FDIC Sells Failed Banks' Toxic Crap Back To Soon-To-Be-Failed Banks At 50% Haircut With Explicit Taxpayer GuaranteeSubmitted by Tyler Durden on 03/12/2010 - 13:07
The FDIC has just announced that it has closed the sale of $1.8 billion of Notes backed by RMBS "from seven failed bank receiverships." The value of the actual aggregate balance: $3.6 billion. And somehow banks still keep their RMBS books marked at par. Furthermore, "the timely payment of principal and interest due on the notes are
guaranteed by the FDIC, and that guaranty is backed by the full faith
and credit of the United States. Sure enough, smelling this insane deal, the vultures came out to snack on the taxpayer's corpse: "The transaction was met with robust investor demand, with over 70 investors participating across fixed and floating rate series. The investors included banks, investment funds, insurance funds and pension funds. All investors were qualified institutional buyers." Just how many of these "banks, investment funds, insurance funds and pension funds" are viable to begin with, courtesy of the FDIC's permission for every failed bank to continue existing is an amusing question, and Zero Hedge will attempt to get an itemized list of the participating buyers.
We start off today's audiovisual segment with an insightful analysis of market dynamics by the duo of Mike Shedlock (Mish) and Marc Faber. Mish who runs the deflation-friendly blog Mish's Global Economic Trend Analysis, observes that the rally is not based on fundamentals, and believes that not only is it time to take profits, the probability of a retest of 666 is "50-50." Faber, always the pragmatist, points out that since the entire US economy is now based on the ponzi principle of money bringing in new money as every offer is chased higher, thinks we will never "see 666 on the S&P 500 ever again. If we go down by
say 10-20% on the S&P 500, our money printer in the US, Mr. Ben Bernanke will flood
the market with liquidity, weakening the dollar, supporting equities and other assets." In other words, as the race to the currency bottom and the attempt to force inflation inevitably picks up, the one true non-dilutable alternative to fiat one-ply, is and remains gold. As Faber cautiously says "I think an individual should take responsibility and be his own central bank, and buy gold every single month." As to where money can be invested in this time, both seem to agree that Japan, which is already 20 years down the money printing experiment, and there is little marginal fiat dilution remaining, is a good target to invest. This is further reinforced by Dylan Grice's recent observations about numerous Japanese stocks trading at or below liquidation value.
Earlier today the Census Bureau came out with its February retail sales announcement which was classified by CNBC's Bob Pisani as terrific on the basis of a 0.3% increase over January. What few point out is the January revision, which changed the January retail sales estimate from 355,777 to 354,339. As February came in at 355,546, one can see why the government's game of endless data fudging continues. Had January been unrevised, February retail data would have been a drop of 0.1% instead of a rise of 0.3%. We fully anticipate yet another downward revision to February numbers once March data comes out, to make the March increase even bigger. Yet what nobody at all is pointing out is that the Consumer Spending data reported by Gallup, which tracks "the average dollar amount Americans report spending or charging on a
daily basis, not counting the purchase of a home, motor vehicle, or
normal household bills", and whose 14 day rolling average for the month of February came not only at a drop of 5.8% from January's average read of 63.4, but came in at a series low 59.7, which was an improvement only on the 59.1 recorded at the lows of the US market crash in March 2009. US Consumption, when not parsed by the ever so creative eye of the US government, has rarely been as low as it was in February.
Lehman's Repo 105 Counterparties Barclays, Mizuho, UBS, Deutsche Bank, And KBC May Have Attempted To "Squeeze" The BankSubmitted by Tyler Durden on 03/12/2010 - 11:16
Yesterday we asked just who the counterparties on Lehman's Repo 105 transactions were. Today we get our answer: the parties that Lehman used exclusively to mask its true leverage ratio were Barclays, Mizuho, UBS, Mitsubishi, Deutsche Bank, KBC and ABN Amro. This is accompanied by disclosure from the Examiner that these Repos, which should logically have been cheaper to Lehman due to the overcollateralization compared to regular matched repo (remember: 105 instead of 100 plus a minor haircut), in fact were pricier, prompting Lehman staffers such as Mike McGarvey to speculate that counterparties may "try to squeeze Lehman." This is quite a critical development ahead of the lawsuit between the Lehman estate and Barclays (a Repo 105 counterparty), which not only refused to bail out Lehman in the 11th hour, but to subsequently go ahead and in the definition of a fire sale acquire Lehman Brothers' North American brokerage operations for pennies on the dollar, coupled with some serious additional trickery on the side. Another oddity: none of the counterparties were US-based. Did US banks know too well about the imminent collapse of Lehman and thus refuse to participate in the Repo 105 window dressing game? Or, much more relevantly, was Lehman terrified by retaliation of its US-based peers, (be it CDS or stock-based) and as a result refused to open up its deplorable balance sheet to them?
- Built on a lie - the fundamental flaw of Europe's common currency (Der Spiegel)
- It has been a while since we had a Greece rumor: EMU States near €20-25 billion Greece aid accord (Market News. Banking News)
- Germanry and France have decided that Greece needs €55 billion until the end of the year to prevent insolvency (Euro Intelligence, h/t Paul)
- No snow in February - Retail sales in US rose in February (Bloomberg), so did credit card chargeoffs
- IPO window still weak despite melt up: AVEO raises 23% less than sought in first biotech IPO of 2010 (Bloomberg)
- Not so lonesome doves: Janet Yellen to be next Fed vice chair (Reuters)
- Americans' net worth rised 1.3 percent in the fourth quarter to $54.2 trillion.
- Asian shares mixed, Japan stocks gain on speculation central bank to add funds.
- Eurozone industrial output jumps by massive 1.7 percent in January.
- Money fund assets fell by $36.22 billion to $3.090 trillion in latest week.
- Obama to nominate Yellen to post of vice chairman of Federal Reserve.
- Oil drifts above $82 in Asia as month-long rally loses momentum amid weak US crude demand.
RANsquawk 12th March Morning Briefing - Stocks, Bonds, FX etc.
And The Lehman Disclosure Hits Just Keep On Coming; If Fuld Has Not Yet Left The Country, Doing So ASAP May Be A Very Good IdeaSubmitted by Tyler Durden on 03/12/2010 - 00:11
Reading through the thousands and thousands of pages of Valukas' report has proven, as we suspected early today, quite entertaining. After having first uncovered the Repo 105 accounting gimmick, and E&Y (and, in a normal society, Tim Geithner) coffin nail, we are convinced that this is just the tip of the iceberg, and sure enough, as we read along, more stunners come to light. We will update this post with new discoveries, but for now, we present the episode of the Fenway Tri-Party Repo Market Clusterfuck ("FTPRMC"), The Part Where Lehman Lied To Its Shareholders, And The SEC Gets The Middle Finger (Again), and the parable of Ben Bernanke's And His Scale Of 0 To 100 Of Systemic Fuckedupedness.
UniCredit Bank Warns Of Plunge In Sterling And Gilts, As Britain Is Next Country "To Be Pummeled By Investors"Submitted by Tyler Durden on 03/11/2010 - 21:34
Kornelius Purps, director of fixed income at Europe's second-largest bank, UniCredit, has issued a stark warning to clients who wish to invest in the Britain: "I am becoming convinced that Great Britain is the next country that is
going to be pummelled by investors." Ambrose Evans-Pritchard reports reports that "Mr Purps said the UK had been cushioned at first by low debt levels but the
pace of deterioration has been so extreme that the country can no longer
count on market tolerance" and that "Britain's AAA-rating is highly at risk. The budget deficit is huge at
13pc of GDP and investors are not happy. The outgoing government is inactive
due to the election. There will have to be absolute cuts in public salaries
or pay, but nobody is talking about that." And everyone was wondering why the U in STUPID stand for UK (actally make that just CNBC, who never really bothered to even read the original definition). So can the whole sovereign default wave skip the PIIS and go straight to the U?
The "Repo 105" Scam: How Lehman Fooled Everyone (Including Allegedly Dick Fuld) And How Other Banks Are Likely Doing This Right NowSubmitted by Tyler Durden on 03/11/2010 - 18:53
Presenting a detailed look at "Repo 105" - the next soundbite sure to fill the airwaves over the next weeks and months, as more and more banks are uncovered to be using this borderline criminal accounting gimmick to make their leverage ratios look better. This is the first time we have heard this loophole abuse by a bank, be it defunct (Lehman) or existing (everyone else). There should be an immediate investigation into how many other banks are currently taking advantage of this artificial scheme to manipulate and misrepresent their cap ratio, and just why the New York Fed can claim it had no idea of this very critical component of the Shadow Economy.
We present the first two volumes (out of 9) of the massive 2,200 page compendium that represents the just declassified examiner's report in the Lehman bankruptcy case. We will post the other volumes shortly. Below are the key findings from a quick perusal of Anton Valukas' report, which we will be combing through over the next week. Pay particular attention to the Repo 105 scam which allows banks to materially misrepresent their leverage ratios whenever they so choose, thank you FASB, corrupt auditors (in this case E&Y) and Federal Reserve.
Joe Saluzzi Discusses Why This Is Now A "Jason Bourne" Market In Which Everyone Just Keeps An Eye Out For The ExitsSubmitted by Tyler Durden on 03/11/2010 - 17:15
Themis Trading's Joe Saluzzi once again points out the flaws in the all clear psychology, and that if only we can break 1,150 on the S&P (which we just did), we are headed straight to 36,000 on the Dow (although as we are now in a fully blown melt up as we pointed out last week, we very well might). As Saluzzi says, we find ourselves in a "A momentum driven, fragmented equity market. What we see is a very lite volume morning normally, jacked up really fast by a couple of programs that come in, and then you get this churn most of the day. There is not a lot of conviction out there." And the reason why the market closed above 1,150 (1,150.24 on the last print to be specific - what a computer programmed joke) today as a last minute buy program ramps up: "This market is built on lies and rumors." (a topic previously discussed on Zero Hedge). Technicals and algos rule, and the Fed will take care of all the rest. And the faster one's reactions (on the exit button)the better, which is why if one is an Xbox gaming champion and 18 years old or younger, Getco and Goldman will hire you on the spot. According to Saluzzi, this observation has lead to a new nickname: this is now "the Jason Bourne market, because when he goes into a room, the first thing he checks for is where the three exits are. How do I get out. That's what investors are doing."
The 2,200 page report prepared by examiner Anton Valukas detailing the collapse of Lehman Brothers, will be declassified, as, according to wifebeater Judge Peck, it reads like a "bestseller", and is "one of the most extraordinary pieces of work product I have ever encountered." Now, for the first time, we will get an objective analysis into Dick Fuld's allegations that short sellers were responsible for the death of his firm, and just how it is that Barclays managed to (metaphorically) steal the perfectly solvent North American brokerage division for pennies on the dollar (with the Judge's blessing in the first place).
Today the Fed released its Q4 Flow of Funds, aka Z.1, report. Using the data in this report, some have focused on such temperamental measures as household net worth, which in Q4 came out at $54.2 trillion, a $700 billion increase from Q3. What they will not disclose is that all of this increase came courtesy of the stock market, as the "Equity Shares at Market Value" line increased from $15.546 trillion to $16.234 trillion: this represented the entire increase in household net worth. Should the market dive, as many are concerned it is will once the Fed stops manipulating the mortgage (and potentially equity) market, watch all this intangible net worth disappear, as unbooked profits are just that - unbooked. Others will tell you that consumer deleveraging continues unabated, which is true: the decline in total non-financial debt in Q4 for Households and Businesses was -1.2% and -3.2%, respectively. Who made up the difference: the US government of course, whose domestic nonfinancial debt holdings increased by 12.6%. We, instead focus on Tables F.209 and F.210, the detailed listing of holders of US Treasuries and Agencies/MBS securities, as this is precisely where the Fed is the dominant market maker, and the means by which Ben Bernanke continues to manipulate the market by being the perpetual bid for 5% and lower yielding securities, thereby forcing all other yield chasers to go lower in the cap structure and buy, buy, buy all equities. And while there are no major surprises in the data set, it is notable that even as the Fed has purchased over $1.5 trillion in Agency/MBS debt, the total amount of all such securities over the past year has remained constant. The Fed has been buying everything that other have been selling. Adjust the data to exclude the Fed's purchases and one sees just how scary the MBS situation truly is.
$13 Billion 30 Year Reopening Closes At 4.679%, Directs Take Down Whopping 29.7%: A New Record, Indirects Settle For Mere 23.9%Submitted by Tyler Durden on 03/11/2010 - 14:19
Yield 4.679% vs. Exp. 4.702%, Allotted at high 82.8%
Bid To Cover a massive 2.89 vs. Avg. 2.56 (Prev. 2.68)
Indirects at miserable 23.9% vs. Avg. 42.32% (Prev. 40.77%)
Direct take down an absolutely stunning 29.7%
Direct hit ratio 44.4%