Michael Krieger - This Is The Last Dance

"Last year I wrote about how the leaders in America were essentially fiddling as Rome burned. This fiddling has become an all out dance party and many investors have been dragged onto the floor one more time due to money printing, an inherent desire to be optimistic, a plethora of propaganda and rising asset prices. However, this is the last dance folks. Our corporate and political leaders have destroyed us. Chuck Prince would be proud." Mike Krieger

German FinMin Capitulates, Says PIIGS, Global Moral Hazard Win

From Reuters:

German Fin Min: Crisis Largely Over In Europe and Germany
German Fin Min: If Greek Budget Consolidation Succeeds, No Tax Money Will Be Lost
German Fin Min: Without Consolidation In Greece We Will Have Unforeseeable Market Consequences

German Fin Min: Failure With Greece Would Put Euro In Question
German Fin Min: Cannot Throw Greece Out Of Eurozone

It's over - the excess debt/GDP terrorists have won, and Moral Hazard is now a global phenomenon. There will be no more failures anywhere. In other words, all your stock profits will come straight from your taxes.

Federal Reserve Crammed On Red Roof Inn Debt

Remember that bit about how the Fed only holds the highest quality debt (we forget if it was Tweedledum or Tweedledee who said it)? It appears that's just the latest lie in the Fed's endless catalog of misrepresentations. According to TREPP, 11 properties held by Red Roof Inn hotels saw foreclosure actions initiated on them by CMBS special servicers, and are now being sent to the auction block. Guess who is most impacted by this action? Why, the Federal Reserve of course.

Deep Thoughts From Grey Owl Capital Management

"Recently value has been more difficult to find, but not impossible. The run-up has left the S&P 500 with an expected return over the next 7-10 years in the 3-4% range. With that expectation, coupled with the issues discussed at the outset of this letter, we are being very discerning about when and how we add risk exposure."

Frontrunning: April 29

• Must read: Lombard Street believes that the major if not only buyers of the current rally are investment banks themselves, perpetuating biggest "pulling oneself out by the bootstraps" con game in history (FT)
• As Basis Yield Alpha Fund seeks compensation over its Timberwolf losses, Goldman pressed for CDO settlemetn (FT)
• FTW: European confidence improves to two year high (Bloomberg) on what? Expectations of EMU unraveling
• Greenwich Street Capital refused to be "first" ACA, saw Paulson deal as too risky (WSJ)
• Already holding junk, Germany hesitates (NYT)
• Baidu says sales to beat estimates on Google China "semi exit" (Bloomberg)
• Simon Johnson: To save the Eurozone: $1 trillion, ECB reform, and a new head for the IMF (Baseline Scenario)
• Fed can't delay market storm (MarketWatch)
• So as expected it was all just a ploy to get more porn download bandwidth: SEC Schapiro touts Goldman suit while seeking funds (Bloomberg)

Daily Highlights: 4.29.10

• Asian currencies gain, bond risk drops after Fed pledges to keep rates low.
• Asian stock markets little lower, on concerns of a spread of sovereign debt risk in Europe.
• Australia raises excise duty on tobacco by 25%, ends advertising.
• Australia poised to force tobacco companies to sell cigarettes in plain packs, a world first.
• Brazil lifts benchmark rate to 9.5% from 8.75%.
• European stocks rise after the IMF promises to increase the aid for Greece to 120B euros.
• Fed restated their intention to keep benchmark interest rate near zero for “extended period”.
• Global stock markets mixed as European debt crisis continues to unsettle investors.

The Client Always Comes First At Goldman... Except When He Doesn't, Which Is Also Always

One day after the Goldman hearings, we were left with the warm and fuzzy impression that the whole Goldman farce was for nothing, and that everything the firm had been doing for the past 5 years was perfectly legitimate. The prop trading abuse, the discount window generosity, the endless abundance of flow and prop inventory commingling, the endless client rape...All these allegations must have been for naught. Which is why we were thoroughly disappointed when our sense of sudden enlightenment that we may have been wrong all along about Goldman, vanished promptly and without a trace once we had a chance to read the 2007 self-evaluation of Goldman Managing Director Michael Swenson. The line penned by Michael, who incidentally was the least like of the three Goldman SPG MDs testifying on Tuesday based on peer feedback, that broke our collective heart is the following: "Once the stress in the mortgage market started filtering into the cash market, I spent numerous hours on conference calls with clients discussing valuation methodologies for GS issued transactions in the subprime and second lien space [redacted] is prime example). I said "no" to clients who demanded that GS should "support the GSAMP" program as clients tried to gain leverage over us. Those were unpopular decisions but they saved the firm hundreds of millions of dollars." Alas, we find that all of Goldman's sincere hypocritical lies before the Senate committee were... precisely just that.