Daily Credit Summary: July 28 - Down Day
Submitted by Tyler Durden on 07/28/2009 - 16:46Spreads were broadly wider in the US (for the first time in over a week) as all the indices deteriorated. Indices typically underperformed single-names (but IG and HY both made wider tights and wider wides than yesterday) with skews widening in general as IG underperformed but narrowed the skew, HVOL underperformed but narrowed the skew, ExHVOL outperformed pushing the skew wider, XO's skew increased as the index outperformed, and HY's skew widened as it underperformed.
Citi Arb Revisited, Or Here Comes Max Pain
Submitted by Tyler Durden on 07/28/2009 - 16:21
Been a while since we looked at the Citi Arb chart (7.29x common - 1 Pfd): looks like the pummeling for the HFs who hold the arb is again reaching VOW max pain proportions, and with one billion shares traded to the upside today, the game theory among the fund managers who are still involved is about to get quite "defective" in a big hurry.
Fitch: Financial Companies Hold 99.7% Of All Derivative Contracts
Submitted by Tyler Durden on 07/28/2009 - 15:12Fitch has released a comprehensive study on derivatives held by various corporations and has come out with some disturbing results: as Zero Hedge's recent disclosure of data from the Office of the Comptroller of the Currency confirmed, the bulk of the derivative risk is concentrated not merely in the "financial company" category (99.7%) but in a subset of just five companies, which account for an "overwhelming majority" of derivative assets and liabilities.
Joe Saluzzi Discusses HFT On Fox Business
Submitted by Tyler Durden on 07/28/2009 - 15:10Impressive how much more informative Joe can be when he is not caught avoiding the book pitches of assorted blonde HFT "specialists" on CNBC.
Project Mayhem Research: Multiple Anomalies Detected In Silver ETFs
Submitted by Tyler Durden on 07/28/2009 - 13:18During our research into the inventory lists of the iShares SLV and London-based ETFS physical silver funds, we discovered multiple anomalies which cannot be easily dismissed. These included the presence of internal duplicates, rough internal duplicates, weight duplicates, statistical clustering, and cross-reference duplicates. Taken together, these anomalies are cause for concern, and we suggest that more capable teams conduct further research into these issues, as they effect price discovery within the precious metals market, as these ETF shares are being used for settlement and possibly pricesuppression on the COMEX.
If these problems are caused by accounting errors, they are disturbing and perhaps profoundly incompetent, and we suggest both these funds should have their senior management replaced.
In our opinions, the only way for all of these anomalies to occur together as noted in this paper, is via systemic fraud or gross accounting error bordering on jaw-dropping incompetence.
Bond Selloff Accelerates
Submitted by Tyler Durden on 07/28/2009 - 12:47
The selloff across the bond curve picks up, with the 10 Year about to go red for the day, even as equities have fooled the T-800 army to bid stocks up amongst each other.
Janet Yellen On The Outlook For The US Economy And Community Banks
Submitted by Tyler Durden on 07/28/2009 - 12:37In summation, credit needs to flow or the beast will starve:
"Although my message is that you should plan for the worst and exercise caution, I want to stress that it is also critical that you continue to make loans to creditworthy borrowers. The profits that quality loans generate will serve you well as you safeguard capital. They are the core earning assets that will power bank profitability as we head out of this recession. And, of course, the credit provided by prudent, well-functioning depository institutions will play an important role in supporting the broader economic recovery that now seems to be on the horizon.
BXP's Mort Zuckerman: "The Economy Is Worse Than It Looks"
Submitted by Tyler Durden on 07/28/2009 - 11:57One would think that if anyone had an interest in painting an overly optimistic picture for the economy in general, and commercial real estate in particular, the Chairman of office uber-REIT Boston Properties would be it. Nope.
Is The Mortgage Police Losing The Battle
Submitted by Tyler Durden on 07/28/2009 - 11:33
The relationship between the 10 Year and the 30 Year Mortgage spread and the actual level of the 30 Year Mortgage has broken down in the last week. Did the (mortgage) vigilantes pull a fast one?
The Dark Years Are Here
Submitted by Tyler Durden on 07/28/2009 - 10:40And readers say Zero Hedge is pessimistic. Don't read this if you don't want to break out of your MSM-induced happiness daze. Compliments of Matterhorn Asset Management. Snippet:
All the money committed so far has only achieved two things: Firstly it has created some short term hope which together with totally illusionary sightings of green shoots have generated a small stock market correction (which we forecast in our January Newsletter) and some belief that the crisis is ending. Secondly, all the funds printed so far to save the system have gone to Wall Street but has done nothing whatsoever for the real economy. And what is the government doing about it. They are doing the only thing they know which is to print more money.
This is total lunacy! How can any intelligent person believe that printed pieces of paper can solve an economic catastrophe?
If that were the case we could all go home and write out pieces of paper or use Monopoly money to spend in the shops or repay our debts.
Bank Failure Friday Chart Approaching Exponential Curve
Submitted by Tyler Durden on 07/28/2009 - 09:33
Sheila Bair's favorite math equation these days:
where n = bank failures and x = tax rate
GX Clarke Defines "Indirect Bidder"
Submitted by Tyler Durden on 07/28/2009 - 09:00From GX Clarke
What exactly is an indirect bidder?
This question used to be fairly easy to answer. An indirect bidder was one that did not trade with Primary dealers and dealt directly with the Fed at auctions. That's the kind of quirky funny twist on language that would draw the ire of a George Carlin, "So an IN-direct bidder Bids
Directly. Hmmmm."
GE Capital Serving Kool Aid All Morning
Submitted by Tyler Durden on 07/28/2009 - 08:37GE Capital, aka the next CIT, is practicing its recently acquired hypnosis skillset (perfected via daily lessons from CNBC anchors) which has culminated with a 63 page presentation replete with far too much empty verbiage and green shootery.
The take home message:
- H1 Net Income has plunged to $1.7 billion on $557 billion in total assets, and only thanks to firing pretty much everybody: $1.9 billion in SG&A savings
- This is down $24 billion from Q4 as GECC is "continuing to rapidly reduce balance sheet"
- Loss reserves are skyrocketing: currently at $6.6 billion, up one billion from Q1
- 2009 TY original outlook: $5 billion; Fed base case: $2.0-$2.5 billion, Fed adverse case: $0
- How many more people can GECC fire as its balance sheet implodes?
- Oh yeah, and if CRE really blows up, CIT, here we come
Daily Highlights: 7.28.09
Submitted by Tyler Durden on 07/28/2009 - 08:07- Asian stock markets move mostly in a tight range after their string of recent rallies.
- CFTC report to blame speculators responsible for driving oil-price swings.
- Coal producers cope with sluggish demand
- Crude Oil trades near a three-week high after gains in equities markets
- SEC firms up plan to limit short sales of stocks.
- AIG unit keeps $2.4B from asset sales as taxpayers wait for payment
