Archive - 2009

Earlier, Goldman Sachs, which has a propensity for pissing pretty much everyone off these days, got in some hot water with the Teamsters, for allegedly "actively soliciting bond trades for clients and
underwriting credit-default swaps to benefit from a failed
exchange and resulting bankruptcy." We won't comment on this as we have repeatedly said it is quite farfetched to say that CDS in itself can create the kind of death spirals that those unfamiliar with the product tend to believe occur courtesy of CDS traders. However what did catch our attention was the following claim made by Goldman spokesman Michael DuVally: “Goldman does not have a position in [YRC], nor are
we making markets in the company’s bonds or credit-default
swaps.” That we will comment on, because it appears to be an outright lie.

Vote passes 16 to 7. Jeff Merkley breaks ranks with the Majority and deserves the praise of those 79% who believe Bernanke should be fired.We will shortly analyze why Senator Corker's real estate interests may have been quite a conflict of interest in his vote.Full Vote Count Below.

"Well, our theme throughout October and November has been that upon a break of the 50-dma EURUSD would post a rather sizable correction as I think the EUR above 1.50 is completely mispriced against the USD. Yesterday we thought 1.4550 being reached we would see a bounce, but a flurry of stops overnight took us a fair bit lower again. We are currently in sub-wave 3 (probably towards the end of sub-wave 3) of the initial bearish impulse. Any bounce close the 50-dma should be sold as the view for a stronger USD remains intact." - Nic Lenoir

RANsquawk 17th December US Morning Briefing - Stocks, Bonds, FX etc.

With no distressed issues left in US markets, here is some bond trader humor of the best kind - guaranteed hot potato money.

After the collapse of Lehman, the Fed stepped in to bail out the financial system by providing blanket guarantees on virtually all asset classes. The chaos was palpable: we now know the "thinking" behind just the $700 billion TARP component of the bailout, thanks to PIMCO's latest brain trust addition: Neel Kashkari, whose rocket science math he himself encapsulated as follows: "We have $11 trillion residential mortgages, $3 trillion commercial mortgages. Total $14 trillion. Five percent of that is $700 billion. A nice round number." The same kind of back of the envelope math dominated Bernanke's decision to provide an explicit dollar for dollar guarantee for the entire ~$8 trillion in loans in the US financial system, and then some. By some estimates the Fed guaranteed in some form or another, up to $26 trillion. And while a lot was merely backstop funding, banks were happy to take advantage of actual funding to a material degree, approximately $1.6 trillion. The bulk of these funds came from by various "temporary" liquidity programs that the Fed adopted. It is precisely the bulk of these facilities that the Fed is now ending.

How big a deal is Greece? Potentially real big. This story has all the pieces for something to get out of control. If the potential for chaos exists, the markets tend to gravitate towards it. Every day we seem to get a bit closer.

The naysayers are growing, while those that are taking remedial grade 1 at the Derek Zoolander school for Senators who can't read good are all for Benny and the Choppers.

Update: Senator Kay Bailey Hutchison also No on Bernanke

The hearing for the reconfirmation of the Honorable Chairman of the Year can be watched here live. Wall Street's emissaries can be vaguely seen in the background, taking notes of which Senator will not receive their bonus check this year.

Even as initial jobless claims jumped by 7,000 to 480k in the week ended December 12, disappointing the consensus watchers which expected a number between 450-475k, the story continues to be in the exhaustion numbers where 144 thousand people dropped off continuing claims and shifted to either extended or EUC. And while EUC moderated from an increase of 328k to "only" 46 thousand, the combination of extended and EUC was worse than even the prior week, when the total of these two categories indicated 137 thousand had exhausted traditional insurance benefits.

• Weil: Five lessons for next time banks come begging (Bloomberg)
• Wake up call for the Fed: ECB to start consulting banks, investors on collateral (Bloomberg)
• Ex-wife sues Steve Cohen, claims he was involved in insider trading (WSJ)
• Goldman driving YRC Trucking into bankruptcy, Hoffa says (HuffPo)
• Democrats blues grow deeper in new poll (WSJ)
• Whitney cuts Goldman Sachs, Morgan Stanley estimates (Bloomberg)

• Asian currencies decline, led by Won, Peso, as US recovery boosts dollar.
• China stocks fall on new share sales, worst losing streak since September.
• Dollar rose to a 3-month-high against the euro FOMC remarks.
• ECB said to start consulting Banks, investors on collateral transparency.
• Fed signals markets return to health while extending low rates for economy.
• Homeowners with mortgages of more than $1M are defaulting at almost twice the US rate.
• Hong Kong asset prices face risk of 'sharp corrections,' Central Bank says.

There are many comments surrounding the return of TARP. I think one of the most important points are being missed. Most of these banks swore that they didn't need TARP. Despite this, in order to return it, they must go back out to the capital markets. Why do you have to hit the market to return a loan that you said you didn't need, unless you needed it? This obvious lie has went unchallenged.

The EURUSD 50 DMA of $1.41 is fast approaching, just as Goldman predicted. The dollar is now back to early September levels, as the predicted unwind of the carry trade is among us. Was the European implosion really all that unpredictable? With equities lagging, once the reality of the move is comprehended, look out below in stocks.

RANsquawk 17th December Morning Briefing - Stocks, Bonds, FX etc.