Remember G-Pap's statement, repeated roughly once for every dollar of US sovereign debt, that Greece is not looking for financial aid? One could say the man knows a lost cause when he sees one (nobody can say they refused to help you if you didn't actually need help), which is why Greece has just become the biggest sovereign debt panhandler, begging its own people for a bailout. The Greek situation is now so bad that as of a few days ago there is a newly opened account titled "Solidarity Account for Repayment of Public Debt" at the Bank of Greece, which is now redirecting public donations straight for the "repayment of Greece's public debt." We hope these are tax deductible. This account has appeared about at the same time as California has started asking retail investors to directly invest in its critical $2 billion bond offering. In the sovereign crises of the future, will paypal donations play a critical role? All signs point to yes.
For much of the early going the Industrials looked like they might have a go at a run toward new highs. Part of the thrust came from a series of rumors that spurred trading in the likes of Fannie, Freddie, AIG and Citi. The rumor that seemed to help them all was a zany thesis that the U.S. might ban shorting of the companies that it had a large stake in. While the rumor seemed whacky and unfounded, a rumor is not responsible for who believes in it. That became evident as buyers surged into the above-named stocks, probably on the theory that a shorting ban could cause a massive short covering rally. Citi benefitted from a couple of other rumors. Charlie Gasparino reported on Fox that the U.S. government was looking to sell its Citi stake. That might free the company up. The stock spiked 7%. Also helping was the strong demand for some preferred shares the company was issuing. The rumor driven frenzy in those stocks swelled the volume sharply. Monday looked like the slowest day of year, followed by the highest volume in a month. All thanks to a couple of rumors. - Art Cashin
- Regulators tell US banks to hold money (FT)
- Even as Italy is expected to go bust next, Italy's Romano Prodi Says "Greek Crisis Is Over, Rest of Region Safe" (Bloomberg)
- Race to the bottom with G4 currency rhetoric (Reuters)
- Finance: an exposed position (FT)
- Todd Harrison: The witch hunt widens on Wall Street (MarketWatch)
- Simon Johnson reviews Hank Paulson's memoir (The New Republic)
- Asian stocks fluctuated as shipping lines and oil companies declined.
- British banks face increased bonus disclosure as Myners plans to lower bar
- China's trade surplus shrinks to smallest in a year as imports surge 44.7% in Feb.
- Chinese banks lend about $102.6B in February, around half the loans issued in Jan.
- EU is considering a ban on speculative derivative trades, including credit default swaps.
- Japan's Jan machinery orders fall 3.7%; business spending revival may be slow.
- Manufacturing in U.K. unexpectedly plunges as it sees `fragile' economy
RANsquawk 10th March Morning Briefing - Stocks, Bonds, FX etc.
1) Somebody (wink wink) spreads a rumor that shorting government-owned companies will be banned. Citi is one of these companies.
2) Rumor spreads, causing AIG, C, FNM and FRE to skyrocket.
3) Citi announces it is placing $2 billion in TruPS, benefiting from the stock-buying orgy.
4) Cramer, and a bunch of fourth-rate analysts come out of the woodwork, and join the bandwagon, saying how Citi is massively undervalued and how the stock is merely an indication of the market realization that Citi's -100% Tier 1 capital when Marked-to-Market is a much more palatable 349,594,388% when Marked-To-Bullshit.
5) SEC (wink wink) comes out with a one sentence refutation of the rumor late at night, when nobody will notice: "There is no truth to the rumor that we are considering restricting the
short-selling of stocks in which the government has a stake," John
Nester, Securities and Exchange Commission.
And that's how the market works nowadays. Better luck next time.
The concept of entropy is one of the most useful terms for understanding just about everything. While it has its origins in natural law – thermodynamics, specifically – the concept holds true pretty much across all closed systems. In the simplest of terms, every closed system will ultimately degrade toward a state of maximum entropy.
Columbia's Charles Calomiris, who predicted the Argentina sovereign debt crisis (not sure which one: do people actually keep count?) was on Bloomberg TV spreading some more logic, first as pertains to those satanic monsters better known as CDS traders with the following piece of brilliance - "the CDS market always requires two parties in any transaction." This is something that everyone tends to forget. Unlike stocks or cash bonds, where the whole concept of Zero Sum is somewhat murky (especially in naked shorting) in derivatives it is precisely that - one man's loss is another man's gain - no exceptions. Why is nobody scapegoating those traders who enable the speculators to exist? If you raise the CDS offer high enough nobody will buy - we could just as easily blame the CDS sellers for their stupidity and willingness to take on capital losses. But as the whole topic of CDS speculators is pretty much a dead horse at this point. Calomiris also points out another obvious feature of the Greek speculator raid: "the spreads that we saw in Greece at their worst in the CDS market were about 4%. Based on what we know from the history of sovereign crises given the current fundamentals in Greece if anything that is a very muted response in the market. I would have expected a much greater response and I think we will see a much greater response..." Second, Calomiris says that the next country to fall after Greece will be not Spain, but Italy - the reason: massive governmental corruption.
The US Leg Of The Blame [FX/CDS/Goatherding] Speculators World Tour Comes To An End In Front Of Tim Geithner's OfficeSubmitted by Tyler Durden on 03/09/2010 - 18:34
The meeting between the Greek Minister Of Prime Scapegoating and the US Secretary of Treasury Defrauding ("I used TurboTax") has ended "satisfactorily": idiotic lunacy, which we are now convinced has mutated and gone airborne, has spread and now Geithner is very likely infected. According to preliminary reports president Obama may be contagious as well. G-Pap is quoted by Market News as saying that "President Barack Obama gave a positive response to the European efforts to combat some aspects of market speculation that could destabilize markets and the euro." Seriously, is this just some sick, perverted scheme to make going long the dollar (short the euro) illegal? Can we just make it so much easier and simply hand Benny and the Inkjets the constitution to use as 1-ply Treasury Paper one of these days?
Former Bridgewater-ite (which we hear is not doing that hot lately) Rick Bookstaber, who was recently appointed at the SEC in some risk management capacity, comes out with a truly amusing rant on why gold is in a bubble, and, not just that, but that "we all know gold is in a bubble." Ignore the fact that all multi-billionaire hedge fund managers have been loading up, all relevant and semi-relevant pundits have been claiming that gold is gradually becoming the one alternative to fiat debasement which has recently become a global phenomenon, and ignore that even with the dollar going up, gold has defended its 1,100 an ounce price quite successfully. Bookstaber compiles vivid imagery upon even more vivid imagery, and goes as far as comparing the quest for gold with the pursuit of hookers "#000000;">Even if a guy is just after sex, he at least has the decency to act like there is some substance behind his interest. #000000;">But with gold, no one seems even to
care about giving a justification, other than “gold has been a store of
value throughout 5,000 years of monetary history”. No one? Dear Mr. Bookstaber, feel free to peruse the following thoughts by Eric Sprott, Dylan Grice, #000000;">Hugh Hendry, #000000;">David Rosenberg, Fred Hickey, Jim Grant, David Einhorn and last but not least, Goldman Sachs, on some contrarian opinions to your prevailing dogma. And speaking of unconflicted advance warning vis-a-vis ponzi bubbles, where was your current employer cautioning the general population about the dot com bubble? Or the housing/credit bubble? Or the Madoff ponzi? Or the current Great Currency Deflation Bubble? Perhaps you can expend your time and energy on the real source of soon-to-be unparalleled wealth loss instead of focusing on the fringe "tin foil"-hatted gold community which nobody takes seriously anyway (except India of course which just incidentally bought 200 tons of gold north of $1,000).
Images Of Titanic And Assorted Rodents: Chief SEC Economist James Overdahl Leaves For Private SectorSubmitted by Tyler Durden on 03/09/2010 - 16:56
The SEC's Chief Economist and PPT liaison, who previously held the same position at the Gary Gensler (former Goldmanite) run CFTC, has decided to leave the much maligned and impoverished syndicate for greener pastures. His next stop: NERA Economic Consulting.
Headline which tells you all you need to know:
15:32 03/09 GREEK PRIME MINISTER ENTERS MEETING WITH US TSY'S GEITHNER
Can Someone Please Finally Explain What CDS Are To The Mainstream Media And The Greek Minister Of PrimeSubmitted by Tyler Durden on 03/09/2010 - 16:31
This is just getting ridiculous. First the NYT had some choice words over the weekend in describing the whole CDS fiasco, which alas did not have quite the desired effect, and now the BBC is out with a primer on SPECULATION ANALYSIS (yes, a primer), in which it has the following stunner:
Government bonds come with an insurance policy, called a credit default swap (CDS).
At this point: i) everyone has become an overnight "expert" on CDS, ii) every "expert" is patently wrong on what CDS is, iii) insane college green preachers have incorporate the word CDS to go right before harlot, and right after apocalypse, iv) "Unprincipled speculators are making billions every day by betting on a Greek default" according to Papandreou, even though the DTCC notes the net notional in Greek CDS is only $9 billion, v) the SEC is about to get involved meaning activation of WOPR can't be far behind.
Charlie Gasparino over at Fox Business News reports a rumor that the government may be looking to dispose of its 27% Citi stake at some point over the next 3 months. Logistics aside, presumably somehow this means that even more bankrupt companies like AIG, FNM and FRE are probably next in line for offloading the taxpayer stake into the hands of hapless hedge/sovereigns funds. We hope it is not the same hedge funds that have recently received subpoenas and C&D orders from ever shorting the euro (i.e., going long the dollar).As a reference point the gov't owns 27.01% of Citi which has a hilarious market cap of $108 billion, and owns 80.66% of AIG with its $23.5 billion capitalization. This explains why the government is now actively pulling the borrow: gotta sell at the highest possible price. Meanwhile, Doug Kass reports that a rumor of "new stringent short-selling rules is causing a squeeze in heavily shorted names this afternoon." Last but not least, here is the rumor as reported by Seeking Alpha. So yes, it appears we are back to the joyful days of late spring 2009 when the rumorsphere drove crap financials into the troposphere, even as nobody knows anything, and rumors are generated simply to explain massive short squeezes.
Retiree Confidence About Comfortable Retirement At Generational Lows Even As Millionaire Ranks Jump By 16%Submitted by Tyler Durden on 03/09/2010 - 15:13
The fundamental schism within American society continues, with $1 million plus households spiking in 2010 by 16%, even as the broader population has increasingly less (if any) money saved up, and the confidence of retirees who believe they have enough money saved up to last them through their retirement years drop to a generational low. The split between the bankers and Main Street is continuing to crystallize as simply one between the rich and the poor. One wonders how long before pitchforks are involved?