Archive - Nov 2009

Is this bill good or bad? What's it missing?

Can someone please stop the endless cha-ching noises coming out of Julian Robertson's offices already? What's that? Ok, so...apparently absent some sodomy involving bond vigilantes and the inhabitants of the Marriner S. Eccles buildling, nothing can be done.

Perhaps gold investors are suffering the blues of too much good news since breaking out to the upside, north of the magic 1,000$ an ounce. Inflation being the big macroeconomic risk that everyone is looking for, might just be the real disappointment. For most of the last three decades we have been conditioned to drive/manage by looking in the rear view mirror. The last big black swan event of the 70’s related to the interest rate spike never replayed itself out a second time around. In the years ahead the unexpected might just be the norm and an extraordinary event could actually lead us to a hyper-deflationary black swan.

One of the primary underthemes these days in the regulatory and academic community is the discussion of not just whether or not to break up Goldman (moot: the company has no place continuing to exist in its current form which is essentially a Holding Company for the Federal Reserve, Treasury, the White House, Congress and the Senate), but how to do it. Apparently, Goldman's apparatchiks have realized that the tide of public anger is shifting from a broad, blind anger aimed at the generic concept of "Goldman Sachs", into a definitive policy approach that recommends the immediate tear up of Goldman into various, less than monopolist organizations (Ma Bell ring a...well, bell?). It is impending for the "greater good" of the country and society that this debate becomes front and center immediately. After all, the suddenly very devout oracular priests at the top floor of One New York Plaza must be fully aware of the scripture prophesying that when the oceanic ecosystem would be threatened by one omnipotent, middleclassovorous squid, the vengeful god proceeded to smite it with great vengeance and furious anger (or something like that - we hope to stand corrected by the one "true" intermediary of God's real message these days: Goldman Sachs).

• Yields 3.47% vs. Exp. 3.475%
• Bid-To-Cover 2.81 vs. Avg. 2.83 (Prev. 3.01)
• Indirects 47.3% vs. Avg 40.78% (Prev. 47.24%)
• Indirect Bid-To-Cover 1.51
• Alloted high 82.49%
• Directs at 4.5% of Total accepted

It will surprise no one, we expect, to learn that we considered the notion that Chrysler or GM would somehow remake themselves into "green automakers" overnight (in the auto business this translates to "several decades") the insane ramblings of redistribution-rationalists.

"The economy’s return to growth after a year and a half of recession marks a major turn and it looks like more than a flash in the pan. It seems to me that the economy has entered a sustained period of expansion. We’ve seen meaningful upturns in areas as diverse as housing, consumer spending, industrial production, and foreign trade. And, a number of factors bode well for the future, including a better functioning financial system, low mortgage interest rates, a resurgent stock market, a stabilization of house prices, and stronger growth abroad." - Janet Yellen

This from the FHFA. The private sector financial institutions nearly killed us. The public sector lenders might just finish the job.

Not much optimism from one of CNBC's favorite bulls. Yet even Costa is wrong about today's market direction as 7 shares of SPY move the market up by almost half a percent. In the meantime, the gold creep higher continues.

Some observations into the trading desk that runs the free world, as well as a modest proposal for Chairman Ben.

Last week saw a moderate widening in both bonds and loans, with the broad universe of tracked credits pushing wider to 427 bps and 665 bps forloans and bonds, respectively . This represents a change of 21bps and 8 bps for the two products, with loans curiously widening by a much bigger beta adjusted margin. The bubble bid for risky is still alive and kicking. We anticipate next week's update to bring both of these metric to new YTD tights. Some of the biggest movers were Sungard loans, tighter by almost 150 bps sequentially, and Graham Packaging wider by 100 bps. In bonds, the biggest mover was Neiman Marcus which widened by over 100 bps, and TRW moved out by about 75 bps.

"During AIG’s bailout, Goldman had influence over the decision to use public funds to pay 100 cents on the dollar for these CDOs (the underlying risk of the credit derivatives), but none of the information about the volume of Goldman’s trades with AIG—or the Goldman CDOs hedged by AIG’s other counterparties—was made public. Goldman’s public disclosures in September 2008 obscured its contribution to AIG’s near bankruptcy and the need to bailout Goldman’s trading partners in AIG related transactions. Goldman’s trading activities played a starring role in the near collapse of the global markets." - Janet Tavakoli

• SAC said to tell clients a review found no suspicious trading (Bloomberg)
• John Crudele destroys the fabricated data coming out of the BLS: real unemployment at 22% (Post)
• The Mishkin galatic stupidity trifecta:
  • After destroying Iceland, finance "guru" Fred Mishkin says asset bubbles are a good thing (FT) - Where does the Fed find these sociopaths?
  • And even more toxic filth out of the Iceland destructor: The Fed is Already Transparent (WSJ)
  • As a reminder, Fred Mishkin, was left the Fed in disgrace in 2008, has credibility boredring on negative infinity (Zero Hedge)
• Charlie Gasparino on mollusks and purported credibility: Goldman Sachs doing god's work (HuffPo)

• Asian stocks, currencies climb as reports show demand spurred by stimulus.
• China to overlook calls for stronger yuan as exports fall, researchers say.
• China's house prices rise at fastest pace in 14 months, government says.
• EU objects to Oracle's takeover of Sun.
• Japan's government is set to reach a decision on a rescue package for Japan Airlines.
• OPEC sees signs of oil demand in the U.S.
• Advanta Corp. files for bankruptcy, may turn over its banking unit to regulators.

For clues on inflation expectations in this carry-trade-crazed market, Tuesday’s auction of some $25 billion in 10-year treasury notes is something to pay attention to.