First Greek Bank Runs--Now Spanish Bank Runs/
Good
evening Ladies and Gentlemen:
Gold closed up today by a rather large $38.00 to $1574.80. Silver also
rallied to finish the comex session at $27.99 up 82 cents. For a change
today we saw the Dow plummet by 156 points and gold and silver
rallied. The gold price rose above the 2% shackle put on by the
bankers. The USA 30 yr bond fell in yield to 5 months lows indicating
the serious nature
Geithner Comes Clean: "I Don't Understand It"
Tim Geithner outdoes himself this evening with three hypocritical, self-defecating-deceiving, and typically ignominious clips courtesy of his interview with Jeffrey Brown of PBS NewsHour. While we knew TurboTax was beyond him, the Treasury debacle-in-chief admits he doesn't understand how the debt limit has bubbled back up (seeing it as part of a partisan political agenda); admits that perhaps the NY Fed has a 'perception problem' with Jamie Dimon on the board; and his piece-de-resistance his cognitive dissonance erupts as he touts Obama's economic and jobs record: "look how well we are doing relative to any other major country".
It seems the election cycle is well and truly upon us and revisionism
and populism will once again trump sensibility and forthrightness. One Epic Chinese Bubble - One Chart
The best charts are those that need no explanation. Such as this one.
Everything You Need To Know About Europe's Dilemma In 4 Minutes
The
current crisis of the Eurozone is a result of the imbalance of
economic power between the core and the periphery but once one
understands the non-economic and completely political strategy that is
occurring, comprehending the at-times-incredible decision-making (or
lack thereof) is at least easier to digest. Stratfor's Adriano Bosoni
provides a very succinct description of everything you wanted to know about Europe's 'situation' but were afraid to ask in under 240 seconds.So How Are JPM's Prop "Counterparties" Faring?
We already know that JPM has lost billions on its prop trade, and as suggested earlier (and as the FT picked up subsequently), JPM's prop desk (not to mention its actual standalone hedge fund, $29 billion Highbridge, which nobody has oddly enough discussed in the mainstream press yet) is so large that unwinding the full trade, as well as all other positions held by the CIO, would be unwieldy, allowing us to mock "the fun of negative convexity - especially when you ARE the market and there is no-one to unwind the actual tranches to." The FT then phrased it as follows: "I can’t see how they could unwind these positions because no one can replace them in terms of size. It’s a bit of the same problem they face with the derivatives trade," said a credit trader at a rival bank. "They pretty much are the market." Which actually is funny, because if the media were to actually read a paper or two on how the market works, and puts two and two together, it just may figure out that the biggest beneficial counterparty for JPM is none other than the Fed, using the conduits of the Tri-Party repo system. But that is for Long-Term Capital MorganTM and its new CIO head Matt "LTCM" Zames to worry about. In the meantime, a question nobody has asked is how have the purported JPM counterparties, the most public of which are BlueMountain and BlueCrest who leaked the trade to the press in the first place, and are allegedly on the other side of the IG9 blow up doing. Well, according to the latest HSBC hedge fund update looking at the week ended May 11, not that hot.Guest Post: The All-Important Question
When Mr. Market ultimately becomes disenchanted with the fiscal excesses of the sovereign deadbeats, he can express his ire most energetically. When the current bond bubble here in the US ultimately bursts, as it must, it's going to be a bloodbath. Of course, there is much, much more at stake to coming to the correct answer on the recovery, or lack thereof, than that. For instance, poor economies make for poor reelection odds for political incumbents. And when it comes to maintaining a civil society, the lack of jobs inherent in poor economies often leads to a breakdown in civility. On that note, overall unemployment in Spain is now running at depression levels of almost 25%, and youth unemployment at close to 50%. How long do you think it will be before the citizens of this prominent member of the PIIGS will refuse being led to the slaughter and start taking out their anger on the swine (governmental and private) seen as bearing some responsibility for the malaise? Meanwhile, back here in the United States, the commander-in-chief is striding around the deck of the ship of state trying to look like the right man for the job in the upcoming election, despite the gaping hole of unemployment just under the economic water line. His future prospects are very much entangled with this question of recovery.So, what's it going to be? Recovery… no recovery… or worse, maybe even a crash?
It's Not Over Yet For JPM
IG9 10Y spreads re-surged today and were very choppy into the close as they broke back above 155bps (at 155.5/157.5bps now) for the first time since Mid-December with a 31% rip in the last two weeks. This fits perfectly with our ongoing thesis of this being a tail-risk hedge (not a simple 'spread' as other ignorant commentators presume) whose risk management has exploded in their face. While the skew (the difference between the index and its portfolio fair-value) has collapsed and arbs will be happy and likely exiting - the same correlation shifts (that we discussed earlier) that drove the big bank to sell more and more protection into a spread compressing market are now back-firing as systemic risk re-surges and the correlation shift is forcing them to buy back more and more protection into a spread decompressing market. Oh the fun of negative convexity - especially when you ARE the market and there is no-one to unwind the actual tranches to.
Hewlett Packard Getting Ready To Axe 30,000 Jobs
Now all Obama has to do is give them student loans and they can go study
sanitation engineering at University of Phoeniz online and they'll
disappear from the labor force! LINK Great way to once again lower the
unemployment rate!
USA Jobs Reality
13,000 here, 25,000 there, and suddenly it all starts to add up. Political
rhetoric may live in fantasy land, but the markets do not. Headline: Postal
Service announces mass layoffs The United States Postal Service announced
today it will close 48 mail processing and distribution centers this
summer, cutting 13,000 jobs. The Shallowford Road center was marked for
closure earlier this...
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John Boehner: "Obama Debt Ceiling Increase Demand Took My Breath Away" .
*I consider gold outside my regular investments. I don't trade bullion. I
hold it as a unit of wealth. I know that one hundred years from now,
bullion will possess purchasing power. The dollar? I don't know. I do
know that the history of every fiat currency is a descent into
worthlessness. No fiat money has ever survived.* - Richard Russell on
King World News LINK
It's coming, people. Both a big debt ceiling increase and a lot more QE.
Anyone who thinks the Fed is serious about not printing any more money is
either cluelessly naive or hopelessly ignorant. The apathy and... more »
Did Today's Stock Plunge Give The QEeen Light?
From mid-November last year, S&P 500 futures fell from a high of 1259 to a low of 1136 in around 9 days - 123 points (or 9.7%). This was enough, it seemed, for the Central Banks of the world to get on the phone and press the big green 'print' button in a coordinated response to markets waking up to the dismal reality hidden under the covers. From May 1st highs at 1412 to today's 1300.5 lows is a 112point drop in around 13 days (or a drop of around 7.8%). While the most recent move is slower and smaller so far - today's action in stocks (and even more so in Gold) perhaps reflects the reality that QE3 is inevitable (gold) but not until stocks have fallen enough to warrant 'extraordinary actions' by the Fed. Do we have another 2-3% drop before the Fed picks up the phone?
And Another Omen: S&P Is Down 6.66% In May
Obviously, satan was involved in a whole lot of things today, such as Facebook pricing on the day when the market was down 6.66% for the month.
Moody's Downgrades 16 Spanish Banks, As Expected
As was leaked earlier today, so it would be:- MOODY'S CUTS 16 SPANISH BANKS AND SANTANDER UK PLC
- MOODY'S CUTS 1 TO 3 LEVELS L-T RATINGS OF 16 SPANISH BANKS
- MOODY'S DOWNGRADES SPANISH BANKS; RATINGS CARRY NEGATIVE
Facebook IPO Prices At $38/Share
Finally, we can move on:- FACEBOOK SAYS 421.2 MLN SHARES PRICED AT $38-SHR
- What is Ben Bernanke's IPO allocation?
- Does the CIA use tax or cost basis accounting?
- When do the puts start trading?
- What is the fair value of Like relative to intrinsics and is Bruno Iksil long or short it?
Flight From Risk: Treasury Plummets To Record Low Yield As Gold Surges
Now its getting interesting. 30Y yields fell the most in 5 months today back to 5 month lows, 10Y yields crashed to all-time closing lows, and Gold surged by its most in 4 months (and 2nd most in 7 months) as stocks started to accelerate lower. Gold is unch on the week now as 30Y is -21bps and 10Y -14bps to 1 1.69% handle
- incredible. Between the Philly Fed's confirmation of deceleration in
US macro data and Europe's increasingly crescendo-like implosion, is
it any wonder that the decoupling thesis has given way to reality.
S&P 500 e-mini futures repeated the early rally late fade pattern
of the last 8 days but this time it was more aggressive as ES pushed
towards 1300. CAT was a dog today accounting for 25% of the Dow's
losses and AAPL tumbled further - heading towards a 20% retracement off
its highs. Financials tumbled further with Citi inching very close to red YTD (and JPM falling rapidly). Credit markets, which led the selloff, continue to slide but this time with equities in sync. Equities
went out at their very lows of the day at 1300.50 (at 3.5 month lows)
as VIX soared over 24% to close at its highest in 5 months. Jamie Dimon "Invited" To Testify Before Senate
Update: JPMORGAN SAYS DIMON TO AGREE TO TESTIFY TO SENATE. Ummmm, there was an option?As everyone (or at least Zero Hedge) long expected, JPM's prop trading debacle just got political and senators are about to demonstrate to the world just how little they understand about modern IG9-tranche pair trades. Expect to hear much more about JPM's "shitty" prop deal.
Goldman Goes Short The US Consumer
Because the proper trade is to respond only after JCP blew up proving that the US consumer is finished, here is Goldman finally joining the bandwagon of shorting the terminally tapped out all buying, all eating, all charging Joe Sixpack.Gundlach On Mortgages, Models, And "AAPL-To-NatGas" Monster Legs
Jeff
Gundlach discussed mortgages, models, math, and moronic delusion with
Tom Keene on Bloomberg TV this morning. Starting with why Europe
matters to US Treasury and mortgage markets, the DoubleLine boss goes on
to address whether banks/hedge-funds have become too math-centric. "I don't believe in models" is how Gundlach begins his diatribe on the over-confidence in math and empirical relationships. Jeff believes there is no
reason to hold any investment grade bonds that are inside of 3 years
(and perhaps even 5 years) because they "just basically have no yield" and further, it is non-sensical to think that short-term interest rates are going up
in the US. As Socrates said, Gundlach echoes the fact that 'one should
not try to know everything; but respect the things that one cannot
know' - don't delude yourself - which seems like good
advice for all those with such high convictions of sustained reality.
Towards the end he discusses his already-infamous short-AAPL,
Long-Nattie trade - adding that the trade has 'monster legs' and the
biggest mistake investors make is exiting winners too early.Regardless Of What The Propaganda Says, This Is Not How A Free Society Treats People
It seems so bizarre that a country once regarded as the freest, most economically enviable in the world would treat its productive citizens with such hostility. This is where Eduardo Saverin comes in. The Facebook co-founder, who finds himself a few billion dollars richer this week, recently renounced his US citizenship. And, to the intelligentsia, it’s not ‘fair’. ‘Saverin needs to pay his fair share! He owes America more,’ they whine, completely ignorant that the 30-year old is already forking over a $500+ million exit tax (which may end up in the billions). Apparently it’s not good enough that the company Saverin co-founded has created tens of thousands of jobs, spawned entire industries, and produced oodles of new millionaires. Oh yeah, it’s also made things damn easy for the CIA, NSA, and FBI. You’d think Uncle Sam would pin a medal on his chest. But no. Saverin left behind a lot of value and decided to move on to greener pastures in Singapore. Now the do-gooders in Congress are cooking up new legislation (the EX-PATRIOT Act) designed to permanently bar ‘renunciants’ like Saverin from re-entering the United States.A Simple Question For Senator Schumer
As many already know, earlier today Senator Schumer announced the cleverly named Ex-PATRIOT act, which seeks nothing short of exile for anyone who effectively declines their US citizenship for tax avoidance purposes. So far so good. We have, however, one simple question. In light of recent media reports of rampant abuse of various international tax loopholes by US corporations (recall the Double Irish with a Dutch Sandwich), but much more importantly, the glaring abuse of offshore tax shelters by hedge funds - organization such as Paulson & Co., RenTec, York Capital, etc., and financial institutions, such as Lazard, Blackstone, and Credit Suisse, can Senator Schumer please rep, warrant and guarantee that none of his corporate sponsors, i.e., his Top 100 Contributors, have ever engaged in any form of explicit or implicit tax avoidance, tax offshoring, and tax shelter. To facilitate his checklisting, we have presented his top 100 contributors below. Because if he can't, one may be left with the impression that his whole anti-tax tirade and legislation is, you know, hypocritical.Step Aside Business Cycle: Presenting The Business Swirl
The
business cycle ought to be thought of as a series of discrete phases,
each one quite distinct from the other, rather than as a smooth and
uninterrupted process through time. This is how Goldman Sachs describes what is a compelling view of the dynamics of macro acceleration-and-deceleration and expansion-and-contraction
and how these separate phases of their so-called 'swirlogram' can be
mapped into asset class performance. This means that unlike traditional
business cycle momentum jockeys and the extrapolating 'rulers' of the
world, trade positioning should depend not only on the current state of
the cycle but also on the near-term phase transition. As the cycle
turns, so do assets; economic acceleration serves as an early indicator
of looming shifts. Hence, vigilance in monitoring the business
cycle with an eye towards identifying cyclical turning points is
instrumental to a disciplined investment process. These lessons are timely too. Back in March, the business cycle peaked.
The GLI shifted from the Expansion phase to the Slowdown phase; growth
remained positive but acceleration turned negative. More ominously,
April GLI growth was quite modest, with downward revisions to the last
few months of data too. If the current downbeat data trajectory is
extended, current GLI readings may prove to be overly optimistic. And
should acceleration remains negative (which today's Philly Fed will
drive), there is not much of a growth buffer to prevent the
cycle from slipping into the Contraction phase, where the message for
asset markets is clear and sobering.Fitch Roundtrips On Greece, Re-Downgrades Country
And.... roundtrip.- From March 13: Fitch upgraded Greece's credit rating by one notch to B- following a successful debt swap finalised this week that erased some €100 billion from the country's crippling debt
- From May 17: Fitch Ratings-London-17 May 2012: Fitch Ratings has downgraded Greece's Long-term foreign and local currency Issuer Default Ratings (IDRs) to 'CCC' from 'B-'. The Short-term foreign currency IDR has also been downgraded to 'C' from 'B'. At the same time, the agency has revised the Country Ceiling to 'B-'. The downgrade of Greece's sovereign ratings reflects the heightened risk that Greece may not be able to sustain its membership of Economic and Monetary Union (EMU). The strong showing of 'anti-austerity' parties in the 6 May parliamentary elections and subsequent failure to form a government underscores the lack of public and political support for the EU-IMF EUR173bn programme.
Gold Tells The Truth
John
Maynard Keynes, Charlie Munger and Warren Buffett all said or implied
that gold was a barbarous relic. But what’s the barbarous relic? The
precious metal that shows prices without a veneer of manipulation, or
the paper currency that smudges the true state of supply and demand
through money printing, thus misleading markets and society? Charlie
Munger says gold is not for civilised people, but in reality gold may be
the most civilised currency of all — because it allows civilised
people to purchase insurance against the risk of civilisation failing.Unless donations increase dramatically($10.00 this year)...
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