Archive - Dec 9, 2009

Gold mania has now moved to sovereign CDS, where the top 5 names are flying again. Biggest movers are the usual suspects: Dubai, Greece and Latvia. As Zero Hedge has been saying since it hit about 22 bps, CDS on the United States will soon likely see a replay of 2008 action. As of today it traded at 36, 2.5 bps wider. And when this starts really moving, watch out.

Just a quick perusal of news (and an analytical fact or two) in the CRE space that makes one wonder why Goldman Sachs thinks that anyone would believe them. Then again, looking at the ($19 billion) bonus pool, much of which was just nearly halved by the UK government, it appears as if enough people believe them. Let's see what we can to do alleviate that...

The battle of those relegated to the compost heap of financial analytics takes on a new and exciting form, with Moody's preparing to rip apart Cramer's Dubai bulish call.

"We have been preaching short positions in EURUSD and AUDUSD as part of our long USD trading outlook. Our view has been reinforced by the break through the 50-DMA in EURUSD and DXY as wehave well documented already. Accordingly, Stocks have retraced following their brief highs post NFP last Friday. While on the bigger picture we remain bearish for risk markets as daily divergence is absolutely massive in S&P, Dax Futures, or AUDUSD which is a great risk proxy as well, in the shorter run, as highlighted on the attached charts, there is 30-min and 60-min bullish divergence and here is a possibility the initial bearish impulse is complete. We would recommend taking some chips of the table here and sell EURUSD on a re-test of the 50-dma at 1.4878, which we have corresponding to the 0.9178/0.92 zone in AUDUSD. In AUDUSD the 0.8950 is the big level to break to accelerate towards our medium term initial target of 0.8270." - Nic Lenoir, ICAP

I don’t share the recent stock optimism as the tail is wagging the dog. The higher the stock index goes the greater the number of bulls and the greater the amount of decimated bears. Those burned bears will not be adding to the buy side at lower prices to cover shorts. Good news about this will also turn out to be bad when the party is up.

Stephen Colbert destroys "Dr. Blankcheck von Moneypants." Must watch clip.

Remember the deal which to much fanfare, lots of subsequent Merrill upgrades, and endless boasting by SL Green CEO Marc Holliday was supposed to usher in the second golden age for New York Commercial Real Estate? The deal that was the alleged steal of 485 Lex by a bunch of shady investors which we wrote about first 4 months ago. The deal that SL Green CEO, Marc Holliday said "is a first, but significant step
towards the sale of interests in 485 Lexington Avenue. If ultimately
approved, the transaction would demonstrate that the Midtown Manhattan
office market continues to stand as one of the world's top locations
and that investor interest is once again on the rise." Remember now? Ok. That deal just died. And with it died any hope that the "Midtown Manhattan office market continues to stand as one of the world's top locations," that REITs fairly priced, and that Bill Ackman's recent REIT book talking tour is anything but.

RANsquawk 9th December US Morning Briefing - Stocks, Bonds, FX etc.

RANsquawk 9th December Morning Briefing - Stocks, Bonds, FX etc.

"I am hereby extending [TARP per] the authority provided under the Act to October 3, 2010. This extension is necessary to assist American families and stabilize financial markets because it will, among other things, enable us to continue to implement programs that address housing markets and the needs of small businesses, and to maintain the capacity to respond to unforeseen threats, as described above." Tim Geithner

Threat #1 - landslide change in the political landscape in 12 months

Just a day after the second reverse repo test was conducted, the Fed has launched repo test #3: this time, as we expected, for a greater (if still notionally meaningless) amount of $225 million, compared to yesterday's $180 million. The term of this operation is just one day, compared to the 8 and 3 in tests #2 and #1. The increasing frequency of these Temporary Market Operations should be making the liquidity bulls very nervous. And as we pointed out yesterday, the notional on the repo test "can only go up" - so far we have been proven right. Yet wait for the collateral to move down from Treasurys. That's when all hell will break loose.

"The equity bear market has not finished. The valuation bear market began in 2000 and we have only seen two Acts of a far longer and more disturbing play. The mega-rally in the equity markets this year is little different from what we saw in Japan during the mid-1990s. Even a structural bear could have made a lot of money in Japan playing cyclical rallies, but he/she needed to sell as the cycle turned downwards. Hence the topping out of some key US leading indicators may signal that the top of the equity rally is close. Look to exit risk positions." - Albert Edwards

Nothing to see here. Just an oncoming sovereign default freight train. Oh, and a total collapse in the euro.

In his pre-budget report, British Chancellor Alistair Darling said that he will now levy a 50% tax on banker bonuses. The new tax will be effective from today until April 5.The tax will hit virtually all financial companies, including subsidiaries of foreign banks . Thus a Goldman banker working in London will suddenly be faced with a much higher marginal tax rate that his associate in New York. This will either generate much transatlantic resentment, or expect a comparable move to the replicated by the IRS with the President's blessing, who has already lost control of the unemployment picture, so the last thing he can do to regain some popularity is to take Main Street's outcry direct to the southern tip of Manhattan.

Yet even as the likelihood of a copycat tax in the U.S. is increasing, the question is do the domestic trading desks now drop the market and show the administration who is really in charge? Because even the President's working group can not survive a concerted attack from every single financial entity in the world. And bankers are nothing if not efficient at marking their territory in the protection of take home pay. If that requires a 200 point drop in the S&P, so be it.

• The new underground economy (Washington Times)
• Goldman Sachs taking "Hard Look" at pay practice, board member says (Bloomberg)
• China said to plan 8 trillion Yuan new loans cap for next year (Bloomberg)
• China squeezes property speculators with tougher tax penalty (Bloomberg)
• Greece finance minister says no risk of default (Bloomberg)
• At the same time Greece tumbles (FT)
• Dubai stocks slump for third day, Nakheel sukuk in focus (MarketWatch)