The EPA Steps In To Regulate Greenhouse Gases In Case Of Cap And Trade Failure

Goldman's tentacles are smart, and know all about contingency planning. With so much of the firm's future strategy contingent on Cap And Trade derived profits, the firm is hedging for a downside case scenario. The attached presentation by the Environmental Protection Agency is just the fall back plan. UEA debate notwithstanding, the EPA, after "careful consideration of the full weight of scientific evidence and a thorough review of numerous public comments received on the Proposed Findings published April 24, 2009" has found that "six greenhouse gases taken in combination endanger both the public health and the public welfare of current and future generations." Truly an opportune timing for the EPA to come up with this, seeing how suddenly scientific evidence does not really mean as much as it used to...oh, one month ago. And not to mention that whole Goldman/Cap And Trade backlash of course.

Merrill RateLab's Stocking Stuffers

Merrill is convinced inflation is a-coming. As such, here are RateLab's proposed top trades, some of which are rather esoteric, others which make intuitive sense (of course, assuming one agrees that inflation trumps deflation: a bold assumption keeping in mind the endless consumer credit collapse). Some of the ideas: i) Sell OTM Payer Skews, ii) GNMA Reverse Mortgage Floaters, iii) Sell MBS/Buy Treasury Strips, iv) Buy CMBX 3 AAA /Sell CMBX 3 A, v) Buy FN 4.5/Sell half of FN 4 and 5 each, vi) Buy August 2025 vs USH0 Basis, and lastly some encouraging words on Agencies. As Zero Hedge is firmly convinced that the entire mortgage market is firmly gamed courtesy of endless Fed intervention which is the defacto buyer of first, middle and last resort, we urge readers to be very careful with any andall MBS/Agency trades.

Bloomberg Finally Discloses NYB Insider Trading Action, Schapiro Must Still Resign

A report by Bloomberg finally recaps the flagrantly obvious insider trading in NYB stocks and options, presented first here on Zero Hedge.

Latency Arbitrage: The Real Power Behind Predatory High Frequency Trading

A new white paper out of Themis Trading analyses the impact of predatory algos comprising various HFT strategies. In Themis' view: predatory HFT generates $1.5-$3 billion in profit. Themis concludes with the following three market integrity questions:

1. Instead of belittling the impact of latency arbitrage, and representing it as a gloriously naive $0.01-$0.02, does the regulators' thinking change if that impact is as high as $3 billion a year?

2. In a quid-pro-quo worlds, are market centers merely charging HFTs a higher fee in exchange for an advance look at the NBBO? Market centers should be protecting all participants equally.

3. The most critical question: "When a market center provides an HFT the ability to out-maneuver institutional orders, is not the exchange putting institutions and their brokers in breach of their fiduciary responsibilities, especially those institutions managing pension funds governed by ERISA?"

Weekly Flow Of Funds Summary

An overview of where money is moving most recently, from Morgan Stanley. Overall a mixed picture, with anyone who has half a brain dumping as many MBS as the Fed will buy (i.e., all of it), coupled with a mildly declining interest in Treasurys.

And You Were Worried About Gold...

All it took was for Chairman Ben to open his mouth. The rest is "lift every offer" history.

Lunatics At Institute For International Economics Endorse $6 Trillion More In QE, Cite Fred "Iceman" Mishkin For Corroboration

The latest lunacy out of the Institute for International Economics notes that the dollar can and should go to negative territory courtesy of another roughly $6 trillion in Quantitative Easing. Enter Joseph Gagnon, who is obviously daring to boldly go where the Fed Chairman can only dream of going, and is set on ruining whatever is left of America's (and the world's) middle class.