After last week the ECB experienced a rare event: a failed SMP sterilization tender, when only E60.8 billion of bids from 41 banks appeared to compete for E73.5 billion in recycle monetized peripheral bonds, this week it is back to smooth sailing, after JC Trichet mobilized the infantry and got every single bank to submit a bid: the number of banks participating in today's "liquidity absorbing" operation surged from 41 to 68, and the total amount of bids increased by a whopping 50% from E60 to E92 billion, a 1.4x bid to cover. And lastly while the marginal rate in the last auction of 2010 was 1% with full allotment, this time it was cut by more than half, at 0.45%, with 93.04% of the bids allotted at the marginal rate. Just what changed so drastically in the past week to justify such a huge surge in liquidity and confidence is just slightly baffling.
To all those who penned lengthy essays and activist missives to various law enforcement and judicial organizations in 2010 over the fraudclosure fiasco, we have one word: condolences. According to Bloomberg, which cited Iowa Attorney General Tom Miller, "The five largest mortgage loan servicers, including Bank of America Corp and JPMorgan Chase & Co may be the first to settle with 50 state attorneys general who are investigating foreclosure practices." It appears these attorneys general were all sequestered and advised of the now-traditional M.A.D. apocalypse that would follow if this latest iteration of Wall Street's corner cutting was pursued by the full extent of the law. In other words what many have claimed is the biggest fraud in MBS history is about to be swept under the rug in exchange for 30 pieces of silver wrtistslaps. In the meantime, disclosure such as that revealed by Allstate, which virtually proves that Bank of America was lying outright to investors about its portfolio quality, will be made irrelevant, and yet one more aspect of TBTF fraud will be institutionalized.
RANsquawk European Morning Briefing - Stocks, Bonds, FX etc. – 04/01/11
After Zero Hedge posted the King World News update that Carlos Slim may be looking at (re)entering the silver market fray by acquiring Fresnillo yesterday (following a comparable rumor spread some time ago by none other than the Daily Mail, which of course meant it was going to be bogus), the stock is reacting appropriately and has moved violently to the upside, 5% higher at last check. The FT, which has chimed in on this development this morning, believes that the Mexican billionaire may need to bid a hefty premium for the $19 billion company.
The Daily Mail is rapidly becoming the most discredited rumor spreading enterprise in the known universe. As if last week's completely bogus Imax rumor was not enough, today the newspaper is going to town on BP, claiming that Shell is interested in bidding up the name. While we couldn't care loss what the intangible benefit to the tabloid is from spreading these rumors which take about 2-4 hours to be refuted, we are stunned that investotrs, pardon, robots, are so stupid to keep falling for this. Then again, as all robots do now is scan headlines and trade accordingly (the faster the better), this is not really all that surprising. And once the momentum HFT algos are activated, it's off to the races. We cant't wait for Daily Mail to spread the next Radioshack LBO rumor whose sequential number may have as many zeroes a the new US debt ceiling.
Goldman's Alec Phillips has compiled a great docket of key events on the US fiscal calendar for the first half of 2011, of which easily the biggest wildcard is the initiation of the debate debt ceiling increase. While Zero Hedge believes that most of the rhetoric surrounding this issue is primarily of a polemic nature, with lots of ins, lots of outs, and most certainly lots of theater, the ceiling will be passed right on cue, by anywhere between $1.6 and $2.0 trillion: enough to fund the deficit for the next year and leave a small buffer. One thing is certain: discussion will most certainly not commence until as late as possible, which means sometime in late March, early April (as such we urge readers to aggressively sell the InTrade Feb 28 "debt ceiling" contracts).
Simon Black currently in Santiago, Chile, presents a quick introspective on the key events of 2010, before moving on to a few broad forecasts for 2011. We hope his predictive ability is better than that of one Byron Wien. The key among Simon's predictions is that very soon we may see the same kind of power vacuum that brought about the Thermidorian Reaction in that last major systemic overhaul. Of course, the fact that we still have to experience a an actual storming of the Bastille is a little perturbing. But everything in due course...
You have seen it it in the New York Times in a much abridged version...So here it is in the original, in both real and nominal terms. Via Ed Esterling, Crestmont Research.
A source in mergers and acquisitions out of Europe has alerted King World News that Carlos Slim may be looking to enter the silver market in a big way. Gold and silver are in big bull markets and this is attracting the attention of some of the smartest money around the globe. James Turk commented, “If this deal does happen Eric, this is going to make the silver shorts choke.” Fresnillo has a current market cap of roughly $19 billion.
Instead of wasting time with Byron Wien's Top 10 "predictions for 2011" we have decided to skip this latest and greatest worthless charade in prognostication, and instead we believe that presenting the list of what the man whose retirement age has come and gone, thought would happen in the past year, is a great example of why all these so called institutional Wall Street experts are nothing but two bit hacks. As may be expected, somehow Wien got exactly zero out of ten correct! The man is the contrarian indicator on Wall Street. Also keep in mind: it takes a lot of skill to be this bad.
I have been constructive on the dollar index for a little while. I had drawn attention a few weeks back when we broke the 60-dma as it has been an excellent envelope since 2008 for the price action bullish or bearish. My thinking was that one should try buying on a retest. Sure enough we almost saw tick-for-tick the moving average on Friday (at a time when most certainly very few bought). What now? Well one cannot ignore that from the lows of early November to the local highs of November 30 the wave pattern looks like a corrective a-b-c in a generally bearish trend. However as you know looking at the chart bigger picture I believe 2008 marked the lows and we are about to embark on a major bullish move. - Nic Lenoir
One can not blame Mort Zuckerman for being bullish on housing (or at least some segments thereof): after all the outspoken Obama critic just splurged $930 million on the John Hancock building (which recently went into foreclosure at a $660 million valuation, but Mort has a story about how improvements in the parking lot and somesuch are worth the 50% hike in price). Yet what the Boston Properties chairman likes in commercial real estate (and for a contrarian and somewhat more lucid view feel free to peruse comparable thoughts by Howard Davidowitz) he loathes in residential real estate, which would be bad news for Bank of America if the bank's real name wasn't Bank of Banana Republic. In an interview with CNBC's finest, the USNews editor said that the record shadow inventory is "what’s going to put downward pressure on residential prices. And in my judgment, that’s going to continue forat’s going to continue for several years. We’ve seen home prices go down now for four months in a row, according to the Case-Shiller Index , by 1.3 percent in the last month. So it’s an accelerating downtrend in those prices. This is on top of three to four years of declines.” Oddly enough, no mention of the fact previously discussed by Davidowitz that "we have 21 square feet of selling space for every man woman and child in this country" but then again that may not be too bullish for CRE. And at the end of the day everyone has an agenda.
When we predicted a few weeks ago that the US would end 2010 with $13.8 trillion in debt we miscalculated the settlement dates on all the last round of bond auctions . As a result, we are happy to announce that as of December 31, 2010, the US now has $14,025,215,218,708 and 52 cents in debt (incidentally this is an increase of $154 billion in debt on the US balance sheet overnight). As a reminder the debt ceiling is 14,294,000,000,000. Which means at a run rate of $125 billion in net monthly issuance, the US may not even get to the end of March at the current burn rate. Which also means Congress better start the discussion on raising the debt ceiling as soon as February. Which means someone is about to [win/lose] some serious cash on the Feb 28 debt ceiling hike InTrade contracts.
When we last looked at the updated CAPE and q S&P valuation readings as compiled quarterly by Smithers & Co, the market was only 48% overvalued. It is therefore not surprising that following one of the most ridiculous melt ups in the past two years (and we have had many in that period) that following the firm's most recent Z1 update of the CAPE (Cyclically Adjusted PE) and Tobin q chart, the S&P is now well over 70% overpriced. This is obviously amateur hour. With the Bernanke Put having eliminated all risk and stock trading lab rats now concerned about being bumped up in a higher tax bracket, not to mention that the S&P 500 20 day historical vol just hit 39 year lows, please wake us up only when this number is in the 4 digit range.