Bernanke løfter børsene - igjen....

I dag har Benny vært ute med sin beige book og forsikret at alt er i sin skjønneste orden. Veksten blir nærmere 4% til neste år.

Når Bernanke sier det, så må vi jo tro ham....

Tidligere på dagen fikk børsene et solid løft etter ubekreftede meldinger om at Kina hadde økt sin eksport med 50% på et år.

Siden denne enorme veksten ikke har smittet over på BDI, går vi ut fra at transporten nå går over land....

Eller kanskje eksportveksten er en kombinasjon av bløff, fri fantasi og ønsketenkning i likhet med Bernankes prognoser...

Mish har som regel mye bra krakkstoff, men i dag overgår han seg selv. Sjekk denne rapporten:

I do not think I have ever seen a warning like this one. BMO literally says Go to Cash - In Plain English

Summary

We advocate switching out of equity positions and going to cash. The European sovereign debt crisis appears to be nowhere near over. The global credit environment is worsening. Cost of capital is going up and availability is going down. There are large gaps between where the credit market prices risk and where the equity market is priced. Equity is lagging the deterioration in credit conditions. Moves in currency, equity and commodity markets are mirroring the moves in the credit market. Global growth, in a credit-constrained environment, will slow. Profits will be squeezed by the higher cost of capital.

State of the Market: Credit vs. Commodities & Jobs

The frail state of the markets is now becoming more obvious and as such the audience for our call to cash is growing. The difficulty in getting our message out is that in its raw form (how we normally write), the argument is quite technical:

Client: Why go to cash?
Quant/Technical: Look at the euro-dollar basis swap pricing!
Client: Say what??

Now, however, the market is showing signs that everyone can easily recognize as indicative of economic weakness:

Job growth has stagnated, and
Commodities and inflation expectations are falling.

These new signs are not new information on why things are bad. Rather, they are symptoms, or outward displays of how weak the credit market has become.

Weakening credit conditions are the cause.
Economic fallout is the effect.

Western European Sovereign Debt Crisis = Asian Growth Problem

We observed that the sovereign default risk of Europe was very well connected to the sovereign default risk of Asia.

Then we tracked down the tidbit that European financials have funded Asia to the tune of more than half a trillion dollars.

By observation, we know there is a link and now we have part of the economic rationale for what we are seeing.

We have what we need for our call for extreme caution:

The funding of Asian growth is closely tied to the health of the European financial system.

Further, we know that the North American equity market is fixated on Asian growth.

Our equity market correction starting gun went off the moment Asian currencies, and thus optimism toward Asian growth, started falling.

The close ties between European and Asian credit are showing up in the tick charts only in times of stress, which is why we started picking up the relationship quite recently.

Growing Asian risk is equal to, outward capital flows, and ultimately a slowdown in Asian growth. An Asian economic slowdown in a capital-constrained world will bring forth lower global growth, and lower commodity prices.

European Sovereign Debt: Hard & Soft Asset Bubbles

Greece has started the process to sell private assets to raise capital. Publicly traded Greek stocks in which the government has a stake are falling fast, as investors fear large government sales.

The market is concerned that the German taxpayer will have to fund a Greek debt default spiral. Alternatively, euro holders worry that the German taxpayer will not fund Greece, leading to euro disintegration.

The market is now giving Spain a hard time, with Spanish government 10-year yields now higher than when the bailout package for Greece was announced.

The Spanish problem is also one of easy euro credit, which fed a construction, or hard asset bubble, that has now burst.

At the leading edge of the credit crisis in this case are Spanish regional banks, or cajas.

As the FT described succinctly; “the unlisted cajas – many of them politicised, linked to regional governments and with an opaque ownership structure – seized market share from the banks at the peak of the recent housing boom and now account for about half of outstanding loans in Spain. Several are heavily exposed to bankrupt property developers and homeowners unable to meet mortgage payments.”

There is much more in the report.

Without directly saying "go to cash", I see no reason to have net long exposure here. Except perhaps for some exposure to gold, if you are not hedged, cash is the safe option.

Finally, if you do not know how to hedge, now is not the time to learn.

Kunne ikke vært mer enig. Mer substans her enn i alle rapportene Skagen har produsert til dato. Sammenlagt.

En annen god gammel indikator på at noe alvorlig kan være på vei, er shorteforbudene som kommer både ute og hjemme.

I skrivende stund ser det ut til at lufta er gått ut av Bernanke-hypen, og selv om det ikke ble LOD, landet DOW godt under 10.000 igjen.

Hvis tallet på nye ledige i morgen blir verre enn ventet, lover ikke dette bra for morgendagen.

Hvis det ikke kommer enda en gigantisk intervensjon i valutamarkedet.

God grøt

Buffett


Uff,da. Nå som vi hadde det så hyggelig:

WASHINGTON, D.C. (June 9, 2010) — The Mortgage Bankers Association (MBA) today released its Weekly Mortgage Applications Survey for the week ending June 4, 2010. The Market Composite Index, a measure of mortgage loan application volume, decreased 12.2 percent on a seasonally adjusted basis from one week earlier. This week's results include an adjustment to account for the Memorial Day holiday. On an unadjusted basis, the Index decreased 21.1 percent compared with the previous week.

The Refinance Index decreased 14.3 percent from the previous week and the seasonally adjusted Purchase Index decreased 5.7 percent from one week earlier. The unadjusted Purchase Index decreased 16.3 percent compared with the previous week and was 30.4 percent lower than Memorial Day week last year.

Uff,da. Fra vondt til verre:

Even as the regularly scheduled take down of gold sends the risky FX pairs (but not the EURCHF), and their immediate computerized proxy, the S&P, higher, the truth about Europe's bad and deteriorating liquidity is out there in plain view. The most recent ECB Discount Facility usage just hit a fresh new all time high at €365 billion, 15 billion higher compared to two days ago, and €80 billion higher compared to a month ago. Banks are now openly warehousing every euro bill they can find with the ECB. Compounding the issue, is the continuing grind higher in the EUR Libor, hitting a fresh 2010 high of 0.65%. The primary driver for these adverse development was the earlier news in Spanish newspaper Cinco Dias that Spanish interbank liquidity no longer exists. And while reality is uglier by the day as the double dip reality seeps in, in the realm of rosy mythology, we have Ben Bernanke seeing US economic growth, and the World Bank rising global GDP growth forecasts. Picks your side.

ECB deposit window usage: