Guest Post: Lies Across America
by Zero Hedge - November 28th, 2010 10:47 pm
Courtesy of Tyler Durden
Submitted by Jim Quinn of The Burning Platform
Lies Across America
“Every single empire, in its official discourse, has said that it is not like all the others, that its circumstances are special, that it has a mission to enlighten, civilize, bring order and democracy, and that it has a mission to enlighten, civilize, bring order and democracy, and that it uses force only as a last resort.” – Edward Said
The increasingly fragile American Empire has been built on a foundation of lies. Lies we tell ourselves and Big lies spread by our government. The shit is so deep you can stir it with a stick. As we enter another holiday season the mainstream corporate mass media will relegate you to the status of consumer. This is a disgusting term that dehumanizes all Americans. You are nothing but a blot to corporations and advertisers selling you electronic doohickeys that they convince you that you must have. Propaganda about consumer spending being essential to an economic recovery is spewed from 52 inch HDTVs across the land, 24 hours per day, by CNBC, Fox, CBS and the other corporate owned media that generate billions in profits from selling advertising to corporations schilling material goods to thoughtless American consumers. Aldous Huxley had it figured out decades ago:
“Thanks to compulsory education and the rotary press, the propagandist has been able, for many years past, to convey his messages to virtually every adult in every civilized country.”
Americans were given the mental capacity to critically think. Sadly, a vast swath of Americans has chosen ignorance over knowledge. Make no mistake about it, ignorance is a choice. It doesn’t matter whether you are poor or rich. Books are available to everyone in this country. Sob stories about the disadvantaged poor having no access to education are nothing but liberal spin to keep the masses controlled. There are 122,500 libraries in this country. If you want to read a book, you can read a book. The internet puts knowledge at the fingertips of every citizen. Becoming educated requires hard work, sacrifice, curiosity, and a desire to learn. Aldous Huxley describes the American choice to be ignorant:
“Most ignorance is vincible ignorance. We don’t know because we don’t want to know.”
It is a choice to play Call of Duty on your PS3 rather than reading Shakespeare. It is…
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Euro Sells Off Following Comments By Banque De France Governor Noyer
by Zero Hedge - November 28th, 2010 10:27 pm
Courtesy of Tyler Durden
…But did traders pick the wrong currency to sell? Tonight’s prompt sell off in the Euro is now being attributed to comments by Banque de France Governor Christian Noyer who said monetary easing creates the potential for global imbalances. While it is true that Noyer stated that The European Central Bank will keep its emergency measures as long as needed, this is not news. Obviously all of Europe is now reliant solely on the ECB’s bidding of last resort for each and every failed bond auction and to prevent bond routs in the secondary market. Again: this is not news. Yet what is interesting is that instead of selling off the EUR, traders may have picked the wrong currency. To wit: Noyer was actually blasting the pegged CNY, which means that the CNY-derivative currencies, the AUD and the NZD should have taken the brunt of tonight’s action, and in the wrong direction at that. And, ultimately, the target was the USD. The moment this became clear (9pm Eastern) is when gold took off.
Confirmatory headlines:
*NOYER: MORE FLEXIBLE YUAN WILL HELP IT PLAY BIGGER WORLD ROLE
*NOYER SAYS YUAN ISSUE WON’T BE RESOLVED RIGHT AWAY
*NOYER SAYS CURRENCY, COMMODITY, CAPITAL-FLOW VOLATILITY RISING
*NOYER SAYS NATIONS CHALLENGING EACH OTHERS’ POLICY NOT GOOD
*NOYER URGES DE-LINKING RESERVES GROWTH, EXCHANGE-RATE POLICY
*NOYER URGES EFFORT TO ADDRESS GLOBAL CAPITAL FLOW VOLATITILITY
*NOYER SAYS MONETARY EASING CREATES POTENTIAL FOR IMBALANCES
*NOYER SEES DOUBT ON CONSISTENCY OF MAJOR ECONOMIES’ STRATEGIES
*NOYER: SOME VOLATILITY MAY BE INDUCED BY OFFICIALS’ POLICIES
In other words, Noyer indirectly attempted to push the EURUSD. And failed… Was that the extent of Europe’s intervention for the evening?
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Investor Sentiment: Smells Like A Top
by Zero Hedge - November 28th, 2010 10:06 pm
Courtesy of thetechnicaltake
It was only 2 weeks ago that the “dumb money” indicator and Rydex market timers were bullish to an extreme degree and company insiders were selling shares at a clip that had not been seen in 4 years. In most instances, these are bearish signals. The exception would be the scenario where too many bulls actually leads to a bull market. This is what happened in 1995, 1998/ 1999, 2003 and 2009. Will this scenario be repeated in 2010? It is seeming less and less likely, and if this is the case, then it is worth repeating what I have stated for 3 weeks in a row: “If the market hasn’t topped out already, it should do so within a couple of percent of the recent highs. Rallies should be sold and stops tightened up. The market is prone to sudden sell offs. There will be better risk adjusted opportunities to buy in the future.“
{click on images to make larger}
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Play China’s Yuan From the Long Side
by Zero Hedge - November 28th, 2010 9:46 pm
Courtesy of madhedgefundtrader
Any doubts that China’s Yuan is a huge screaming buy should have been dispelled when news came out that it had displaced Germany as the world’s largest exporter.
The Middle Kingdom shipped $1.2 trillion in goods in 2009, compared to only $1.1 trillion for The Fatherland. The US has not held the top spot since 2003. China’s surging exports of electrical machinery, power generation equipment, clothes, and steel were a major contributor. German exports were mired down by lackluster economic recovery in the EC, which has also been a major factor behind the weak euro. Sales of luxury Mercedes and BMW cars, machinery, and chemicals have plummeted.
Four back to back interest rate rises for the Yuan, and a constant snugging of bank reserve requirements by the People’s Bank of China, have stiffened the backbone of the Middle Kingdom’s currency even further. That is the price of allowing the Federal Reserve to set China’s monetary policy via a fixed Yuan exchange rate. Is certain that Obama’s stimulus program is reviving China’s economy more than our own.
The last really big currency realignment was a series of devaluations that took the Yuan down from a high of 1.50 to the dollar in 1980. By the mid nineties it had depreciated by 84%. The goal was to make exports more competitive. The Chinese succeeded beyond their wildest dreams.
There is absolutely no way that the fixed rate regime can continue, and there are only two possible outcomes. An artificially low Yuan has to eventually cause the country’s inflation rate to explode. Or a global economic recovery causes Chinese exports to balloon to politically intolerable levels. Either case forces a revaluation.
Of course timing is everything. It’s tough to know how many sticks it takes to break a camel’s back. Talk to senior officials at the People’s Bank of China, and they’ll tell you they still need a weak currency to develop their impoverished economy. Per capita income is still at only $3,000, less than a tenth of that of the US. But that is up a lot from a mere $100 in 1978.
Talk to senior US Treasury officials, and they’ll tell you they are amazed that the Chinese peg has lasted this long. How many exports will it take to break it? $1.5 trillion, $2 trillion, $2.5 trillion? It’s anyone’s guess.
One thing…
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The Definitive Unwrapping Of The “Irish Package”
by Zero Hedge - November 28th, 2010 9:25 pm
Courtesy of Tyler Durden
Everything you desired to know about the “Irish Package” and then some, dissected with clinical post-mortem precision by Goldman’s Francesco U. Garzarelli. We can only hope the Spanish, Italian and French packages are deemed more satisfactory by the market.
On the Irish Package and EMU Sovereign Debt
In an emergency meeting this afternoon, EU Finance Ministers and the IMF have agreed to extend financial support to Ireland. According to EU Commissioner Rehn, no ‘haircuts’ will be applied to holders of senior bonds issued by the Irish banks. However, we would caution that additional liability management transactions are still likely at the major Irish banks. The agreement will be formalized in coming weeks in a Memorandum of Understanding.
We think the Irish deal will lead to a moderate compression in Irish government bond spreads. The encouraging elements are the relatively speedy negotiations under the emergency framework agreed this Summer, the emphasis given to the recapitalization of domestic banks, and the long maturity of the loans. We provide details below.
Separately, the Eurogroup (comprising the finance ministers of EMU member states) issued a statement summarizing a political agreement on a new sovereign debt crisis resolution mechanism applicable from 2013, forming part of a broader overhaul of the Euro-area fiscal governance framework. The plan envisages a permanent conditional funding facility (ESM), shaped along the lines of the EFSF but of yet unknown size.
In order to gain access to external conditional funding, an EMU sovereign will in the future need to pass a debt sustainability test conducted by the EC and the IMF, in liason with the ECB. A failure to pass would result in debt restructuring involving private sector participation. To facilitate the process, from June 2013, all bonds issued by the EMU member states will include collective action clauses, as is currently the case in the US and the UK. ESM funds will be junior to IMF loans, but senior to existing bondholders.
The ministers’ announcement clearly states that no private sector participation in restructuring procedures will apply ahead of mid-2013. This will validate the upward sloping term structure of peripheral EMU sovereign bond spreads, particularly up to 5-yr maturities. For currently outstanding bond redeeming after June 2013, the impact should be broadly neutral, as the probability of a credit event does not change in light of this announcement, while the benefits from a…
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Weekly Recap, And Upcoming Calendar – $39 Billion In Monetizations In The Next Week
by Zero Hedge - November 28th, 2010 9:06 pm
Courtesy of Tyler Durden
Per Goldman Sachs
Week in Review:
It was another week of nervousness, choppy price action and gradually rising risk aversion. Most of the concerns were linked to the evolving European sovereign debt crisis, the gradual escalation of the conflict on the Korean peninsula and China policy tightening in response to rising inflationary pressures. Macro data was mixed to good, with outstanding European business surveys, further improvements in the US labour market with a sharp drop in weekly claims below the range but also a worrying drop in durable good orders.
In response to these developments pro-cyclical currencies dropped across the board, including the EUR, the AUD and many NJA currencies, whereas the USD strengthened notably. Since the Fed QE announcement, the broad trade weighted USD has now rallied by about 3%, correcting half of the 6% sell-off which occurred in anticipation of the Fed decision.
Week Ahead:
The upcoming week will be dominated by the same key themes as last week. News on the European sovereign debt crisis, China tightening, the Korean conflict and macro data will remain in the limelight. However, with key US releases including Chigaco PMI, ISM and payrolls data watching may become relatively more important in the coming week. Then again, there is always the trust old FRBNY, which kicks off the reflation trade with not one but two POMOs tomorrow: altogether $39 billion in monetizations coming up in the next week.
Monday, 29th
Hungary MPC – policy rate to stay unchanged at 5.25% according to GS and consensus forecasts.
Swedish GDP (Q3) – GS and consensus expect a +1.2% increase qoq.
Euroland Business confidence (Oct) – After the good PMIs recently, we expect this to increase to +3 compare to +2 for the consensus and 0 in the last reading.
US Dallas Fed business survey (Nov) – Given the huge range of surprises in the Philly Fed and Empire surveys, there is probably more focus on the other regional surveys than normally. Consensus expects a moderate increase to 3.0 from 2.6.
Also interesting – Swedish retail sales (Oct), Korean industrial production (Oct).
Tuesday 30th
Chicago PMI (Nov) – GS and consensus expect a 60 reading, virtually unchanged from 60.6 in October.
Conference Board Consumer Confidence (Nov) – Consensus expects a small uptick to 52.6, similar to the last U Michigan survey.
Case Shiller Home Price index (Sep) – With…
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Guest Post: Ireland, Please Do the World a Favor and Default
by Zero Hedge - November 28th, 2010 8:57 pm
Courtesy of Tyler Durden
Submitted by Charles Hugh Smith from Of Two Minds
Ireland, Please Do the World a Favor and Default
Ireland would save the world from much misery by defaulting now and driving the vampire banks into liquidation.
The alternative title for today entry is: Ireland, please drive a stake through the heart of the vampire banks which have the world by the throat. The entire controlled demolition of the Eurozone’s finances can be summed up in one phrase: privatize leverage and profits, socialize losses and risk.
The basic deal is this: protect the bank’s managers, shareholders and bondholders from any losses, while heaping the socialized losses and risks on the taxpayers and citizens.
While there are murmurings of “forcing bondholders to share the pain,” any future haircut will undoubtedly be just for show, while the Irish pension funds are gutted to bail out the banks.
EU Outlines Bond Restructuring Plan (WSJ.com)
Europe Goes “Completely Mad” At Suggestion Of Irish Default Demanded By 57% Of Irish Population (Zero Hedge)
Here is a chart which illustrates the dynamic at play in Greece, Ireland and indeed, the rest of the world as well: leveraged speculation and mal-investment lead to asset deflation and collapse.
Here is a chart which illustrates how asset deflation leads to taxpayer-funded bank bailouts and then sovereign default. It’s fairly self-explanatory:
It’s rather straightforward: as asset bubbles rise, they enable vast leveraging of credit and debt. Once mal-invested assets collapse in value, then the debt remains, unsupported by equity or capital.
As the Financial/Political Elites transfer these catastrophic losses onto the citizenry, they set off a positive (runaway) feedback loop: the Central State austerity required to pay the borrowing costs of the bailout sends the economy into recession, which reduces borrowers’ incomes, triggering more defaults which further sink housing prices. As prices continue falling, bank capital declines, requiring ever-larger bailouts to provide the banks with a simulacrum of solvency.
Austerity measures must be tightened to channel more of the citizens’ incomes to the banks, which further suppresses the economy, lowering tax revenues and incomes, which leads to more austerity to fund more bailouts, and so on, until the haggard remnants of a once-wealthy citizenry finally rebel against their Financial/Political Overlords and topple the government which arranged the bailout.
A new populist…
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Following Hungary And Ireland, France Is Next To Seize Pension Funds
by Zero Hedge - November 28th, 2010 8:19 pm
Courtesy of Tyler Durden
If the recent Hungarian “appropriation” of pension funds, and today’s laughable Irish bailout courtesy of domestic pension funds sourcing 20% of the “new” money was not enough to convince the world just how bankrupt the entire European experiment has become, enter France. Financial News explains how France has “seized” €36 billion worth of pension assets: “Asset managers will have the chance to get billions of euros in mandates in the next few months for the €36bn Fonds de Réserve pour les Retraites (FRR), the French reserve pension fund, after the French parliament last week passed a law to use its assets to pay off the debts of France’s welfare system. The assets have been transferred into the state’s social debt sinking fund Cades. The FRR will continue to control the assets, but as a third-party manager on behalf of Cades.” FN condemns the action as follows: “The move reflects a willingness by governments to use long-term assets to fill short-term deficits, including Ireland’s announcement last week that it would use the country’s €24bn National Pensions Reserve Fund “to support the exchequer’s funding programme” and Hungary’s bid to claw $15bn of private pension funds back to the state system.” In other words, with the ECB still unwilling to go into full fiat printing overdrive mode, insolvent governments, France most certainly included, are resorting to whatever piggybanks they can find. Hopefully this is not a harbinger of what Tim Geithner plans to do with the trillions in various 401(k) funds on this side of the Atlantic.
More from FN on how first France, and soon every other socalized pension regime, will continue to plunder a nation’s life saving to fund short-term deficits:
The decision has prompted a radical restructuring of the FRR’s investments. The new strategic investment plan, which will be released in the new year, will see a rapid reduction in its 40% allocation to equities and a shift to cash and short-term government bonds, according to a source close to the situation.
There will be a focus on liability-driven investment, where asset managers are told to minimise risk by matching assets closely to liabilities.
The transfer of the FRR’s assets to Cades is controversial. Force Ouvrière, a trade union confederation, accused the government of “provoking the clinical death” of the FRR.
The decision was
…
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As Sliding EURUSD Takes Out Friday Lows, Market Response To Bailout Is “Concerning”
by Zero Hedge - November 28th, 2010 7:43 pm
Courtesy of Tyler Durden
Despite its illiquidity, The FX market has been the first and earliest indicator of how the market is taking the Irish bailout. So far it has been a complete abortion, and after opening in the mid 1.33 in the interbank market, the EURUSD has just touched on 1.3196, and is about to take out Friday support. The vigilantes refuse to go away. In addition to LCH margin hikes on Portugal and Spanish bonds tomorrow which now appears inevitable, we continue to expect that FX margin requirements will be hiked over the next few days across the board. Lastly, expect to hear rumors of secret service chasing any and all bond shorts/CDS longs. The war for the Eurozone’s survival is now on in earnest.
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Drop Dead in the Future? What About Today?
by ilene - November 28th, 2010 7:19 pm
Courtesy of Bruce Krasting
The surprising (to me) result of the Irish bailout is the related agreement by EU leaders to force bond-holders to face a haircut should an EU state become “insolvent” after 2013. I think this was done in an effort to placate the many voices that are saying “no” to the state bailouts. It sounds as if the leaders are responding; “We will fix this problem now, but in the future will let the chips fall on the bondholders back.”
That may sound like a reasonable approach. I see some unintended consequences. From the WSJ:
Creditors of euro-zone countries that face insolvency after 2013 will see their bond holdings restructured.
Okay, we get that. After 2013 holders of bonds of troubled countries get hit. But what happens between now and 2013? Again from the Journal:
Ms. Merkel has stressed in that the proposal would affect only bonds issued from late 2013.
Wait a second. If bonds issued after late 2013 are at risk, does that mean that bonds issued before 2013 are not at risk? That sure is what it sounds like to me.
The bond market is going to call this bluff. There are Greek, Irish and Spanish bonds that are trading at 9%, 7% and 5% respectively that are the buy of a lifetime if I am reading this right. Who wouldn’t want to buy a nice 9%, ten-year Greek bond that was also guaranteed as to payment by the big hitters of the EU? A “fully” guaranteed bond would trade closer to 3% than 9%.
So I am left confused by this development. Other questions:
-If the “at risk” provisions for all existing EU sovereign debt is somehow eliminated you have to ask; who is making the promise that all that debt is money good? The ECB? I would think not. We are talking of a few trillion Euros if you add in Spain and Italy. You need a big stick to guarantee that nut.
-What the hell is going to happen in 2013? By setting a “date certain” situation where the status of a borrower changes from one day to the next is just begging for a crisis. Depending on the circumstances one of the countries could be blocked out of the credit market overnight. This plan is a set-up for failure, not success.
It’s possible that…
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Philip R. Davis is a founder Phil's Stock World, a stock and options trading site that teaches the art of options trading to newcomers and devises advanced strategies for expert traders...
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