AIG Goes Suborbital

The ravenous algo has just sniffed out AIG. Because now that the firm has no relevant core assets to sell, it surely merits a 10% spike in several minutes. Or is there merely a rumor that there is a rumor. Hopefully the government isn't back to its old trick of rolling buy-ins in financial firms. All's fair in love and getting the market higher, higher, higher.

February ETF Update: Biggest ETF Gainer In Last Month: SPY

We have closely tracked the Q4 bank influx into the SPY ETF, which on ever declining volume breadth has become the one most dominant market determining factor, on both a push and a pull basis. It is no surprise that in February the SPY was once again, by a wide margin, the biggest source of capital inflows in the equity ETF space. As the chart below from Invesco demonstrates, institutions that still have remaining cash, ploughed over $1.5 billion into the SPY, which now has over $70 billion in net assets. Ironically this occurs as on a YTD basis US Market Cap-related ETFs have seen over $14.5 billion in net outflows, as virtually all equity ETF exposure has been broadly shunned.

ECB Withdraws Massive €295 Billion Of Liquidity In One-Time "Fine-Tuning" Operation

A quick glance at today's ECB open market operations section indicates that even Trichet may be getting a little worried about liquidity gone wild in Europe. Of course, his US counterpart has no such concerns. Earlier today, the European Central Bank announced that it had drained a whopping €295 billion in an unscheduled, one-time liquidity-absorbring, fine-tuning operation. There were 193 bidders supporting the ECB operation. Is liquidity getting a little frothy? "Fine-tuning" liquidity by almost a third of a trillion may seem to indicate so.

Following Up On The Japan Disaster Scenario; Or Can Still We Learn From The Failure Of Keynesianism?

"A few months ago I wrote about an impending government funding crisis in Japan. The pushback was so interesting I thought it worth writing up. None of you really disputed the long-term problems facing Japan but, for various reasons – which I’ll look at below – very few of you thought it was worth worrying about just now. Meanwhile, the biggest JGB holder on the planet – the Government Pension Investment Fund (GPIF) – which has already admitted it’s no longer able to roll maturing bonds, has announced that it will open credit lines so it doesn’t have to sell them to fund its obligations. With ¥213 trillion of JGBs to roll this year, or around 45% of GDP (see chart below), maybe I’m not the only one scared stiff after all!" Dylan Grice, SocGen

ECB Warns Germany's First Quarter Growth May Be Negative

The most probable replacement to Trichet, Axel Weber who is a member of ECB's governing council said earlier on Bloomberg TV that extend and pretend is now shifting to Europe warning that Germany's Q1 growth could be negative, of course qualifying the statement that everything past this quarter will be stronger. Weber said that "a very weak first quarter means that the second and third quarters will be stronger." Even so he said there was still no reason to revise the expectation of German growth in 2010 to just over 1.5%. German growth in 2010 to just over 1.5%. We fail to see how with austerity measures sweeping across traditional German import partners, particularly within the PIIGS, there is any hope that the German economy will regain an upward trajectory, although by Q2 and Q3 when various additional stimulus measures will have to be announced globally, and the ECB will likely finally commit to QE, he may very well be right. As more and more of the world is becoming like China in goalseeked GDP growth virtually all economic indicators are starting to lose any predictive value, especially on an adjusted "stimulus-free" basis.

Daily Highlights: 3.9.10

• Bank of England sees 'grounds for optimism' on Britain's recovery as risks diminish.
• China's interest-rate gap driving pressure for Yuan gains, regulator says.
• German industrial output rises 0.6% in Jan , despite 14.3% fall in construction activity.
• Gold is “unlikely” to be China’s primary investment to diversify its reserve hldgs: regulator.
• Taiwan's February exports rose 32.6%, suggesting strong economic growth.
• Yen strengthens as exporters bring home profits; most Asian stocks slide.

Wall Street Has Become Underwrita Non Grata In Europe

First China comes through on its threat of disposing US securities, now Europe is rapidly isolating Wall Street from participating in European sovereign bond offerings. The Guardian reports that "for the first time in five years, no big US investment bank appears among the top nine sovereign bond bookrunners in Europe, according to Dealogic data compiled for the Guardian." Curiously, just the one bank which has recently found itself out of favor with domestic investors, Morgan Stanley, has a notable presence in Euro sovereign league tables (at number 10). The biggest loser - the dynamic duo of vampire squid and Fed Jr. " Goldman Sachs doesn't make the table. Goldman made it to number five last year and in 2006, and number eight in 2007, the data shows. JP Morgan was in the top ten last year and in 2007 and 2006 but doesn't appear this year." European leaders are funny - first they use Goldman for everything; now that they have been caught red-handed, they avoid Goldman like the plague.

And while the lost corp fin revenue stream is likely not huge (for now), should domestic issuers follow in Europe's footsteps, it may get a little tricky. We wonder when the Huffington Post will start a "move your money" campaign for capital raisers: urge companies to go to small and boutique banks instead of the bulge bracket behemoths... When dying from a thousand cuts, each little one counts.