David Kostin summarizes the paradox of the rally: "S&P 500 has returned 7% YTD but most investors trail the index. Hedge funds have suffered from short positions and returned 2% in 1Q. Core mutual funds returned 5% reflecting underweight positions in Consumer Discretionary which surged 14% in two months, twice the market rebound." Well, not the Fed. The Fed is ahead of everyone. Although, once it becomes legal to sell again, the dash for trash may finally end. Then again, the modern market is, as John Taylor puts it, nothing but Alice in Wonderland...
After 70 Months Of Trade Surpluses, China Records A $7.2 Billion Trade Deficit In March: Detailed Summary Of March Trade DataSubmitted by Tyler Durden on 04/10/2010 - 15:18
In March China recorded its first trade deficit after 70 straight months of trade surpluses, which has occurred even despite global calls that the Renminbi needs to be revalued by about 20%. The primary reason for this was that in March China imported a total of $119.4 billion worth of goods - the single greatest amount recorded in history. This was offset by $112.1 billion of exports, well below the record exports China was pumping out in late 2008 in the mid $130 billion range, and the $130.7 billion exported in December of 2009. Below we present a summary of the key highlights of China trade balance over the past 3 years.
Crude oil prices ended the week virtually unchanged from a week ago as optimism about demand warred with trepidation about historically high inventories in both crude oil and gasoline.
The benchmark West Texas Intermediate contract settled at $84.92 a barrel on Friday, only 5 cents ahead of the previous week’s Thursday close after surging above $87 a barrel early in the week and then declining for three straight sessions.
Bears noted that oil seemed unable to stay above $87 a barrel level, while bulls said that oil had tested the $84 level going down and found resistance.
Given that the stated amount of gold in the GLD Trust has grown to over 850 tons, it appears that a lot of investors believe and trust that investing in GLD is the same thing as buying physical gold bullion. A close reading and analysis of the GLD Prospectus, however, reveals that investing in GLD is drastically different from owning gold. This analysis will show why GLD is nothing more than another form of a derivative security which is loaded with counter-party default risk. Ultimately, the value of the GLD Trust, and the price of its stock, has the potential to experience substantial loss. Under certain circumstances GLD could be worthless. As an investment advisor, I do not recommend that anyone use GLD instead of buying physical gold because it is not an investment in gold and the legal structure of GLD is such that unsuspecting investors could end up losing all of their money. Furthermore, because the risks embedded in GLD are documented in the GLD Prospectus, investment advisors who recommend GLD and use it in client portfolios are exposing themselves to the risk of negligence lawsuits.
Edolphus Towns Says Fed Officials Were Unhappy About Friedman Waiver To Buy GS Stock, Were OverruledSubmitted by Tyler Durden on 04/10/2010 - 11:27
One of the most botched cases of conflict of interest abuse by a Federal Reserve official will forever remain the purchase of Goldman Sachs shares by Goldman Board Member, and FRBNY Board Member (the squid likes to keep its Federal Reserve puppets closely supervised) Stephen Friedman: an act strictly forbidden by the Fed itself. The action was so indefensible it led to Friedman's quitting shortly after disclosure of his transgression leaked. Yet the reasons why Friedman managed to effect this purchase of 37,000 shares of GS on December 17, 2008 is because he was granted a "waiver" by the Fed. A month ago, Chairman of the House Oversight Committee, Edolphus Towns sent a rather angry letter demanding an explanation from Ben Bernanke why he had allowed this blatant case of semi-insider trading to occur at the highest echelons of shadow government. Today, we find out that Towns is unhappy with the production provided by the Fed, and concludes "that senior officials had misgivings about granting the waiver but were ultimately overruled" and that "we believe a closer examination of this issue is necessary, especially when Congress is considering increasing the Fed’s powers. In the coming weeks, we will continue our investigation of this matter and will schedule a hearing to learn more from Mr. Friedman and senior Fed officials about how he was permitted to make windfall profits by trading stock in a company he had a role in regulating." We are not so sure there is any room for confusion - after Goldman told its pseudo employees at the Fed to bail it out at the cost of tens of billions in taxpayer money, why is it in any way surprising that those same FRBNY Goldmanites will not be allowed to profit from Goldman's bailout as well? The is nothing than a clear cut case of power and political capture at the very highest level of the country, by the two most collusive entities, whose sole purpose is the confiscation of middle-class wealth, or whatever is left of it, before the administration decides to hike middle-class taxes to a Socialist country appropriate 99%.
In a tragic accident, Polish president Lech Kaczynski, his wife Maria, the head of the Polish central bank Slawomir Skrzypek, the Army Chief Staff and 92 other people were killed as the airplane carrying a Polish delegation was landing in Smolensk, in Russia to commemorate the thousands of Poles killed by Stalin in Katyn in 1940. The crash appears to have been an accident due to atmospheric conditions and there are no signs of foul play. First video clip from Russia Today on the plane crash attached.
In the week ended April 6, the record number of net speculative Euro shorts seen last week of -85,326 declined by almost 20k contracts to -67,223. The weekly change of 18,103 was the second biggest increase in bullish EUR bias in 2010. This was also manifested in the price of the EUR over the prior week, in which the dollar opened very week on Greek fears then somehow ended stronger even though nothing had been resolved about the Greek situation. Much more importantly for carry traders, the number of Yen shorts surged, with the net number of speculative JPY shorts hitting a two and a half year high of -42,305. Yet the deterioration in sentiment was a fraction of last weeks, when net short positions increased by a massive 41k to -31k. In the other major currencies, both the GBP and the CHF saw a minor improvement in sentiment, although while the CHF is close to the flatline, the GBP continue to be close to record net short levels.
Has The iShares Gold ETF (IAU) Been Covertly Depleted Of 90% Of Its Physical Holdings, With Banks Like JPM And Goldman Pocketing The Actual Gold?Submitted by Tyler Durden on 04/09/2010 - 19:24
A few days ago we presented an interview of Harvey and Lenny Organ with King World News, in which the Organs recounted their personal visit to Canada's only bullion bank vault - ScotiaMocatta. According to them, the vault contained roughly 89,000 ounces of gold, in the form of "210 400 oz bars, 4,000 maples, 500 eagles, 10 kilo bars, 10 one kilogram pieces of gold nugget form." As GATA's Adrian Douglas confirmed, this was equivalent to about $100 million at today's gold price. Yet what we find perplexing is the disclosed gold holdings of the iShares Gold Trust (IAU) in the very same vault, which amount to 457k troy ounces. Are precious metal ETFs nothing more than a perfectly legal, CFTC supervised operation that allows the "Authorized Dealers" of the world to "withdraw" the physical gold out of various world vaults, even as the retail population ends up holding increasingly more worthless stock certificate whose asset collateral is approaching zero?
The U.S. Mint just reported another record, but this time it wasn’t for gold. The Mint sold more Silver Eagles in March and in the first quarter of the year than ever before. A total of 9,023,500 American Silver Eagles were purchased in Q110, the highest amount since the coin debuted in 1986.
While this is certainly bullish, there’s something potentially more potent developing in the background. Namely, how this matches up with U.S. silver production. Like gold, the U.S. Mint only manufactures Eagles from domestic production. And U.S. mine production for silver is about 40 million ounces. In other words, we just reached the point where virtually all U.S. silver production is going toward the manufacturing of Silver Eagles. - Casey's Gold & Resource Report
Ben is a lying sack of shit, but there is a rationale for what he is doing. Maybe it’s only because he is trapped in Goodfellas, but he is going to follow the policy—if I understand it right—to the bitter end. So it is good to understand this rationale. Understanding it gives you a new view on hedge construction. Here is a set of simple positions; this book can be refined based on your sophistication. For example, instead of a long bond, a flattener trade is surely better but also more complicated.
Erik Nielsen must have gotten quite a beat down from the Goldman Greek PR corps. Earlier, as we disclosed, the firm's European strategist, suggested that something nasty this way comes courtesy of an emergency ECB meeting. Later, he backtracked not only on that statement, but also on all the media hoopla over the country with the inverted curve, saying (independent) media is now the functional equivalent of CDS traders - vile, smelly, scheming bastards. Amusingly, this is very much reminiscent to Erik faux pas in early February when he had the temerity to point out (rightfully so) that the Greek GDP deficit is actually 16%, not 12.2% as was widely believed (and with every passing week it is becoming clear that Nielsen was completely right, as 2009 GDP is now at 12.9%, and probably will be 14% in another month, yet post another smack down had to reissue his note saying it was all his fault for stirring the speculative elements). Too bad Erik does his best to report the truth as he sees it, only to receive the prop desk's Greek trading axis after the fact, which today apparently was in direct opposition with his earlier bearish tone.
Apollo, Goldman Back To Their Old Fleecing Ways, MetalsUSA IPO Bombs, Costs Goldman's Top Clients 8% In One DaySubmitted by Tyler Durden on 04/09/2010 - 17:12
In the hubbub over the Greek default and the resultant market melt up, one thing was promptly forgotten - the IPO of a company that one year ago was on the verge of bankruptcy. PE firms are smelling the market top and are bailing out in droves from portfolio holdings, selling shares to those who can't get enough of this downtickless rally. Metals USA, a service center, went public at $21.00, coming to market above the indicated range of $18-20. Good thing lead underwriter Goldman did not tell the orderbook it was coming out with a Conviction Buy on the stock potentially as soon as yesterday (although certainly not today... at least not yet). Alas, not even the squid's soothing words of discounted comfort were enough to save this public offering from bombing, as the midline of this range is precisely where the stock closed - at $19.20, or over 8% down from the offering price. Some overzealous basic industries "experts" are now drinking their newly discovered deposits of unemployment courtesy of $3 happy hour pints.
In what can hardly be described as a travesty of efficient markets, the Dow closed at the perfectly normal level of 10,997.35 after the complete lack of a concerted effort by the primary dealers to reroute recently acquired capital into stocks that are now trading at triple digit forward multiples. Fear not - the resilient U.S. consumer who now realizes that no contracts have to be honored (courtesy of a unrepentant skeleton) and instead all money must be rerouted into shares of Pets.com, will make sure that the market is and always will be a leading indicator to a 400% debt/GDP economy. Also ignore that the Dow hit 11100.98 as if possessed by a mysterious GETCO DMMon, that was also perfectly explainable. After all, over the weekend, as Morgan Stanley whisper expectations indicate, Greece will default. That, together with an imminent meteor impact that is set to wipe out humanity and leave SkyNet in charge of trading stocks, should be sufficient for newly crowned Supreme Justice 80286 to make offers of any securities not only illegal but punishable by lethal and prompt use of Norton Antivirus software and/or H2O.