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Daily Highlights: 9.28.2010

  • ADB raises Asia ex-Japan growth f'cast for this year to 8.2% vs. July view of 7.9%.
  • ADB says Asia must refrain from tightening 'too quickly'.
  • Asian stocks fall on European debt concerns, Metal prices drops.
  • Fed weighs a more open-ended, smaller-scale bond purchase program.
  • German consumer confidence f'casts 4.9 pts for Oct, a rise from rev 4.3 pts in Sept.
  • AIG's Asian unit gauges demand for its Hong Kong listing; plans to raise $10-15B.
  • China Airlines plead guilty to fixing prices on air-cargo shipments, pay $40M fine.
  • Exelon Corp. to sell $900M of debt to fund its purchase of a Deere's wind-power unit.


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Today's Economic Data Highlights

Key events dominating today are Case Shiller, Confidence (both Conference Board and ABC) and Richmond Fed.



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RANsquawk European Morning Briefing - Stocks, Bonds, FX – 28/09/10

RANsquawk European Morning Briefing - Stocks, Bonds, FX – 28/09/10



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Replaying The Flash Crash

Just because it was less than half a year ago, and just because it is certain to occur again, and just because so many have already forgotten what that "end of the world" feeling was like and are back to collecting pennies in front of an out of control rollercoaster, here is, once again, the historic CNBC footage from May 6, in the minutes leading to the 1,000 point drop on the Dow Jones, when the Fed lost all control. Hopefully this will remind all those who are supposed to fix the market, yet continue to merely enforce the interests of those who brought the market to this pathetic state, just how many tens of trillions of dollars are at stake.



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Introduction To The Road Through 2012: Revolution or World War III

The following is Part I to David DeGraw’s new book, “The Road Through 2012: Revolution or World War III.” This is the second installment to a new seven-part series that we will be posting throughout the next few weeks. You can read the introduction to the book here. To be notified via email of new postings from this series, subscribe here.



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The Most Detailed Forensic Analysis Of The Flash Crash To Date (And Likely Ever)

Our friends at Nanex have completed a full forensic analysis of the flash crash, on a tick for tick basis, between the fateful times of 14:42pm and 14:52pm on May 6. Under permission directly from Nanex, we present to you a fascinating and fully interactive chart, which is the bast to date analysis of everything that transpired during the flash crash. On the chart below (after the jump), every underlined component is a hyperlinked module with extensive detail associated to any one individual fragment of the flash crash. As Nanex, demonstrates, the key catalysts commence at 14:42:43.600 with a bout of quote saturation, move on promptly to heavy selling in the ES, and concludes at 14:42:44.100 with heavy selling of the SPY, QQQQ and all ETFs immediately following. It is all downhill from there.



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On Jumping Sharks With Barry Ritholtz

Barry Ritholtz is once again in Zero Hedge-marketing mode, which is probably not too surprising: this marks only the second time in under a week in which Mr. Ritholtz has exhibited a fascination with Zero Hedge, previously demonstrating a borderline obsession by actually scouring through tweet mentions of our humble blog. And humble we are - we have paid Barry exactly zero for this ongoing free advertising fest. That said, we are confident Barry will be happy with us reposting his entire post for our readers because he does bring up some valid questions, to which we provide our own brief perspective.



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SEC Flash Crash Report To Restore Confidence, Cure Herpes, And Bring Back Elvis From The Dead

Well, if there is anything the SEC is actually capable of doing, it is to market its worthless and corrupt old self. According to Reuters "the upcoming flash crash report will show that regulators have a "very deep understanding" of the marketplace, giving the public a measure of confidence, the head of the U.S. Securities and Exchange Commission said on Monday. "It will paint a very clear picture of how the markets operated on that day," SEC Chairman Mary Schapiro said in an interview, adding she expects regulators will issue the report "in the next several days." Well thank fucking god that the regulators will at least have an "understanding" of how $1.5 trillion in market cap was lost in the span of 15 seconds, and was immediately found again, courtesy of the New York Fed, and that we will once and for all know that HFT is nothing but a ravenous cancer deeply embedded in everything market related, that should have been chemo'ed years ago, when that hyperventilating fringe blog started discussing it (luckily, in less than 100 paragraph rambling and somnolent streams of consciousness). But no, the SEC decided to wait until 20 weeks of fund outflows have put a nail in the coffin of investor confidence. And, by the way, the SEC report will do absolutely nothing to change the public's perception of the market, as nothing at all will change. Because if it did, it would cause roughly $50 billion in annual revenue to evaporate, and the market lobby will simply not allow that. On the other hand, hanging HFT out to dry, will confirm that the SEC actually had a very "non-existent" understanding of the marketplace, for allowing HFT encroachment for so long. In retrospect, we take that back. The only thing the SEC can do to begin the act of restoring confidence in the marketplace is for everyone at the world's most worthless organization, from Mary Schapiro to the lowliest analyst, to hand in their resignation effective 2 years ago, when the greatest experiment in market manipulation began in earnest.



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Guest Post: Iran's Option In Case Of Attack On Its Nuclear Facilities

Sources in the Gulf region report that Iran is preparing for a possible attack by Israel and/or the United States on one or more of its nuclear production units by stockpiling arms and munitions with its proxy militias in Kuwait and Bahrain. This comes as Bahrain arrests 23 opposition leaders accused of terrorism offenses and hints that Iran is behind an alleged plot to overthrow the government. Bahrain's attempted coup reports should be taken seriously, as Iran knows that its best chance of fighting the US and/or Israel is by proxy. Hitting Bahrain hard would greatly upset the overall security situation in the Middle East and Gulf region.



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Bullard Confirms QE Over $1 Trillion Would Result In Outright Debt Monetization, Which Geithner Said Would Never Be Allowed

The Fed's preferred voicebox, WSJ's Jon Hilsenrath is out with another article discussing what the imminent QE2 may look like. The summary is that contrary to expectations for a "big bang" intervention, the Fed will instead do $100 billion in QE a month until such time as it deems fit. A few observations on this article.



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Prechter Reiterrates Call For Dow 1,000, Even As Surging Gold And Plunging Dollar Leave Much Credibility To Be Desired

One has to wonder by now just what is so magical about the Dow 1,000 that Prechter has been so infatuated with since time immemorial. Why not 999? Or 1,001. Oh well, as the rest of the world continues to expect the Dow's drop to precisely 1,000, Prechter's call for a surging dollar (ahem), for a plunge in gold (ahem, ahem), and for a rout in stocks, has left quite a few investors with some unpleasant margin calls. What is odd, is that Prechter seems to completely miss the natural hedge offsets of his bearish trade, and he confuses both inflationary and deflationary outcomes that reinforce each other's loss, in his blind pursuit of a market crash. Perhaps Mr. Prechter would be wise to heed the statement from Brazilian finance minister, who earlier acknowledged there is now a full-blown war of central bank attrition. And, no this is not a zero sum war, as all currencies are devalued equally against each other, but absolutely lose value against other fixed assets like gold.



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The Nasdaq's Totally Arbitrary "Flash Crash" Cutoff For DKing Trades Of 15% From NBBO Provides A Great Arb Opportunity

Now that the PGN crash is done and over with, we decided to look at just what shares the NASDAQ decided to DK (in other words deem invalid), and which would stay. Assuming a fair and efficient market would mean all trades should stay, and the algos that were pushing the offer all the way to $4 should eat their losses, just as those who bought at $4 should keep their profits. On the other hand, assuming the whole episode was seen as one big error, then any trades that diverged from the prevailing NBBO before the crash of around $44, should be DKed. To our astonishment, the NASDAQ picked the totally arbitrary number of 15% to set as a threshold on DKing, meaning that any trades executed above $38.10 would stay, while every trade at $38.10 and below would be cancelled. As there were thousands of shares changing hands above this cut off, we are confident that many people will be very, very pissed, especially if they sold at the last accepted price of $38.38/share (see chart below). We urge if any readers traded PGN, or know of people who sold above this threshold, or, even worse, were stopped out and now see their trades stand, to immediately i) write us and describe their situation, and ii) to contact legal counsel and sue the NASDAQ for damages for setting a completely arbitrary cut off on what the exchange deems valid HFT manipulation, as opposed to outright insane. And much more importantly for everyone else: immediately set limit buy orders at 15% below the NBBO in eacn and every stock, with a subsequent sell limit the second stocks are unhalted. This will guarantee you that each and every time there is an HFT flash crash you will make lots and lots of money, courtesy of a market so broken, now apparently even the aliens are coming to help us.



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Mutual Fund Monday Streak Broken By Absence Of POMO, As SPY Volume Plunges Below Abysmal

In a surprising, and at the same time completely expected reversal, all those who thought that Monday's always close due to mutual fund inflows were stunned to see a red close. Which should not be too surprising: after all there was no POMO today - period. The only days that now have a chance of closing in the red is when the Fed is not directly involved in greasing stocks through its open market operations. Which means tomorrow should most likely end green - Tuesday and Thursday are this week's POMOs: tomorrow the Fed will buyback TIPS maturing without maturity limitation, while Thursday will see the monetization of longer-dated bonds, due 2/15/2021 – 8/15/2040. Following these two actions, the Fed will next send Amazon, Netflix and Apple to fresh quintuple digit forward PEs on October 5 and 6.



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Brazil Confirms What Everyone Knows: "A Currency War Has Broken Out"

From the FT: "An “international currency war” has broken out, according to Guido Mantega, Brazil’s finance minister, as governments around the globe compete to lower their exchange rates to boost competitiveness." Welcome to the new frontline. It is being played out at every 500x levered FX trade station. No prisoners are taken as those wounded are immediately shot. And the incursions have now entered stocks and bonds. Trading any assets is now retaliation against a central bank somewhere (most typically at Liberty 33 or at the Marriner Eccles building) which is engaged in open warfare against the world's middle class. And yes, the Brazil Central Bank earlier announced that it was heading unto the breach, buying yet more dollars for 1.7094 reais at auction, and has bought as much as $1 billion USD each day for the past two weeks, putting the Japanese intervention from two weeks ago to shame.



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Morgan Stanley Institutes Hiring Freeze, May Follow Up With "Significant Cuts" If Market Boycott Continues

And so Wall Street continues to not grasp that as long as the vast majority of people realize just how manipulated and broken the market is, they will simply stay out of it. Today, Gasparino breaks the news that Morgan Stanley has instituted a hiring freeze and that if the current volume drought which will certainly wreck EPS for Q3, persists in Q4, the firm will follow up with "fairly significant cuts." Since we don't anticipate the corrupt regulators to do anything that will return confidence to capital markets (and no, Brian Sack, closing the market by one penny in the green will not help), and since the 2s10s will continue to flatten, the pain for banks will only get worse and worse. Add on top of that the likelihood that very soon the FASB may require banks to report the actual MTM value of their hundreds of billions in underwater loans, and it becomes increasingly obvious why financials will soon be the industry that drags the entire market much lower.



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