The Euro has broken $1.30
When the entire global investing zeitgeist is getting drunk off of a weaker USD and its that USD that has rallied sharply this year, one can't be surprised that markets are trying to recover from a hangover. The dollar started to rally late 2009, just about the time we were hearing the words sovereign debt issues. People still piled into European and US Equities because sovereign debt was just an issue, after all issues can quickly become socialized on the backs of taxpayers. It then became a problem, no problem here. Bailouts will do the trick. Now its a full blown crisis. OK. If bailouts don't work, we can just print money cant we? Sorry Charlie! It ain't working this time until the market corrects and China starts their printing press. Blast off for that is sometime in August 2010.
I would say that the 12 week rally we saw in Euro/US Equities was kinda like the last call at the bar. The markets were running on fumes. We are in a period of long due consolidation and the correction in Euro/US Equities is long due.
Essentially, what we were seeing was how risk asset markets were so dependent on a weaker USD. Weaker USD meant faster/cheaper exports for Asian economies. When the USD is weaker we have global liquidity. This global liquidity reached a top at the end of 2009. There was a tight correlation between liquidity and risk assets, this is not rocket science people. People have had a hard time making any loot because liquidity has shrunk because of the move in USD higher. Higher USD means people are becoming risk averse. Why do you think policy makers had a dollar destruction policy in the first place?
Remember this is a problem of debt. The 2008 global equity correction was a problem of debt. What we are seeing today is a problem of runaway debt. Subprime problems were clearly evident in 2006 and those problems actually peaked in 2007 before the peak in equities. This is no different. Same problems of debt with different incompetent characters. The progression is the same as it was in 2008. The optimism in investor attitudes towards the stock market topps out when the underlying fundamentals are getting weaker. Its exactly the same when markets bounce from severely oversold levels.
The correction will be quick and painful, because that is how corrections roll. It takes 12 weeks to go up 15%, but 2 weeks to lose it all. Ahhh! Such is life in the global casino we call financial markets.
We all should enjoy this. I know I certainly will.
Wednesday, May 5, 2010
Tuesday, May 4, 2010
TAX TAX TAX
Another reason to sell global equities...Windfall Profits Tax!
http://www.reuters.com/article/idUSTRE64344Q20100504
There is nothing worse for equity prices than the words levy and taxes. Especially if its attached to the biggest industry in your country.
Other countries are also considering such taxes.
Brazil mining industries should take notice.
http://www.reuters.com/article/idUSTRE64344Q20100504
There is nothing worse for equity prices than the words levy and taxes. Especially if its attached to the biggest industry in your country.
Other countries are also considering such taxes.
Brazil mining industries should take notice.
COMPX Down 2.82% - Sayonara!
The NASDAQ or THE COMPX is down 2.82% or 71 points today. This was after it was up 1.57% yesterday. The COMPX was down 2.01% on Friday and 2.04% on last Wednesday. This is clearly an indication that the NASDAQ/TECH run for the time being is over.
You may ask why are the techs weaker than the broader markets? My dear fellow this is because this is where the growth is! Has anyone noticed that the Shanghai Composite is down some 13.48% this year and 18% off its 52W highs? We all know that China was the big growth driver that drove the global economies out of recession. Sure central bankers helped out tossing money from the skies, but it was the original China stimulus that got things back in gear. Now that momentum is exiting China equities investors have to re-access growth globally. This is happening for one simple reason. China wants to slow their economy. They want to slow speculative lending. They have continually raised reserve requirements this year in an attempt to reign in their banks. The Chinese will not allow an overheated economy anymore than they will allow their economy to go to hell. This is what stimulus is for. I fully expect the Chinese to come out with a $500B USD stimulus sometime in late July/August. This will pull global equities out of their summer hiatus.
The NASDAQ, like I predicted last year would get us out of this funk. Now that it has, profits need to be booked. How many profits is the question? In the final analysis, the selling in tech land should filter over to other hot sectors like the REITS and Retail.
You may ask why are the techs weaker than the broader markets? My dear fellow this is because this is where the growth is! Has anyone noticed that the Shanghai Composite is down some 13.48% this year and 18% off its 52W highs? We all know that China was the big growth driver that drove the global economies out of recession. Sure central bankers helped out tossing money from the skies, but it was the original China stimulus that got things back in gear. Now that momentum is exiting China equities investors have to re-access growth globally. This is happening for one simple reason. China wants to slow their economy. They want to slow speculative lending. They have continually raised reserve requirements this year in an attempt to reign in their banks. The Chinese will not allow an overheated economy anymore than they will allow their economy to go to hell. This is what stimulus is for. I fully expect the Chinese to come out with a $500B USD stimulus sometime in late July/August. This will pull global equities out of their summer hiatus.
The NASDAQ, like I predicted last year would get us out of this funk. Now that it has, profits need to be booked. How many profits is the question? In the final analysis, the selling in tech land should filter over to other hot sectors like the REITS and Retail.
More Greenspan Incompetency
The Huffington Post has done a nice job of reviewing the 2004 FOMC transcripts.
http://www.huffingtonpost.com/2010/05/03/greenspan-wanted-housing_n_560965.html
This is certainly not eye opening stuff. We all know that Greenspan is as incompetent as they come, but its still mind boggling the level of such nitwit behavior that was exhibited. If this type of monetary policy can be modeled from the nitwit school of economics, I really have no idea what the idiots at the FOMC are doing today. Ben Bernanke is willfully taking the country for a ride off the cliff with his bubble inducing ZIRP.
When someone says they had no clue that housing was a problem or that it was becoming a bubble, that person is bottom line rationalizing incompetent willful destructive behavior. It is disingenuous to state differently.
Greenspan at every opportunity downplayed any talk of bubbles and over investment. For Instance, Atlanta Fed Governor Jack Guynn has this to say:
"A number of folks are expressing growing concern about potential overbuilding and worrisome speculation in the real estate markets, especially in Florida. Entire condo projects and upscale residential lots are being pre-sold before any construction, with buyers freely admitting that they have no intention of occupying the units or building on the land but rather are counting on ‘flipping’ the properties–selling them quickly at higher prices."
Again, all of these worries were brushed aside by Greenspan. Greenspan wouldn't budge from his roots of deregulation, free markets, and financial innovation.
This should not come as a surprise to anyone at this point. Greenspan has been unmasked for the fraud that he is. His total rationalization of his destructive Fed policies are all well known. First it was productivity gains, then globalization, then global savings glut. Then Ben Bernanke got on the Greenspan wagon with the idea that deflation was the killer. All of these failed policies are just an excuse to print money to make Wall Street happy.
If anyone wanted to know where Greenspan's head was with regards to Housing?
Here it is:
Remarks by Chairman Alan Greenspan
Understanding household debt obligations
http://www.federalreserve.gov/boarddocs/speeches/2004/20040223/
"One way homeowners attempt to manage their payment risk is to use fixed-rate mortgages, which typically allow homeowners to prepay their debt when interest rates fall but do not involve an increase in payments when interest rates rise. Homeowners pay a lot of money for the right to refinance and for the insurance against increasing mortgage payments. Calculations by market analysts of the "option adjusted spread" on mortgages suggest that the cost of these benefits conferred by fixed-rate mortgages can range from 0.5 percent to 1.2 percent, raising homeowners' annual after-tax mortgage payments by several thousand dollars. Indeed, recent research within the Federal Reserve suggests that many homeowners might have saved tens of thousands of dollars had they held adjustable-rate mortgages rather than fixed-rate mortgages during the past decade, though this would not have been the case, of course, had interest rates trended sharply upward."
"American homeowners clearly like the certainty of fixed mortgage payments. This preference is in striking contrast to the situation in some other countries, where adjustable-rate mortgages are far more common and where efforts to introduce American-type fixed-rate mortgages generally have not been successful. Fixed-rate mortgages seem unduly expensive to households in other countries. One possible reason is that these mortgages effectively charge homeowners high fees for protection against rising interest rates and for the right to refinance."
Here Greenspan is calling all of those fixed rate mortgage holders idiots for locking in their rates.
You don't think Wall Street structured finance desks were listening? Why were Neg Am, ARM, Pay Option, and other destructive mortgage products such a problem? Greenspan was telling Americans why are you acting irrationally by locking yourself in a fixed rate? He was begging people to speculate on housing. Its the same today as Bernanke is begging people to speculate in financial markets. Where did all of this speculation lead us?
The simple idea that deflation is such a worry leads us directly into destructive bubbles. Bernanke and Greenspan love to print because they are closet inflation junkies.
William McChesney Martin forcibly warned the Senate in 1957 of the problem of inflation.
http://fraser.stlouisfed.org/historicaldocs/762/download/30925/martin57_0813.pdf
This piece is littered with the dangers of letting inflation run wild and how this policy damages dollar purchasing power.
It is just unfathomable that Greenspan and Bernanke held the same office as William McChesney Martin.
http://www.huffingtonpost.com/2010/05/03/greenspan-wanted-housing_n_560965.html
This is certainly not eye opening stuff. We all know that Greenspan is as incompetent as they come, but its still mind boggling the level of such nitwit behavior that was exhibited. If this type of monetary policy can be modeled from the nitwit school of economics, I really have no idea what the idiots at the FOMC are doing today. Ben Bernanke is willfully taking the country for a ride off the cliff with his bubble inducing ZIRP.
When someone says they had no clue that housing was a problem or that it was becoming a bubble, that person is bottom line rationalizing incompetent willful destructive behavior. It is disingenuous to state differently.
Greenspan at every opportunity downplayed any talk of bubbles and over investment. For Instance, Atlanta Fed Governor Jack Guynn has this to say:
"A number of folks are expressing growing concern about potential overbuilding and worrisome speculation in the real estate markets, especially in Florida. Entire condo projects and upscale residential lots are being pre-sold before any construction, with buyers freely admitting that they have no intention of occupying the units or building on the land but rather are counting on ‘flipping’ the properties–selling them quickly at higher prices."
Again, all of these worries were brushed aside by Greenspan. Greenspan wouldn't budge from his roots of deregulation, free markets, and financial innovation.
This should not come as a surprise to anyone at this point. Greenspan has been unmasked for the fraud that he is. His total rationalization of his destructive Fed policies are all well known. First it was productivity gains, then globalization, then global savings glut. Then Ben Bernanke got on the Greenspan wagon with the idea that deflation was the killer. All of these failed policies are just an excuse to print money to make Wall Street happy.
If anyone wanted to know where Greenspan's head was with regards to Housing?
Here it is:
Remarks by Chairman Alan Greenspan
Understanding household debt obligations
http://www.federalreserve.gov/boarddocs/speeches/2004/20040223/
"One way homeowners attempt to manage their payment risk is to use fixed-rate mortgages, which typically allow homeowners to prepay their debt when interest rates fall but do not involve an increase in payments when interest rates rise. Homeowners pay a lot of money for the right to refinance and for the insurance against increasing mortgage payments. Calculations by market analysts of the "option adjusted spread" on mortgages suggest that the cost of these benefits conferred by fixed-rate mortgages can range from 0.5 percent to 1.2 percent, raising homeowners' annual after-tax mortgage payments by several thousand dollars. Indeed, recent research within the Federal Reserve suggests that many homeowners might have saved tens of thousands of dollars had they held adjustable-rate mortgages rather than fixed-rate mortgages during the past decade, though this would not have been the case, of course, had interest rates trended sharply upward."
"American homeowners clearly like the certainty of fixed mortgage payments. This preference is in striking contrast to the situation in some other countries, where adjustable-rate mortgages are far more common and where efforts to introduce American-type fixed-rate mortgages generally have not been successful. Fixed-rate mortgages seem unduly expensive to households in other countries. One possible reason is that these mortgages effectively charge homeowners high fees for protection against rising interest rates and for the right to refinance."
Here Greenspan is calling all of those fixed rate mortgage holders idiots for locking in their rates.
You don't think Wall Street structured finance desks were listening? Why were Neg Am, ARM, Pay Option, and other destructive mortgage products such a problem? Greenspan was telling Americans why are you acting irrationally by locking yourself in a fixed rate? He was begging people to speculate on housing. Its the same today as Bernanke is begging people to speculate in financial markets. Where did all of this speculation lead us?
The simple idea that deflation is such a worry leads us directly into destructive bubbles. Bernanke and Greenspan love to print because they are closet inflation junkies.
William McChesney Martin forcibly warned the Senate in 1957 of the problem of inflation.
http://fraser.stlouisfed.org/historicaldocs/762/download/30925/martin57_0813.pdf
This piece is littered with the dangers of letting inflation run wild and how this policy damages dollar purchasing power.
It is just unfathomable that Greenspan and Bernanke held the same office as William McChesney Martin.
Monday, May 3, 2010
Greece - CHECK!
Step 1 - Run up deficits to preposterous levels - CHECK!
Step 2 - Have CDS rates spike monstrously - CHECK!
Step 3 - Have bond yields equally gap higher - CHECK!
Step 4 - Blame speculators and short sellers - CHECK!
Step 5 - Threaten default - CHECK!
Step 6 - Get Bailout - Check!
Step 7 - Screw tax payers with austerity and higher taxes - CHECK!
Step 8 - Continue to ruin economy by running up debt - CHECK!
Step 9 - Take the money and Default anyway - CHECK!
Step 10- Have new bankers come in 10 years from now and do it all over again - CHECK!
Step 2 - Have CDS rates spike monstrously - CHECK!
Step 3 - Have bond yields equally gap higher - CHECK!
Step 4 - Blame speculators and short sellers - CHECK!
Step 5 - Threaten default - CHECK!
Step 6 - Get Bailout - Check!
Step 7 - Screw tax payers with austerity and higher taxes - CHECK!
Step 8 - Continue to ruin economy by running up debt - CHECK!
Step 9 - Take the money and Default anyway - CHECK!
Step 10- Have new bankers come in 10 years from now and do it all over again - CHECK!
Speechless Datapoint Of The Day
Liquidity Bubbles are all around us.
You want total decoupling?
Here you go!
Can someone please tell China that Europe is their number one trading partner?
You want total decoupling?
Here you go!
Can someone please tell China that Europe is their number one trading partner?
Sunday, May 2, 2010
Physical Gold Shortage
This is an eye opening piece about the fraud that is precious metals trading.
http://www.kingworldnews.com/kingworldnews/Broadcast/Entries/2010/3/30_Andrew_Maguire_%26_Adrian_Douglass.html
This is a US and European National Security Issue. There is currently leverage of 100-1 in terms of paper gold to physical gold available at the LBMA.
What happens when investors demand physical gold?
The easy trade here is to short the Euro, Yen, and USD and buy Gold and Silver hand over fist.
Thank god my mother was buying gold all throughout the 90's.
This really made my Sunday. Enjoy.
http://www.kingworldnews.com/kingworldnews/Broadcast/Entries/2010/3/30_Andrew_Maguire_%26_Adrian_Douglass.html
This is a US and European National Security Issue. There is currently leverage of 100-1 in terms of paper gold to physical gold available at the LBMA.
What happens when investors demand physical gold?
The easy trade here is to short the Euro, Yen, and USD and buy Gold and Silver hand over fist.
Thank god my mother was buying gold all throughout the 90's.
This really made my Sunday. Enjoy.
Saturday, May 1, 2010
The Ending Of the Mortgage Casino
What ever happens in the Goldman Sachs SEC and criminal case is secondary to the ending of the great American Mortgage Casino Machine. The GS case is the ultimate conclusion to a decade long Housing/Real Estate bubble fueled via easy money, NINJA Loans, and complex predatory products. It was this machine that fueled the economy for the last decade. It was the housing casino that elevated top line economic growth. It was this casino mechanism that spurred all of that job growth. It was all a farce.
All of the growth we saw in GDP was a joke. It was all structured finance. Structured finance was the lightning rod for all of the fraud that occurred in the mortgage market. Watching GS in front of Congress this week as well as Blankfein on Charlie Rose last night just alerts to me how out of touch Wall Street is with regards to the real economy. They still have no clue what they have done and how it was the tax payer that saved their bacon. Americans at the moment have a front row seat watching financial reform get gutted in front of them. They have a birds eye view in 3D on how crony capitalism really works. Why do we need James Cameron when we have Congress?
What ever you think about John Paulson and GS doesn't take away from the fact that the Abacus product was a doomsday product that was guaranteed to blow up someone other than Paulson and GS. The product was set up to make John Paulson a boat load of money. In the end, Paulson made out like a bandit while ACA/ABN and IKB took it in the grill.
Meanwhile, CNBC and Bloomberg the two biggest Wall Street apologists constantly seem to make a case that GS is not entirely at fault. Well...We know that. We know that Wall Street is rotten to the core. Can someone please alert CNBC and BBG to this?
Wall Street again is so out of touch they are fighting over semantics of predatory parasitic fraudulent practices. Many Americans are watching this circus as it plays out. Americans simply can't believe that Wall Street created this mess, cleaned up on it before hand and then cried bloody apocalypse to get trillions in bailouts to reopen the Casino once again. Each and every way they have paid out hundreds of millions in campaign money to gut financial reform. The average American at this point has to be completely infuriated.
Goldman was one of the lucky bastards that received huge chunks of bailout money pumped via the Treasury and FRB, many have come to grips with the idea that the government essentially bailed out a decade long casino gambling spree financed by Wall Street and enabled by the Federal Reserve Board. Who was the biggest benefactors? Wall Street and the subprime supply chain.
It was socialism at the highest order bestowed upon the Wall Street Crony Elite. Its the biggest wealth transfer from tax payers to the power elite in the history of mankind. Our country can no longer find fault with Latin American Banana Republics and Russian Oligarchs. We are the quintessential Banana Republic but without any banana's. We are a Swiss-Cheese Economy with rotting cheese.
All of the growth we saw in GDP was a joke. It was all structured finance. Structured finance was the lightning rod for all of the fraud that occurred in the mortgage market. Watching GS in front of Congress this week as well as Blankfein on Charlie Rose last night just alerts to me how out of touch Wall Street is with regards to the real economy. They still have no clue what they have done and how it was the tax payer that saved their bacon. Americans at the moment have a front row seat watching financial reform get gutted in front of them. They have a birds eye view in 3D on how crony capitalism really works. Why do we need James Cameron when we have Congress?
What ever you think about John Paulson and GS doesn't take away from the fact that the Abacus product was a doomsday product that was guaranteed to blow up someone other than Paulson and GS. The product was set up to make John Paulson a boat load of money. In the end, Paulson made out like a bandit while ACA/ABN and IKB took it in the grill.
Meanwhile, CNBC and Bloomberg the two biggest Wall Street apologists constantly seem to make a case that GS is not entirely at fault. Well...We know that. We know that Wall Street is rotten to the core. Can someone please alert CNBC and BBG to this?
Wall Street again is so out of touch they are fighting over semantics of predatory parasitic fraudulent practices. Many Americans are watching this circus as it plays out. Americans simply can't believe that Wall Street created this mess, cleaned up on it before hand and then cried bloody apocalypse to get trillions in bailouts to reopen the Casino once again. Each and every way they have paid out hundreds of millions in campaign money to gut financial reform. The average American at this point has to be completely infuriated.
Goldman was one of the lucky bastards that received huge chunks of bailout money pumped via the Treasury and FRB, many have come to grips with the idea that the government essentially bailed out a decade long casino gambling spree financed by Wall Street and enabled by the Federal Reserve Board. Who was the biggest benefactors? Wall Street and the subprime supply chain.
It was socialism at the highest order bestowed upon the Wall Street Crony Elite. Its the biggest wealth transfer from tax payers to the power elite in the history of mankind. Our country can no longer find fault with Latin American Banana Republics and Russian Oligarchs. We are the quintessential Banana Republic but without any banana's. We are a Swiss-Cheese Economy with rotting cheese.
Watch Sentiment
The biggest and most dangerous risk to this market advance IMHO is sentiment. There is far to much complacency going on. When the original GS news about the SEC case came out, everyone shrugged it off the following week as a major buying opportunity. After the congressional hearings on GS this week, it was the same old bullish rhetoric.
Barron's is running this story today.
http://online.barrons.com/article/SB127266756531384973.html
"Recently, Alan relates, money-market and bear-fund assets both fell to multiyear lows, while bull- and sector-fund assets mounted to their highest levels since the October 2007 market peak. Currently, he reports, there is roughly $7.50 in bull and sector funds for every $1 in bear-market fund assets, which he calls “the most ridiculously one-sided sentiment we have seen since the tech mania convinced folks that no price was too high to pay."
Who knows what happens to Greece. The market always rallies on days where there are rumors of a bailout.
What happens when the inevitable default happens?
Barron's is running this story today.
http://online.barrons.com/article/SB127266756531384973.html
"Recently, Alan relates, money-market and bear-fund assets both fell to multiyear lows, while bull- and sector-fund assets mounted to their highest levels since the October 2007 market peak. Currently, he reports, there is roughly $7.50 in bull and sector funds for every $1 in bear-market fund assets, which he calls “the most ridiculously one-sided sentiment we have seen since the tech mania convinced folks that no price was too high to pay."
Who knows what happens to Greece. The market always rallies on days where there are rumors of a bailout.
What happens when the inevitable default happens?
Earth To US TaxPayer....
....Time to pay up a lot more for some gyro action.
With the clock ticking on Greece.
If you think Greece is the ultimate problem, you are mistaken.
The PIIGS
The two biggest donors to the IMF are the USA and Japan, which also happen to be the two biggest economies in the world. Did I happen to mention that Japan is in a twenty year deflation battle and the US is a never ending ZIRP policy?
With the clock ticking on Greece.
If you think Greece is the ultimate problem, you are mistaken.
The PIIGS
The two biggest donors to the IMF are the USA and Japan, which also happen to be the two biggest economies in the world. Did I happen to mention that Japan is in a twenty year deflation battle and the US is a never ending ZIRP policy?
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