Volume Reveals Difference Between Muscles And Inflated Balloons
Volume reveals the difference between muscles and inflated balloons. A
test and/or break of high volume swing low (climax bottom) on decreasing
volume suggests waning downside force or inflated balloons passing as
muscles. The magenta circles highlight the last three climax bottoms. The
blue arrows directly following them mark the low volume tests and/or breaks
of support. ...
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content, and more! ]]
A Happy Ending News Story - Dogs RULE!
Those of you who are dog lovers as I am, will be absolutely edified by the
following story detailing the heroics of Man's Best Friend. A cat would
have probably run and hid under the sofa...
Pit Bull Shot In The Head Trying To Protect Owner, But Miraculously Survives'Kilo'
Didn't Take Too Kindly To Gunman Pushing Into Staten Island HomeApril 4,
2012 11:01 PM
http://newyork.cbslocal.com/2012/04/04/pit-bull-shot-in-the-head-trying-to-protect-owner-but-miraculously-survives/
"No Additional Stimulus Needed" Is An Illusion
World stock markets fell Thursday after a weak Spanish bond auction
inflamed concerns about the European debt crisis and hopes faded for more
help for the U.S. economy from the Federal Reserve. How long can the Fed
play the "no additional stimulus needed" card for the US when unlike any
point in history the world's financial system is so highly interconnected?
The Fed is already indirectly...
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content, and more! ]]
Is The Japanese Party Ending?
As we discussed here just two weeks ago,
there is a growing concern that Japanese officials will decide to turn
the currency war amplifier volume to 11 and devalue the JPY. With
carry trades unwinding rapidly, JPY continues to strengthen (much to
their chagrin) but now we are seeing very aggressive positioning in 5Y JGB breakevens (or inflation bets) which implicitly belie devaluation expectations. The key being that, breakevens spiking implies a market expectation that the BoJ will finally be forced to stimulate inflation, as Andy Xie recently pointed out,
but going the hyper-inflate path and crushing the JPY. This instead of
the alternative, for an economy which is now no longer in a trade
surplus, which is a collapse in bonds which has its won very nasty
endgame (when if bond yields rise to 2 percent, the interest expense would surpass the total expected tax revenue of 42.3 trillion yen). Today's comments
The mining shares continue being pummelled to the point where one wonders
who is left in the sector to sell them at these levels.
Take a look at the following chart and marvel:
How many of us who were trading the shares can forget what happened to them
back in the summer of 2008 when the credit crisis erupted causing an
avalanche of selling across the paper and hard asset sectors. When the S&P
500 was crushed ( it lost over 50% of its value plunging from over 1500 to
down under 750) the mining shares were unceremoniously trampled under the
feet of men.
During that stage, the shar... more »
In Europe a Failed Spanish auction/Gold and silver bombed/
Good evening Ladies and Gentlemen: Gold closed the comex session down $59.70 at $1612.30 (1:30 PM). Silver followed suit down $2.24 to finish at $31.02. The day started out with Australia reporting a surprising deficit for the second straight month as they are feeling the effects of a downturn in China. China stunned the world with another deficit. When the pendulum swung to Europe we were
Four Weeks Of Deja Vu Propaganda
For everyone who wants to see a simple yet explicit example of how the BLS' relentless propaganda courtesy of perpetual prior "adjustments" trickles down in terms of media propaganda, here it is.Meet The People Bringing You Currency Manipulation On A Daily Basis
Today's
aggressive intervention by various monetary authorities to prevent the
Swiss Franc from trading anywhere close to its fair value (yes
"intervention", the same that happens each day in other capital
markets, like stocks and commodities, read gold) reminded us once again
that it is always and only a central planner's world. Yet
while it is easy to assume there is some big black box doing all this
manipulation, the truth is that the decision chain ultimately ends with
carbon-based lifeforms, who push the buy or sell button, respectively:
i.e., the human element. Which is why we wanted to
present our readers the decision making chain expressed in flesh and
blood terms, namely the people who over and over demonstrate to the
market just who is in control.Initial Claims Continue String Of Disappointments
Today's
initial claims number printed at 357K, on expectations of 355K, a
number which next week will be revised higher once again, likely to
362K. The game here is simple - just show a decline in claims, as what
happened to last week's number, also revised higher, this time from 359K
to 363K, just so it can show a 6K decline and allow the idiot media to
blow such headline as "Weekly US unemployment benefit applications
fall to 357,000, lowest in 4 years" from AP and "Jobless Claims in U.S.
Decrease to Lowest Level in Four Years" from Bloomberg. In reality, this is the third consecutive miss of consensus in a row.
Give us a break - funny then when one considers that last week's
consensus was 350K, which has since been revised to 363K. Or what about
that 348K print the week prior which ended up being a more realistic
364K. In other words, the headlines were 348K, 359K, 357K, and somehow
this is indicative of anything more than outright and endless data
manipulation. Needless to say, when next week the number is revised to a
far greater miss, nobody will care as the embargoed headlines will
once again say "Jobless Claims in U.S. Decrease to Lowest Level in Four
Years" and the sheep will keep on buying it over and over and over.
What is also notable, is that just like yesterday's ADP number, today's
claims data gives no hint what to expect from tomorrow's market
holiday NFP.Andrew Hall On Saudi "Excess Production Capacity" Promises
When
it comes to energy, and specifically crude oil trading, few names are
as respected, if controversial, as former Citi star trader, Andrew
Hall, whose $100 million pay package in 2008 forced Citi to sell energy unit Phibro to
Occidental. He currently is primarily focused on his own fund
Astenbeck, where he trades what he has always traded - commodities, and
primarily oil. As such, his view on the oil market is far more credible
than that of the EIA, or any conflicted Saudi Interests. So what does
he have to say about the biggest wildcard currently in the energy
market, namely whether or not Saudi Arabia, can push its production
from its recent record high of just under 10,000 tb/d to the 12,500
tb/d that would be needed to replace all lost Iranian output (a
question we asked rhetorically two weeks ago). The answer? Don't make him laugh.How The Rout Will Decide The Route
Liquidity never solves issues of solvency and the time that it buys is generally of a relatively short duration. After the $1.3 trillion loan by the ECB to the European banks which helped drive up the prices for European sovereigns what do we now find as the liquidity ebbs? Yesterday’s Spanish auction was abysmal and the French auction today did not go too well with rising yields and less demand. The austerity measures are driving Europe into a worsening recession and the financial positions of Spain and Italy are deteriorating even as new measures are put into place. In fact there are only two ways out of the European mess which are growth, not happening, and Inflation which may be the ultimate strategy employed by the EU and the ECB if the construct holds to the point of changing strategies which is surely no outlier event.Daily US Opening News And Market Re-Cap: April 5
European equities are taking losses as North America comes to market, with particular underperformance noted in the periphery bourses. Risk-aversion pushed both Spanish and Italian yields higher, with the spread between the Spanish 10-year and the Bund crossing above 400BPS for the first time since Late November 2011. The yields have now come off their highs but still remain elevated. It should be noted that markets are generally light today heading into the Easter weekend as investors take risk off the markets, so large surges in volumes have been observed. In the FX markets, EUR/CHF briefly broke below the SNB’s staunchly defended 1.2000 level on some exchanges, but uncertainty remains over the exact low due to different exchanges registering different prints. Needless to say, all exchanges witnessed a 30pip spike upwards in the cross with significant demand seen pushing the cross away from the floor. EUR/CHF now trades around the 1.2020 level.Frontrunning: April 5
- Portugal Says Some Town Halls May Need to Restructure Their Debt (Bloomberg)
- Draghi Scotches ECB Exit Talk as Spain Keeps Crisis Alive (Bloomberg)
- China PBOC Injects Net CNY25 Bln Into Money Market This Week (WSJ)
- BoE warns on mortgage limits (FT)
- Apple investigating new iPad WiFi issues, tells AppleCare to replace affected units (9to5Mac)
- Juppé promises French hard line in EU (FT)
- ECB liquidity fuels high stakes hedging (FT)
- Fed’s Lacker Says Markets Saw Odds of Policy Easing as Too High (Bloomberg)
- Japan minister to ask for nuclear reactor restart: media (Reuters)
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