Archive - Jun 23, 2009

A lot has been said recently over the much-maligned traditional rating agencies: S&P and Moody's. The rampant conflicts of interest over the past decade which everyone on Wall Street was all too aware of, somehow were a shock to politicians such as Barney Frank. In fact these very conflicts have been proposed to be the root of the credit and mortgage crisis (one can see how that is not a futile argument: if an excel workbook crashes your PC if you try to assume declining housing prices someone should have raised a red flag somewhere). Of course, that is a naive conclusion but not entirely without merit. In fact, odds are that the next time the market swoons by 40-60%, Barney Frank will refocus populist anger at exactly these rating agencies which have so far managed to escape relatively unscathed.

Bloomberg out with an article disclosing what every "tinfoil" hat wearer has known for a long time, namely that it was precisely Goldman's collateral extractions out of AIG that were the cause for the firm's collapse, and the ensuing financial catastrophe that to this day has been propped up only thanks to the US government's backstop of nearly $10 trillion in various worthless assets.

In the accompanying presentation, it is easy to see why Bill Gross' PIMCO is highly bullish on credit of any variety. As the table below demonstrates, taken straight out of the biggest bond fund's May 2009 presentation "Investing for the Journey and the Destination: What it means across the Capital Structure" PIMCO doesn't see any overvalued instruments in the credit realm: MBS, IG, EM and HY/Loans all have wonderfully green and positive metrics in the valuation column.

Finally someone is sticking against the taxpayer rape going on behind the scenes each and every day in bankruptcy court (even if it is paradoxically the government itself), in which taxpayers directly pay Wall Street's investment banks who pretend to facilitate Obama's pet UAW-placating and merely liquidation-delaying projects.

The money shot from the US Trustee's objection below:

Most financial experts are aware that the only reason the economy has not yet collapsed entirely, is due to the trillions in governmental safeguards and industrial subsidies. Zero Hedge has written extensively on the topic, and it is nowhere more obvious than here, that virtually the entire financial system is backstopped by explicit and implicit guarantees. And in true pro-cyclical fashion, the expectation for permanent governmental crutches can be best seen in some of the same metrics that in the post-Lehman days markedly went off the charts, most notably the LIBOR rate.

• What low bond recovery rates mean: 45-55% cumulative defaults (Vanguard, hat tip Richard) [HY12 at 81? haha]
• The dumb money is beginning to lose conviction (Technical Take)
• Steve Jakubowski: Objecting to the GM 363 Sale's treatment of product liability claims: stepping into the fray (Bankruptcy Litigation Blog)
• Dianne Feinstein: Obama may lack votes for health-care (Bloomberg)

"The Iranian government must understand that the world is watching. We mourn each and every innocent life that is lost. We call on the Iranian government to stop all violent and unjust actions against its own people. The universal rights to assembly and free speech must be respected, and the United States stands with all who seek to exercise those rights.

Lots of queries lately as to why 10 years (and other bonds on the curve) are still at markedly negative repo rates: i.e. the phenomenon of negative interest for lenders. This is an interesting topic which I will touch on again soon, especially with recently implemented 300 bps fees for delivery fails. Across The Curve has discussed this issue recently and I point to his post for a good primer. An even better primer is straight out of the New York Fed "Repurchase Agreements with Negative Interest Rates." Recommended Sunday reading.

• Steve Jobs had a liver transplant 2 months ago (WSJ)
• Iran's political turmoil creates dilemma for Obama at home and overseas (Bloomberg)
• Cutting the Gordian Knot of GE Theory (AxiomaticEconomics)
• The Plaza stirs with 30 For Sale listings for a total of $250 million (NYT)
• Fear the dark side of China's lending spree (Caijing)

For the 4 people who are still keeping track of the complete failure that is our banking industry, today the FDIC closed down three more banks. This is what - 40, 50, 60? banks that have failed year to date. I used to keep track few months ago. Now, not so much.

For the 4 people who are still keeping track of the complete failure that is our banking industry, today the FDIC closed down three more banks. This is what - 40, 50, 60? banks that have failed year to date. I used to keep track few months ago. Now, not so much.

In what is surely a shocking turn for the Mainstream Media, today's horrendous Johnson Redbook Index numbers were curiously not noted anywhere. As Zero Hedge believes in not depriving its audience of data points, especially those lacking a green steroid shot, the charts below indicate just much of a lack to the US budget deficit, upcoming consumer subsidies will be for President Obama (and taxpayers).

By way of background:

In what is surely a shocking turn for the Mainstream Media, today's horrendous Johnson Redbook Index numbers were curiously not noted anywhere. As Zero Hedge believes in not depriving its audience of data points, especially those lacking a green steroid shot, the charts below indicate just much of a lack to the US budget deficit, upcoming consumer subsidies will be for President Obama (and taxpayers).

By way of background:

In its Chart of the Day, Bloomberg finally picks up on a topic that Zero Hedge readers are all too familiar with - California CDS.

No commentary necessary.