Archive - Dec 9, 2009
Risk Aversion Taking Hold
Submitted by naufalsanaullah on 12/09/2009 22:36 -0500After months of injected liquidity chasing risk assets through a pervasive USD-funded carry trade, the liquidity has dried, credit markets have begun to diverge from equities, cash flow problems in the real economy have resurfaced, the dollar has started a deleveraging-based short squeeze rally, and risk aversion is becoming the name of the game again.
Citigroup: KIA'd
Submitted by Marla Singer on 12/09/2009 20:53 -0500
In the wake of the crumbling of certain sandcastles in the sky, sovereign wealth funds in the middle east have baited our analytic gaze over the last month or so. It takes very little, therefore, to prompt us to take careful notice now just about whenever one is mentioned. Today, the Kuwait Investment Authority (hereinafter the "KIA") and its brutal body-blow to Citi demand our attention.
Will The New ABX Prime Index Be The Reason For The Next RMBS (And Thus, FHA/GSE) Collapse?
Submitted by Tyler Durden on 12/09/2009 19:50 -0500
The worst kept secret on Wall Street over the past few days has been the floating of the ABX Prime index by MarkIt. While previously ABX covered only subprime, with it being fixed within points away from 0 in perpetuity, it appears speculators have decided to move up the food chain into what was formerly considered safe collateral. And MarkIt is more than happy to provide them with the tool to do it. So what will this new index do - well, in addition to making trillionaires out of Paolo Pellegrini and Kyle Bass (in the same way ABX Subprime made them billionaires), the new index may just be the tipping point that finally collapses the trillions in sham GSE holdings at mark-to-myth. Because while Subprime ABX forced funds to have an interest in price discovery in lower rated collateral, so Prime ABX will push the bar even higher. However, funds betting to the tune of hundreds of billions in gross notional will be axed directly against the Fed, the Government, the FHA and the GSEs: the only way they will make money is by prime loans trading down to fair values (as opposed to the artificially propped up par values currently). Just as the ability to bet on the subprime collapse forced the first leg down of the housing crisis, so the prime price-discovery mechanism in the form of Prime ABX, will likely be the last nail in the coffin of sham RMBS marks-to-myth, and firmly ground these in the same sand in which Dubai is about to collapse.
Goldman Explains How It Can Be Long The Dollar AND Call For 2+ Years Of No Fed Fund Tightening
Submitted by Tyler Durden on 12/09/2009 19:39 -0500The biggest discrepancy coming out of Goldman these days is not the "conviction buy" external rating on all equities, even as the prop guys keep selling, but the conflicting opinion of a strong dollar coupled with expectations for two+ years of no Fed Fund rate increases. Conventional wisdom of course says that it has to be one or the other - can't have both. Apparently Goldman clients have voiced enough shock and awe with this position by the masters of the universe, that it has provoked the firm to come out with a clarification of how its trading desk could have been axed so wrong. Below is the proposed justification.
Has Bubble Ben Shown His Hand?
Submitted by Leo Kolivakis on 12/09/2009 19:38 -0500Clearly Bubble Ben has shown his hand but don't be so convinced that the Fed will not raise rates in 2010. If the recovery comes in stronger than anticipated, you might see some significant rate hikes in the second half of 2010. That's when the markets will really get interesting.
IG 13 Constituent Spread Update - December 9
Submitted by Tyler Durden on 12/09/2009 18:55 -0500IG 13 closed at the same level as yesterday, 97.75, even with the average and intrinsic spreads both tightening marginally. The widest and the tightest names are the same: ILFC, AIG and Valero on the wide side, while HP, BDK and IBM round out the "best" credits.
Financial Innovation vs Financial Fraud: A Reggie Middleton Rant
Submitted by Reggie Middleton on 12/09/2009 18:45 -0500Innovation, in and of itself, is a very good thing. The issue currently at hand is that it was not financial innovation that got us into this mess. It was fraud! Financial engineers attempted to create methods of circumventing regulations, laws, prudent risk management, common sense and mean market returns. This lying, in turn, was labeled "innovation", which it absolutely was not, and the moniker has been carried on in the media ever since.
NYSE Short Interest Stays Flat At 13.2 Billion Shares, Down 12% Over Prior Year
Submitted by Tyler Durden on 12/09/2009 17:31 -0500
The most recent short interest report from the NYSE indicated that bearish bets in the form of short exposure is near 2009 lows. The number of shares shorted on November 30, 2009 was 13.2 billion, a 0.2% increase from two weeks prior and a 12% decline from the prior year's 14.8 billion. Of the 4,124 stocks available for trading, 3,431 had short positions of at least 5,000. The most recent short interest came out at 3.45% of total shares outstanding, also flat from the prior two weeks.
That Nice Mrs. Romer Is . . . Dangerous
Submitted by Econophile on 12/09/2009 16:48 -0500Christina Romer is one of Obama's chief economic advisors. But she has absolutely no clue what to do about this crisis. Her recent letter defending the Administration's policies is just the usual hack political stuff one would expect from them. She is typical of the problems in Washington. She means well, but she is fabricating the truth in order to justify their actions. Their approach to using government power is one we should all be afraid of. She spells it out quite clearly.
Another J-Lo Bottom
Submitted by RobotTrader on 12/09/2009 15:21 -0500Yet another bear shakeout engineered by the GS and MS Prop Desks, as the NYA breaks the 50-day intraday, only to see it curl right back around to blast off again. Led none other than the common shares of Goldman Sachs.
Volcker: Financial Innovation is Worthless, and Banks Should Be Limited to Traditional Depository Functions
Submitted by George Washington on 12/09/2009 14:50 -0500Volcker, Soros, Taleb, Krugman and many others call for old-timey banking ...
The Longwave Group On Why The Fed Must Be Abolished
Submitted by Tyler Durden on 12/09/2009 13:30 -0500It is a well documented fact that a few big American banks have long fostered and enjoyed close relationships with U.S. regulators and agencies such as the Federal Reserve Board and the U.S. Treasury. History is also replete with Goldman Sachs executives attaining government postings such as the Secretary of the Treasury; including Robert Rubin and Hank Paulson of recent decades. These relationships of trust are developed and nurtured over time to the point where advice is sought and information exchanged regarding situations on a strictly confidential basis. It is difficult for Long Wave Analytics to believe, for example, that the Federal Reserve didn’t send up a trial balloon last February musing about the prospect of initiating a quantitative easing program involving new Treasury bond issues. How else could Goldman amass $27 billion (U.S.) in trading profits in the first nine months of the year. A 50 basis point move in yield on a 10-year maturity, for example, translates into a price change of $4.20 per $1,000 bond. On a long position of $1 billion (U.S.) of a 10-year Treasury bond, this means a capital gain of $42 million (U.S.).
Who’s in charge? We believe it to be the big American and European banks because, after all, they are the owners of the U.S. Federal Reserve.
$21 Billion 10 Year Closes At 3.448%, Bid-to-Cover at 2.62 (Previous At 3.01) - Ugly Auction
Submitted by Tyler Durden on 12/09/2009 13:11 -0500
* Yields 3.448% vs. Exp. 3.421%
* Bid To Cover 2.62 vs. Avg. 2.83 (Prev. 3.01)
* Indirect Bid To Cover: 1.79
* Indirects 34.9% vs. Avg. 40.88% (Prev. 47.7%)
* Direct bid at 8.94% (compared to 4.5% in November)
* Indirect bid at 34.9% (49.3% in November, 47.3% in October - foreigners are slowly shutting out the US)
* Alloted at high 67.28%
Census Bureau Reports Collapse In State Tax Revenue, Liquor Stores Only Bright Spot
Submitted by Tyler Durden on 12/09/2009 13:04 -0500
Hopefully the administration by now has realized that unless it wants uprisings (either metaphoric or literal ones) it has to tackle the state situation. As today's Census Bureau update points out, and corroborates our earlier findings on the withoolding tax plunge, usually used to fill both State and Federal coffers, total state revenues dropped by 16% to $1.678 trillion, even as total expenses increased by 6.2% to $1.736 trillion.
JPY EUR Twang - Is The Dollar Set To Break Resistance?
Submitted by Tyler Durden on 12/09/2009 12:25 -0500
The traditional stock leading indicator over the past several months, the JPY-EUR FX rate just snapped and dropped below what technicians would call another support level. If the market follows this lower, look for the DXY to surge.









