NUTCRACKER!

It looks like Santa Claus is coming to town. Maybe we get a little consolidation over the next few days and then the next test for the S&P is 1257, the breakeven for the year, 1265.89, the 200-day moving average, and then the October 27 high of 1292.66. Always can be wrong and always with a stop

Choppy Market: Push Me Pull You

There have been several developments and they have imparted conflicting impulses into the market. The S&P downgrade of a number of large banks based on a new methodology that has been unfolding over the past couple of years comes at a poor time, when many banks, especially in Europe, are having funding problems and different measures of financial stress are elevated. Today’s development of the German 1 year note yield falling below zero for the first time is reflective of those pressures

More on how post credit bubble fiscal austerity leads to depression

Britain’s economy is a shambles as the negative impact of austerity has been made plain. Now, mind you, it was already clear from a leaked Greek bailout document that expansionary fiscal consolidation has failed in Greece. But now the OECD’s double dip warning for Britain should make this plain to all

Euro Crisis At A Tipping Point?

The European sovereign debt crisis is rapidly approaching what could be a significant tipping point as it threatens to spread to the heart of Europe. In recent days Italian 10-year bond yields have soared to 7.22% and today Spain was forced to pay 6.975% at its auction. Even French 10-year yields have climbed to 3.71%, its widest spread over German bond yields since the Euro Zone was started. All of this has happened despite large ECB purchases of periphery country bonds over the last few months and the installation of technocratic governments in Greece and Italy.

The fear has now spread to the heart of Europe

Chart of the day: Hours of work needed to buy the S&P500

Here is an interesting take on the valuation of the S&P500 by our friends over at The Chart Store, who do excellent work. Their chart shows that it now takes 69.23 hours at the average hourly wage of $19.53 to buy the S&

A Battle for Oil Production Is Brewing

With big oil’s bank accounts full to the brim with cash, the stage is set for some significant acquisition activity… or, to put it another way, for a battle to buy producing assets. There are quite a number of contestants in the battle – big oil companies are not only competing against each other to sweep up good assets but also against the national oil companies of developing, energy-hungry nations like China, South Korea, and India. Oil demands are rising in these nations so quickly that just to cover expected annual demand increases those three countries would have to jointly spend $30 billion on acquisitions each year

Week that Began with a Bang Ends with a Whimper

The foreign exchange is calmer. Equity markets are generally higher. Global bond markets are also quieter today

Euro Crisis Enters Dangerous Stage

We see no easy way out of the current turmoil. The result of enough fiscal austerity to relieve the debt pressures is a severe recession or depression. Historically, independent nations undergoing austerity have accompanied the policy with monetary ease and a devaluation of their currency. This is something EU members cannot do as they share a common currency and therefore do not run their own monetary policy. Default would cause havoc in the EU banking system that holds a significant share of the sovereign debt. A bailout would require at least two trillion euros, a sum that no one wants to pay. And breaking up the EU would cause major turmoil in global financial markets and economies.

So far the market has rallied strongly on every announced plan for the last year and a half only to decline again when it became clear that the crisis was not over

This is why people are buying gold now

Right now everyone is looking at monetisation and thinking this will save the day. You saw the Lakshman Achuthan video; clearly punters don’t think the US is going to double dip. Buy gold then.

Maybe they are right, but I see weakness ahead in

Italy! Italy! Italy!

The euro zone periphery was a sideshow. This stuff with Italy is the real deal. With yields at 6.7% and rising, it’s game over for the euro zone. The extend and pretend stuff ain’t gonna work

Euro zone Political Developments Remain Front and Center

European shares have given back early morning gains as Berlusconi denies resignation reports. Market attention will remain focused on political developments in the euro zone; Italy likely to overshadow Greece now. Light US data is likely to see the market focus on Fed speakers; China CPI highlights EM data

Fed’s Outlook Nothing To Cheer About

The bulls assert that the market is already discounting major risk and is reflecting widespread fear that may prove unfounded. That might be true if the market had collapsed as in 2000-2002 or 2008-2009. However, the current market is more of an extremely volatile trading range with wide swings in both directions. In fact the huge daily swings to the upside on any hints of favorable news indicate that investors are every bit as fearful of missing the next bull market as they are of getting caught in a free-fall. That is not the kind of action seen at major bottoms. In our view the 2011 lows are likely to be tested and breached with a test of the 2009 lows to follow