Archive - Dec 2009

We are likely to see quite a lot of mileage out of this particular bit of clip art.  True, we have managed to relegate the "Dubai crash" to the dustbin of overhyped crises, but Dubai does not seem particularly disposed to accept that as her ultimate destiny.  The Nakheel bond is but a pair of weeks from default, creditors show no sign whatsoever of any sort of negotiated restructure, much less a moratorium to which creditors could only be heard to cackle loudly.  We are certain all will, however, work out for the best.  ("Nothing to see here.  Please disperse.")

The "CRE-fail" news of the day comes from Chicago where Crains reports that Tishman Speyer has just defaulted on a major mezzanine loan, part of a $1.4 billion package of loans, in which the Federal Reserve is the the main lender via its Maiden Lane I program. Tishman-Speyer, whose 11 Chicago CRE holdings can be seen here, has allegedly defaulted on a mezz loan supporting 6 major commercial properties. The properties, 5.7 million sq. feet in total, represent roughly half of the CRE company's 12.2 million sq. feet of Chicago real estate. And while Tishman has enough of a real estate empire that this won't make a huge impact in the near term, what is notable about the portfolio is that the Fed itself is the holder of the mortgages, which it acquired as part of the Bear Stearns bailout and currently are part of the $26.4 billion in Maiden Lane I Assets. Even as this portfolio has been impaired by over $3.5 billion since inception, we fully expect the fully transparent Fed to have a public announcement as to just how much more value in ML 1 will be lost as a result of this default.

As you will no doubt be aware, a large portion of our energies here at Zero Hedge are devoted to developing new products and services for our readers. In this tradition, we are pleased today to announce a new partnership with Google.

On Wednesday Nov 25 2008, the dollar kissed its 2 year Nov 21 2007 two year anniversary low at 7450. 7450 was the 2007 year low, btw. I quickly scanned the headlines that day and sent a email memo detailing the uber-bearish headlines on the US dollar. The dollar was posting 14 yr lows in the yen. Russia was diversifying into Canadian Loonie, the Suissie rallied on news their CB would remove stimulus, the pound rallied on news the UK GDP was stronger than expected, the Aussie rallied too on news of a their reserve banks 3rd rate hike.

The carry trade is not dead. Only wounded. The prognosis is for a complete recovery thanks to that lifesaver, Ben B.

The Japanese posturing worked: with the yen hitting a 14 year high against the dollar, inside of 85, one short week ago, in the past 5 days the Yen staged a huge drop against the US currency, plunging by the most in over a decade, to 90.5 as of Friday close. While we are not sure what Hirohisa Fujii told Bernanke on the closed line in the past week, we do owe the boys at 33 Liberty a golf clap for managing the carry roll from the dollar to the yen with such efficacy that the stock market did not plunge. It appears the $ Plunge Enforcement Desk and the S&P Plunge Protection Desk have reached a phenomenal level of synergies.

The pace of withdrawing non-standard operations is a balancing act for all central banks that engaged in quantitative easing. If they proceed too quickly and too aggressively, they risk creating another global recession.

Yields are much lower today and are trending down again despite the significant upward yield trend back then. So is this a genuine early economic recovery, or a sign that the modern stock market tends to be a capital-gain seeking momentum machine with little regard for underlying fundamentals? Yes, interest rates are low, but they were back then too, and David Rosenberg suggests most current corporate bond yields are a lot more attractive than yields of the same companies' stocks.

Dollar up, gold down ... check.

Dollar up, Dow up ... huh?

"We expect real GDP to grow 3% (annualized) in the fourth quarter, slow to a 1½% pace in late 2010, and then gradually reaccelerate in 2011." - Goldman Sachs Team Jan, not Team Jim

Gold futures register a "Multiple Confluence" of sell signals across several time-frames ...

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The degree of insider trading in this market is getting ridiculous. And the strangest thing is those who are executing on blatantly obvious material, non-public insider information, are no longer concerned the least bit about getting caught as they realize that the "mighty" SEC will do nothing against them, courtesy of the example the SEC has set by finding absolutely nobody "responsible" (except, of course, the regulator's own future employers who thus get immunity from prosecution) for the greatest market heist in history in which over $5 trillion has been transferred from the middle class to the Wall Street oligarchy (future providers of paychecks for SEC staffers).

Today's grotesque example of the SEC's futility to act as even a modest deterrent to insider trading activity: New York Community Bancorp (which, just so happens, is a $602 million recipient of TLGP debt), whose stock surged in the final minutes of trading for reasons (then) unknown. As reader QevolveQ pointed out at 5:30 pm, the activity in both the stock and the calls of the company was many standard deviations away from average and raised major red flags. Those questions were quickly put to rest when it became known at 6:33 pm that NYB would in fact receive FDIC subsidies to acquire newly failed AmTrust Bank in a transaction that would be "immediately accretive to earnings."

The interview that may have sealed T^G's fate. Even Timmy is slowly realizing that the Administration will need to find a way to deflect Main Steet's anger at Goldman and keep it focused exclusively on Wall Street instead of equating it with Obama et al. The problem is - you make some very serious, tentacled enemies in the process. Geithner also flip flops on his prior position on the transaction tax. While before he was more opposed to the transaction tax than even Marla, his new "windsocked" position on the topic may now provide a challenge even to Nitric Oxide inhibitors.

The man who has benefited more from governmental subsidies for financial companies (which also happen to comprise his core investments) than anyone else, Warren Buffett, has decided to cry foul and complain to the SEC over what is quickly becoming a war in the news wire world. Turns out, his Business Wire firm, which is one of the top two distributors of official news and information from public companies, has realized that subsidies are actually not all that cool, especially when one is not on the receiving end of wasteful capital spending. As a result Buffett has come to the brilliant conclusion: "Business Wire contends that subsidization would be anti-competitive." We wonder how long it will take before Mr. Buffet concludes the obvious - that government subsidization of his pet Wall Street firm Goldman Sachs has very much the same anti-competitive results? We are not holding our breath. Warren has once again proven that while the word hypocrite may be a tad strong in describing him, it does serve quite well.