Well, dumb money is clearly at work today. With Greece basically on the brink of default, Spain, Portugal, Italy are begging to follow suit before people start realizing that disbanding the Eurozone might be inevitable. At the same time GDP would be still solidly negative if it were not for inventory rebuilding and government spending, and our entire financial industry (representing 20% of the earnings of the S&P and access to credit it generated has been the engine of growth for the past 30 years) is being exposed in the media as a fraud and threatened to be dismantled or at least turned into a shadow of its current self. No wonder then that last week the Nasdaq made highs in 21-day RSI that were not seen since December 1999. A 2.3% retracement is clearly the buying opportunity of a lifetime, especially since we are only up 82% since last March. Maybe I missed the part where growth prospects are booming when schools on the West coast only have money to be open 4 days a week. - Nic Lenoir of ICAP
Europe is closed, and Greek bankruptcy is out of mind (FTSE at a one month low is victory for the bulls) so risk is on, as seen by the parabolic intraday rise in the EURJPY: The only trade now is to short the Yen and buy everything else, until Europe opens again and Greek yields hit double digits. In the meantime let's sneak a RMBS securitization deal in the form of the Redwood Trust, the first securitization since early 2008: there is no stopping the bubble.
Insights Into America's Disneyland And Our "Neo-Feudalistic, Gulag Casino Economy" From Mike KriegerSubmitted by Tyler Durden on 04/22/2010 - 15:14
"For those that are in big business and think they have made a great move by joining forces with the state I suggest you go back and read your history. You never will possess the ultimate power, you will be seduced into thinking you do and then when the time is right government can eliminate you and your fortune with the stroke of a pen. Power is granted to you by this authority when you engage in this unholy union and it can be taken away on whim and your wealth confiscated. Selling out freedom and your fellow citizens for some extra money or government contracts will come back to haunt you. Your legacy to the United States will be as Max Keiser has called it, a neo-feudalistic, gulag casino economy that has already begun." - Mike Krieger
The Good: The president had strong language for backing real derivative reforms.
The Bad: Vague language about the "Volcker rule" will not stop Too Big To Fail; but a plan like this (or even one like this) for breaking up the current mega-banks and limiting their liabilities will.
The Missing: NONE of this matters while our cops still work for the crooks.
The biggest bankruptcy in American history has also become the biggest fee bonanza free for all for the dozens of legal and financial advisors who are assisting with the orderly liquidation of Dick Fuld's former firm. Total fees paid out to all related partied now adds up to $741.6 million. Note - this is not for a reorganization: this is a pure liquidation. Of this, chief liquidator firm Alvarez & Marsal has pocketed an unprecedented $262 million. Bloomberg quotes George Fisher of Capital Guardian: "What a travesty. They’ve taken nearly three- quarters of a billion dollars out of a company that’s bankrupt, and nobody cares." Too bad the US government will never allow any other firm to file for either Chapter 11 or 7 as this may put a dent in the administration's plan to confuse everyone that the greatest Ponzi market/economy of all time is based on anything but a constant low-volume meltup in the markets. So obviously restructuring specialists will milk all they can from the one remnant of the biggest market collapse until its emergence into... fully liquidated status. Talk about value added.
Well, that spares some wholesale problems for individual countries to pursue action against Goldman. The EU's Rehn, who earlier catalyzed the upmove in the market by saying what the EU has been saying for week, i.e., that Europe can provide aid to Greece if Greece requests it (no seriously, the same headline repeated 1,000,000 times will push the market green every single time). But his latest is that the "EU is investigating use of CDO's and other derivatives." We are confident that all cash strapped countries, which are so because they ended up blowing money by bailing out their banks who gorged on CDOs (yes, if you are a European country, the sucker on the table is you), will suddenly find more reasons to go after Goldman. If nothing else, it will make Tuesday's congressional hearing a more watched event than the superbowl. To that end, we have inquired about a 30 second advertising spot with C-SPAN.
After France, Spain and Italy were the main net notional movers in the prior week, the fear about the Eurozone continues, only this time spreading increasingly to the core. While the Italy move of over half a billion in net notional increase is not surprising, as many perceive the nation as the next weakest link after Greece and Portugal, the German spike is a little surprising, although less so when one considers the failed 30 year Bund auction yesterday. Other countries that fill out the list of top 10 deriskers in the prior week include Brazil, Russia, Japan, Kazakhstan, Greece (yup, they're back), and the UK, which made the 10th spot, as CDS traders finally focus on arguably the most troubled "developed" country in Europe.
Long-term subsidies, like the Fed holding who-knows-what to maturity, equals soviet communism, as every hooligan knows. Short-term subsidies transfer credit risk, and they leverage parasitic behavior. Positive valuations assigned by shareholders to equities arise solely from anticipation of value transfer from firm debt-holders or resource transfers from US taxpayers. Debt-holder get a piece of this action too if governments overpay for “toxic” assets backing up their claims. But “everybody” receives more than fair value for their investments.
Senator Lindsey Graham Says "This Will Be The Year" China Stops Currency Manipulation, Sees 90 Votes In SupportSubmitted by Tyler Durden on 04/22/2010 - 12:36
Here comes protectionism: South Carolina Senator Lindsey Graham has told reporters that he has 80 or 90 votes of support in the Senate (guaranteed passage) if his Bill to stop Chinese currency "manipulation" were to ever get to the Senator floor. Graham must be getting some serious voter push to get this passed asap: "I understand why the administration is reluctant to push China, but unfortunately we're running out of time. This will be the year." With the delay in the official US Treasury's stance on the Chinese manipulation stance set to expire soon, Geithner must decide if the fall out from an escalation in trade war at the highest level is worth the offsetting legislation that now seems set to pass should he chicken out once again. The end result, of course, will be the same not matter what: tariffs, duties, subsidies, and generally protectionism. How the collapse of trade helps boost the great export-oriented US boom is beyond our meager analytical skills.
Senator Ted Kaufman strikes at the heart of the problem in a fin reform proposal, that is leaps and bounds ahead of the Wall Street co-opted bag of concentrated excrement that is the Dodd proposed "Bill", (which incidentally is also dumber than a bag of hammers in terms of actually regulating any of the really salient risk factors - the thing does not even account for the GSE's $6 trillion in debt for god's sake) whose only purpose is to make sure banks can blow themselves up once again and this time so spectacularly that only Mars would be able to bail out not only America but the world, in the process wiping out all of America's wealth. As Kaufman notes: "The prudent solution is to shrink these institutions to a manageable size at which they can actually be effectively regulated." We completely agree. It is time for this president to actually do something instead of just looking all grave when reading from a teleprompter, pretending he cares about Main Street - and the right thing is to enact the Kaufman-Brown proposed legislation into law immediately. Our only addition: demand that the DOJ look over the trading books of every bank and determine which ones pass a monopoly threshold designation. If Holder and Varney need help in doing their job properly, we will gladly volunteer our services.
Airlines Gambling With People's Lives As Royal Air Force Suspends Fighter Jet Flights After Ash Deposits Found In EngineSubmitted by Tyler Durden on 04/22/2010 - 11:23
If you ever needed confirmation that the airline industry is gambling with everyone's lives just so they can stop the profit bleeding and resume flight, here is the Telegraph confirming that airspace over Europe is anything but safe: "Flight training on RAF Typhoon jets was ''temporarily suspended'' today after safety inspectors found deposits of ash in one of the fleet's engines." And yes, these are sturdy military jets:we wonder how fragile passenger jets with GE turbofan engines are faring in their flights.
That is why the fat lady has sung and the SEC has acted. It is not that Goldman is the ogre that has broken the rules. Everyone has followed this same path, and there weren’t any rules either. There is only one critical difference between Goldman and the others: Goldman is the best, the most efficient. Because it is the best of the breed, the political focus will fall on them. The others will be tried only in the shadow of Goldman, after the show trial is over. Although the public relations team of Goldman came out with a very well reasoned document making their case to those of us who use the firm’s services. Of course, this has gotten great play in the financial press, but it is all beside the point. The issue is not the actual case brought up by the SEC but the entire structure of Wall Street – the fact that a 31 year old derivatives salesman is sometimes paid more than 100 times more than a manufacturing executive in Peoria. The inequality of the system is the issue or, putting it another way, the jealousy of the lunch-pail voter is the political dynamite that cannot be ignored.
In true fashion Moody's wakes up the day of bankruptcy. The new rating? A whopping A3.
EURUSD drops right back below 1.33.
RTRS-GREECE MAY GET SHORT TERM BRIDGE LOAN BEFORE MECHANISM IS ACTIVATED- SENIOR GOVT SOURCE
Euro shoots above 1.33, as everyone forgets that all 1) this has been tried many times already and 2) this is just a DIP loan and all the existing debt gets primed. Congrats Greece - you are now officially bankrupt