There was another deluge of economic data Thursday, almost all of which was ignored – like the prior day. All of this proves something that I say often but few want to believe: the market makes the news – the news does not make the market. Said another way; if the market is going up or down in a strong trend, only the news that agrees with the trend will matter – all else will be ignored.
Thursday’s data went as follows…
Although the European banking sector and political elites would have you believe that its banking problems are a thing of the past, nothing could be further from the truth. European banking spreads are nearly at all-time highs that help set off the flash crash. It is simply getting worse.
Specific proof can be found in Ireland. According to the Irish Times, “IRISH BANKS are issuing bonds to themselves under the Government guarantee to borrow cheaply from the European Central Bank and to avoid drawing more heavily on emergency lending from the Irish Central Bank.
Four banks issued bonds worth €17 billion to themselves last month under the Government’s extended guarantee, the Eligible Liabilities Guarantee, to use as collateral to borrow from the ECB.
“What you have here is micro-quantitative easing, or money printing,” said Cathal O’Leary, head of fixed-income sales at NCB Stockbrokers. “The banks are issuing unsecured loans to themselves.”
Essentially, Irish banks are tapped out and are fearful of a popular backlash if they openly borrow new and massive amounts of capital. They have decided to make it up, to fraudulently print their own money out-of-thin-air…Bernanke style…and lend to each other.
Maybe I’m crazy, but this doesn’t sound good.
Thursday’s data went as follows…
- CPI (inflation) was higher (read: worse) than expected.
- Weekly jobless claims were as expected.
- Leading indicators were worse than expected.
- The Philly Fed report was better than expected. Although the inflation portion of this report was off-the-charts-high, the headline number was better and that’s all that mattered.
- Thursday’s news was, on balance, worse than expected as well as more news from the European banking sector, which was briefly mentioned yesterday. Specifically – Irish banks.
Although the European banking sector and political elites would have you believe that its banking problems are a thing of the past, nothing could be further from the truth. European banking spreads are nearly at all-time highs that help set off the flash crash. It is simply getting worse.
Specific proof can be found in Ireland. According to the Irish Times, “IRISH BANKS are issuing bonds to themselves under the Government guarantee to borrow cheaply from the European Central Bank and to avoid drawing more heavily on emergency lending from the Irish Central Bank.
Four banks issued bonds worth €17 billion to themselves last month under the Government’s extended guarantee, the Eligible Liabilities Guarantee, to use as collateral to borrow from the ECB.
“What you have here is micro-quantitative easing, or money printing,” said Cathal O’Leary, head of fixed-income sales at NCB Stockbrokers. “The banks are issuing unsecured loans to themselves.”
Essentially, Irish banks are tapped out and are fearful of a popular backlash if they openly borrow new and massive amounts of capital. They have decided to make it up, to fraudulently print their own money out-of-thin-air…Bernanke style…and lend to each other.
Maybe I’m crazy, but this doesn’t sound good.
Trade Date: 2/17/11
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E-Mini S&P Trades*
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