2nd Carrier Arrives: CVN 70 Carl Vinson Joins CVN 74 Stennis In Arabian Sea, Off Straits Of Hormuz
Submitted by Tyler Durden on 01/11/2012 - 14:33 Hong KongWhile we await for Stratfor's website to get back up and be fully operational, and provide its weekly aircraft carrier location updates, we have to go low tech, and rely on the Navy itself for an update of US naval aircraft carrier assets. We were not surprised to discover that the solitary CVN 74 John Stennis which for the past 2 months has been all alone in the Arabian Sea, just off the Straits of Hormuz, has finally found its new soulmate CVN 70 Carl Vinson which has arrived by way of Hong Kong, now that CVN 77 Geroge H.W. Bush is back in port. And so the US now has two carriers where there was one, and the US is quite ready to proceed with its joint-Israeli wargame operation titled simply enough "Prophet".
The Cost Of Recoupling: 235 S&P Points
Submitted by Tyler Durden on 01/11/2012 - 14:11 Recoupling
Since late November and more so mid-December, the US equity market (and broad risk drivers) have decoupled from Europe's woes. The fundamental unreality (as we discussed here, here, and here) of this lagging performance and over-enthusiastic economist extrapolations has pushed the S&P to over 235 points over a 'fair-value' of 1050 (based on EURUSD's price). Even on a conservative basis - from the last real-decoupling point on 12/21, the S&P still stands almost 150 points 'rich' to a global-slowing European recession-dragging USD-based-earnings crushing 1.27 EURUSD.
OJ Up.... Then Down
Submitted by Tyler Durden on 01/11/2012 - 13:43
After soaring yesterday, Orange Juice is plunging today, which more than anything should remind us that despite all the "financial innovation" and Fed intervention and manipulation, there is nothing really "new" on Wall Street.
US Breaches Debt Ceiling Even More; Issues 10 Year Debt At Record Low Yield, Directs Surge
Submitted by Tyler Durden on 01/11/2012 - 13:14 Debt Ceiling
America may have breached its debt ceiling, but that is certainly not preventing it from issuing debt, placing another $21 billion in 10 Year bonds in a reopening, which priced 1.5 bps through the WI tail of 1.915% or at 1.90%. This is merely the latest record low yield in the history of the auction. The Bid To Cover came at 3.29: not a record, but certainly one of the top 5 highest. Oddly enough, while the Directs disappeared from yesterday's 3 Year auction, today they surged, coming at double last month's 8.4% at 17.4%, the highest since the August post-downgrade auction. Primary Dealers accounted for 44.3% with Indirects coming in at a very weak 38.3%. Still, the take home is that in the past two days, the US has raised over $50 billion in debt with no capacity, and instead is plundering from government retirement accounts, just like it did back in July 2011 at the first, but not last, debt ceiling theater. SSDD.At least we know what it takes to get new record low yields: just keep breaching the debt ceiling - guaranteed way to raise 30 Year debt at 0.00% in a few months.
Guest Post: Why 308,127,404 Americans Are Going To Get Hosed
Submitted by Tyler Durden on 01/11/2012 - 12:48 Guest Post Precious Metals Reality SPY Treasury DepartmentLast week, the US government’s Financial Crimes Enforcement Network (FinCEN), an agency of the US Treasury Department, published its 2011 annual report. There are a few numbers that are pretty startling. We’ve discussed before that FinCEN is the executive agency tasked with ensuring that every US banker is an unpaid government spy through Suspicious Activity Reports. A Suspicious Activity Report, or SAR, includes details of any transaction that may be deemed ‘suspicious’. Naturally, there’s no clear guidance on what is/is not considered suspicious. Banks, brokerages, money service businesses, precious metals dealers… even casinos are required by law to fill them out. If you withdraw an unusual amount of cash from your bank account, that could be deemed suspicious. If you set up a new payee in your billpay service, that could be deemed suspicious. Anything and everything is fair game. Banks and other businesses who do not fill out SARs face hefty penalties, including imprisonment. If they disclose to a customer that s/he is the subject of a SAR, they have hefty penalties, including imprisonment. When push comes to shove and they have to choose between a nasty penalty, or submitting a SAR about your unusual cash withdrawal, which option do you think they’ll pick? Unsurprisingly, nearly 1.5 million ‘suspicious activity reports’ were filed across the US banking system in 2011, well over twice the number reported in 2004. On top of this, there were an additional -14.8 million- ‘currency transaction reports’ filed in 2011, a 6% jump over last year. It’s an unfortunate trend which highlights not only the end of financial privacy, but also the massive amount of data being collected by the government to keep tabs on its citizens.
Europe Closes Weak After Hopeful Start
Submitted by Tyler Durden on 01/11/2012 - 12:34 British Pound Derisking France Gross Domestic Product Investment Grade Italy Sovereigns
Following yesterday's extravaganza in European credit markets, which saw XOver (European high-yield credit) surge to highs year-to-date (wiping out a week's worth of leaking wider in one fell swoop), today's open suggested some follow-through but as macro data combined with France downgrade rumors (denied rapidly) sovereign and corporate credit markets sold off quite rapidly into the close. Interestingly, financials (senior and sub debt) managed to hold gains from yesterday's close as XOver and Main (Europe's investment grade credit index) along with the broad stock market lost ground to close near their lows (though well off yesterday's open still). EURUSD (holding under 1.27 at the EUR close) weakened fairly consistently after Spanish industrial output and German GDP did nothing to inspire and while sovereign spreads (Spanish and Italian mostly) were outperforming, as the French rumors hit, they sold off rapidly (France and Italy back to unchanged). As usual into the close there was a modest risk rally and sovereign spreads leaked modestly tighter (by around 6-9bps) with France underperforming but we did not see that bounce in corporate credit. The weakness in 'cheap-hedge' investment grade credit suggests risk appetite is not returning and decompression trades are back in vogue after yesterday's snap and perhaps a growing realization that no PSI agreement is looming anytime soon.
The Coercive Greek Restructuring Is Now Imminent: UBS Explains What It Means For Europe (Hint: Nothing Good)
Submitted by Tyler Durden on 01/11/2012 - 12:11 Bond CDS Central Banks default European Central Bank France Greece Gross Domestic Product International Monetary FundOver the weekend, and before it became a popular topic in the mainstream media and an issue of political debate, UBS first among the "non-fringers" discussed the topic of not only a coercive Greek restructuring (i.e., one in which there is no "agreement" of the bondholders) but that it is, in fact, imminent. Since then, the din over this issue has escalate with reports over the past two days, that Greece may enforce collective action contracts as well as force bondholders into a deal, since various hedge fund hold-outs have been holding Europe hostage, a development foreseen here in mid-2011. Unfortunately for Europe, which apparently has no idea what is going on, and whoever is advising it financially is certifiably an idiot, the coercive path is precisely what the end outcome may end up being. Naturally, while this is preciseley what should have happened long ago (and saved taxpayers everywhere hundreds of billions in Greek bailout funds), the fact is that it goes contrary to everything the imploding status quo and collapsing ponzi house of cards is doing to prevent an all out catastrophe, as a coercive transaction actually will have unpredictable and adverse spill over effects in virtually every aspect of European financial markets, which in turn will migrate to the US. The good news is that CDS, despite the constant attempts of the crony and corrupt ISDA otherwise, will once again become an instrument of hedging, which ironically in the long run will be stabilizing. But not before some serious short-term fireworks. UBS explains.
RANsquawk US Afternoon Briefing - Stocks, Bonds, FX etc. – 11/01/12
Submitted by RANSquawk Video on 01/11/2012 - 12:10 ETC RANSquawkChina's Debt Maturity Problem Has Arrived
Submitted by Tyler Durden on 01/11/2012 - 11:12 Bond China Credit Conditions ratings Reality Yuan
We have discussed the seemingly irrepressible demand to lend companies money (for the implicit FX trade) in Dim Sum bond format a number of times and in the last few weeks yields on these bonds have risen further as the reality of a notable contraction in mainland credit conditions (along with a rationalization of the lax restrictions within the bonds themselves) starts to hit investors. Overnight, Bloomberg reports that Shandong Helon, a Chinese fiber maker and the first to lose its investment-grade rating (fallen angel), missed a 397mm Yuan loan payment, only serving to further stoke fears of the knock-on effects of a slowing Chinese economy dragged lower by global growth fears (except for the US which is off in faerie land), as ratings downgrades surged last year. Incredibly, no Chinese company has defaulted on its domestic debt since the country's central bank started regulating the market in 1997, according to Moody's but as Bloomberg notes, there is some 2 trillion yuan of bank facilities set to mature in 2012, compared to 33 billion yuan of bonds - leaving a very crowded-out market of shorter-dated debt rolls soaking up what little credit is willingly available. With Dim-Sum bond yields (based on our index of sizable issues) up over 30% (80bps) from early September and European-based USD strength slowing any CNY-FX decay these holders hoped for, we agree with Gao Zhanjan (of Citic Securities), via Bloomberg, that "there will slowly be more substantive defaults in the future".
Any North Koreans Found Not To Have Cried Hystrically At Kim Jong-Il's Passing May Spend 6 Months In A Labor Camp
Submitted by Tyler Durden on 01/11/2012 - 10:31 Capital Markets KIM Reality
Well, it is a slow news day, so we focus on the patently absurd, such as this news out of Interfax confirming that TheOnion can now close up shop as reality is far, far better. From Interfax: "North Korean citizens, who did not take part in the mourning ceremonies for the country’s late Leader Kim Jong-il, are facing up to six months in labor camps, Interfax reported January 11. According to the South Korean media sources, “People’s Courts” took place all over the country starting December 29 to condemn those who did not show enough emotion after the death of “the great leader” Kim Jong-il. The People’s Court hearings were reportedly over by January 8. The behavior of those people, who criticized the three-generation principle of ruling the country, was also a matter of discussion during the court meetings. It was reported earlier that 2012 calendars were fully taken out of stores because the date of death of the late Leader Kim Jong-il was not marked in them." That said, we doubt anyone will punish the capital markets for crying hysterically should Bernanke's printer finally kicks the ghost.
FoxConn Workers Threaten With Mass Suicide If Working Conditions Aren't Fixed
Submitted by Tyler Durden on 01/11/2012 - 10:05 Apple China fixed
FoxConn, which at last count had well over 1 million workers and rising, appears to have had enough of being the global electronic gadget sweatshop, and as the Telegraph reports, saw its workers threaten with mass suicides unless working conditions are not improved. "Around 150 Chinese workers at Foxconn, the world's largest electronics manufacturer, threatened to commit suicide by leaping from their factory roof in protest at their working conditions. The workers were eventually coaxed down after two days on top of their three-floor plant in Wuhan by Foxconn managers and local Chinese Communist party officials." Does this mean that in the latest Apple prospectus there will be a Risk Factor which says: "Our profit margins may be severely impaired if our contracted work force decides to proceed with mass self-induced genocide." We will find out, but if anyone needed a loud and clear warning that the record profitability of high margin electronics producers is about to go down, this is it.
Goldman Unveils The Script In The Greek Haircut Kabuki
Submitted by Tyler Durden on 01/11/2012 - 09:39 Bond CDS default ETC European Central Bank Goldman Sachs goldman sachs Greece Gross Domestic Product Reality recovery Sovereign Risk Sovereign Risk Sovereigns United Kingdom
It will come as no surprise to anyone (other than Dallara and Venizelos perhaps) that all is not rosy in the Greek Public Sector Involvement (PSI) discussions. Whether it is the Kyle-Bass-Based discussions of the need for non-Troika haircuts to be 100% for any meaningful debt reduction, or the CDS-market-based precedent that is set from chasing after a purely voluntary, non-triggering, agreement, the entire process remains mired in a reality that Greece needs much broader acceptance of this haircut (or debt reduction) than is possible given the diverse audience of bondholders (especially given the sub-25 price on most GGBs now). As Goldman points out in a note today, the current PSI structure does not encourage high participation (due to the considerable 'voluntary' NPV losses), leaves effective debt-relief at a measly EUR30-35bln after bank recaps etc., and as we have pointed out in the past leaves the door open for a meaningful overall reduction in risk exposure to European sovereigns should the CDS market be bypassed entirely (as the second-best protection for risk-averse investors would be an outright reduction in holdings). The GGB Basis (the package of Greek bond plus CDS protection) has been bid up notably in the last month or two suggesting that the banks (who are stuck with this GGB waste on their books) are still willing to sell them as 'cheap' basis packages to hedge funds. This risk transfer only exacerbates the unlikely PSI agreement completion since hedgies who are holding the basis package have no incentive to participate at all.
The US Debt Ceiling Theater Is Back: Think The Issue Is On Autopilot? Think Again
Submitted by Tyler Durden on 01/11/2012 - 09:14 Bank of America Bank of America Debt Ceiling default Florida New Debt Issuance President Obama Rating Agency
As Zero Hedge reported first, the US is once again, in just 5 short months (see chart), back at the debt ceiling, with just $25 million in new debt issuance dry powder, or in other words, no space of more debt absent resorting to the same "technique" last seen in late July when the Treasury plundered from government retirement accounts in order to accommodate new debt, such as yesterday's issuance of 3 Year bonds, and today's 10 Year bonds. And as The Hill reported yesterday, Obama is expected to request that Congress allow the incremental and final $1.2 trillion debt expansion (of the $2.1 trillion total) within a few days. So it is all on autopilot right? Wrong. As Bank of America explains below, it is very likely that the US will not have a debt ceiling hike for at least a few weeks, meaning that while a debt hike will ultimately come, it will very soon be all the song in dance, potentially overtaking the GOP drama, coupled with the pillaging of government retirement accounts yet again and likely leading to more rating agency action as the US debt fiasco is once again brought front and center. And the last thing the market needs is to experience the August 2011 collapse which brought it to 2011 lows and sent it gyrating for 400 DJIA points daily, in essence breaking the market as noted previously. And the worst news is that even with $1.2 trillion in new debt capacity, the total amount is guaranteed to not last through 2013, and should tax withholdings dip as trends are already indicating on adverse year over year comps, the $1.2 trillion in new debt may be exhausted as soon as September, which at this point may be the only thing that derails an Obama reelection if indeed he is running against "Wall Street."
China's Gold Imports From Hong Kong Surge to Highest Ever? - PBOC Buying?
Submitted by Tyler Durden on 01/11/2012 - 08:39 British Pound China Eurozone Gold Spot Hong Kong India Nicolas Sarkozy People's Bank Of China Reuters Twitter World Gold Council
The run into Chinese Lunar New Year has again seen higher than expected Chinese demand for gold and China's voracious appetite for gold is surprising even analysts who are positive about gold. As Chinese people's disposable incomes gain and concerns grow over inflation and equity and property markets, Chinese consumers and investors are turning to gold as a long term investment hedge. There is informed speculation that commercial Chinese banks may have taken advantage of the recent price dip to build stocks of coins and bars and accumulate bullion. China's demand for physical gold bullion has rocketed past India with the country now overtaking India in the third quarter as the largest gold jewellery market according to the World Gold Council. There is also informed speculation that some of the buying was from the People's Bank of China with one analyst telling Bloomberg that “there is always the possibility that some purchases were made by the central bank.”
Iran Interest Rates Raised To 20% To Fight Hyperinflation; Iran Nuclear Scientist Killed In Street Bomb Explosion
Submitted by Tyler Durden on 01/11/2012 - 08:23 headlines Hyperinflation Iran Mohammad UraniumYesterday we reported how as a result of a financial embargo enacted on by the US on New Year's Day, Iran's economy had promptly entered freefall mode and is now experiencing hyperinflation as the currency implodes. Today EA WorldNews gives us the response, which confirms that indeed the economy is in terminal shape following an interest rate hike to 20%. From the Source: "State news agency IRNA has no news on the Iranian currency this morning, but it does feature an interview with an official, noting the rise in interest rates to 20%. The effort is to reduce the flow of cash in the economy, but the official says it will increase capital investment by banks in an "impressive market"." As noted before, every incremental creep worse in the status quo merely makes the probability of escalation higher due to a lower opportunity cost of "irrationality" although we hope we are wrong. And in other unreported so far news, EA also informs us that in a street bomb explosion in Tehran earlier, one Mostafa Ahmadi Roshan, deputy head of procurement at the Natanz uranium enrichment facility, was killed. Are predator drones now patrolling over the Iran capital? Who knows, but Iran is already spinning the news.
