Thursday, August 25, 2011

CDS on RBS higher than 2008

"I think we are heading for a market shock in September or October that will match anything we have ever seen before," said a senior credit banker at a major European bank."

Monday, August 22, 2011

No Enigma on Arrival

Stepping off the plane used to be the first hit of the smells of India. The dust, a faint whiff of diesel, and the pungent naphtha whenever passing a lavatory in the dimly lit hallways of the airport while walking the long stone corridors which echoed with footsteps.

The new airport is now open, a good as any in the world, I'm told. and indeed, stepping off the plane, you have no clue where you are. The sealed doorway efficiently keeps the night air out; the carpeted hallways with moving sidewalks and the brightly lit shopping arcade with all the same brand name storefronts could be anywhere, on any continent, in any time zone. So there is no doubt that Delhi airport has finally arrived, arrived into the timelessness of the shopping mall which all airports have become, cloned identical twins of the arcades of Las Vegas, with the menace which only the security apparatus of the state can provide now comfortably hidden behind the glittery invitation to consumption.

Friday, August 19, 2011

As the clever hopes expire of a low dishonest decade

Well, we knew this, but somehow it's always reassuring when the latest newfangled tehnique confirms one's bias!

Network analysis indicates that a small elite has disproportionate control of the world economy.

The graph is certainly pretty.

Add to this the latest rehabilitation of Karl Marx coursing through the twitterverse, even at bastions of capitalism like UBS:

Justin Lahart
Not just Roubini singing Marx's praises - UBS economist George Magnus says Marx offers "still relevant insights"

And then add the increasing undercurrent of violence from the radical right all over the world, and I start trying to convince myself that Romney might not be that bad.....

I'm feelin' like it's time to dust off the Auden as I head off to the Maine coast....

Exiled Thucydides knew
All that a speech can say
About Democracy,
And what dictators do,
The elderly rubbish they talk
To an apathetic grave;
Analysed all in his book,
The enlightenment driven away,
The habit-forming pain,
Mismanagement and grief:
We must suffer them all again.

Thursday, August 18, 2011

Philly Fed craters and software bots nowhere to be seen...

My friend Mark has talked about the value of an AI program to scan news releases and trade rapidly off of them.

Naturally I assumed this had been long ago done given all the chatter about computerized trading...

Today, I loaded the Philly Fed release at precisely 10 am and scanned it in about 3 seconds. Then I waited. and waited....
and waited for the news to hit the major blogs and bloomberg, etc.

The market had already plunged on the jobless numbers, but it stayed flat for a full 5 min after the release.

I guess the bots aren't out there yet.....


Monday, August 15, 2011

The Empire Manufacturing Data is In, and the Winners Are....

The Double Dippers!

The future new orders and shipments indexes dropped to their lowest levels since September 2001.

Now it's Japan's Q3 rebound vs New York's Q3 slide... who will win the round?

"The Name is Bond, Euro Bond"

This Yahoo piece summarizes the state of play of the top issue of the moment.

Friday, August 12, 2011

Recession Watch

John Hussman's composite recession predictor has been flashing red for about 10 days, and it's been very good. It did not falsely flag last summer's swoon as an oncoming recession, while it nailed the 2008 decline in Dec 2007.

This graph (h/t Zero Hedge) shows that the consumer's confidence is cratering rapidly, so the fabled "70% of the US economy is the consumer" meme implies a real implosion of final domestic demand.

Add to that the austerity in Europe which is reducing external export demand (based on the new export figures, Q2 GDP looks to be revised to under 1% -- far below "stall speed") and then also the credit crunch strengthening the dollar, and you have a recipe for a serious slowdown in US corporate overseas profits.

This chap at Stanford seems to agree.

So while I've been spectacularly wrong about the timing of these things and have lost money making one-way bets, I certainly wouldn't want to be invested in equities right now. Having cash on hand to buy later (average decline in the S&P in a recession is 40%) makes a lot of sense. The current rebound in the market might be an opportunity to lighten up portfolios. Even gold may go down quite a bit in that instance, though not for long.

Of course, once Benny and the Feds start serious QE3, which I now believe is inevitable, we will see a rerun of the asset inflation of the past 2 years, but whether enough and early enough to avert a serious further dive in stocks is uncertain.

Tuesday, August 9, 2011

Clever Ben Makes Another Call to the Confidence Fairy

So the ECB kicked the can down the road, hoping that Germany will buckle in September when faced with the choice between the financial armageddon of european disintegration or a fiscal union with serious money printing a la the USA trying to ward off debt deflation while still protecting the banks.

Meanwhile, the Fed does something interesting. I was blindsided and lost all the profits I made yesterday when I re-entered bearish positions after their announcement. Where was QE3? nowhere, or so I thought... I thought we're headed down -- and the first hour after the announcement that seemed to be true. But the roar back is probably not dumb money (I was the dumb money).

For an excellent analysis of what the Fed did today check out a guy named "Trader Dan": Got gold?

Sunday, August 7, 2011

A showdown between the capital markets and the world's central bankers.

Tonight is one of the more significant moments in financial history. Certainly at least as much as several of the Sundays in 2008, but in many ways even more so, since the geopolitical stakes for systemic hegemony are much greater and obvious.

While the ECB has just announced Italian bond purchases -- and while some are saying they have committed "to do what it takes", it's not clear that this is the "bazooka" that the Fed used in 2008. So I'm not sure they got the memo. If they did, and are going to provide an unlimited backstop to the national euro bond markets, then this will set up a large devaluation of the euro, inflation in the several year time frame, and a continuing surge in gold prices. It would also be another salvo in the currency wars, and might over time lead to trade tensions and tariffs and GD 2. Hard to believe the Germans will accept monetization of bad Club Med debt, though, so I suspect this will continue to be a muddle through attempt with ongoing unresolved crisis. Either way it seems that we are looking at systemic crisis either short term or longer term.

Dow futures are down 236 points right now, and the S&P 27 -- better than at the open. Expect central bank interventions all night....

Thursday, August 4, 2011

Designated Bagholder: The European Central Bank

So far in this cycle, the Europeans have been the designated bag holders -- clinging to their sound money policy while the US devalued and China used its peg to boost exports to the Eurozone. It been amazing to watch German industry compete in the face of these headwinds -- but effectively they've used the sovereign debt crisis on their periphery to good advantage ie keeping their currency from a moonshot, even tho its strengthened this year.

Now the chickens are coming home to roost and either the euro implodes and Germany loses its Latin shell, or else the ECB will have to step in and buy all that dreck. The euro will decline a lot, and US exports will decline as a result. US-Chinese tensions will rise once more.

It looks like a recession is unfolding -- it will be obvious in about 6 weeks methinks.

2012 is going to be a grim year in the US. As for BHO's re-election, it will take a lot of propaganda bought with Wall Street donations to get him past the finish line.

The obvious move for the Left is to try to split the Tea Party movement (not the superstructure) towards left-wing populism.

If there were a Left.....

Monday, August 1, 2011

Bonfire of the Vanities, an Auto da Fe of the People

Jane Hamsher:

7:02: Timothy Geithner holds a debt ceiling celebration party with the U.S. Chamber of Commerce,Financial Services Forum, Securities Industry and Financial Markets Association, American Insurance Association, Financial Services Roundtable, American Council of Life Insurers, the National Association of Real Estate Investment Trusts, American Bankers Association and the National Retail Federation. I feel compelled to mention that this is not snark.