Bill auctions: 13 week bid-to-cover 2.79, 26 week 2.72.
Both the lowest btc in over three months.
Gee, on a day when the market is down 24 handles on the SPX there's no huge demand for Treasuries?
Hmmmm.... gee, let's see, we seem to be a bit short of money here.
Short on the Treasuries, short on equities, short on COMMODITIES.
Remember what I was talking about with liquidity drains a week and change ago? Two events detected a few days apart, with today being "T + 3" on the second one (yes I know that other markets don't settle like stocks, but there is USUALLY a 2-3 trading day delay between when these things are initiated and when they show up in the markets.)
The Fed is quickly proving that it is nothing more than this:
I bet that if the movie were shot today that guy would be standing there in a pair of boxers.
I hope you folks who got all giddy about the SPX in the 900s and the DOW up around 8,800 took the opportunity to either sell or hedge.
While there is no guarantee that this pattern will continue the fact remains that liquidity matters and there is little point in trying to argue that the primary fuel for the rally off the March lows has been unprecedented system liquidity provided by Sir Feds-a-lot.
The problem is that Treasury has been and continues to suck all the oxygen out of the room with their unprecedented issuance of debt to fund Obama's silliness in the form of his budget "priorities" and the raw handouts to banking interests, much of which is apparently going to show up in Goldman Sachs bonuses.
Again, to put this in perspective this 7-day window has $165 billion in issuance. The entire S&P 500 - all 500 stocks - has been trading in the $2-2.5 billion a day range for the last month or so. That's the capital flow that is represented by all trades in all 500 stocks.
There are of course lots of other stocks, but in aggregate the S&P 500 posts the largest dollar volume on a typical day by a significant margin.
You simply cannot issue $165 billion in Treasury Debt and expect it not to have a major impact on system liquidity. It is not possible. That which is spent on one thing (in this case Treasury bonds) cannot be spent on another (in this case stocks.)
The Fed cannot "monetize" this debt without creating an instant dislocation in the Treasury market - their games thus far have produced a SMALL rumbling of trouble there, but nothing like an outright monetization campaign would produce.
Bernanke and Obama are backed into a corner, exactly as I predicted would happen. In order to continue to issue like this in the Treasury market while not driving Treasury rates to the moon money will have to be "scared" into bonds - which means blowing up the stock market.
Sorry folks, but those "green shoots" are in fact marijuana plants and our President along with his economic advisers have been smoking 'em.
You have to love Goldman Sachs:
Staff at Goldman Sachs staff can look forward to the biggest bonus payouts in the firm's 140-year history after a spectacular first half of the year, sparking concern that the big investment banks which survived the credit crunch will derail financial regulation reforms.
A lack of competition and a surge in revenues from trading foreign currency, bonds and fixed-income products has sent profits at Goldman Sachs soaring, according to insiders at the firm.
Nothing like a little taxpayer money funneled through AIG to add to the pool, right?
In April, Goldman said it would set aside half of its £1.2bn first-quarter profit to reward staff, much of it in bonuses. It is believed to have paid 973 bankers $1m or more last year, while this year's payouts are on track to be the highest for most of the bank's 28,000 staff, including about 5,400 in London.
Let's remember that Goldman got roughly $10 billion in AIG-funneled money to "settle" CDS that their CEO said was a fully-hedged position and which would have had no material impact if AIG had gone down, mostly because they had collected nearly all of the hedge before AIG got in serious trouble.
That is, they got paid twice - once with their hedge (good move guys) and again by government fiat, directed by Henry Paulson who coincidentally used to run Goldman.
Also note the size of the first-quarter profit, multiply by four (assuming equally good results) and then compare against the "extra" payout through AIG to figure out whether there would be any bonus pool absent that payment.
Looks to me like the US Taxpayer is funding all of Goldman's bonuses, never mind this ditty:
Last week, the firm predicted that President Barack Obama's government could issue $3.25tn of debt before September, almost four times last year's sum. Goldman, a prime broker of US government bonds, is expected to make hundreds of millions of dollars in profits from selling and dealing in the bonds.
Nice, eh? Do Treasury's bidding, get paid for it, get an extra $10 billion from the taxpayer as a gift to cover a bet you had already hedged against default, and pocket it all.
Change we can believe in - yep, we'll steal even more than we did under The Bush Administration!
Disclosure: No related company-specific positions.
Stanford's "dodge" of regulators is apparently going to lead to at least one criminal indictment of a regulator, either here or in Antigua (and perhaps both):
In a telephone interview Friday, the attorney general of Antigua and Barbuda, Justin Simon, said he would consider any United States request for extradition of King, who has been on leave since March. Simon said the Antiguan government was conducting an independent investigation of the official.
"This concerns me greatly because it reflects adversely on the commission," he said, referring to the Financial Services Regulatory Commission. But, he added: "I think I am satisfied" that King "hid things" from the commission's board "and got involved in a personal relationship with Stanford".
He said it was "a distinct possibility" that King would also be prosecuted in Antigua.
SEC officials said that while foreign nationals were charged with some frequency, it was rare if not unprecedented to charge a foreign financial regulator with fraud.
How about if we start by charging some American regulators with fraud?
You know, like this, which I referenced in a previous Ticker:
May 21 (Bloomberg) -- The Office of Thrift Supervision authorized “inappropriate” backdating of capital by six institutions, including IndyMac Bancorp Inc., that led to “misleading financial reporting,” the U.S. Treasury inspector general said in a report.
Oversight failures were “very serious” and included a senior deputy director in August instructing a lender to backdate and a regional director authorizing revised accounting, according to the report today. OTS left unchanged revisions at three unidentified thrifts. Republican Senator Charles Grassley said the actions were “completely unacceptable” and a congressional subcommittee planned an investigation.
It’s “alarming that such high-level OTS officials were not only aware” of two revisions in capital reports, but “directed or authorized” the backdating, Susan Barron, audit director in the Office of Inspector General, said in the report that didn’t identify five of the six lenders. IndyMac’s August revision on capital helped the lender avoid OTS restrictions.
Alarming eh?
That's all we have to say about it?
Alarming?
Hmmmm.....
PS: Stanford's alleged fraud appears to have cost investors $8 billion or so. The actions of the OTS in this regard cost the FDIC's insurance fund - that is, the taxpayer - far more than that.
Where are the indictments?
Ok, ok, I'll spend about 30 seconds of digital ink on this one, since I was asked to and it is so simple to demolish their arguments.
ECRI is claiming that:
"With WLI growth rocketing up almost 30 percentage points in six months, it's virtually pounding the table about the recession ending this summer," said Lakshman Achuthan, managing director at ECRI.
Yeah ok.
In the same press release:
It was ECRI's highest yearly growth reading since the week ended October 26, 2007, when it stood at minus 0.6 percent.
How'd that stock market forecast work out if you believed in only a "small" decline in October of 2007? Anyone remember where the SPX and DOW were then? Good. Where are they now?
The weekly index rose in the latest week because of higher commodity prices and stronger housing activity, Achuthan said.
Uh huh. Higher indirect taxes on over-encumbered and laid off consumers (which is what higher commodity prices do) is a sign of positive economic conditions to come?
Again - how did that work out in 2008, when oil went to $150/bbl?
By the way, the reading that they now say is "about where it was in October of 2007" led them to say this at that time:
"With GDP, nonfarm jobs, personal income, and manufacturing and trade sales all at record highs in their latest readings, .... the key coincident indicators that determine whether the economy is in a recession show quite clearly that it is not..... In other words, future data revisions aside, there is little indication that a recession has already begun.
and
The difference this time is that even through the shocks have arrived, good leading indexes like the USLLI are not yet showing recessionary weakness, whereas in the past such recessionary vulnerability was followed by the shock. This is a key reason why the economy is not yet in a recession.
.... However, this weakness is not pronounced, pervasive and persistent enough to be recessionary.
They then go on to hedge their bets, like all people who want to be able to say they were right no matter what happens.
Why do I bother with people like this; my predictions are still out there for 2008. More to the point, however, this is what I said in late October, roughly when their newsletter was released:
- Your house is going to go down in value by 30-50%. If you bought it after 2003, you will be underwater for certain. If you have more out in mortgage(s) and HELOC(s) than its 2003 value, you will be paying for an asset that is worth less than you owe. That's a fact. If you are forced to move in that situation, you will be rendered bankrupt. Congratulations.
- The stock market will collapse. The S&P will see 800 again. Believe it. It will come. Perhaps not tomorrow, but it will happen. It is inevitable. It could be far worse. We could see 500 on the S&P 500. If you don't get a crash, it will only be because your money will be worthless; a 1500 S&P with a 50% devaluation of your purchasing power is the same as a 750 S&P - and buys just as much. That's the game being run. It won't work - we'll get a devalued currency and a market crash - the worst of all worlds.
- We will get a deep, long recession. Believe it. It is coming. I know you don't want to hear it, but its true. It is inevitable. It could have been a deep, sharp but short recession, but Bernanke and the Federal Government will not make the right choices and you, collectively, have not put any material amount of pressure on them to do the right thing. Count on that. As a result, the next decade is going to suck.
- Foreigners will not come in and save our markets and assets. There are other parts of the world that haven't mortgaged their futures. Oh sure, China and India have problems - big ones - in their own asset bubbles. But they, along with the Japanese, at least save some of their incomes. They've got the base to build from. We do not. The "hot money" will go where it can earn a return and where there's something to build ON. That's not the United States any more. All we have are 6,000 nuclear weapons.
Along with a couple more things, including a prediction for $5/gasoline (just missed on that one, but the ramp from October 07 was still pretty severe.)
Oh, unlike ECRI, I don't redact my "public" stuff either. By the way, why DID they black that stuff out?
You tell me: how'd I do?
And guess what - unlike ECRI, I don't charge for those forecasts either. Mine are free and they're not "black boxes" - they're observations and predictions, with the reasons for my belief set forth where you can evaluate them.
Click for full-screen.... warning, contains salty language.
(Credit Obseedian on the forum)
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