Gold, Silver, Corn, And Brent Are Best Performers On The 5-Year Anniversary Of The Great Financial Crisis

Five years ago today BNP Paribas stopped withdrawals from three of their investment funds - because they couldn't value their holdings following the subprime fallout - and arguably marked the start of the Great Financial Crisis as money markets seized up and the ECB did its first emergency liquidity pump. In the five years hence, as Deutsche's Jim Reid notes, its been a pretty good run for commodities and most fixed income assets. Given all that's gone on over this period it’s fair to say that returns have been pretty good if you've been in the right areas. The authorities have played a big part in ensuring the period wasn't a disaster even if there have been frightening periods and very poor returns in some areas. Given that there are still numerous unresolved issues, the authorities need to continue to be on full alert for the next 5 years to ensure that when we do the 10 year anniversary there haven't been set-backs in many of these assets

 

Why The Fate Of The Global Equity Rally May Rest In The Hands Of Soybeans

In last night's very disapponting data release from China there was one notable piece of data: CPI dropped to a 30-some month low, yet it came above the expected print of 1.7%, instead printing at 1.8%, in the process dousing many hopes that the PBOC would immediately succumb to even more interest rates cuts, including a reduction in the far less material RRR. We have long claimed that when it comes to monetary easing, the PBOC is far, far more sensitive to blunt, shotgun approaches such as monetary easing for one simple reason: food prices, which in a nation of 1.3 billion has the potential to lead to very adverse side effects if left alone to spike on its own devices. And yet, with both the ECB and the Fed now likely out of the picture for a while - due to Rajoy's unwillingness to cede sovereignty to the Troika and Germany in order to activate another futile episode of ECB bond buying, and because the Fed does not want to be seen as a political organization and do more QE 2 months ahead of the election - the market's pent up hopes for more easing remain with the PBOC, which has in times of need, always been the marginal driver of global demand. Such hopes may be dashed for one simple reason. Soybean prices.

Banking's Tobacco Moment – LIBORious Speculation?

With bank exec heads rolling, investigations hotting up globally, politicians fuming and investors exercising caution in bank shares, the LIBOR scandal is fueling massive speculation about the long-term ramifications for the industry. Indeed, after all that the banking industry has faced in the wake of the bursting of the housing bubble, an anonymously quoted bank CEO in a recent Economist story proclaimed "This is the banking industry’s tobacco moment." While there are more reasons not to draw parallels between the banking industry now and the tobacco industry of the mid-1990’s than there are similarities, we thought it would be interesting to review the impact on Tobacco during its "moment", and beyond.

Goldman Slays Muppets Again

The muppet slaying shall continue until no clients remain. From April 10, via Francesco Garzarelli, two weeks into Q2:

Our recommendation to be short 5-yr Spanish bonds (Oct-2016) against their Italian counterparts (Sept-2016), initiated on March 14 at a yield differential of -6bp, is now at -24.9bp, against our target of -50bp....we do not see much more room for Italian rates to further outperform Spanish ones

Enter the company's Q2 10-Q filing:

Goldman Sachs Cut Italy Debt Holdings 92% Last Quarter

Unleaded Gasoline Flirting with the $3.00 Level

Trader Dan at Trader Dan's Market Views - 1 hour ago

One of the casualties of all this chatter about another round of funny money from the Monetary Masters of the Universe is the price of Unleaded Gasoline. Throw in a dose of tensions in the Mid-East on top of this, and you get a market that is clearly going to cause headaches for the Central Planners if they stupidly unleash another round of Quantitative Easing at the end of this month or early in September. Consumers will soon be reeling from the effects of rising grain prices related to the worst drought in decades to have struck the critical corn and soybean growing regions of t... more » 

 

Neil Barofsky On the Economy

Marshall Auerback: Central Banks Will Need to Recover Their Gold

It's A Waiting Game For Gold

Eric De Groot at Eric De Groot - 4 hours ago

Total assets WA stochastic has generated a daily close above 50% three times since June 2012. A sustained close above 50% generates a buy signal for gold. Chart: London PM Fixed Gold and GLD (ETF) Total Assets WA Stochastic ------------------------------------- Insights is intended to reflect excellence in effort and content. Donations will help maintain this goal and... [[ This is a content summary only. Visit my website for full links, other content, and more! ]] 

 

Buy More Bonds Does't Solve Anything

Eric De Groot at Eric De Groot - 5 hours ago

A buying program would be more likely to stimulate if the Fed actually bought corporate rather than government bonds. The point doesn’t even enter the discussion here. Success of any buying program requires the dollar value of the stimulation to exceed that of the relentless and ongoing asset destruction worldwide. In other words, the forces of inflation must exceed that of... [[ This is a content summary only. Visit my website for full links, other content, and more! ]] 

 
 

U.S. Dollar Strength Implies Trouble Ahead For Europe

Eric De Groot at Eric De Groot - 5 hours ago

The presistent rally in the U.S. dollar and recent strength in gold suggest that central bankers cannot stem the flight of capital from Europe without draconian capital and border controls. The U.S. dollar index either fails or jumps the creek at criticial resistance. Critical resistance is depicted by green line weighted down by an anvil... [[ This is a content summary only. Visit my website for full links, other content, and more! ]]

8 Ways Of Looking At A High Yield Bond Selloff

A few things have been going on in the world of high yield credit recently. While the 'beta' to recent interest rate weakness is low (spread duration reduces any empirical sensitivity here), the relative weakness on high-yield bonds in the last few days has been quite notable for the oh-so-high-beta 'safety' of high-yield credit. And while technicals (flows) dominate, the illiquidity in the cash bond market remains dire for any size and the massive 530k block sale at VWAP last night makes us nervous.

Why The US Is So Attractive To Money Laundering Banks

Whether you are a Mexican or a Mexican't, it would appear that the heavily-regulated and oh-so-vaunted halls of the US banking systems would be a terribly difficult place to launder your hard-earned drug/terrorism/piracy spoils. But as Stratfor's Ben West points out in this fascinating and brief clip, it is the 'safety' of the US system that makes it so attractive; for once the 'Tony Montanas' have found their banker 'mark' (whether it's HSBC or StanChart) - and paid their 'little friend' the standard vig - the money flowing out the other end of the US banking systems' laundry is as clean-looking as Carmelita Jeter the day of a drug test. The sad but true reality is - as usual - given the means, there is always a way; and the US has favored nation status among the world's pillagers.

Art Cashin On "The Folks Who Brought You 1.5% GDP and 8.3% Unemployment"

Confused what the Fed may or may not do in 3 weeks? Join the club (although the answer at this point is a definite nothing especially with food prices soaring not only in the US but around the world). There are those - banks - who as we have said repeatedly are in desperate need not of promises of further easing, but of cold, hard, free, electronic reserves. Then there is everyone else who doesn't care what the Fed does because it will have no impact on the economy, but at least it may raise 201(k)'s for a little longer, preserving the myth that asset values may still increase, and feed the illusion of wealth. At least until the impact of the latest Fed (non) intervention fizzles. Then there is Art Cashin, who deserves to be heard, if for no other reason, than because he is the true Chairman (of the fermentation committee).

The Trannies Have Spread Wide Open

Presented with little comment but the Dow Transports are now around 5% out of line relative to the impervious Industrials over the short-term and on a longer-term basis are sending some rather concerning signals that we have seen before...

Why Did The BLS Leak Initial Claims Data 15 Minutes Early?

Today, at 8:21 am, 9 minutes before the official BLS claims release, we received an update from Stone McCarthy which had a rather starting subject line: "Claims Out Early 361,000 -6,000." The email body essentually said what everone would find out was precisely the case subsequently: "Initial Claims for Unemployment Insurance fell 6K to a level of 361,000 for the week ending August 4th. The prior week's level was revised to 367K (previously 365K). SMRA's estimate anticipated a level of 365K for last week's claims. The Bloomberg survey's median estimate was 370K, and individual estimates ranged from 359K to 385K..."  We noted this at the time. Subsequently, Bloomberg confirmed all of this: "Jobless claims data were available on Labor Dept. website about 15 minutes before scheduled 8:30am release today, Stone & McCarthy Research Associates economic analyst Terry Sheehan says." Now aside from the fact that SMRA should be commended for chacking the DOL.gov website early and getting a critical advance look at today's most important data point, we have some questions:

Wholesale Inventories Drop MoM First Time in 9 Months

As we noted last night, inventory destocking is the great unknown as far as consensus expectations and the wholesale inventories data this morning just confirmed that this is a worrying trend. With the first drop MoM since September 2011 and dramatically missing expectations, inventories dropped 0.2% and perhaps more worryingly - given the drop in inventories - is the critical inventory-to-sales ratio has now risen two months in a row as clearly sales are dropping faster than companies were expecting.

Bloomberg Consumer Comfort Index Back At 'Severe Economic Discontent' Level

Bloomberg's Consumer Comfort index slipped back below -40 this week (despite all the market ebullience) indicating empirically at least a period of severe economic discontent among the most critical segment of our economy. Worst still, the outlook for the economy is its weakest in six months and the last two months have seen confidence on the economy plunge its fastest in 13 months.

How Is Jon Corzine Doing? Ask Him Yourself

The "Honorable" Jon Corzine may have prudently disappeared form the face of the earth, but that doesn't mean he is not accessible. In fact, in the parlance of our Bloomberg times, he is "Green" and anyone out there with a terminal can have a live Q&A with the former head of MF Global and Goldman Sachs.

Biderman Responds

The Zero Hedge audience have always been tough task masters and will hold people's feet to the fire. While markets have been a little tempestuous to say the least recently, TrimTabs' Charles Biderman comes out swinging with a spirited and honest defense of his calls - and quite frankly we still tend to agree with his bigger picture view of where this ends. From his Facebook miss to short-term fluctuations in the equity market (that now seem precipitously away from credit market reality), Biderman responds to comments here and elsewhere on both position sizing and perhaps most importantly risk management - adding (and this is where we believe he is dead right though timing the call is practically impossible) that "when the collapse happens it will happen overnight - that is why [he wants] to be short but safe at the same time."

Insolvent US Postal Service Loses Whopping $5.2 Billion In Third Quarter, 70% Higher Than Year Ago

Update: USPS STILL EXPECTS TO RUN OUT OF CASH IN OCTOBER - well, this is the bailout request that Draghi was waiting for. All your ECB - get involved.
The epic collapse of one of the most bloated government institutions continues at a ridiculous pace. From Bloomberg:

• U.S. POSTAL SERVICE LOST $5.2 BILLION IN THIRD QUARTER
• POSTAL SERVICE LOSS Q3 COMPARES WITH $3.1 BILLION LOSS YEAR AGO
• POSTAL SERVICE 3Q REVENUE FALLS TO $15.6 BILLION FROM $15.8B
• POSTAL SERVICE `LIQUIDITY CHALLENGES' REMAIN IN 2013
• POSTAL SERVICE MAIL VOLUME FALLS 3.5 PERCENT IN THIRD QUARTER
• POSTAL SERVICE WILL CONTINUE TO PAY EMPLPOYEES, SUPPLIERS

And it gets better:

• POSTAL SERVICE LOSS INCLUDES SKIPPED PAYMENT TO TREASURY - in other words the taxpayer bailouts of the USPS have begun... and the loss would have been even bigger.

The punchline:

• POSTAL SERVICE WILL `NEVER' CEASE DELIVERING MAIL: MARSHALL

 

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Greek Parliament Speaker Hires His Daughter During His Only Day On The Job

There are no hyperbole in this headline. Nepotism is not just alive but it is blatant and thriving in Greek politics. As Athens News reports revelations that Vyron Polydoras, who held the position of speaker for just a single-day during the hung parliament of May 2012, rushed to hire his daughter - Margarita - as an employee of his office. Not only did he hire her on his one and only day in office, despite defending himself by stating he was entitled to hire up to six staff, but he also managed (all in this one day remember) to approve a two million euro 'election bonus' for his staff and police. We suspect the TROIKA will be permanently boots-on-the-ground here for a lot longer than anyone believes - and if we hear the word 'committed' or the phrase 'trust us', we know its all over.

Better Claims And Lower Trade Deficit Put September NEW QE Announcement In Jeopardy

The surprising economic beats, even as Europe and now China slide, continues, following better than expected initial claims, which were released early as someone broke the news embargo, and trade deficit data. In the week ended August 4, 361K people filed initial jobless claims, lower than the upward revised 367K, and below expectations of 370K. This is the 5th week out of 6 in which claims have beat expectations, and heading into the September FOMC meeting, especially in the aftermath of the "blistering" August NFP report, any hope that the Fed will do anything forceful can now be taken off the table. Continuing claims rose by 53K from 3,279K to 3,332K. Adding to the economic tailwind was the June trade deficit, which narrowed by 11% in June, down to $42.9 billion from $48.7 billion, and well below the expected print of $47.5 billion, down on sliding energy prices (back in June - as a reminder crude has soared 20% since then). The reason was a 0.9% rise in exports and 1.5% drop in imports. As Bloomberg observes, "this is likely the last report that shows the narrowing of the deficit this quarter." Finally, perhaps the most notable move that will pass largely unobserved is that in the week ended July 21, a whopping 127K dropped off extended claims, which means no more free $400 weekly checks, and a corresponding hit to iGadget purchases and retail sales.

Disinformation: How It Works

The best way to disarm disinformation agents is to know their methods inside and out. This gives us the ability to point out exactly what they are doing in detail the moment they try to do it. Immediately exposing a disinformation tactic as it is being used is highly destructive to the person utilizing it. It makes them look foolish, dishonest and weak for even making the attempt. Internet trolls most especially do not know how to handle their methods being deconstructed right in front of their eyes and usually fold and run from debate when it occurs. The truth is precious. It is sad that there are so many in our society who have lost respect for it; people who have traded in their conscience and their soul for temporary financial comfort while sacrificing the stability and balance of the rest of the country in the process. Disinformation does not only threaten our insight into the workings of our world; it makes us vulnerable to fear, misunderstanding, and doubt: all things that lead to destruction. It can drive good people to commit terrible atrocities against others, or even against themselves. Without a concerted and organized effort to diffuse mass-produced lies, the future will look bleak indeed.

Daily US Opening News And Market Re-Cap: August 9

The initial boost given to European equities following weaker than expected overnight data from China, which renewed speculation of more stimulus measures, has faded throughout the morning. The major European bourses are now trading in negative territory at the North American crossover. The DAX is underperforming, weighed down by the likes of Commerzbank and Deutsche Telekom who both failed to impress markets with their earnings reports pre-market. However, thin summer volumes and another light economic calendar have once again been the theme for the morning, with only the UK Trade Balance for June gaining some market attention. Despite the larger than expected deficit, the ONS said that the figure is likely distorted by the extra public holidays.

"RBS Algo Went Berserk"

This Monday, a few shorts days after the Knight algorithm decided to do what it and the Fed does best, and go on a shopping spree, gobbling up $7 billion in stocks in 45 minutes and in the process almost destroying its host like any self-respecting virus, something weird happened with the 1.20-pegged EURCHF in the minutes after the marked closed: it shot up for no reason, only to slam right back down. Some speculated it was a fat finger. Turns out they were right. Only with a twist, as first it appears it was purely human error, which in turn set of an avalanche of algo trades which had no idea why they were buying, except that someone else was buying, so they had to be buying: the purest definition of momentum trading insanity, where one buys or sells with no rhyme or reason, but simple because someone else, marginal enough, is moving the market. And that is why every single capital market: stocks, bonds, commodities and FX, is always one trade away from total collapse.

Frontrunning: August 9

• Gu Kailai Trial Has Ended, verdict imminent (WSJ)
• Greek unemployment rises to 23.1 pct in May, new record (Reuters)
• Greece’s Power Generator Tests Euro Fitness Amid Blackout Threat (Bloomberg)
• Fannie Mae, Freddie Mac Results May Ease Wind-Down Push (Bloomberg)
• Monti takes off gloves in euro zone fight (Reuters)
• U.S. Fed extends comment period for Basel III (Reuters)
• HP in $8bn writedown on services arm (FT) - must be good for +10% in the stock
• News Corp in $2.8bn writedown (FT) - must be good for +10% in the stock
• Japan to Pass Sales Tax Bill After Noda Avoids Election Push (Bloomberg)
• China May Set New Property Controls This Month, Securities Says (Bloomberg)

 

ECB Re-Regurgitates Draghi As Greek Unemployment Rises To New Record, China Deteriorates With No Easing In Sight

It has been a quiet session overnight (and that will continue until the Germans come back from vacation) punctuated by Mario Draghi's attempt to jawbone the market into submission again, this time following the release of the ECB monthly report in which it basically regurgitated Draghi's still misunderstood speech in it said it may buy bonds if strict conditionality is ensured, the same conditionality that Spain said it would not comply with, yet which European bond traders continue to misunderstand, because Spain will not request a bailout as long as its 10 Years are trading below 8% yield. Of course, nobody wants to sell first, until the selling actually begins. Then it will be waterfall. In other news Greek industrial production rose by a tiny amount from below sea level, rising by 0.3% in June following a 2.9% decline previously. This however must be due to the Greek workers' enhanced efficiency - Greek unemployment just rose yet again to the mindblowing 23.1%, from 22.6% - a new all time high (with youth unemployment just 45% away from 100%). And so the race between Spain and Greece over who can hit 50% unemployment first continues. Another notable economic milestone was crossed after the IFO institute euro-area economic climate indicator declined for first time this year, pushing the EURUSD to just above 1.2300. There were also more bad news from the UK whose trade deficit widened more than expected hitting GBP10.1 billion vs GBP8.7 billion estimated, with a record GBP28.3 billion good deficit, led by oil, cars and chemicals. In other news the European collapse continues unabated, yet the market which has long been nothing but a central bank policy tool and no longer discounts anything is perfectly oblivious to what is happening. There was one notable final change: the Chinese economy accelerated its own deterioration, and this time, courtesy of the specter of soaring food prices and a CPI print above estimates, it is very much powerless to even threaten with more easing.

Knight's Berserk Algo Bought $2.6 Million Worth Of Stock Every Second

While we already presented, courtesy of Nanex, the modus operandi of the Knight berserker algo, there was one outstanding question. What was the bottom line. And no, not how much the loss on Knight's Income Statement would be as a result of this glimpse into what really happens in the market: we already knew that would be $440 million. The question is what is the notional amount of stock that this algo bought in the 45 minutes in which it was operational. We now know: $7 billion. Or $155 million per minute. Or $2.6 million per second. Or, assuming the algo impacted just 150 stocks as previously reported, it was buying on average $17,333 in each name every second. Or, assuming an average stock price of the universe of 150 stocks of $30/share, the Knight algo lifted the offer roughly 600 times each second. For 45 minutes straight! That's right - the market making algorithm of a designated market maker which is responsible for 10% of the order flow in the US stock market, entered a pre-programmed mode (because the computer was told to do whatever it did by someone, and not without reason) that saw it buy up $2.6 million worth of stock every second.
 










Today’s Items:

First…
France’s Richest to Flee 75% Tax Hike
http://www.cnbc.com

France’s socialist president, Francois Hollande, is vowing to impose a 75 percent tax on the portion of anyone’s income above a million euros a year. Many of the roughly 30,000 high end wage earners are pondering to move themselves and their wealth to Belgium, or see their standard of living diminished.

Next…
QE3 has Arrived
http://www.youtube.com

No formal announcement of QE3; however, this video details the backdoor method that the Fed has started to monetize the debt.    The Federal Reserve will not monetize the debt.   Right!

Next…
Europe Is Not a Matter of Opinion… It’s a Matter of Math
http://gainspainscapital.com

Many continue to believe that the FED and the ECB can solve the EU crisis; however, that is about as likely as Michael Moore winning the Miss Universe pageant. Everyone now knows that many EU banks are in serious trouble and the idea that 1 out of 3 euros to prop up the EFSF fund coming from two bankrupt nations, Spain and Italy, is ridiculous. Moreover, Germany’s backstop of over 1 trillion euros to the EU, via its central bank, places Germany’s official debt to GDP well over 100%.

Next…
Indians Smarter Than Their Government
http://www.mineweb.com

The Indian government is trying to make suckers out of their citizens by getting them to invest in anything but gold.   With that said, many Indians are not falling for it as they increased purchases of gold by 35% in the first two months of 2012.

Next…
14 Questions People Ask About How To Prepare For The Collapse Of The Economy
http://theeconomiccollapseblog.com

Here are a few questions and check the link for the associated answers…
1. How do I get started?
2. What Should I Do With My Money?
3. Should I Invest In Precious Metals?
4. Should I Get Out Of Debt?
5. What If I Don’t Have Any Money To Prepare?

Next…
Taking Social Security Checks to Pay Student Loans
http://www.smartmoney.com

The once untouchable Social Security checks are now being garnished to pay for student loans that are not paid off. You can walk away from your house or car, but you cannot walk away from your student loans. To make things worse, many of these retirees are not in hock for their own educations; instead, it is for their children. This makes student loans the most horrible method of being in debt.

Next…
State-Sponsored Attackers May Compromise Your Account or Computer
http://www.shtfplan.com

Google is warning everyone that their accounts are being hacked or monitored by a third-party such as a state intelligence agency. It may also explain that heavy breathing I hear on the phone as well. Seriously, now I wonder which state intelligence agency would be doing something like that… Homeland Insecurity, or any other of the alphabet agencies perhaps?

Next…
54.5 MPG and The Law of Unintended Consequences
http://townhall.com

According to the National Highway traffic safety Administration, 6-11 million low-income drivers will not be able to afford cars between 2016 and 2025 as the prices of cars go up to meet the new mileage standards. These drivers will be forced into the used car market; however, thanks to the “Cash for Clunkers” program, there are less used cars; thus, their prices are skyrocketing as well. The compounded financial impact is a “regressive” tax and a war on the poor.

Finally, please prepare now for the escalating economic and social unrest. Good Day!
 

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