And so the EURUSD plunges to new lows. Yesterday, we expected the euro would hit a 1.25 handle by the end of the day. Alas, we were off by 4 hours. US banks are now rumored to be joining European banks in taking on the ECB directly and shorting the living daylights out of the doomed currency expecting another several hundred billion in bank bailout funds to be added shortly. Last time we were here a week ago in the EURUSD, the Dow was crashing in the four digit range. Now, we know that the machines have decoupled from the EURUSD and EURJPY signals, as the EUR is no longer a part of any correlation trade, As such we expect the euro to hit parity at about the time the S&P hits 1,500, on yet another no volume melt up, just in time for Gold to hit a 3x multiple of the S&P. Although, that won't be today: gold is currently being pushed down the LBMA. JPMorgan can not imagine a world where gold is $1,250 or higher. Alas, we give this last ditch attempt at most 24 hours. In other news, the EURUSD has buyer support in the 1.2550 area. As for stocks: look at volume. If it abysmal as it tends to be whent he Primary Dealers, the Fed and the quant community collude to push it up double digit handles, we expect S&P 1,200 today. If volume picks up the market will tank. Guaranteed.
RANsquawk European Morning Briefing - Stocks, Bonds, FX etc. – 13/05/10
In a feat that would seem to defy the odds, Goldman Sachs, JPMorgan Chase and Bank of America this week each said its trading desk made money every day of the first quarter. Goldman said its daily net trading revenue topped $100 million 35 times last quarter out of 63 trading days. JPMorgan and Bank of America disclosed similar eye-popping stats. Citigroup, too, recorded a profit on each trading day, Bloomberg News reported, citing unnamed people who knew the results. The intrigue is high. If a too-big-to-fail bank’s traders were able to make money every day of a quarter, were they really trading in any normal sense of the word? Or would vacuuming be a more accurate term? What kinds of risks do such incredible profits entail, for the banks and the rest of us taxpayers? And are results such as these too good to be true? - Jonathan Weil, Bloomberg
Crude oil prices dropped on Wednesday, with the front month falling to fresh lows against deferred contracts. Refined products fared better, and they finished in positive territory, as traders responded to this week’s DOE report.
In the process of falling, the front-month June crude oil contract finished near a three-month low, and it ended within fairly easy striking distance of its now major support at $74.50. Also evident on Wednesday was a clear divorce from equities, which had a very strong day, with the bellwether DJIA gaining 148.65 points to 10,896.91 by the 4 PM final bell. The US dollar was slightly higher against the euro and did not seem to exert any major influence on oil prices on Wednesday.
All we can hope for is for this to get to trial. And any case which in its brief says: "As American citizens, the Plaintiffs allege the financial and banking system imposed on them by the Federal Reserve Banking sytem is a violation of their Constitutional and Human Rights. That the banking system practiced by the New York Federal Reserve Bank, owned and controlled by the Defendant Wall Street Banks, is the most sinful and evil PONZI scheme man is capable of devising" deserves a hearing.The ratings for C-Span will blow the Superbowl away. A 30 second ad slot will cost exponentially more as the case progresses adversely for the Federal Reserve, and the dollar gets increasingly devalued.
Retail Investors Flee From Market Even Before Record Market Crash, YTD Domestic Flows Into Stocks Are NegativeSubmitted by Tyler Durden on 05/12/2010 - 18:50
The weekly ICI number for long-term domestic mutual fund flows is out, and not surprisingly, retail investors were bailing out in droves from the stock market even before the massive flash crash of May 6. In fact, in the week ended May 5, retail investors had pulled a massive $2.235 billion out of the market, after the S&P had dropped a mere 5% or so from the prior week. We are positive that when the number for the current week comes out, the outflows will be stunning now that investors have no faith left in the rigged casino "capital markets." Of course, this is simple to explain: with everyone and their grandmother habituated to a market that can only go up, at the first sign of jitteriness everyone and their grandmother bails, although only the big institutions really get to exit: everyone else has to hope the SEC will not cancel their trades the next day. And now that the market has been thoroughly discredited, the primary dealers have no choice but to ramp it up on no volume yet again, in hopes of pulling in the momos and the housewives into it as usual, courtesy of the CNBC cheerleaders, just to pull the rug a few days before the next trillion dollar bail out is needed and "justified." Oh, and whoever cares, retail domestic flows into stocks year to date are negative by $1.5 billion. Tells you all you need to know about who is buying this "market" - momo emptor.
Spreads rallied today with HY outperforming IG but neither IG nor HY able to get down to Monday's tightest levels as we note 3Y continuing to underperform 5Y (albeit both compressing today) as risk seems to be dragged nearer-term and credit is definitely less Utopian than equities.
Earlier we noted that the Austrian mint was on its way to depleting its gold reserves following "panicked buying" from Europeans, who now openly fear the demise of their currency. Now, courtesy of Slim Beleggen, we understand that the situation in the silver market is just as bad and has also spilled over to Germany: the contagion is no longer one of sovereign debt, but of precious metal physical inventory. The primarily silver focused (but holding gold as well) Kronwitter precious metal online retailer is not only not accepting any orders, but has entirely taken down its website. The only message left for visitors is (translated from German) as follows: "Dear customers, due to the enormous number of orders we can take at the moment no new orders via the Internet, email or fax."
All you need to know is highlighted in red (we'll leave the 10 paragraph recap to those who enjoy building narratives out of noise). We are now back to the old regime where a 25 handle move is based purely on Vitamin H(ope). And now, the EURJPY is completely decoupled as the carry trade is once again the USDJPY. At this point the Euro can fall to 0 and nobody will bat an eyelid: that signal has been terminally disconnected from all algos.
Re: Winning at Ethics, the Goldman Way
I have reviewed no less than seven times your entire
episode on Charlie Rose.
Your artful simplicity, studied humility and former
hairline all positively radiated against the set’s dark
As one of my lesser colleagues on the desk marveled,
“Lloyd seemed almost human: Why?” To which I replied, evenly:
“because he finally read my last memo.”
Of course there was no reason you should look to one of
your own traders for advice. But now that you have, we must
proceed quickly. American public opinion is volatile; our
exposure to it is peaking, and it will be more difficult than
usual to create the illusion for American mortals (or as we like
to call them, “The Morts”) that our business is in their
interest, much less that we share anything in common.
This time, please, do not wait five months to internalize
my new action items.
PIMCO's McCulley Discusses The Ticking $3 Trillion Shadow Banking Time Bomb, Defends The Fed As Head RegulatorSubmitted by Tyler Durden on 05/12/2010 - 15:54
On August 9, 2007, game over. If you have to pick a day for the Minsky Moment, it was August 9. And, actually, it didn’t happen here in the United States. It happened in France, when Paribas Bank (BNP) said that it could not value the toxic mortgage assets in three of its off-balance sheet vehicles, and that, therefore, the liability holders, who thought they could get out at any time, were frozen. I remember the day like my son’s birthday. And that happens every year. Because the unraveling started on that day. In fact, it was later that month that I actually coined the term “Shadow Banking System” at the Fed’s annual symposium in Jackson Hole.
It was only my second year there. And I was in awe, and mainly listened for most of the three days. At the end, Marty Feldstein always does the wrap-up. Everybody wanted to talk. And since I was a newbie, I didn’t say anything until almost the very end. I stood up and (paraphrasing) said, “What’s going on is really simple. We’re having a run on the Shadow Banking System and the only question is how intensely it will self-feed as its assets and liabilities are put back onto the balance sheet of the conventional banking system.” - Paul McCulley
Gasparino has broken news which everyone knew was pending, namely that Deutsche Bank's Greg "I am short your house" Lippmann, who abruptly left the firm a few days after the SEC complaing against Goldman was made public, is about to get the probe. In other words, the toxic CDO sale probe is escalating, and the latest lucky contestants are Citi and Deutsche Bank, which according to Fox Biz' Charlie Gasparino have been subpoenaed for further documentation after a preliminary investigation left far too many questions open.
ENGLEWOOD CLIFFS, N.J. – May 12, 2010 – John Carney will be joining CNBC.com, the online destination for real-time global business news and expert analysis, as Senior Editor, it was announced today by Allen Wastler, Managing Editor, CNBC.com. In addition to writing for the site, Carney will also appear regularly on CNBC’s Business Day programming.
“John has deep connections on Wall Street and has a unique insight into its trading community,” said Wastler. “He is well-known within the financial world and we are delighted to have him on our team.”
US More Bankrupt Than Ever - $83 Billion April Deficit Is Record For The Month, $30 Billion Worse Than Expected As Tax Receipts PlungeSubmitted by Tyler Durden on 05/12/2010 - 14:11
Well, if nothing else, we now know officially just how great those tax receipts were. Good thing too - we can end that whole superficial tax receipt debate and focus on important things. April's tax deficit of $83 billion was the highest April deficit on record. America is now more bankrupt than ever. Income was $245.3 billion, 8% below the total recorded last April. Spending was $328.0 billion, up 14% year-over-year. A year ago in April the deficit was $20.9 billion. And here is the data: tax receipts down 7.9% YoY, Individual Income Tax down 21.5% YoY, and more importantly, spending: Total spending up 14.2%, National defense up 17%, Medicare up 39.4%, Social Security up 4.2% and General Government up 5.6%. At least interest payments were down 9.5%.
And now back to your regularly scheduled bankrupt country market melt up.