Epic EUR Short Squeeze Sends Risk Soaring, Gold Over 1600
The
squeeze is on. EURUSD is probably the most extreme example of the
squeeze-factor potential of what is at its heart a lot more talk and lot
less action. Up almost 250 pips from its pre-summit-statement levels,
EURUSD is just under 1.2700 - which in context is only back to 6/21
levels. As we noted on June 3, the epic level of CFTC non-commercial EUR spec shorts were ripe for a squeeze-fest, while on the other hand we specifically said "the pain trade will be any
appeasing announcement from Europe." Sure enough we got just that
(supposedly) and EURUSD is now up well over 300 pips from those levels
as the clear pain trade plays out. The USD weakness has driven
commodities higher with Gold reaching $1600 once again (6/21 levels).
European sovereigns are (somewhat expectedly given the euphoria -
though just how much has actually changed is unclear) also rallying hard
on the day but while they have compressed spreads markedly, they have
stalled at unchanged on the week (though Portugal remains notably wide
on the week). Credit and equity markets in Europe are in sync and have
snapped higher to 6/21 levels also (with financials outperforming
modestly). Europe's equity markets are all soaring - up 3 to 4.5% - as DAX is now outperforming the S&P 500 on the year once again. Big moves (multiple sigma in bond and FX markets) and yet we can't help but think they were hoping for more than just a retracement of one week's price action.Latest "E-TARP" MOU Sends Spanish Bonds Back To Monday Levels
In the aftermath of last night's bombastic European announcement coming in the late night hours, in which Europe has virtually promised the kitchen sink, one would imagine that the response for the biggest beneficiary, Spanish bonds, would be far more dramatic. Instead after ripping 60 bps tighter in a kneejerk move, the yoyo reaction has seen bonds slide wider ever since, and the result being a SPGB level last seen... on Monday. Why is the market not more enthusiastic? Because what happened last night is nothing short of the second Greek bailout announcement from October, which followed a similar pattern: a late night announcement by Europe that Greece is saved, followed by a brief rip of a rally, only to give it all back, and to require global central bank intervention one month later. Because what really happened last night? Merely promises. We will not dwell much on the fact that the ESM has yet to be ratified by the paying countries, that the ESM will now have to be scrapped in its current format, and resigned by all 17 member countries since the seniority provision is somehow scrapped: an event that amounts to a cramdown exchange offer, that while everyone is talking about the uses of funds, nobody has uttered a peep about the sources, that Germany has yet to say what the German conditions will be or whether the revised deal will even pass the Bundestag, that the deal is contingent on the formation of a "effective single supervisory mechanism is established, involving the ECB" which in Europe is next to impossible, and that finally the whole "arrangement" is nothing but an Memorandum of Understanding - the weakest form of non-binding agreement possible. Which is why we are just a little skeptical and that today's E-Tarp is merely the latest catalyst to be faded.
Last Night's Critical Phrase "No Extra Bailout Funds"
There was just one relevant phrase uttered in all of last night's bluster, and ironically it came from Italy's own Mario Monti who said that there are "no plans for boosting bailout funds." This really is all that matters. Why? The Bridgewater chart that we presented before once again explains it all.
As Europe Moves To An "E-TARP", Goldman Is Selling Spanish, Italian And Irish Bonds To Its Clients
Below is Goldman's quick take on the E-Tarp MOU (completely detail-free, but who needs details when one has money-growing trees) announced late last night. In summary: "We recommend being long an equally-weighted basket of benchmark 5-year Spanish, Irish and Italian government bonds, currently yielding 5.9% on average, for a target of 4.5% and tight stop loss on a close at 6.5%." By now we hope it is clear that when Goldman's clients are buying a security, it means its prop desk is selling the same security to clients.What They Really Said: Key Soundbites From Last Night's Eurosummit
Much has been speculated about who promised what at last night's summit, and who guaranteed that the ESM would do this, that and the other, as once again, just like last summer, the ESM is becoming the most universal Swiss army knife ever conceived (just pray it never has to be actually used). Here, courtesy of Reuters, are excerpts of what they all really said.German ESM Ratification Vote To Be Delayed?
While Italy is already celebrating the double whammy of its victory over Germany in football and in the corridors of bureaucracy (read the following from Spiegel for the German perspective: "How Italy and Spain defeated Merkel at EU Summit"), Germany may have some other plans. While the ESM ratification vote has planned to take place later today, many are now saying this vote should be delayed as its represents a "180 degree" shift in previous commitments. Die Welt reports: "Given the confusion over the results at the EU summit in Brussel, speculation has been raised in Berlin to postpone the vote on the euro rescue ESM. Several Members of the CDU-FDP coalition also called for a dismissal of the agenda item on the evening, it was said from the CDU and FDP immediately before the start of a special meeting of the Budget Committee. Point of contention is that Chancellor Angela Merkel in Brussels more concessions for easier credit to ailing banks in Europe has been as expected." And more: "The Budget Committee of the Bundestag will hold a special session on the summit resolutions. The government must explain its turn through 180 degrees, called the SPD budget expert Carsten Schneider. With the decisions on permanent euro rescue ESM "means any obligation of a country are only a paper tiger," Schneider criticized with regard to that ailing banks are to receive direct assistance ESM. The meeting will take place on Friday afternoon." In other words while the CDU conservative budget expert is calling for an all normal vote, the SPD is getting worried. The question now is what happens to the ESM ratification vote today: that is the key catalyst for the time being.Hardball In Brussels
In the final analysis Europe is quite exposed at this moment and may be for quite some time. The ESM, after the change in seniority status, must be re-affirmed in at least two countries that are the Netherlands and Finland and Germany has not yet approved it yet either. The EFSF has already spent $450 of its capacity on Greece, Ireland, Portugal and now $125 billion for Spain. The balance left in the fund is tissue paper thin and that is all that is in existence presently for any more problems in Europe. Plans and schemes aside, the amount of money that could actually be used today is a drop in the proverbial bucket.The Story That Got Bloomberg News Blocked In China
Bloomberg News may be the most read news source in the world, but as of today, it is no longer available in China. Why? According to Bloomberg TV News Editor Denise Pellegrini, all it takes is for some investigative reporting exposing the dirty laundry, or in this case the even dirtier assets of one Xi Jinping - "the man in line to be China’s next president." In "Xi Jinping Millionaire Relations Reveal Fortunes of Elite" Bloomberg writes: "Xi warned officials on a 2004 anti-graft conference call: “Rein in your spouses, children, relatives, friends and staff, and vow not to use power for personal gain.” As Xi climbed the Communist Party ranks, his extended family expanded their business interests to include minerals, real estate and mobile-phone equipment, according to public documents compiled by Bloomberg. Those interests include investments in companies with total assets of $376 million; an 18 percent indirect stake in a rare- earths company with $1.73 billion in assets; and a $20.2 million holding in a publicly traded technology company." That a country's will seek to block the internet when the wealth of its humble leaders is exposed is expected. However, what is unexpected is that the hidden assets of China's president in waiting are rather easily discovered is troubling: it means Goldman has still much work to do in China, and much more advisory work to the country's elite over how to best hide its assets in various non-extradition locations around the world under assorted HoldCos. Just like in the US. The good news, for GS shareholders, however, is that this indeed provides a huge new potential revenue stream.
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I'm PayPal Verified Rising Spanish and Italian Yield Sugggest Urgency While Eurocrats Talk
Eric De Groot at Eric De Groot - 2 hours ago
Rising interest rates in Spain and Italy reveal the urgency for decisive
action. The Eurocrats motivated huge social and political differences
within a common monetary union can do little more than talk and kick the
can down the road. Decisive action without public support translates into a
swift change of leadership. The following down trends illustrate the flight
of capital from...
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content, and more! ]]
Japan's Debt Addiction Creating 'Mother of All Bubbles'
Eric De Groot at Eric De Groot - 2 hours ago
“The most powerful force in the universe is compound interest”, Albert
Einstein Money will flee from the Yen and JGB in the coming years. It's
only a matter of when. Headline: Japan's Debt Addiction Creating 'Mother of
All Bubbles' With the debt crisis in Europe showing no sign of letting up,
Japan is increasingly being seen as a safe haven, with foreign demand for
the country's bonds...
[[ This is a content summary only. Visit my website for full links, other
content, and more! ]]Personal Savings Rate Rises To Highest Since January As Spending Grows At Lowest Rate In One Year
The latest confirmation that the US consumer is rapidly retrenching ahead of the great unknown which is the US fiscal cliff was the just released data on Personal Spending and Income, both of which came in as expected, at 0.0% and 0.2% over the prior month. This was the lowest rate of increase in the Personal Spending rate since June 2011, when spending posted a -0.2% decline. This was to be expected considering the ongoing contraction on the income side: "Private wage and salary disbursements increased $1.1 billion in May, compared with an increase of $5.3 billion in April. Goods-producing industries' payrolls decreased $7.0 billion, in contrast to an increase of $5.6 billion; manufacturing payrolls decreased $4.5 billion, in contrast to an increase of $3.2 billion." The collapse in manufacturing wages was somewhat offset by gains in services: "Services-producing industries' payrolls increased $8.3 billion, in contrast to a decrease of $0.4 billion. Government wage and salary disbursements increased $0.3 billion, compared with an increase of $0.4 billion." And for the best indication of just how consumers feel about the economy, one just needs to look at the savings rate: at 3.9%, this was the highest savings rate since January as any free money enters not the economy, but bank checking accounts and counterparty risk-free mattresses.
Goldman Lowers Q2 GDP Forecast One Day After Raising It
High frequency economics is truly living up to its name, as now GDP forecasts are adjusted not weekly but daily. After Goldman yesterday hiked its Q2 GDP forecast to 1.7% on better than expected Q1 GDP composition, today's weak consumer spending data pushed it right back down. "Due to the downward revisions to March and April PCE, we revised down our estimate for Q2 PCE to +1.8% (annualized) from +2.0% previously. This lowered our tracking estimate of Q2 GDP growth to +1.6% from +1.7%."Art Cashin On The Latest Eurozone "Remedy"
As always, the most pragmatic read thru of what are now day to day rescue efforts out of Europe, which in its own words has effectively given up on seeking a long-term remedy, comes from UBS' Art Cashin who as usual cuts right to the bone of the deluge of essentially hollow endless chatter out of Europe whose sole purpose is to once again baffle all the algos with binary bullshit.The Real Bailoutelli
Yesterday Italy had two Super Marios: Balotelli, much more properly called Bailoutelli,
who is lauded as a hero after scoring the decisive goal against
Germany in the Euro2012 football championship (at least until the final
against Spain on Sunday), while the second claimed an even more
decisive victory over European paymaster Angela Merkel (at least for a
few hours, and certainly at least until the realization that details do matter - such as who actually pays?)
So when the haze of hangover clears, things may be very different (and
they certainly will be: Mario Monti himself said moments agi that Italy may one day ask for financial aid... but
not yet). But for now, the delighted locals are having a field day
with some creative Photoshopping, and offering a two for one.
Presenting - the real Bailoutelli.Chicago PMI Beats Modestly As Respondents Get More Despondent
While it is unclear today if good news is bad, bad news is good, or if economic news even matters when all that matters is how much money central planners are willing to release into the market, the just released Chicago PMI did post a modest rebound after the near record May plunge. Printing at 52.9, the number was modestly better than May's 52.7, and higher than expectations of 52.3. The question then is whether this is good or bad for hopes of more NEW QE?With 8 of 11 respondents clearly noting that business is slowing down as inventories are rising, those who are concerned no more easing will come this year can likely breathe a sigh of relief. And while most of the indices were more or less in line, the forward looking spread between backlogs and inventories (indicative of future business demand) is the highest it has been since December 2008. What happens when one has too much inventory that can not be sold? Ask NKE longs this morning.
Head Of Fed's Plunge Protection Team Withdraws Resignation, Will Stay As Advisor To Goldman's Bill Dudley
A week ago we noted that the departure of the Fed's PPT head, Brian Sack, whose tenure was set to end today, which we casually reminded the market about hours earlier, and his replacement with an academic, would likely be the greatest undiscussed S&P catalyst as the head of the entire US equity market, not to mention the Fed's POMO and various other known and unknown open market operations, would be none other than a B-Grade UCLA academic. Well, this has now changed, because as Dow Jones reports Brian Sack has withdrawn his resignation from the New York Fed, and will stay on as advisor to Goldman FRBNY plan Bill Dudley.- BRIAN SACK WITHDRAWS RESIGNATION FROM NEW YORK FED
- BRIAN SACK TO STEP DOWN AS HEAD OF NEW YORK FED MARKETS GROUP
- BRIAN SACK TO STAY AT NEW YORK FED AS ADVISOR TO DUDLEY
Today’s Items:
Only 43% of Germans would vote to keep the
euro while 41% would opt to return to their former currency. In
addition, 51% of Germans favor EU membership. With that said, as more
news comes out how bad many EU nations are, there is an intensifying
desire to get the hell out.
A divided Supreme Court’s decision upholds
that the government is allowed to tax people for not having health
insurance. In effect, this ruling grants Congress more power to oppress
the people. Imagine… Donate 10% of your income to buy U.S. bonds, or
some other item up to Congressional vote, or pay a 20% tax. Yes, soon
our pledge of allegiance will be “One Nation under Government with No
Liberty and Injustice for the slaves.” This country has been going to
hell for a long time. Today they finally put the tombstone over the
grave.
Next…
How the Ruling affects You
http://www.washingtonpost.com
http://www.washingtontimes.com
http://redalertpolitics.com
How the Ruling affects You
http://www.washingtonpost.com
http://www.washingtontimes.com
http://redalertpolitics.com
Aside from the death of liberty, to get an
idea how the Supreme Court ruling will affect your finances, go to this
site. So, while you ponder your costs, just imagine how much Holder’s
criminal contempt of Congress will cost him as he goes to Disney world?
First $2 billion on May 10th, as stated by
Jamie Dimon, now it is past $9 billion. Their publicly admitted loss
is getting bigger by the day as the proverbial derivative dam shows more
leaks. It is unlikely that we will know what the true magnitude of
their losses are until this bank, and others, go under.
Yes, the price of gold and silver are
tanking and for the short term that will be the case. Aside from the
Supreme Court ruling, the reason for this is simple, there are forces
out there, using paper, to get you scared to invest in these physical
assets. With that said, as Central banks, directly, or indirectly, ramp
up their printing, or digital, presses, inflation will increase. At
some point, look out because the house of cards that is the fractional
banking system will collapse and if you are holding paper, you are
holding trash.
The House Oversight Committee has approved
a bill requiring a full audit of the Federal Reserve; however, it must
pass the full house and the same bill must pass the Senate. In
addition, it must be strong enough to stand up to the assured
Presidential veto. In short, do not count on any successful vote for
the auditing the Fed seeing the light of day… Period!
For those attending the London Olympics,
you may want to rethink that decision. It has been found out that G4S,
the company responsible for security at the Olympics, has ordered
200,000 caskets and has botched security procedures that leave the Games
open to attack. In addition, there is a lot of weird Illuminati
symbolism associated with these particular games that is well… Pretty
scary.
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