With governments fueling "La Terreur" towards all things financial, it's hardly surprising that market players are running scared after talk of market clampdowns and restrictions. However, before we panic and cut all our positions it's important to understand what's motivating governments. What are their true objectives and what lasting impact can they have on markets? Once we understand this can we place our bets more securely and objectively.
Ex-Goldman Greek Operative Announces Bond Issue To Be Delayed Until New Austerity Digested, IMF To "Technically" Support Implementation Of...Submitted by Tyler Durden on 03/03/2010 - 12:59
Petros Christodoulou, most famous for having worked previously at Goldman, and now incidentally the head of the Greek Public Debt Management Agency, has told Market News that while he has no comment on the timing or tenor of the new issue (we venture to assume the timing will be in the next two weeks, as after that Greece be bankrupt for real), he is willing to wait and "allow the market time to digest" the announcement of today's austerity measures. (And if these don't work, the next round will promise Greek workers will pay the government for the privilege of having a job.) Of course, the implementation of these measures is subject to a mass rioting contingency, so while the verbal diarrhea out of everyone who is axed in the viable Greece trade continues, actual actions will be few and far between.
Medivation shares are not doing too hot: apparently if your core Alzheimer's drug (developed in collaboration with Pfizer) ends up being a failure, your stock drops by almost 70%. Pity, because that drug may have been useful to everyone else buying the broader stock market with the hope they won't eventually suffer the same fate. Yet what is notable is that this information, which hit Business Wire at 7:30 am Eastern, was apparently good enough for someone to make a huge bet on a stock plunge just before the market closed yesterday, at 3:59pm to be specific, and to make almost $21 million on inside information. The net result: a profit of just under $21 million in 1 minute of open market activity. Even Goldman can barely make that much money at that speed.
The following just released video from the Cleveland Fed, in which the Fed explains the workings of the Fed, does not need much commentary, suffice to say that it likely came to you courtesy of the production and direction talents of Goldman's PR group. It appears the video is supposed to be some form of user friendly PR approach created by the same people that gave you Enron. Alas, some of the biggest roles of the Fed are sadly unaccounted for. We leave it up to you, dear readers, to uncover just what these are but here are some suggestions: buying everything in perpetuity, keeping Goldman solvent in perpetuity, keeping the Fed's shady dealings with other Central banks and primary dealers hidden from the public's eye in perpetuity, keeping fed funds rate at (or below?) zero or below in perpetuity, etc, you get the picture.
Goldman Offers Olive Branch To Greece, Praises Country For "Tough Actions" (Words, Technically), Awaits Further CDS BashingSubmitted by Tyler Durden on 03/03/2010 - 11:17
Goldman's chief Euro strategist Erik Nielsen is out with another note, this time one of praise and wild-eyed adoration for the increasing desperation in Greek polemics (note, not actions: those tend to be more of the semi-violent police clashing, people striking variety). Well, duh, of course Greece will promise it will take out a second-lien on the Parthenon (and a first on the Acropolis): the country will be out of money in two weeks for Pete's sake! Aside from the pandering desire to be next in line as lead underwriter on the next Greek multi-billion swap (and receive fees, millions of dollars in juicy fees), Nielsen does provide a good narrative that ties in the Greek bail out, and the recent anger against CDS "Speculators" who will at the end of the day be the validation for why Europe will have "no choice" but to bail out Greece, as it is solely through their vile scheming that GGBs are trading so much lower compared to where they should be trading. Because taking a cue straight from the US market, none of this bankruptcy stuff is relevant at all when dealing with capital markets.
Rumors of Papandreou's resignation as Greek prime minister have been swirling all morning, and adding to the swirling a la carte buffet of false news coming out of Athens. However, as of now, that particular rumor is being refuted: the Prime Minister's spokeswoman has just announced that "the PM has definitely not resigned." We give him until the earlier of the two: i) the new 10 Year GGB come to market with an 8 handle, ii) crippling strike causes Greek foreign trade to drop by 120% (net of pervasive tax "efficiencies" within the Greek nation).
A vigilant reader points out that the biggest threat to markets these days is not moral hazard, which has been embraced by everyone and their grandmothers. It is that pesky "Amoral" version that is now raising eyebrows. To wit:
Put in a sentence.
------------(insert financial institution) exersised a great deal of amoral hazard when they collaborated with other funds to hasten the fall of __________ (pick a company or country) by shorting __________ (stock/cds/currency).
Because there surely would be no moral hazard be if there was no amoral hazard in the first place. Can we get rid of those pesky (efficient) markets altogether and just call for the Central Committee, aka the Fed, to run things with everyone's blessings? After all, they do so already.
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.