Holiday-shortened week, but the news flowed as strong as ever. Here are some highlights from Romeo’s Newsstand–this week’s Top Newsstuffs…
John Hilsenrath (WSJ): At his Congressional testimony July 17-18, Bernanke may discuss switching asset purchases to MBS (mortgages) as effective means to lower a broader range of interest rates, since today’s job data disappointed.
Why Gordon Brown Sold England’s Gold on-the-Cheap to Bailout the Banks: A Description of Paper Gold & the Bullion Leasing Shell-Game | Telegraph UK
Treasuries lease Gold to bullion banks, who sell it into the market & reinvest the proceeds (“carry trade”). Therefore, these banks are short GC & Treasuries only own paper IOUs, not physical gold. “Brown’s Bottom” in 1999 intentionally crashed the GC market so bullion banks could unwind shorts & stay solvent.
U.S. Real Estate is Booming & Inflation is Here | History Squared
Rental yields up, sales +20%, inventories -20%, WFC mortgages +30% in 1q12, Fed’s buying MBS & we’ve reached the 6yr historical average life for a housing bust. [Beware the shadow inventory.]
Rail Traffic Weekly: Still Mixed | Association of American Railroads (AAR)
Carloads -2.9% and Intermodal +3.3 (cumulative ytd volume); -2.5% and +7 respectively (vs. this week last year).
9 of 20 groups posted gains: Petroleum +51.8%, Motor vehicles/parts +18.5 & Lumber/Wood +11.9; Farm products -16.8%, Grain -16.6.
ECB Margin Calls Surge (Most in 9 Months) & Basis-Swaps Plunge | ZeroHedge
Sign that we’re at the limit of collateralized lending by ECB (no more secured bailout loans).
Physics: Empirical Discovery of the Higgs Boson (“God Particle”) | Reuters
CERN scientists find the subatomic particle, which Peter Higgs imagined in 1960. The boson bestows mass on other matter and helps explain the way the universe was ordered after the chaos of Big Bang.
ZIRP Is Wrecking Social Security | Bruce Krasting
Of the $660b in SSTF 2012 asset turnover, $135b in 5.64% coupon bonds rolled into 1.375% paper (v. actuarial assumed 4%)–lowering SSTF annual income by $5.7b. Another $543b in paper will mature before ZIRP’s 2014 end, with reinvestments yielding $23b less/year in total. This means the fund will top-out in 2015 and reach zero by 2023 (v. 2021 & 2033 prior estimates, respectively), at which time, US law forces a 25% cut in benefits that’ll affect 72mm people. [#Byproduct #UnintendedConsequences]
How the Fannie and Freddie Could, But Won’t, Cut Housing’s Gordian Knot | naked capitalism
The solution to a housing recovery is mortgage modifications to viable borrowers, but servicers are paid to foreclose–even despite HAMP/HARP incentives.
FHFA should encourage GSEs to provoke voluntary modifications under Chapter 13 bankruptcy (whereas HARP/HAMP had forced private lenders into involuntary restructuring) and cram down second-liens.
2q12 Earnings Expectations | Bianco Research
In 8/2011, 2q12 SPX EPS growth was forcast for +11.12%. It’s been pared back ever since, now at -1.80% as earnings season approaches.
The Smartest Man In Europe: We’re “Dancing around the Fire of Hell” | Byron Wien
The “Smartest Man” says he, “massive amounts of debt will bring the decline of Western Civilization, but that in the meantime, policy makers would pull every trick they could in order to stave off a catastrophic event.”
Chart: Fed Interventions Since 2008 | Stone & McCarthy Research Associates
Includes all Large Scale Asset Purchases (LSAPs), Maturity Extension Programs (MEPs) & interest rate reactions by date.
The Four Paths Forward For The Euro Area | Goldman Sachs
After last week’s EU Summit, EMU can progress toward fiscal integration via a Cultural Revolution, the Long March, a Great Leap Forward, or Disintegration. GS sees them pursuing the Long March over next 1-3 years.
China: Falling Star | Barron’s
Featuring Jim Chanos, Jeremy Grantham, William Overholt, and some bearish Chinese statistics.
Global Purchasing Managers Index (June 2012): Lowest Reading Since 2009 | Business Insider
Following May’s broad-based contraction, June’s Global PMI of 48.9 showed continued manufacturing contraction, with most countries missing forcasts, declining on absolute & sequential basis.