Archive - Nov 2009

Marc Faber on Helicopter Ben flooding the market with pieces of paper if the S&P were to hit 800 again. The problem with this assumption is what happens to treasury rates. Already all the excess liquidity is bypassing stocks (and definitely bonds which at 3-4% have little room to grow) and going straight into gold. As the US government has to extend and roll maturities, thereby making 30 Years attractive, we would take the other side of the Faber bet: there will come such a time in the near future, when the flight from risk assets, engineered by the Fed, will become as pervasive as today's dollar carry trade. Ultimately the Fed is more interested in low rates than 100x+ P/E's (one hopes, or else a gaggle of retarded monkeys can do Bernanke et al's job better). And with Treasury QE done, and MBS being gamed to the point where the FRBNY is doing all it can to obfuscate just what is really going on in that particular market, one can be sure that Bernanke will be all too happy to sacrifice equities at the bond altar.

Cue loud music which gets everyone up on their feet ...

ECB President Jean-Claude Trichet on Wednesday urged European insurers and pension funds to have sufficient capital on hand, stressing they are "systemically important" to the financial system. I have long argued that insurers and pension funds need to be monitored by regulatory agencies that respond to systemic risks. Unfortunately, the New Normal for retirement benefits looks a lot like the old normal based on chicanery and deceit.

Some dramatic moves in CDS action today, with GASBG 5 Yr Senior Protection flying after the CNBC announcer and bestselling author extraordinaire called for the ouster of god's true broker.

Technical Profiles of Gold vs Silver, the US Dollar vs Gold and the US Dollar with highlights from an interview with the winner of the 2008 Automated Trading Championship

"The New York Fed anticipates that, through the balance of the [Quantitative Easing] program, the trading days on which its own staff conducts the program's purchasing activity will gradually increase relative to those trading days on which Wellington executes the program's purchasing activity." - FRBNY, on taking over trading in MBS Agency products and eliminating any and all trading transparency

Goldman Sachs, which lately has been caught in a toxic spiral of potential misrepresentations (courtesy of the SIGTARP report which plainly refuted the firm's claims that it was not on the hook vis-a-vis AIG, and by the way, Ms. Tavakoli, we are waiting for you to retract your apology to the 85 Broad team) and horrendous PR (first Blankfein apologizing for something, then Gasparino telling Lloyd he should step down), may be the final straw that finally breaks open the Fed's "book of death" (for the middle class, f/k/a "book of life" for the banker cartel). Ahead of tomorrow's hearings on various Fed transparency initiatives, Rep. Elijah Cummings is calling for a complete tear down of the existing Fed structure, and demands an overhaul to the "minimal accountability" that the Fed issubject to courtesy of the current Wall Street perpetuated ( and lobbied) status quo.

Despite his recent admonitions about market participants never learning from the past, Howard Marks is more than happy to take advantage of just the kind of gullibility he writes about in his expansive investor letters. In fact, the manager of over $67 billion in assets is launching a $250 million 10 year bond deal which Bloomberg expects will price as soon as today. Full roadshow presentation attached.

Mark it down, today was another big winner for the options market makers. Any stock that was in an uptrend this month was instantly shanked (retail, oil service, semis). And any sector which was in a strong bear trend before this week was powerballed (shippers, steels, fertilizers, banks). All large put and call positions in these sectors will be effectively vaporized by Friday.

One month ago, Zero Hedge did an exhaustive examination into the topic of over half a trillion of foreign FX liquidity swaps to central banks issued by the Fed, and how by administering this unprecedented incursion into international monetary policy, Ben Bernanke became the lender of last resort not only to US institutions on the brink, but to all those foreign central banks, and thousands of foreign financial institutions, who were massively short the dollar the last time the bubble popped (ring a bell?). Since we have ended up in the same boat promptly once again, and since the ponzi scheme can only continue so long before all those short the dollar scramble to cover shorts at some point in the future, as Roubini has predicted, it is merely a matter of time before the Fed will need to disburse another trillion or so of FX swaps to bail out all those who are shorting the US middle class into oblivion. We ignore the ethics of bailing out those who have done nothing but piggyback on the dollar carry trade, and in doing so, have decimated the purchasing power of America's working class, which is precisely what Ben Bernanke did. Buying stocks may be patriotic but bailing out those who want your dollar to purchase less tomorrow than it can today, sure does not pass the sniff test (Bernanke, of course, being at the top of that particular food chain).

Taking a card from the Private Equity deck, the Obama Administration has indicated that it wants to fast-track the Initial Public Offering of General Motors.

"Yesterday’s subprime is today’s FHA. It’s a definite train wreck and the flag will go up in the next couple of months: Bail us out. Give us more money." - Bob Toll

Saber rattling about seceding from the Union for this reason or that (we are looking at you, Texas) has heretofore been a cheap political maneuver often motivated by the desire to shine the dim witted light of the mainstream media on some states' rights issue long since stripped away by the Supreme Court. This fact has permitted us to mostly ignore these sorts of pronouncements as casual. That might be a luxury of the past given the emergence of a new and severe phenomenon: crushing state deficits and an already beleaguered lender of last resort. (Read: The Federal Government).

"one way to value gold, therefore, is to ask at what gold price the value of outstanding central bank paper would be completely backed by gold. The US owns nearly 263m troy ounces of gold (the world's biggest holder) while the Fed's monetary base is $1.7 trillion. So the price of gold at which the US dollars would be fully gold-backed is currently around $6,300." - Dylan Grice, SocGen

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