Archive - Sep 2009

"The deal was actually structured to give Barclays an immediate and enormous windfall profit. Certain Lehman executives agreed to give Barclays an undisclosed $5 billion discount off the book value of securities transferred to Barclays, and later agreed to give billions more in so-called "additional value" that Barclays demanded, but the Court never approved. This immediate windfall to Barclays (i) was not disclosed to the boards of LBHI and LBI, (ii) was not revealed in the agreement the Court was asked to approve, and (iii) was never disclosed to the Court until now."

"Market considered stronger technically from recent period of consolidation, move upward on higher volume; declines of June and early August are seen as having shaken out weak hands, as indicated by shrinkage in brokers' loans. Recent economic news has also been encouraging, including steel production, retail and mail order sales. Roger Babson's switch to bullish stance has also attracted attention. All indications point to good sized gains in stocks in the near future, though third-quarter earnings reports in a few weeks may change the trend."

Oh, source: 1930

In today's rehearsal of what efficient markets should look like: the VIX and the SPY will correlate with an R2 of 0.999 while the dollar will get the usual royal beatdown as the Yen-Euro trade goes parabolic. If that doesn't work out, we will try a different script tomorrow.

No news here really. Market starts dropping: volume immediately picks up to 10 million above average. Then stocks retrace all their losses and add gains as volume flatlines, or actually decreases during the day. In the past week shorters will not short, sellers will not sell, aside from the first 30 minutes of market trading, when market volume ramps. In the meantime someone (fund managers with career risk as disclosed yesterday) is accumulating all those lifted offers as the market ploughs into the parabolic phase.

Today $2 billion was used up by the Fed to purchase several off the run 2021-2026 maturities and to goose up equity market liquidity just that little more. With today's action there is exactly $16.7 billion left remaining in the QE treasury basket.

Massachusetts investigators say James S. McDonald, president and chief executive of investment management firm Rockefeller & Co., has died of an apparently self-inflicted gunshot wound.

There was a time when FINRA did some good things. It did mostly useless things, and was glaringly incompetent in even those, but on occasion it would do something proper, at least when moderating analyst conflicts of interest. Then the crash came, and all bets were off. Interestingly, in October 2008, a month after the bottom came off the market, and when the kitchen sink was being thrown at stocks in order to prevent further collapse, FINRA lost the last shred of interventionist integrity it had when it decided to abolish the so-called quiet period for research actions subsequent to a follow-on offering. Yesterday, JP Morgan was more than happy to take advantage of this last shred of regulatory decency collapsing by the wayside, as more and more synergies of the SEC-Wall Street merger become effectuated.

“Come on, Direct Edge. Come on Nasdaq. Come into this data center,’’ said Stanley Young, the chief executive officer of NYSE Technologies and co-global chief information officer of NYSE Euronext.

"[The Fed] is bigger than the Congress, [it] has more power than the Congress. The Fed Chairman probably is more powerful than our president, and yet we refuse to look at it. The time has come for us to look at the Fed" - Ron Paul

Fortress investment group has been on a tear recently: the stock which had probed the sub-dollar space some months ago, recently got a much needed upgrade from the fine analysts over at Barclays, which optimism was undoubtedly bolstered by the firm's retention of one Daniel ("His Name Is Not") Mudd as CEO, who did miracles during his prior tenure at Fannie Mae for shareholder returns. After all, as the whole "once bitten..." saying goes, one can be positive he has learned from losing billions in shareholder value in the past, and will never repeat it again. (Outliers such as Bob Nardelli are just that - outliers.) Yet a casual glance at the Fortress Board of Directors reveals one Howard "Howie" Rubin. Is there more than meets the eye here?

Capital One's August charge-off and delinquency rate data was filed today, and while some voodoo accounting likely helped the annualized charge-off rate decline from 9.83% to 9.32%, the 30 day+ delinquency increased from 4.83% to 5.09%. So while the marginal credit card holder is "expected" (see definition below) to start paying credit card balances due, the recidivist abusers keep ignoring those 3rd notification letters.

• The new carry trade: Funding in dollars (FX Solutions)
• Retail sales ex auto subsidies up 1.1% (Bloomberg)
• Core PPI up 0.2%, gasoline up 23% (Bloomberg)
• Evans-Pritchard: Credit shrinks at Great Depression rate prompting fears of double-dip recession (Telegraph, h/t Geoffrey)
• Weil: Too-big banks can take comfort in Obama's math (Bloomberg)
• Retail sales here - not so much “We need to see a revenue story emerge”: Best Buy profit misses estimates as sales fall at older stores (Bloomberg)

• Asia currencies gain on signs recovery may spur rate increases.
• British inflation falls back to 1.6 percent amid favorable oil price comparisons.
• Car, gas sales seen boosting August retail sales, but consumers cautious.
• China shares rise for 3rd day on economic recovery hopes, led by metals.
• EU deepens investigation into Dutch govt.'s plan to buy ING bad assets.
• Dollar trades near weakest level this year on record low borrowing costs.
• Foreign direct investment in China climbed for the first time in 11 months in August.

A year after Lehman collapsed, what have they learned on Wall Street? Absolutely nothing. That's pretty much what I see on Wall Street and at the large "sophisticated" Canadian public pension funds. Behind the rhetoric, it's business as usual. Who needs risk management when the markets are on fire and you're looking to shoot the lights out?

"Mr. President, I have discussed a variety of questionable practices that deserve and I hope will receive a searching examination by the SEC and by Congress. While some of these innovations have produced benefits, they have also created wide disparities between high-speed traders and average investors. We do not have a clear accounting of all the costs and benefits of these recent market structure changes... High-frequency trading, while not illegal, may operate in ways that undermine the legitimacy of our financial markets. In order to restore investor confidence, we must effectively regulate unfair performance-enhancers. We must shine a light on dark pools, conduct a searching examination of high-frequency trading strategies to ensure they are not manipulative, ban flash orders, and give regulators the tools they need to ensure that broker-dealers are acting in the best interests of their clients." - Senator Ted Kaufman