Don't say the SEC doesn't work hard for its billion dollar budget. The syndicate endorsing corruption (and not even worthy of capitalization), has released a press release indicating it is now pursuing enforcement action against a "known" psychic "who fraudulently raised $6 million after telling investors he could predict stock market highs and lows." Uhm, so does that mean that the SEC is now after every single pundit on CNBC as well? To be sure, while there are many more egregious cases of market manipulation out there, this one will surely make the late night comedy circuit.
LTCM General Counsel: "The U.S. Stared Near-Catastrophe In The Eye, With LTCM, And Decided To Double Down."Submitted by Tyler Durden on 03/04/2010 - 16:51
Must read interview by Kathryn Welling with James Rickards, former General Counsel of Long-Term Capital Management. His observation that the financial system is now as risky as it was back then is something that modern bankers will hear and thoroughly forget immediately, only to be reminded once everything collapses once again: "What strikes me now, looking back, is how nothing was changed: no lessons were applied. Even though the lessons were obvious, in 1998. LTCM used fatally flawed VaR risk models. LTCM used too much leverage. LTCM transacted in unregulated over-the-counter derivatives instead of exchange traded derivatives. So risk models needed to be changed, or abandoned. Leverage had to be slashed. Derivatives had to be traded on exchanges or cleared through clearinghouses. Regulatory oversight needed to be ramped up... The government did just the opposite. Glass-Steagall was repealed in 1999, so that banks could become hedge funds. The U.S., in effect stared near-catastrophe in the eye, with LTCM, and decided to double down."
Is Abnormally Profitable Recent Performance On "Mutual Fund Mondays" Indicative Of Market Manipulation Or Just Herding?Submitted by Tyler Durden on 03/04/2010 - 16:01
Zero Hedge has previously discussed the bifurcation in market performance when comparing regular hour trading with that of the afterhours session, noting that in the September through December 2009 period, the market would have been flat if one were to strip away the benefit of gains after the market closed. Today, we take a look at a different set of data, namely observing a very peculiar market phenomenon associated with the term coined as Mutual Fund Mondays, especially over the past 6 months. Whereas on a long-enough timeline, the market performance on any given Monday (or, more specifically on any given first day of the business week), has averaged to about a 50% win/loss ratio, this is certainly not the case in the September 2009 - March 2010 period. In fact, during this time period, when the broader market has risen by only 10%, the positive contribution from Mondays has been 20%, implying that on all other days of the week the market has, on average, lost 10% in the past 6 months. Furthermore, the win/loss ratio for the first trading day in the last 26 weeks has been 85%: a nearly 3 standard deviations from the norm outlier. Let's dig in.
Goodbye David Paterson? Governor's Top Aide Holds Emergency Meeting With Entire Staff, Topic Unknown (But Likely Guessed)Submitted by Tyler Durden on 03/04/2010 - 14:55
Update: Nope. It's not what everyone expected. MSNBC reports this is the resignation of the director of communications. It appears Patterson is sticking until the bitter end.
Is this the end for troubled New York Governor David Paterson? The Wall Street Journal has just reported that "his top aide is convening an emergency meeting of the administration's entire staff Thursday afternoon. Larry Schwartz, the governor's chief of staff, alerted the staff about the 2:30 p.m. EST meeting by email on Thursday, but didn't specify what would be discussed." One thing is certain: the New York governor, presiding over a state which recently was declared to be out of cash as early as March (so, well, now), will likely be all to happy to hand over the baton to his replacement, most likely current AG Cuomo.
New Greek €5 Billion 10 Year Bond Prices At 300 Over Midswaps, 326 bps Over 2020 Bund, Comes With 6.25% CouponSubmitted by Tyler Durden on 03/04/2010 - 13:40
The Greek 10 year bond issue priced at a reoffer of 98.942; It came with a 6.25% coupon, and priced at 300 over midswaps or 326 bps over the January 2020 Bund. The bond pays annual interest: what are the InTrade odds that even one coupon gets made on this issue?
Traders said that amidst all the rumors, market sources have cited a Fannie Mae business change that was said by sources to involve Fannie Mae restricting its non-US-bank lending in the fed funds rate market to the following list of 10 banks (US banks not
changed): Deutsche Bank, ING, BNP, Barclays, Lloyds, RBS, Scotia, Ntl Bank of Canada, RBC and Toronto Dominion. Thus it would be "substantially reducing" its list of banks by "what was thought to be dozens" of banks, said a trader; it appeared there was no reason given.
Yesterday we had the Cleveland Fed posting videos complete with the Ben Bernanke doodles of 3 year olds explaining how the Fed should (but does not) work. Today, we have a much more entertaining (and thus sure to go viral) 10 minute long, easily digestable summary of the firm that took the face of humanity, inserted its blood-sucking proboscis, and sucked (to borrow an allegory). Now that Goldman has added blogs and other web-based media as a risk factor in its 10-K, we wonder if next year's version will also include references to viral YouTube videos disclosing "unsubstantiated" facts about the firm. And for a somewhat more somber look at the real headwinds facing Goldman's PR department, we urge readers to read Jonathan Weil's piece today: "Goldman's Reputation Is Blankfein's Job No. 1."
Marc Faber's latest thoughts on the euro (not good), on Greece (also not too good), and gold (good to quite good). "I don't think it will work out, and I think other countries like Spain and probably Portugal (and Italy) will then also have to be bailed out eventually, and it will lead to more monetization in Europe, one of the reason the euro has been so week... The pain of the austerity will be very, very burdensome on Greece, and eventually the economy can not grow with the kind of budget they will have to enact, and under these conditions their currency is way overvalued (they are in the euro). And so without the ability to grow, their ability to pay the interest and repay the debt will actually diminish.... I think everybody should accumulate some gold over time. I would recommend people to buy every month some gold for ever."
Barely had we finished bashing Deutsche Bank in our prior post, that we noticed that Moody's had just notched Deustche Bank not once, but twice, from Aa1 to Aa3. Now where the hell are those pesky shorts who are #*$!ing up the grand German uberplan of trying to mimic the US in its don't ask/don't tell plan of financial gayness. From Moody's: "The rating agency believes that Deutsche Bank's capital ratios are likely to face further pressure from pending acquisitions, potential increases in loan-loss provisions and higher regulatory capital charges."
Yesterday CDS speculators, today financial shorts, tomorrow the world. German regulator BaFin has learned absolutely nothing from America's 2008 brush with the short sale ban, and has announced that it is tightening disclosure rules on short-selling as related to ten financial company shares, saying it "wanted to ensure the stability of the financial system" is preserved. Ah, the old "if-the-world-is-threatened-by-vicious-speculators-you-must-acquit-of-irresponsible-fiscal-policies-and-mismanagement" defense. Additionally, BaFin, which is still trying to figure out just who it was that got cremated on the most ridiculous short squeeze ever (i.e., Volkswagen) said that the move was made necessary "by the need for the regulator to be informed quickly to take "targeted action" should such activity pose risks."
From the rumor bag:
Not too sure what to make of this, but this rumor is around on Chicago area short term rate desks
Just heard that Fannie has cut off up to 10 European banks in the short-term funding mkt (not hearing why), meaning that they will have to borrow elsewhere going forward, thus being blamed for the movement down in price in Fed Funds mkt & Eurodollar mkt (expecting LIBOR to be higher tmrw & next few days b/c more people will need to borrow). That movement is being blamed for the 2yr selloff / curve flattening & thus impacting the long end as well (just not as
Setting aside the implications for european short-term funding, it may be time to take a look at Libor futures once again.
Rumors swirling earlier this morning that the identity of the heretofore unknown direct bidder may be none other PIMCO competitor BlackRock. In part these rumors have been fuelled by an earlier WSJ article "BlackRock plays it safe - Treasuries" in which author Min Zeng notes that "the world's largest money-management firm by assets, has increased its holdings of Treasury securities in recent weeks in response to the unsteady outlook for growth, ongoing sovereign-debt woes and contained inflation risks." If so, it will be interesting to watch the divergence in sovereign bond holdings between PIMCO, which has made it clear it finds the best opportunities in foreign holdings, namely Brazil, Russia, and Poland, and BlackRock, which prefers to play it safe by going domestic. Yet, is BlackRock merely being handed PIMCO's sloppy seconds? Bill Gross' fund has lately been marginally "constructive" at best on US Treasuries. To be sure, a deep pocketed buyer will be needed to absorb the trillions in upcoming UST supply, and with PIMCO allegedly out of the picture, the US Treasury will gladly take anyone's money at this point.
At the risk of repeating myself, I hold the view that one of the big risks is China equity market blowing along with other EM and certain commodities like copper. The other day I warned that if we gapped down in Copper we would form an island reversal on local highs after failing against the former support of the bullish channel now resistance, which would have been a MAJOR bear signal. What was interesting is that overnight markets traded down enough and we looked set to gap down, but around 6/7 AM the market caught a bid. It's all the more interesting that it is not just a one day occurrence, the past few days we traded soft in Copper and Gold in Asia and caught a bid in early morning NY time. Given that Asia is one of the huge buyers, it is clearly adding to my concern. - Nic Lenoir
Over the past three months it has become clear that one of the traditional staples of the second part of the bear market rally (the one beginning in July of 2009), the near 1.00 correlation between a weak dollar and a strong market, has broken terminally. And even with the dollar surging as problems in Europe come to the fore, the market, after dipping temporarily in early February, has staged an almost complete comeback, which has left many scratching their heads as to what the cause for this uncorrelated market move may have been. An interesting summation from one of the more prominent economic skeptics, David Rosenberg, provides some answers not only to this question, but why an economy which refuses to improve, can lead to continuous stock gains.
The turf war to (not) bail out Greece is on. Even though nobody wants to do it, yesterday's announcement by the IMF that it is willing to lend the troubled country a hand (and a few billion drachmas) has put Jean-Claude Trichet on edge. And even assuming today's bond deal gets done without too many glitches, Greece has at best bought itself breathing room for a month or so.We expect the volume on bailout speculation to go down at best by a couple of notches. In the meantime, the ECB has made it clear that Greece's problem are Europe's and Europe's alone, thank you IMF and America. This was made quite explicit in Trichet's post-ECB rate press conference earlier, when he said that he does "not trust that it would be appropriate to have the introduction of the IMF as a supplier of help through stand-by or through any other such help."