The most expected yet anticlimactic bond auction for 2011 has come and gone: after getting the backstops of the ECB, China and most recently, Japan, Portugal managed to sell €1.25 billion in 4 and 10 year paper. And while the the yield on the 10 year was better than expected, and notably lower than the 7% where the point had been trading on the curve recently, the 4 year priced notably weaker compared to previous. Of course, none of this would have been possible had the ECB not been buying Portuguese bonds in the open market for two days this week, and continuing into Wednesday, into the biggest farce of a market currently operating in Europe.
RANsquawk European Morning Briefing - Stocks, Bonds, FX etc. – 12/01/11
Any billionaire who continues borrowing slides from Zero Hedge, surely knows what he/she (although in this case most certainly he) is talking about (especially one that expects a double digit drop in equities in 2011). This goes double for any billionaire who actually has a James Bond fetish to impart to his investor presentation. Attached are 89 pages of shaken and stirred data, that you wouldn't really find at any other "institutional" asset manager.
This one was just too hilarious to pass by without presenting it. It was in fact hilarious enough that it could be presented a la carte without spoiling it by actually commenting...
When you're on the right side of a macro trend, supposedly random events inexplicably go right with improbably high probability. I can live with such blatant disregard of nice mathematical properties. What I cannot live with is the lack of understanding when the trade may end. There're many ways the gold trade may end, but valuation is not one of them (though valuation may cause temporary pull-backs once in awhile). As I said in the beginning, there's simply no rational basis for gold valuation in anything else. It is, quite simply, whatever value the market is willing to pay for.
Is The Criminal Case Against Goldman About To be Reopened, As Robert Khuzami's "Ethical" Reputation Lies In RuinsSubmitted by Tyler Durden on 01/11/2011 - 20:09
After a few days ago we described in detail the facts behind the ACA lawsuit against Goldman, we were left scratching our heads how it could be that the SEC could ever possibly scuttle this criminal case which was obviously a slam dunk through court, and which based on the disclosures presented by ACA, is a blatant violation case of 10(b)-5 securities fraud and underwriter representation. We asked: did the SEC hide a key piece of the case against Goldman to fast track a settlement process? We concluded that even the SEC's otherwise completely inexperienced legal team should have been able to get this case through the finished line without the need to settle. Two developments today may allow us to postpone the head scratching for at least a bit. According to the FT, the Senate permanent subcommittee on investigations is about to issue a report which "will press the SEC to reopen its investigation into the bank." And in a completely separate report, we learn from Bloomberg that the SEC's top enforcement official, Robert Khuzami, who settled the SEC case with Goldman, is now being probed for his role in Citi's abrupt settlement over the summer. According to Bloomberg disclosures in a letter that served to open the probe "Khuzami ordered his
staff to drop the claims after holding a “secret conversation,
without telling the staff, with a prominent defense lawyer who
is a good friend” of his and “who was counsel for the company,
not the individuals affected.” We hope readers are able to put two and two together, and ask: just why is Robert Khuzami, former General Counsel for Deutsche Bank, still pretending to represent investor interests, when he obviously has far more powerful (and rich) interests to answer to?
Zero Hedge is happy to announce a new collaboration with the precious metals experts at Gold Core. We look forward to posting periodic industry updates, notes, analysis and commentary in conjunction with GC on all matters of topical significance in the PM space. As an introduction, we would like to present GoldCore's review of 2010 and Outlook for 2011. A sample from the analysis: "Should the dollar and other debt laden currencies and government bonds fall sharply in value due to a panic and wholesale liquidation we could experience hyperinflation. In this scenario paper assets will be shunned and people will protect themselves by buying hard assets such as real estate, commodities and gold and silver bullion. In such a scenario, gold and silver surge would quickly reach their inflation adjusted 1980 high of $2,300/oz and $130/oz before overshooting to much higher levels as was seen in Weimar Germany and more recently in Zimbabwe."
In the eyes of this volatility trader the current paradigm of monetary and fiscal stimulus may best be understood as the greatest leveraged volatility short in economic history. The current stimulus is analogous to continuously rolling "naked" put options on the global economy, backed by margin provided by the US taxpayer, generating short-term growth at the expense of long-term systematic risk. The reinvestment of the premium into risk assets by the investor class ensures the Fed's naked put is never exercised. In theory the Federal Reserve is now the largest volatility trader in the world...You've most likely heard the old adage about the danger of picking up pennies in front of a steamroller. The great volatility short is no different in principal as our government collects trillions of pennies from the treads of a debt steamroller repatriating them to the driver in exchange for a promise to slow the machine. We must hope the operator is able to find a better job before he becomes dependent on those pennies for his survival. At 9.4% unemployment it will be challenging. In a recent letter to senior members of Congress Treasury Secretary warned there will be "catastrophic economic consequences" if the government's $14.29 trillion debt ceiling is not increased immediately. What should be apparent by now is that one day the greatest volatility short in history will face a margin call the US taxpayer will be unwilling or unable to meet. While the markets remain in a state of euphoria it may be the right time to opportunistically position yourself on other side of the Fed's volatility trade by going long tail risk.
After insiders closed off 2010 with just 19x more selling than buying, they have greeted 2011 with a ratio of selling to buying of 114x, a decent pick up in dumping. Specifically there were 4 purchases in the first week of 2011 in S&P 500 names, for a total of $2.5 million in notional. This was offset by $290 million in sales, in 86 transactions. The only notable purchase in the last week was in ATI, which has continued to see insider buying for the past month. The selling side is far more interesting, and here we can see ongoing dumping of Google, MCK, Qualcomm, Ford, HP, Carnival, CSX, and so forth. Luckily for the PDs and the Fed, the retail hot grenade lemmings are finally stepping in, because it was unclear how much longer the HFTs could keep the market from crashing again.
Violence Over Surging Food Prices In Algeria Spreads As Rioting Leaves Many Dead In Neighboring TunisiaSubmitted by Tyler Durden on 01/11/2011 - 17:02
A week ago we noted that the first Fed 'excess liquidity' inspired violence of the year broke out in Algeria, where following the recent release of FAO data confirming food prices have just hit an all time high, rioting broke out "over rising food prices and chronic unemployment... with youths torching government buildings and shouting "Bring us Sugar!" To be expected, this event received no coverage in the US. In the meantime, the violence has escalated and spread to neighboring Tunisia, where weeks of clashes have left 14 dead. The reason for the lethal violence- "high unemployment and the surging cost of living." One would think that excess economic slack from pervasive unemployment would bring about a plunge in the cost of living... Unfortunately, that is not the case in a centrally planned world.
From Dow Jones
- Illinois House Committee Passes Tax Bill To Cut Deficit
- Illinois Income Tax Would Jump To 5% From 3%
- Illinois Corporate Tax Would Jump To 7% From 4.8%
- Illinois Bill Now Goes To Full House
Cazenove's Griffiths: "Not Owning Gold Is A Form Of Insanity And May Even Show Unhealthy Masochistic Tendencies"Submitted by Tyler Durden on 01/11/2011 - 16:24
Whoever said CNBC does not have good content: the biased station's European division actually has some very informed and interesting guests. Of particular note is yesterday's interview with Cazenove's technical strategist Robin Griffiths. And while the chartist tends to not be too happy with the recent stock market action (who is), the most notable item on the docket was Griffiths discussion of gold. And it was quite memorable: "I
think not owning gold is a form of insanity, it may even show unhealthy
masochistic tendencies, which might need medical attention. Real assets hedge paper money being printed into oblivion, so you've got
to own gold and you've got to own other commodity-related investments
still. Gold is far from being an overowned trade at the moment, far, far from it. Although it's been a top performer for each of the last ten years, it's
still in a linear trend. Eventually it will go exponential and make more
in the last little bit than the whole of the ten year trend." That pretty much covers it.
Over a year ago we attempted to deconstruct Goldman's prop trading activity using scraps of data from the tax returns of the Goldman Sachs Foundation. The reason we did that, is that up until today, the firm had never disclosed the non-client aspect of its trading, instead dumping all related revenues and profits in the umbrella "Trading and Principal Investments." That is no longer the case, as starting today the firm will break down its client facing and prop ("Investing and Lending") revenue and profit streams. The reason for our long-term fascination with Goldman prop trading, which is nothing less than a glorified hedge fund, and has no client flow focus whatsoever (presuambly), is that we had always claimed it accounts for a substantial portion of the firm's if not top, then certainly bottom line. After all it was Lucan van Praag who told us directly, that prop trading contributions to Goldman were really de minimis, a response which we took extremely skeptically as the margins associated with a modest revenue amount may well be huge and thus result in a substantial pre tax net income benefit to the firm. Today Goldman also published an 8-K that did a pro forma breakdown of its earnings. To our great surprise, we were correct in assuming that Goldman prop has been the dynamo behind the firm's profitability in 2010.