Archive - Dec 2009

It has been a while since Alan Grayson had a public appearance. Today the man comes back with a bang.

Peter Santoro, Managing Director and Head of Institutional Markets at somehow still troubled hedge fund Citadel, has left for greener pastures, according to our rumor bag. One hopes it is not to join another former Citadel specialist, Misha Malyshev, former head of quant trading at the Chicago fund, who also bolted earlier this year and is currently embroiled in litigation with his former mothership. The departure of such a high profile trader right before bonus season is very suspect to say the least. In other news, Citadel is well on its way to becoming Jefferies-lite, after the "hedge fund" is close to finalizing the terms of the Targa Resources $150 million TL A and $550 million TL B.

Sorry, market is like a broken record, same play calls are made over and over. The Fed sells down stocks, interest rates collapse, new debt is raised 300% oversubscribed, increasing deficits financed with ease as fearful investors pile into the U.S. Dollar.

The two lessons we take away as standouts from the credit crisis are probably somewhat unconventional, but we think they are of great import. First of all, "big" has a way of changing to "trivial" overnight when one is talking about government spending. Second, the "biggest of the big" isn't summed up by large, complex models. Instead, it gets added up on scratch paper. Or via the calculator feature of a Blackberry. Or scrawled on a cocktail napkin with a leaky pen. Today, drawing from these lessons, we think that five simple lines portend something, well, big.

Welcome to ACME bond auctions. This is the world of looney tunes where Tim and Ben, the rescue rangers, run the printing press and the toilet paper issuance facility.

Japan has been the poster child of what not to do. They are a textbook case for the failure of Keynesian stimulus. After 20 years of repeating the same mistakes with the same results, you would think they would learn. They haven't. Now they may enact a policy that will lead to depression level unemployment. Remember the definition of insanity: do the same thing over and over and expect a different result?

It seems like yesterday that Bob Toll was propounding the benefits of stimulus packages for housing and the ever improving status of new home sales (solidly grounded in the same sands as Dubai is now sinking into). Yet while we at Zero Hedge have enjoyed taking repeated stabs at Mr. Toll's seemingly endless selling of his own stock, we have not learned our lesson. Which is why we present his insider transaction in a new and original way, courtesy of Bloomberg. As the image indicates, Mr. Toll's money is roughly 180 degrees from where his mouth is.

It's a scam ...

Merely Siesta break? Or something more... getting more information.

• Yields 1.223% vs. Exp. 1.229%
• Bid-To-Cover 2.98 vs. Avg. 2.92 (Prev. 2.62)
• Indirect Bid-to-Cover 1.32
• Indirects 60.9% vs. Avg. 57.70% (Prev. 54.15%)
• Alloted high 50.40%

79% of America's population (those who know who the Fed Chairman is, and unanimously want him never to step into the hallways of the Marriner Eccles building ever again) has 10 more days of hope, before a Senate panel votes against the broad desires of more than two thirds of America's population, and votes for Bernanke's renomination, thus setting off on a course of virtually guaranteed financial catastrophe. Dow Jones reports: "A U.S. Senate panel will vote Dec. 17 on Federal Reserve Chairman Ben Bernanke's nomination to serve a second term as head of the central bank, the Senate Banking Committee said Tuesday." In the meantime, Volcker once again demands a return to Glass Steagal. His warnings continue to fall on ears enclosed by a tentacular vice grip.

Even as the BLS and the administration are trying to cover up the real state of unemployment affairs using assorted semantic gimmicks of just what it means to be unemployed, and as companies provide adjusted EPS numbers, while actual earnings continue to collapse, the true barometer of spending, provided by the Financial Management Service, tax withholdings (net of refunds), continues to paint the truest picture of just what is really happening with both America's consumer and the corporate world. And it ain't pretty. On a rolling 12 month basis, individual tax withheld has dropped by nearly 8% YoY, from $1.42 trillion to $1.31 trillion, while company witholdings are down a whalloping 64%, from $274 billion to just under $100 billion! This is money that will never be used to pay down the skyrocketing US deficit, because both the US consumer and average US company are simply not collecting the required cash to line the Treasury's pockets with the one traditional way to pad the deficit: taxes. Expect much, much, much more debt issuance in America's short, medium and long-term future.

The WSJ reporting that Istithmar, the investment arm of Dubai's royal family, has lost the foreclosure auction for the Union Square W Hotel, which as we pointed out a month ago was the most likely next CRE casualty. The winner: mezzanine specialist LEM Capital. We wish them all the best. Presumably this means the bottle service at the Underbar has all but dried up. Do you see what happens Larry when the bouncer doesn't rotate the B&T crowd to keep the banker-folk happy? And this happening even with all-time record bonuses? Travesty.

Remember the jovial market response after the B(L)S came out with the 10% unemployment number courtesy of all able-bodied unemployed migrating to work in Tijuana? No? Neither does the market. The 10 Year is now back to pre-NFP levels. It would appear the government's "data scrubbing" interventionism now has a half-life of at best 3 business days.

"We will continue to use all tools at our disposal to aggressively pursue illegal market manipulation by high frequency traders and others." Mary Schapiro

But we thought manipulation by HFT only existed in the deranged brains of certain fringe websites. How is that possible?