Our European central bank friends went and borrowed a trillion dollar bailout from us, and all we got was this lousy 6 hour bounce and rolling head and shoulder formation? Goldman Sachs is now red as the bears smell fear again, and as goes Goldman so does the market (even if it means a Warren Buffett MBO/LBO of every public stock). Look for a fun close or the announcement of another trillion dollar bailout from JCT who is now and forever the butt of every joke of bureaucratic incompetence.
"Here’s what I have in mind. Suppose that, for every relevant financial institution, the government issues a “rescue bond.” The rescue bond pays a variable coupon equal to 1/1000 of the transfers made from the taxpayer to the institution or its stakeholders. (I pick 1/1000 out of the air; any fixed fraction will do.) Much of the time, this coupon will be zero, because bailouts aren’t necessary and so the firm will not receive transfers. However, just like the institution’s stakeholders, the owners of the rescue bond will occasionally receive a large payment. In a well-functioning market, the price of this bond is exactly equal to the 1/1000 of the expected discounted value of the transfers to the firm and its stakeholders. Thus, the government should charge the financial firm a tax equal to 1000 times the price of the bond." Minneapolis Fed President Kocherlakota
Jim Rickards, who recently has gotten massive media exposure on everything from the JPM Silver manipulation scandal, to the Greek default, was back on CNBC earlier with one of the most fascinating insights we have yet heard from anyone, which demonstrates beyond a doubt why any attempt by Europe to print its way out of its current default is doomed: "Look at what Soros did to the Bank of England in 1992 - he went after them, they had a finite amount of dollars, he was selling sterling and taking the dollars, and they were buying the sterling and selling the dollars to defend the peg. All he had to do was sell more than they had and he wins. But he needed real money to do that. Today you can break a country, you don't need money you just need synthetic euroshorts or CDS. A trillion dollar bailout: Goldman can create 10 trillion of euroshorts. So it just dominates whatever governments can do. So basically Goldman can create shorts faster than Europe can create money." Just wait until Europe finally realizes that the CDS "speculators" had all the cards in the poker game all along. And we hope Europe listens to the man: being LTCM's GC he knows all about failed bail outs.
"We expect to conclude our review in the coming four weeks. The migration will most likely be substantial, probably within the Baa range; but an adjustment to below investment grade is also possible. This will depend on developments in the Greek economy once the fog of financial panic, support-mobilisation and street demonstrations dissipates. The country’s debt is large but not unbearable; however, the required adjustment is obviously very painful, and short-term economic prospects are clearly dismal – though not out of proportion with developments already seen in several European economies last year. Once we have concluded our review, we will publish a detailed explanation of our rationale for re-positioning the rating." Moody's
Morgan Stanley's Stephen Roach spoke with Bloomberg's Tom Keene earlier, pointing out the most troubling statistic about recent market activity, which has to do with both the frequency and amplitude of catastrophes: "The crises are coming with greater frequency. Over the last 25 years we have had an average of one crisis every 3 years. The gap this time is 18 months. The scale is bigger. This is a much more serious problem in the eurozone than the Asian financial crisis." So intercrisis half-life continues to decline as the severity jumps exponentially. In other words, in nine months we will need a combined Fed-ECB-BOE-PBoC-BOJ effort for about $10 trillion just to calm the markets. 4.5 months after that, $100 trillion more... And so forth. Enjoy.
Developing story, but it appears the reign of Gordon Brown is over. Now he only has to explain why he sold all that gold at the all time lows.
Investors Willing To Pay 31% Premium To NAV For Sprott's Physical Gold ETF In Strike Over Global Fiat Devaluation InsanitySubmitted by Tyler Durden on 05/10/2010 - 11:51
Over the past month, gold has quietly become the only true flight to safety. Forget the dollar: the dollar is "safe" just as long as Bernanke does not decide to pull a Sunday night comparable to what the ECB did last night and strangle the greenback with one press release: frankly it is just not worth the imminent currency debasement risk, especially with the inversion in the EURUSD as the trading day has proceeded. But don't take our word for it: even with today's last bail out which is supposed to scare all shorts into covering, and unload all risk-free trades, Gold is still at $1,200. And for a far more material indication of what the market thinks of not just gold, but ofrepresentations of gold holdings by ETF's with "imaginary" unaudited stashes all over the world, take a look at the Sprott PHYS physical gold ETF, and specifically the premium over its NAV. Today it hit an all time record of 31%. The NAV differential has steadily crept higher since the launch of PHYS. Investors are willing to pay 30% more than the real value of holdings just for the knowledge that the gold backing their "assets" actually exists.
After trading as high as mid 1.30s, the EURUSD is rolling over, and its slide is now picking up steam, barely holding on to 1.2858 at last check. The 1.2800 stops are looming, whose break would take the EURUSD back to a 1.27 handle.This may very well still turn out to be the shortest and must futile trillion dollar bailout in history yet. Don't forget it was the EURJPY correlation desks that freaked out on Thursday and drained all NYSE liquidity in stocks. It will be truly amazing if we get another 1000 point move in the Dow... But not up.
Just headlines for now. Of course, if your trading record is 63 out of 63 in the past quarter, you are fully exempt from paying any taxes in America in perpetuity. After all you own the country.
The bankruptcy of America is getting borderline hilarious, even as stock capitalization surges by about $1 trillion based on funny money to be printed by the ECB with the Fed's assistance. In the second coming of moral hazard, one piece of news that some may have missed is Fannie Mae's earlier announcement that the mortgage lender is now more bankrupt than ever before - the firm lost $13.1 billion in net income on $3 billion in revenue. "The first-quarter loss resulted in a net worth deficit of $8.4 billion as of March 31, 2010, taking into account a $3.3 billion reduction in our deficit related to the adoption of new accounting standards, as well as unrealized gains on available-forsale securities during the first quarter. The Acting Director of the Federal Housing Finance Agency has therefore asked Treasury to provide us $8.4 billion on or prior to June 30, 2010." Additionally, the Fed backstopped entity also announced that "there is uncertainty regarding future of
business after conservatorship terminated and expect this uncertainty
to continue." But since in America asset prices have not reflected fundamentals in over a year, nobody gives a rat's ass. And the political whores in DC feel like beating up anyone who even dares to mention this particular $7 trillion dollar question mark which is equivalent to 50% of total US debt, so expect no reform to happen here, just like nothing happened with HFT, until the markets hits 1 quadrillion or zero. For all intents and purposes, the two outcomes are equivalent.
Here we go:
A refresh on Rule 48:
"Rule 48 is intended to be invoked only in those situations where
the potential for extreme market volatility would likely impair
Floor-wide operations at the Exchange by impeding the fair and orderly
opening of securities."
If you ever wanted to see what monopoly looks like in chart form, here it is:
In the quarter ended March 31, Goldman made money on every single trading day. The firm did not record a loss of even $0.01 on even one day in the last quarter. That's 63 days profitable out of 63 trading days. The statistic probability of this event is itself statistically undefined. Goldman is now the market - or, in keeping with modern market reality, Goldman is the house, it controls the casino, and always wins. Congratulations America: you now have far, far better odds in Las Vegas that you have making money with your E-Trade account.
Not one bit embarrassed by their last witch hunt against speculators that led European politicians to discover that the biggest CDS "speculator" against Greece was in fact the Greek post bank (a fact that received very little publicity surprisingly), they are back at it again. It seems there might be a slight confusion though on their part between investors and speculators. By taking on the supposed speculators with an unprecedented galore of currency debasement, European countries are very unlikely to attract any foreign capital going forward. This is nothing else than capital markets fascism and a poorly disguised ponzi scheme. Fact is that fiscal finances are in poor order and not expected to get much better in the future. Rather than tighten the belt and address the gap as they should, governments around the world are lending themselves the money they need to spend. Throughout the financial crisis the only category of workers that has seen a pay rise are those working for the government. Yes there have been layoffs, but very little pay cuts. Talk about a collective effort! While capital markets seem happy to celebrate the madness this morning, also a by-product of a lot of shorts of risk being chased through the gates of hell, I expect that the markets will see through this mascarade in due time. The only trade that makes complete utter sense is being long Gold, and once the short covering is over short EURUSD. It is worth noting that the precious metal now trades with a positive correlation to the USD, and the weakness this morning should not be expected to last as the weekend's news is exactly what gold investors have been counting on: complete global monetization of debt. It won't be long before central banks run out of gold to sell to put a lid on the market at this pace. Maybe the financial bill will also include a speculation limit on the purchase of physical commodities. - Nic Lenoir, ICAP
- Asian stocks, US Futures, Euro climb on global plan to stem debt crisis.
- China posted a $1.68B trade surplus in April, Xinhua News Agency reports.
- ECB says will intervene in bond market in unprecedented bid to buoy Euro.
- EU crafts $962B show of force to support Euro, halt global crisis.
- Fed restarts currency-swap tool with ECB in effort to contain debt crisis.
- US, Australian, Japanese bonds tumble as Europe arranges rescue package.
- Accounting regulators find deficiencies in 15 audits conducted by Deloitte & Touche.
The Price Of Supreme Court Conscience: $10,000 Squid Bucks - The Skinny On SCOTUS "Justice" Elena KaganSubmitted by Tyler Durden on 05/10/2010 - 07:09
The scramble to fill the Supreme Court with Fed and Wall Street puppets in advance of Bernanke's last ditch appeal to preserve his secret bailout optionality of his closest Wall Street friends is on. Now that Elena Kagan is a officially the latest supreme court "justice", here is all you need to know about her independent "allegiance", courtesy of the WSJ: "From 2005 to 2008, Ms. Kagan was a paid member of the Research Advisory Council of Goldman Sachs Global Markets Institute, according to financial-disclosure reports she filed after being appointed to her current job. The form shows she was paid $10,000 in 2008, when she was dean of Harvard Law School. Asked if there was a concern that this issue could be used against Ms. Kagan, should she be nominated, Mr. Gibbs said, "No."