Citi's 'Red Flag' Warning From The Credit Markets

It seems the world is willing to come on TV and tell the rest of the world that consensus is bearish, sentiment is weak, and that this rally 'proves' that investors are resilient. We have shown in recent days that the consensus is much more bullishly positioned in fact and as Citi's HY credit desk noted today:

"I'm a little cautious on how much further this rally goes. Not because I think that the September road bumps that have been very well flagged are going to come and bite us, but more because the consensus, which towards the end of August was mixed, to slightly wider, is now getting into a "this market is bullet proof, the ECB and FED put is there, and the technical is still great, and we're only going one way... Tighter". When the market consensus moves like this, it's small red flag, even though it definitely doesn't feel like that at the moment."

"One recurring lesson of the last few years is that the threats of central bank intervention tend to be far more effective than the actual programs."

Presenting The Democratic National Convention's "Ron Paul Moment"

Moments ago we learned that the Democrats have once again reinstated language into their party platform that recognizes Jerusalem as the capital of Israel as well as the words "God-given" that were removed in this year's platform. However, the 'vote' on this controversial decision (shown in the clip below), brings back vivid memories of the GOP convention's own Ron Paul moment; and must be seen to be believed as the true state of our nation's "democratic process" is once again exposed for all to see. Simply remarkable...

Why The Market Expects The ECB To Soak Up All Remaining 2013 Issuance

Just what is priced in? That is the question. Based on the aggregate size of the Fed and ECB balance sheets, it appears the S&P 500 is pricing in an increase of around USD300bn in the short-term. This USD 300bn amounts to EUR 240bn - a very special and rather too coincidental number. Based on expectations of supply, the EMU16 nations have EUR 245bn issuance remaining for the rest of 2013. So, it would appear that the market, in its ever-hopeful ebullient way has priced in the expectation that the ECB will soak up the entire remaining debt issuance of the 16 (remaining) Euro nations for the rest of the year. Anything less will be a disappointment - and remember each nation will have to ask for 'help' before receiving this 'support'. Coincidence, maybe? Over-confidence, perhaps? Reality, not a chance.

Retirement Reality Full Frontal: Why Every 30 Year Old Must Risk It All To Be Able To Retire

Exceptionally low interest rates are bad for banks, insurers, and, more generically, anyone wishing to save money. Of the three, it’s the situation of the savers that is most untenable. In particular, Citi notes in a recent report, those wishing to retire at 65 or thereabouts are in for a nasty surprise when they start to run the numbers. Given that real yields are negative for Treasury bonds inside of 20-years, the steady stream of inflows into investment grade bond fund that hold a mixture of government, agency, and high grade corporate securities, will simply fail to return an adequate rate of return commensurate with the current savings rates of most retirement savers. What savers need to do is find higher asset returns or increase their personal savings rate. As the chart below shows, there are few options but to go all-in to the most excessive ends of the risk spectrum, or raise the proportion of savings and higher savings rates lead to lower consumption, a decline in corporate profits, and recession.

Bloomberg leaks the scope of Euro bond buying/basically Europe's version of operation twist/ gold and silver steady.

Harvey Organ at Harvey Organ's - The Daily Gold and Silver Report - 5 hours ago

Good evening Ladies and Gentlemen: Gold closed down today to the tune of $2.20 to finish the comex session at $1690.80.  Silver finished down 10 cents to $32.26.  The bankers were ready willing and able to launch a raid.  However their efforts were thwarted by news of a leak from Bloomberg on the Draghi plan to buy Euro bonds.  The actual release was nothing but a yawner as we will discuss

 

Bearish Outlook For The Next 3 - 9 Months

Admin at Marc Faber Blog - 6 hours ago

I personally think that for the next three to six-nine months, equity markets will rather go down than up and a better buying opportunity will occur at some point in this period over the next nine months. - *in ET.com* Related ETFs: iShares MSCI Emerging Markets Index ETF (EEM), SPDR SP 500 ETF (SPY) *Marc Faber is an international investor known for his uncanny predictions of the stock market and futures markets around the world.* 

 

Crude Oil: If Anything Makes It Go Down, Buy It

Admin at Jim Rogers Blog - 6 hours ago

The surprise with oil is going to be how high it stays and how high it goes. We are running out of known reserves of oil. There may be a lot of oil in the world. If there is, we just don't know where it is. So prices are going to stay high and go much higher. If America goes to war with Iran, they are going to skyrocket. If there is a big surprise, if Spain suddenly goes bankrupt out of the blue, then oil prices will collapse. If the prices collapse, I would suggest you to buy more. If there is anything that makes it go down, I would suggest buying it because until we find a lot of ... more » 

 

Eurozone demands six-day week for Greece

Eric De Groot at Eric De Groot - 8 hours ago

The response from the Greek people to austerity plus an additional boot in the pants from its creditors might be interesting. Headline: Eurozone demands six-day week for Greece Greece's eurozone creditors are demanding that the government in Athens introduce a six-day working week as part of the stiff terms for the country's second bailout. The demand is contained... [[ This is a content summary only. Visit my website for full links, other content, and more! ]]

Gina Rinehart Is A Bubble

"Australian mining magnate Gina Rinehart has criticised her country’s economic performance and said Africans willing to work for $2 a day should be an inspiration. Ms Rinehart is said to make nearly A$600 (£393) a second." The richest woman in the world is making an increasing number of public appearances, and speaking of increasingly controversial topics. I wonder why. It couldn’t be that she is becoming increasingly aggressive and controversial because her core business is in trouble, could it? Marc Faber suggests so: "There have been four mega bubbles in the past 40 years. In the 1970s it was gold; in the 1980s it was the Nikkei, and in the 1990s it was the Nasdaq. Bigger than all of them, though, has been the iron ore bubble, a tenfold increase in prices in less than a decade."

Bad News For NFP Bulls: Help Wanted Ads Plunge By Most Since Lehman Collapse

There is one major problem, for the administration at least, when it comes to presenting labor data that is not "compiled" by the Bureau of beLabored Statistics and its Bank of Spain-endorsed Arima-X-13 seasonal data fudging program: it reflects realty, not statistical or seasonal adjustments, and certainly can not be skewed this way or that depending on what best suits the incumbent presidential candidate two months ahead of the election. Which is why one won't read anywhere that one of the most reliable indicators when it comes to real time hiring data as reported by the actual job market and not by some conflicted, data challenged organization which on top of everything has data leak issues, namely Help Wanted ads just plunged by the most since the Lehman collapse.

AAPL And High-Yield-Credit Crunch As Bonds, Stocks & USD Unch

As Elvis (oops) Jerry Lee Lewis might have said if he were a trader "there's a whole lotta shakin' going on" but not much else. Cross asset-class correlations were weakening, ranges were very narrow today in stocks, credit, Treasuries, commodities, and FX, and volumes were well shrug. The three biggest items of note to us were among 'leadership' assets: AAPL dropped rather notably into the close - ending -0.7%; HYG (the high-yield bond ETF that has been so flow-/yield-grab-driven) dropped significantly into the close (saved by a last minute rescue) after heavy volume at the close last night and relatively heavy today as we sold down; and the major leveraged financials GS and MS - soared intraday (GS>MS) far exceeding their peers - but MS gave a significant amount of it back into the close while GS kept pushing up (+3%) with some major volume and VWAP action. Everyone is waiting for the great and good Draghi to anoint this rally tomorrow morning but the last hour pull to VWAP in S&P futures was not followed by VIX, as we note today was the lowest average trade size (amateurs) day of the year in S&P futures.

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The Post Globalized World Part 1: Why The PIGS Are Out Of Luck

There are three key factors to modeling trade flows - or relevance - in a post-globalization world. While competitiveness is important, countries gain from being generally 'Technology-rich', 'Labor-rich', and/or 'Resource-rich'. The following chart, from Deutsche Bank, shows where the world's countries fit into the Venn diagram of give-and-take in a post-globalization market. The red oval highlights where Italy, Greece, Portugal, and Spain (and Argentina sadly enough) do not fit into this picture. Two words - Euro-sustainability?

Presenting The Most Shorted Stocks

By now it should be no secret that under the New Centrally-Planned Normal, good is great, but worst is far greater. It is therefore no surprise that in the past year, some of the highest returning stocks have been the companies which have seen wave after wave of shorts come in, attempting to ride the underlying equity value to zero, only to see themselves scrambling to cover short squeezes, generated either due to the pull of borrow by an overeager shareholder (think SHLD), or due to bad news not being horrible enough, leading to short covering ramps (think AMZN at each and every worse earnings call, which however is never bad enough to finally trounc the last traces of the "bull story"). Which is why, as we have done on various occasions in the past, we have collated the most hated stocks in the less prominent but far more volatile Russell 2000 Index, where we have limited the universe to the 700 or so stocks with a market cap between $50 million and $1,000 billion, or those which tend to have aggressive moves up or down on modest volume (i.e., not widely owned). We have then sorted these in descending order of Short Interest as a % of Float. The results are presented below.

88% Of Traders Expect A Spanish 'Bailout' By Year-End

With the front-end of the Spanish (and Italian) credit spread curves having compressed to what Goldman believes is 'fair-value' given rates and current fundamentals, it seems the consensus expectation ahead of tomorrow's ECB call is that Draghi will promise, deliver, and implement instantaneously. In a recent client survey a stunning 88% of investors expect Spain to officially request activation of EFSF/ESM support - subject to an MoU - by the end of the year (with 70% expecting it by the end of October - the heavy redemption month). A full 50% expect the Italians to follow suit by the end of Q1 2013. The paradox of course is that with the spread cost of funding so 'low', Spain has no need to ask for the help that is implicitly priced into the low yields - and with that huge maturity looming, it seems they have two options: 1) pre-empt the redemption by issuing short-dated debt now to fund it (piggy-backing on the ECB's confidence inspiration) but of course this will signal no need for a short-term MoU and therefore no ECB support and therefore bonds will sell-off; or 2) admit defeat, beg for help, lose face and get the bailout... (as we await tomorrow's 'details' on the seniority issue). The promise (or threat) of support implies it has to get worse before it can get better.

Santelli On "Why Money Is Important" And A Trillion Is A Big Number

Fresh from his vacation with Mickey and Minnie, CNBC's Rick Santelli is back and mind-blown at the total cognitive dissonance of the fact that we just broke through $16tn debt. The relaxed Chicagoan summarizes, in words and tables that any Disney-princess-loving 6 year old girl could comprehend, why "a trillion is a big number" and while not dissing the first lady's speech, he notes that unlike her "money's not important to Barack" comment, when the number gets this big, it better matter to someone.

US Aircraft Carrier Stennis Is Now En Route To Join Enterprise And Eisenhower Off Iranian Coast

Back in early July we wrote that contrary to expectations, veteran Middle Eastern aircraft carrier CVN-74 Stennis would end its shore leave far earlier than expected, and be redeployed back to its usual stomping grounds just off Iran months ahead of schedule. As of days ago, the Stennis has quietly departed Naval Base Kitsap-Bremerton and is off. It will join CVN-65 Enterprise (which is doing its last tour of duty ever before being decommissioned) and CVN-69 Eisenhower in the Arabian Sea, aka off the coast of Iran. This will be one of the only times in history when the US has had three aircraft carriers in close proximity to those evil Iranians who are hell bent on global domination. Expect Stennis to reach Iran (and be available to support an Israeli attack of Iran) in the last third week of September. Then determine when the next full/new moon is following the arrival of Stennis at its destination, and buy Brent calls just ahead. Finally, profit.

What to Do When - Not If - Inflation Gets Out Of Hand

The cheek of it! They raised the price of our favorite ice cream. Actually, they didn't increase the price; they reduced the container size. Raising prices is one thing. We understand raw-ingredient price rises will be passed on. But underhandedly reducing the amount they give you… that's another thing entirely. It just doesn't feel… honest. You've noticed, we're sure, how much gasoline is going up. Food costs too are edging up. Kids' college expenses, up. Car prices, insurance premiums, household items – a list of necessities we can't go without. Regardless of one's income level or how tough life might get at times, one has to keep spending money on the basics. According to the government, we're supposedly in a low-inflation environment. What happens if price inflation really takes off, reaching high levels – or worse, spirals out of control? That's not a rhetorical question. Have you considered how you'll deal with rising costs? Are you sure your future income will even keep up with rising inflation? If your monthly expenses are about $3,000/month, you need 45 ounces of Gold to cover two years of high inflation.

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