Nomura Sees Fed Issuing QE-Lite Statement On August 10
by Zero Hedge - July 30th, 2010 7:27 pm
Courtesy of Tyler Durden
Just because “extended” and “exceptional” is so H1, 2010. With three brand new doves on the board of the Fed, it was only a matter of time before the printers realized that there is no reason why ZIRP should hold the central bank back, now that even hotdog vendors know all about the deleveraging double dip the US finds itself in. Up on deck we Nomura, which issued the first official change in a call for QE-Light. The firm’s economists David Ressler and Zach Pandl, no doubt after consulting with Richard Koo, say, “we now expect the FOMC to ‘ease’ at the 10 August meeting. Exactly what form this easing might take is debatable. Our assumption is that they will change the language of the statement to signal that the balance sheet will remain expanded, and change policy around the MBS program to start reinvesting paydowns.” It won’t be the last. Should the Fed telegraph further easing, expect stocks to surge at least another 10% as the 10Y approaches 2.5% as nothing makes sense any more.
More from Market News:
Nomura Friday became the first major firm to formally anticipate a change in Fed policy as soon as August 10 to alter course toward some renewed quantitative easing, arguing that without thechange, Fed policy is becoming less accommodative week by week.
“We think there will be something in the (FOMC) language that maybe reverts back to the language of 2009, around the first time they made this statement, that the Federal Reserve needs to maintain an expanded balance sheet,” David Resler, chief North American economist for Normura, told Market News International.
“That begs the question, what does that mean to expand,” he continued. “We don’t think they will actively buy things,” he said, but
that they will have to “back up their language.”While the Fed now is committed “only to rolling over guvvies,” he said, “they are becoming less accommodative each week. Mortgages are not being replaced” and other shrinkage is taking place.
“They need to have a strategy for preserving (the balance sheet’s) size. Does that mean they will reinvest paydowns. I don’t know, and we’re agnostic on how they will do it.”
Just lowering rates “is not on the table any more,” he said, and changing the rate of interest on excess
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DiggWeekly Commitment Of Traders Summary: July 30
by Zero Hedge - July 30th, 2010 7:06 pm
Courtesy of Tyler Durden
Courtesy of Libanman Futures
Bull/Bear Weekly Recap
by Zero Hedge - July 30th, 2010 6:57 pm
Courtesy of Tyler Durden
Submitted by RCS Investments
Bullish
+ Global trade continues to expand. Industrial production in emerging market economies is up more than 10% from their prerecession peak. (Link Courtesy of News-to-Use).
+ Chicago PMI shows an increase in activity during the month of July. Manufacturers continue to report expansion in the Mid-West, a very important manufacturing hub. All sub-components rose, particularly the all important “New Orders” implying that activity is set to increase in the months ahead. (Links Courtesy of Briefing.com )
+ Earnings reports continue to impress and various global trade bellwethers cite improved outlooks in the quarters ahead. These negative macro trends that the bears cite are not affecting company bottom lines. In fact, revenues are showing more signs of life.
+ Continued reports of Eurozone financial tensions easing as yield spreads continue to contract and the Euro is near a 2.5 month high. Eurozone sovereign woes? Where? Meanwhile more countries are finding themselves having to raise rates as economies are overheating in growth. (Courtesy of The Big Picture)
+ The American Staffing Association’s staffing index shows that demand for temporary workers continues to rebound. Demand levels are quickly approaching 2006 & 2008 levels. This shows that demand for labor is out there and will soon translate to more robust job reports.
+ Mortgage Applications for purchase rose again for the second week in a row and lends more credence that a floor for demand has been formed.
+ Case-Schiller Home Prices Index shows that property values are stabilized and will help reinforce consumer confidence and spending.
Bearish
- Durable Goods Orders surprised to the downside. The one sector that was keeping this recovery alive is fading. The demand side of the equation is still a no show. The last line of defense for the bulls is looking quite tenuous at this point.
- Chicago Fed’s National Activity Index (one of the best proxies for GDP) came in negative as production and employment related indicators led the deterioration. This further confirms that employment is not making a significant rebound and end-demand has not taken the baton from the “inventory-bounce-led” recovery.
- GDP growth comes in lighter than expected and the recession was deeper than once thought. Meanwhile the consumption sub-component grew at a measly 1.6% vs. an…
Are Treasuries the Last Diversifier Left?
by Zero Hedge - July 30th, 2010 6:29 pm
Courtesy of Leo Kolivakis
Luca Di Leo and Darrell Hughes of the WSJ report, U.S. Growth Slowed in 2nd Quarter:
The U.S. economy slowed in the second quarter as the government said the recession was deeper than earlier believed, adding to concerns over the recovery’s strength.
The Commerce Department Friday said U.S. gross domestic product, or the value of all goods and services produced, rose at an annualized seasonally adjusted rate of 2.4% in April to June. In its first estimate of the economy’s benchmark indicator, the government report showed growth was lifted by business investments and exports. Consumer spending, a key growth engine for the U.S. economy, made a smaller contribution to growth.
Economists polled by Dow Jones Newswires were expecting GDP to rise by 2.5% in the second quarter. Stock futures weakened after release of the data; Standard & Poor’s 500 futures were recently down about 11 points to 1086; Dow Jones Industrial Average futures were off 82 points to 10327.
In the first quarter, the economy grew by 3.7%, revised up from an originally reported 2.7% increase. But growth estimates all the way back to the start of 2007 were revised lower.
The report showed a bright spot continuing in the economy: the growth of business spending on equipment and software. This spending continued to surge, increasing by 21.9% in the second quarter, compared with a 20.4% rise in the first three months. The figures highlight the contrast in the economy between high company profits and a persistently feeble jobs market keeping consumers at bay.
Business spending actually climbed at the fastest rate since 1997, but the big story was the downward revision in the level of real GDP in Q1 2010, a point that Yanick Desnoyers, Assistant Chief Economist at the National Bank, addressed in his comment on the report:
The U.S. economy increased 2.4% in the second quarter, slightly below market expectations. Q2 delivered slower GDP growth compared to Q1 but with a marked acceleration in real domestic demand from 1.3% to 4.1%. We prefer to see a weaker GDP growth due to a rise in imports with strong domestic demand than a weaker GDP growth due to a weaker domestic demand.
…
Are Treasuries The Last Diversifer Left?
by Zero Hedge - July 30th, 2010 6:29 pm
Courtesy of Leo Kolivakis
Luca Di Leo and Darrell Hughes of the WSJ report, U.S. Growth Slowed in 2nd Quarter:
The U.S. economy slowed in the second quarter as the government said the recession was deeper than earlier believed, adding to concerns over the recovery’s strength.
The Commerce Department Friday said U.S. gross domestic product, or the value of all goods and services produced, rose at an annualized seasonally adjusted rate of 2.4% in April to June. In its first estimate of the economy’s benchmark indicator, the government report showed growth was lifted by business investments and exports. Consumer spending, a key growth engine for the U.S. economy, made a smaller contribution to growth.
Economists polled by Dow Jones Newswires were expecting GDP to rise by 2.5% in the second quarter. Stock futures weakened after release of the data; Standard & Poor’s 500 futures were recently down about 11 points to 1086; Dow Jones Industrial Average futures were off 82 points to 10327.
In the first quarter, the economy grew by 3.7%, revised up from an originally reported 2.7% increase. But growth estimates all the way back to the start of 2007 were revised lower.
The report showed a bright spot continuing in the economy: the growth of business spending on equipment and software. This spending continued to surge, increasing by 21.9% in the second quarter, compared with a 20.4% rise in the first three months. The figures highlight the contrast in the economy between high company profits and a persistently feeble jobs market keeping consumers at bay.
Business spending actually climbed at the fastest rate since 1997, but the big story was the downward revision in the level of real GDP in Q1 2010, a point that Yanick Desnoyers, Assistant Chief Economist at the National Bank, addressed in his comment on the report:
The U.S. economy increased 2.4% in the second quarter, slightly below market expectations. Q2 delivered slower GDP growth compared to Q1 but with a marked acceleration in real domestic demand from 1.3% to 4.1%. We prefer to see a weaker GDP growth due to a rise in imports with strong domestic demand than a weaker GDP growth due to a weaker domestic demand.
…
Should China Dump Dollars for Commodities? What about the “Nuclear Option” of Dumping Treasuries? Can Global Trade Collapse?
by ilene - July 30th, 2010 5:59 pm
Should China Dump Dollars for Commodities? What about the "Nuclear Option" of Dumping Treasuries? Can Global Trade Collapse?
Courtesy of Mish
Every time there is a little blip by China in its purchasing or holding of US treasuries, hyperinflationists come out of the woodwork ranting about the "Nuclear Option" of China dumping treasuries en masse.
Such fears are extremely overblown for several reasons.
1. China’s purchasing of US assets is primarily a balance of trade issue. If the US runs a trade deficit, some other countries run a trade surplus and thus accumulate dollars. This is purely a mathematical function as I have pointed out many times.
2. If China dumps treasuries for Euro-based assets, oil-based assets, yen-based assets or for that matter anything other than dollar based assets, the problem merely shifts elsewhere and those buyers would have to do something with the dollars such as buying US treasuries or other US assets. This too is purely a mathematical function.
3. If China dumped treasuries it would tend the strengthen the RMB and China has been extremely reluctant to let the RMB appreciate. Indeed, the US is begging China to revalue the RMB upward, but China resists.
While China may make short-term moves in its reserve holdings, the odds of China dumping treasuries or dollars in size is quite remote.
Capital Tsunami Is The Bigger Threat
Michael Pettis discusses those ideas and more in The capital tsunami is a bigger threat than the nuclear option.
An awful lot of investors and policymakers are frightened by the thought of China’s so-called nuclear option. Beijing, according to this argument, can seriously disrupt the USG bond market by dumping Treasury bonds, and it may even do so, either in retaliation for US protectionist measures or in fear that US fiscal policies will undermine the value of their Treasury bond holdings. Policymakers and investors, in this view, need to be very prepared for just such an eventuality.
… the idea that Beijing can and might exercise the “nuclear option” is almost total nonsense.
In fact the real threat to the US economy is not the dumping of USG bonds. On the contrary, in the next two years the US markets are likely to be swamped by a tsunami of foreign capital, and this will have deleterious effects on the US trade deficit, debt levels, and employment.
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Wanted: One Cool Customer
by ilene - July 30th, 2010 5:50 pm
Wanted: One Cool Customer
Courtesy of Joshua M Brown, The Reformed Broker
Different market environments call for different temperaments, and this tape calls for One Cool Customer. The cross-currents lately are absolutely cartoonish – back-to-back-to-back triple digit rallies while each morning we are treated to fresh evidence of Slouching Housing, Hidden Consumer.
A lot of pros were washed out at the bottom this month when the 8 or 10 month moving averages that they use as stops were violated. Right on cue, the S&P rallied 6% off those lows during July, almost out of spite. The frustration is palpable and people are getting heated.
What to make of it all? I don’t know about you, but I’m looking for cool heads and calm direction – so I’m reading a lot of Leigh Drogen lately on his Surfview Capital blog.
You may know Leigh from the StockTwits stream. He is in this market, not just discussing it. And Leigh Drogen is cooler than Lenny Kravitz in February.
Based on his writing, it appears that he’s back to playing his momentum faves and making mental room for the possibility that the tape is, in fact, getting "healthier"…
It’s hard to sit through pullbacks, but as Jesse Livermore said, the real money is made by sitting, not by coming and going. The last two days have been a tough chop fest where you really don’t want to be trading. I took off a decent amount of long exposure yesterday morning at the top, but not enough to keep me from looking at my book today and cringing, just a little. Even when you know what’s about to take place, and that your plan is to let it happen and buy into it, watching your P&L move against you is never fun. Today my second largest position, and what is a normal position size in $WPRT is down 10%, not fun. Other than that, everything is acting predictably soft, consolidating nice gains from the past week or so. We’re not playing for peanuts this time as has been the case the past three months. It’s time to make some real money as the market has become a bit healthier. Raise your stops along the way and buy the pullbacks.
Whenever sentiment and the direction of the market diverge so drastically as is the case now, the key is to stay cool. For smart, emotionless…
GDP: 3 Years of Massive Downward Revisions; Inventory Adjustments Run their Course; Where to From Here? Fed’s Counterproductive Policies
by ilene - July 30th, 2010 5:09 pm
GDP: 3 Years of Massive Downward Revisions; Inventory Adjustments Run their Course; Where to From Here? Fed’s Counterproductive Policies
Courtesy of Mish
The BEA has finally admitted something anyone with a modicum of common sense already knew: The recession was far deeper and the "recovery" far weaker than previously reported.
Please consider BEA report Gross Domestic Product: Second Quarter 2010 (Advance Estimate) Revised Estimates: 2007 through First Quarter 2010
Real gross domestic product — the output of goods and services produced by labor and property located in the United States — increased at an annual rate of 2.4 percent in the second quarter of 2010, (that is, from the first quarter to the second quarter), according to the "advance" estimate released by the Bureau of Economic Analysis. In the first quarter, real GDP increased 3.7 percent.
The real story in the report was not the continuing ratcheting down of GDP forward estimates, but rather massive backward revisions, most of them negative, dating back three full years.
Revision Lowlights
- For 2006-2009, real GDP decreased at an average annual rate of 0.2 percent; in the previously published estimates, the growth rate of real GDP was 0.0 percent. From the fourth quarter of 2006 to the first quarter of 2010, real GDP increased at an average annual rate of 0.2 percent; in the previously published estimates, real GDP had increased at an average annual rate of 0.4 percent.
- For the revision period, the change in real GDP was revised down for all 3 years: 0.2 percentage point for 2007, 0.4 percentage point for 2008, and 0.2 percentage point for 2009.
- For the revision period, national income was revised down for all 3 years: 0.4 percent for 2007, 0.6 percent for 2008, and 0.4 percent for 2009.
- For the revision period, corporate profits was revised down for all 3 years: 2.0 percent for 2007, 7.2 percent for 2008, and 3.9 percent for 2009.
- For 2007, the largest contributors to the revision to real GDP growth were a downward revision to PCE, an upward revision to imports, and a downward revision to state and local government spending;
- The percent change from fourth quarter to fourth quarter in real GDP was revised down from 2.5 percent to 2.3 percent for 2007, was revised down from a decrease of 1.9 percent to a decrease of 2.8 percent for
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For F^*%’s Sake, Goldman Sachs!
by ilene - July 30th, 2010 4:57 pm
Sure to improve Goldman Sachs’ sh*tty image. – Ilene
For F^*%’s Sake, Goldman Sachs!
Courtesy of Jr. Deputy Accountant
I need IMMEDIATE clarity on this new Goldman rat policy, preferably from a real Goldman rat, as there are just too many questionable words out there for any reasonable Goldman rat to keep up with. Is asshat allowed? How about bonehead? Or **-burping **** slut? I need to know. Like now.
WSJ:
There will never be another s— deal at Goldman Sachs Group Inc.
The New York company is telling employees that they will no longer be able to get away with profanity in electronic messages. That means all 34,000 traders, investment bankers and other Goldman employees must restrain themselves from using a vast vocabulary of oft-used dirty words on Wall Street, including the six-letter expletive that came back to haunt the company at a Senate hearing in April.
OK so obviously "shitty" is out but what about all the almost-profanity out there? What about cocksucker, where does cocksucker stand? That’s not technically a swear word.
That’s one c*cksucking CDO. Yeah OK maybe it is a swear word. Whatever, they can call it the Unicorn and Rainbow Deal and it’s still shitty if you ask me.
It Would Sell Itself If They Had Just Called It “Nookie”
by ilene - July 30th, 2010 4:45 pm
TLP: It Would Sell Itself If They Had Just Called It "Nookie"
Courtesy of Jr. Deputy Accountant
And B&N is making its play by both going old school and looking ahead.
NYT:
In September, the chain will begin an aggressive promotion of its Nook e-readers by building 1,000-square-foot boutiques in all of its stores, with sample Nooks, demonstration tables, video screens and employees who will give customers advice and operating instructions.
By devoting more floor space to promoting the Nook, Barnes & Noble is playing up what it calls a crucial advantage over Amazon in the e-reader war: its 720 bricks-and-mortar stores, where customers can test out the device before they commit to buying it.
“I think that’s everything,” William Lynch, chief executive of Barnes & Noble, said in an interview. “American consumers want to try and hold gadgets before they purchase them.”
Amazon’s Kindle e-reader is for sale on Amazon.com and in Target and HMSHost stores.
Barnes & Noble has already installed small counters in its stores where customers can test out the Nook. The new display space would be much larger, and it would be located next to each store’s cafe, to encourage customers to stop by the Nook space, coffee or tea in hand.
Points for placement, B&N. And points for foresight in making room for the expanded Nook boutiques by clearing out some of the CD bins. (Can you remember the last time you bought a CD?) Pretty soon, B&N will be thinking about moving all the music online.
Just like, uh, Amazon.
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