- Asian stock markets were lower Friday with Japanese tech stocks weighed by the strong yen.
- China has raised down-payment requirements for certain home buyers.
- China sold U.S. Treasurys for the fourth consecutive in February; holdings down $11.5B.
- Emerging bond inflows of $10.4B surpass 2005.
- EU Finance Chiefs meet as Greece moves on bailout.
- Fed's Yellen says she's growing more confident economy is on 'right track'.
- Ireland asks church to pay half 1.4B Euro abuse bill.
RANsquawk 16th April Morning Briefing - Stocks, Bonds, FX etc.
The impossible is happening with futures taking a big hit. Can anyone seriously recall when the Fed allowed this to happen last? The question tonight is who over at Liberty 33 is getting sacked (no pun intended) for this gross oversight. Do those people not realize letting the futures drop is treason and punishable by A. Joseph Cohen rereading Leonard Cohen, in roughly the same octave? If we take out what Bob Pisani would call the psychologically important barrier of 1200, watch for the S&P and gold (last seen at 1155) to play a nasty game of convergence. With the largest SPY put open interest at $117, we may just see a 30 point drop in the index if the "boys" don't intervene post haste. After all it is well known ponzis are only allowed to go up.
Kyrgyzstan’s mass anti-government protests last week were essentially the culmination of more than a decade of disillusionment and dissatisfaction that accumulated in the nation’s political, economic and social spheres from the period of Akayev to his successor Kurmanbek Bakiyev, with virtually every Kyrgyz concerned about rising prices and falling standards of living, both issues of little concern and dimly understood in Washington.
Presentation By David Yerushalmi Suing The Fed On Grounds AIG Takeover Was Illegal Money Laundering SchemeSubmitted by Tyler Durden on 04/15/2010 - 17:41
Some time ago, the law office of David Yerushlami, which a week ago filed a lawsuit in the Federal District Court challenging the constitutionality of Obamacare, sued the Fed over its takeover of AIG claiming the entire transaction was illegal and was in essence a money laundering scheme. Below we present the powerpoint presentation prepared by the law firm. Here is how Yerushalmi explains his motive: "The Law Offices of David Yerushalmi, P.C. presents an online PowerPoint presentation fully narrated illustrating rather graphically just how Timothy Geithner, who was then (Sept. 2008) the president of the Federal Reserve Bank of New York, orchestrated the illegal acquisition of 77.9% of AIG's equity and voting rights. As the presentation makes clear, while the FED certainly had authority to loan AIG billions and to take all of the company's assets as collateral, which it did, it had no legal authority to acquire nearly 80% of AIG's shares and voting rights. But this is exactly what it did when it created with great fanfare what is called the AIG Credit Facility Trust." Attached also is a latter by David to SIGTARP Barofsky, discussing the same.
With the stock getting monkeyhammered after hours, here are first flash thoughts on GOOG's quarter from UBS (which has a $700 price target). As soon as they are available, we will present the thoughts of everyone else who has a Buy on the name (pretty much all of Wall Street).
Sprott Speaks, Discusses The Global Ecoonomy, The Imaginary Recovery And His New Physical Gold TrustSubmitted by Tyler Durden on 04/15/2010 - 16:47
I still have a deep, deep concern about the leverage in the banking system. I look at the inability of governments who are spending vast amounts of money to generate much growth in GDP. I can give the example of running a $1.5 trillion deficit last year and GDP goes up $200 billion. So we are not getting much bang for the buck but we still owe the buck at the end of the year. I also worry about what's going on in China. The Chinese government has asked the banks to cool down their lending, the latest data in March show that lending has gone down from $300 billion per month to $100 billion. That's $2.4 trillion a year less. And obviously it has to have an effect on their economy as the lending of $2 trillion did positively last year. When you look back at China in 2009, they had a $4 trillion economy, they lent $2 trillion to people, they had a $600 billion stimulus: those should generate some GDP growth. I am not even convinced that 10% growth which would be $400 billion is a good response to all the measures that were taken. - Eric Sprott
"Somewhat paradoxically, the show of solidarity for Greece by other euro area members and the ECB raises the risk that the euro will break apart eventually. Seceding from the euro area to devalue is very costly and risky. But seceding to revalue and introduce a harder currency is easier. Germany might opt to do so one day. * The road to such a break-up scenario leads through even more fiscal profligacy and divergence in the euro area, a politicisation of monetary policy, and a weaker currency. Recent events suggest that the trip down this road has started." - Morgan Stanley
From A Cyclical Start To A Defensive Finish - Goldman's David Kostin Tells Clients Where To Shove Their MoneySubmitted by Tyler Durden on 04/15/2010 - 15:56
A presentation by Abby Joseph Cohen's replacement on where Goldman's clients should put their money. To be taken with the usual airplane carrier full of salt, and dodecatuple reverse psychology. The core theme of the presentation: BRIC, BRIC, BRIC, cyclical, cyclical, cyclical. Remember Wall Street lesson 101: whatever Goldman's clients are buying, Goldman is selling.
Developing: Eurocontrol says airspace closed in Ireland, UK, Belgium, Netherlands, Denmark, Sweden, Norway, Finland, France, Germany and Poland. US taxpayer-backed delegations packing bags of money can still fly into Athens for the time being. Approximately 5,000 to 6,000 flights were cancelled due to volcanic ash on Thursday. Also, from Reuters, Iceland volcano plume expected to cancel 21,000 flights today, may spread to Germany and Poland on Friday, European agency says.
The middle east powder keg is on the verge of exploding. After repeated warnings of possible escalation between Iran and Israel, we get the first official confirmation that the conflict may not be tidy and contained. The Telegraph is reporting that King Abdullah of Jordan has just warned the US that a war between Israel and Hizbollah is imminent and that is could spread across the Middle East. Just like the Great Depression ended in a Great War, so this ongoing Great Depression v2.0 (because -10% GDP when one takes away the government stimulus is precisely that) is likely about to result in another one.
This piece was emailed to me by a friend. Its author, John Harris, according to his own bio, is “the founder and managing partner in Ceylon LLC, a provider of communication software libraries that enable traders to conduct electronic trading business on major industry platforms.” So… I get it; he is staked in the debate. Either he or his customers do not want their activities to be scrutinized by the SEC, who is charged with keeping our markets fair and safe. I am not sure I agree with the limits (2million shares per day/ or $20 million value… I would have gone way higher… higher to the point where this is aimed at the HFT the SEC is trying to understand, without catching any traditional mutual funds or hedge funds in the trap) that the SEC is proposing, but I can’t think of a more reasonable approach for the SEC to take, then to collect data on activities it does not understand, yet seeks to regulate. As industry participants who have watched this HFT defenses morph continually after each tactic fails, we are amused. - Sal Arnuk, Themis Trading
Lately I have been using the phrase "Corporate Communism" on my television show. I think it is an especially fitting term when discussing the current landscape in both our banking and health care systems. As Americans, I believe we reject communism because it historically has allowed a tiny group of people to consolidate complete control over national resources (including people), in the process stifling competition, freedom and choice. It leaves its citizens stagnating under the perpetual broken systems with no natural motivation to innovate, improve services or reduce costs. Lack of choice, lazy, unresponsive customer service, a culture of exploitation and a small powerbase formed by cronyism and nepotism are the hallmarks of a communist system that steals from its citizenry and a major reason why America spent half a century fighting a Cold War with the U.S.S.R.
We are one step away from the full blown reincarnation of the entire CLO market. We read in Loanconnector that "LCDX14 and LCDX13 are better today on increased volume as accounts have found it increasingly difficult recently to take on exposure via the cash market, sources said. With sellers hard to come by in the cash loan space, investors are turning to synthetics to take on exposure." And there you have it: offer spigots everywhere are shut down as nobody sees any incentive to sell in a market where the Fed has taken away all the risk. And with sellers unwilling to offer product no matter what the cost, the scramble for derivatives and synthetic exposure is coming back with a vengeance. If this is any indication, we expect that the securitization market for corporate loans will be flying within a few weeks as investors needing to allocate capital to moral hazard strategies scramble to get Citi, Goldman, and Barclays to resecuritize all the same crap, and then some, that got us in this mess to begin with. With dividend deals, PIK toggles, no COC bonds, no downgrade trigger issues already a daily occurrence, corporate issuers hold all the cards. For all those companies which have opened restructuring practices over the past year in expectations of surging defaults, our condolences. You - 0, Moral Hazard - Infinity. As for the LCDX situtation: "Meanwhile, the Markit LCDX13 is hitting all time highs of 106.0625-106.1875 this afternoon."
At this rate the only metric to gauge the stock market will be how big the L2 order book is. Any time, any time, there is a pick up in volume, over the past 3 months, the market has dropped. Plain and simple. Consolidation to the downside will be very entertaining.