Enacting a credible bankruptcy process to solve the too-big-to-fail problem, clarifying the Fed's umbrella supervision and financial stability roles, and enhancing market discipline are steps we must take to lower the probability of a future crisis. We could simplify the entire financial regulatory legislative initiative by focusing on these three key elements. We do not need huge new bureaucracies, or a complete restructuring of our regulatory agencies. - Charles Plosser
The foreign exchange markets were quite volatile Tuesday. Around 4:00 a.m. (EST), the dollar (DXY) was roaring higher. By 7:30 a.m. it was down on the day, allowing stocks, oil and gold to open higher. For much of the day, those assets fluctuated in reaction to the Euro’s strength (or lack thereof). The dollar relationship blurred, ever so slightly, perhaps due to the extreme weakness showing up in the British Pound. It was not currency that caused the late fade in the Dow. That seemed to be a case of fatigue. We wrote that the bulls needed a close in the S&P above 1120. While it did hit 1123 intra-day, the late day fade took the S&P back below the target. That left open the question of a possible retest of the January highs. The bulls may need to regroup if they wish to try again. - Art Cashin
- China's hidden debt to reach 96% of GDP, compared to the IMF's estimate of 22% (Bloomberg)
- Here come the idiots - Banks summoned to EU to discuss sovereign CDS market (Bloomberg)
- Upwardly biased ADP continues longstanding tradition of prior downward revisions (Bloomberg)
- US said to tell hedge funds to save euro records (Bloomberg, first reported on Zero Hedge)
- SEC supervisor surfed tranny porn to cope with stress [and self-loathing from working for an incompetent bureaucracy] (Dealbreaker, h/t plastic man)
- Europe's original sin (WSJ)
- Rumors of Ukraine's default to become certainty: Tymoshenko loses Ukraine vote, moves into opposition (Bloomberg)
- Asian stocks, currencies climb on Greece optimism; MSCI erases 2010 loss.
- Australia GDP growth accelerated to 0.9% last quarter - fastest pace in almost two years.
- Euro rises, Greek spreads narrow on new measures.
- February US auto sales better than expected despite snow, Toyota; Ford bests GM.
- FCC's new plan to propose $25B in new federal spending for high-speed Internet lines.
- Greece passes $6.6B more deficit cuts to avert fiscal 'catastrophe'.
- Oil hovers below $80 in Asia after mixed US inventory report suggests sluggish demand.
- AK Steel hikes prices of carbon steel products by $40 per ton.
Greece Threatens EU It Will Go To IMF For Bail Out Unless Merkel Stops Changing Her Song Every Fifteen MinutesSubmitted by Tyler Durden on 03/03/2010 - 09:05
From Dow Jones: Greek PM Says If EU Doesn't Help Greece It May Go To IMF. Also, this is the definition of a complete lack of leverage: Greek Cabinet Member: PM Says Greece Needs EU To Show Its Support Now, and that the Time for EU Help Has Arrived. And screw strikes - here comes the civil war:
- Greece to cut public sector salary benefits by 30%,
- Cuts wages across the board.
- Establish emergency tax of 1% for salaries over €100,000
- Freeze public sector hiring in 2010, and in 2011 one new job will be filled for every 5 retirements
And all this is followed by a cold water throwing Angela Merkel who just said that the Friday meeting will be purely on the "State of things" and no aid to Greece will be promised.
As always, pure anarchy - should be enough for some 1-2% worth in computerized S&P buying on a few hundred ES blocks.
RANsquawk 3rd March Morning Briefing - Stocks, Bonds, FX etc.
What CDS Speculators? The Reason Why Greek Spreads Blew Up Is Because Of Bond Selling, Not CDS BuyingSubmitted by Tyler Durden on 03/02/2010 - 22:27
There is nothing quite as liberating as jumping on the bandwagon of scapegoating that which one does not understand. The idiocy of the chorus which blames CDS "speculators" for the mysterious kidnapping and rape of the Easter Bunny and Santa Claus' stomach stapling, not to mention the imminent Greek implosion (NOT as a function of a funding crisis, but due to the one soon to be unending strike, which will commence once Greeks realize their wages are about to be cut by 250% and the new retirement age will the same as that of Yoda), is just getting surreal. And if the cheap seats housing the portly derrieres of all those CDS "experts" need yet more proof just how full of excrement their pointless multi-syllabic exhortations are, we present Credit Trader's very diplomatic presentation (diplomatic, because our version would have included a preponderance of breathless f-bombs, which is why we wisely decided against writing one), which is sufficient and necessary to hopefully shut all these empty chatterboxes up for good. Alas, that ain't happening. Either way, here is the data, which will certainly not make an impression on anyone except those why actually do understand how the CDS market works. For everyone else (the "it's like selling a warehouse full of feces... in backwardation, thank you speculators... buying crap insurance on the warehouse and then redirecting the Chipotle lunch hour crowd into it" people), start writing your disgruntled, opinionated and Thesaurus-worthy retorts. Oh, and by the way, are speculators guilty that CDS spreads on Greece have collapsed by over 120 bps in the past two weeks? Oddly, we have not heard anything about that at all in the idiotstream media.
January CMBS Delinquencies Hit Record At $46 Billion, 5.8% Of Total, A 10.3% Increase Sequantially And A 325% Increase Year Over YearSubmitted by Tyler Durden on 03/02/2010 - 21:51
On one hand you have Moody's REAL CPPI index telling you commercial real estate prices not only bottomed in December, but are now increasing at the fastest rate in years. On the other hand you have reality staring you in the face (that is if you are reading the February RealPoint CMBS report), in the form of $46 billion in CMBS delinquencies in January: this was a record 5.762% of total, and represents a 325% increase from the $10.8 billion inJanuary 2009 (and a 10% increase sequentially). Contrary to all propaganda punditry, the rate of deterioration in commercial real estate keeps accelerating. Oh, and this number does not include the $3 billion Stuy Town default, which will be counted for the first time in March. Look for the % of delinquent loans to hit 8%-9% within 6 months, about the time when TALF will be really needed. Too bad TALF expires the same day as Quantitative Easing for MBS ends, March 31.
As we continue to move through 2010, we suggest benchmarking against the 5% 50 day MA demarcation line. Again, we wish there were Holy Grails in the wonderful world of investment management and technical analysis specifically, but there are no guarantees. These patterns of cyclical bull market development and maturation have been very consistent historically when looking at this 5% 50 day MA experience. Remember, although there are no guarantees in the financial markets, this pattern has been consistent for over a half century now, through generational credit cycles and otherwise. Over the very short term and amidst the heightened and perhaps unexpected volatility of the moment, we want to make sure we stay in harmony with the message and movement of the market. And this is what we hear when we “listen” to the risk management lessons of the last half century. A half century of human decision making represented graphically. Don’t forget the old Jesse Livermore truism. Human decision making never changes, only the wallets do.
Is Wells Operating Below The FDIC Statutory Minimum 3.0% Tier 1 Capital To Total Assets Ratio Courtesy Of A Few Accounting Gimmicks?Submitted by Tyler Durden on 03/02/2010 - 17:52
Each quarter, following the release of assorted 10-K's and Q's, one of the most interesting pieces of detective work in the world of financials occurs when one, hopefully armed with a lot of free time, pores through the hundreds of pages of financial arcana and outright magic and cow manure, better known as Wells Fargo's financials (blessed by such grizzled and conflicted wizards as Warren Buffett). The investigative work is usually driven by the desire to uncover just where the trampling of accounting rules, and collusion between the management team, accountants, lawyers and regulators (FDIC and otherwise) occurs. In this specific case, the results demonstrate that adjusting for some ratheregregious accounting "frivolities", Wells Fargo may well be under the 3.0% FDIC Tier 1 ratio minimum for "strong" bank holding companies. This would imply that the publicly reported Tier 1 ratio of 6.46% is more than double what the bank deserves, and a pure construct of some accountant's imagination rather than anything even remotely indicative of the truth.
It's official - Goldman Sachs is the new American Idol. The firm has taken over American public interest and its airwaves (both metaphorically and soon, if Canada is any example, literally) - after serving as ground zero for the financial system bailout, after facilitating the fudging of EU entrants' books over the past decade, after going after iconic soccer clubs, and after actually rebranding marine wildlife, the firm is now implicated as the key lender, and, after pulling liquidity at the last moment, soon to be owner, of the Sawgrass Marriott Gold Resort & Spa, which has just filed for bankruptcy. The resort, which is home to the associated TPC Sawgrass golf course (which has not filed for chapter 11, at least not yet, and also happens to be the headquarters of the PGA Tour), is where Tiger Woods decided to apologize on February 19 for having sex with "those women." We are positive that the latest reality series to come out of Hollywood brain trust "Who wants to marry a Goldmanaire" is just months away.
As you by now well know I am fundamentally bullish USDJPY for the long term. Leaving aside the fundamental economic problems of the Japanese economy, the BOJ has recently pretty much committed to pursue QE until they can somehow manufacture inflation, the debt to GDP ratio is 200% and rates are at 0% so comparatively the USD has nothing to be ashamed of, and the Fed is starting to pull out liquidity from the market. Therefore if risk doesn't collapse (as it would trigger the usual flight to quality in JPY / carry trade covering) the elements in terms of monetary policy and rates cycle are also in place to support economic fundamentals. - Nic Lenoir
The artificially-engendered revival of the dispute, which began in February 2010 between Argentina and the United Kingdom over the sovereignty of the Falkland Islands in the South Atlantic, has been portrayed as a posturing by embattled Argentine Pres. Cristina Fernández de Kirchner, taking advantage of both the start of exploratory oil and gas drilling by British company Desire Petroleum in the Falklands waters, and the talks by Latin American and Caribbean leaders of the Rio Group in the Mexican resort of Playa del Carmen, beginning on February 22, 2010. But the crisis may well play into the political posturing of equally embattled United Kingdom Prime Minister Gordon Brown, who faces a general election by June 2010 at the latest.
Greek Prime Minister: Greece Faces "Bankruptcy" Without Radical Action, Country Is In "Wartime Situation"Submitted by Tyler Durden on 03/02/2010 - 13:35
Has it been 15 minutes? Yep - here's the latest from Dow Jones: Greece risks bankruptcy if it doesn't take radical extra measures to fix its finances, Prime Minister George Papandreou warned Tuesday, saying the country was in a "wartime situation." We are confident the "wartime" reference is purely a metaphor cause Turkey has been very quiet lately. And here is how you can help.
As the financial crisis has unfolded over the last two years, the Federal Reserve has been responding in a variety of unprecedented ways. Therefore, it is logical to assume that these never-before-used actions have altered long-established ways of viewing things. One area that has been impacted is the US dollar money supply.