Archive - 2009

David Paterson speaks on CNBC. Not good news for New York inhabitants, or NY CDS shorts. Or not... NY State CDS hit an all time wide of 357 bps in December. They are now around 140. Any escalation of NY's fiscal crisis may simply imply more and more taxpayer bailouts. Swaption time.

We start the outlook for the week outlining Gold and EURUSD. Gold exhibits a lot of divergence on the hourly chart and has seen almost down to the dollar the Elliott extension for the 5th leg of the bearish impulse from the highs at 1,113.2. We expect a retracement towards 1,165/1,170 which corresponds to the 50% retracement from the highs and a move back to the wave 4 of lower order. If that zone holds on the upside we expect the market will then dip to 1,070 which is the next key support on the downside. Similarly, EURUSD shows divergence on the hourly and 3-hour charts. In terms of sub-structure we cannot exclude a final push to 1.4565, but overall we think the market should bounce this week to retest the 50-day moving average resistance at 1.4880. The slope of the 50-dma is in the process of flattening, and the daily MACD is now negative. This could indicate a much deeper correction is in the works on the bigger picture. This remains our view. We would recommend selling a bounce in the 1.4880 area if we do get there.

As more and more of the broad public figures out what this thing called sovereign CDS is, the next logical question (especially for algos and correlation desks) is whether or not sovereign leveraged levels can be gamed, or is there any specific correlation that can be arbed as the dominos start to fall (not everyone has the luxury of printing limitless amount of the world's reserve currency). Below we present a chart correlating the CDS with the Debt to GDP ratios of various indicative countries. The chart excludes the outliers of Argentina, Venezuela and the Ukraine, which even though having less than 100% Debt-to-GDP are all trading 1000 bps and wider.

Is there a correlation here? You decide. The R2 is 0.5143, which probably means that algos will gradually start to flatline the correlation as more and more sovereign CDS-trading players emerge.

Today at 7pm, Greek Prime Minister George Papandreou will address “the economy, the productive model, the credibility of the state mechanism, the confidence of our European partners and, above all, the daily life and prospects of Greeks." The reason for this extraordinary measure (keep in mind this is Greece, not D.C., where the president provides hourly updates on the latest BLS releases) is the recent plunge in Greek stocks and government bonds, and culminating with several rating agencies either downgrading the country (Fitch) or putting it on downgrade review (S&P). Most recently, the yield on Greek 10 years hit 5.295% on concerns the country's fiscal deficit of 12.7% will makes its already extreme leverage even more unmanageable. And the biggest wildcard: the massive reliance of Greek banks on ECB repos backed by potentially soon to be much lass valuable government debt.

• The bank with the worst balance sheet remembers it is bonus time, systemic risk be screwed, pays back TARP (Bloomberg)
• Matt Taibbi takes on... Steve Liesman in a blast from the past (The Nation)
• And all is good again: Nakheel bonds double from 51 to 109.5 (Bloomberg)
• Exxon to buy XTO energy for $31 billion in stock, not a single dollar in cash (Bloomberg)
• Goldman fueled AIG gamles (WSJ)
• Tullett Prebon will help brokers move out of U.K. (Bloomberg)

RANsquawk 14th December Morning Briefing - Stocks, Bonds, FX etc. (Dubai Bailout Special)

• Asian markets rebounded Monday after Dubai received $10B in financing from Abu Dhabi.
• China launches landmark natural gas pipeline tapping into Central Asia's vast reserves.
• Dubai gets $10B in financing from Abu Dhabi, part to be used to pay down Dubai World debt.
• Euro gains after Dubai gets $10 billion of aid from Abu Dhabi.
• France's Sarkozy to unveil details of euro35B plan to spur investment in universities.
• Germany's budget sees a record of $125B in new borrowing next year, spending rise of 10.5%.

RANsquawk 14th December Morning Briefing - Stocks, Bonds, FX etc.

I am back from my brief blogging hiatus and not surprisingly, all of the nutty things going on in the financial markets have not magically reversed themselves. So, after some separation from the markets I have made a list of the things I think make the least sense and would impact investors in a meaningful way if the current trends turned around.

The government of Abu Dhabi and the Central Bank of the United Arab Emirates agreed to provide $10 billion to the Dubai Financial Support Fund, allowing Dubai World to repay $4.1 billion of Islamic sukuk bonds that are due today, the government of Dubai said in an e-mailed statement. Statement from Dubai Supreme Fiscal Committee attached.

Lately there has been much back and forth over the definitions of (un)employment, of improving (deteriorating) trends therein, and of just what is going on with the labor pool in the U.S. Due to the lack of a definitive data series that tracks comprehensive unemployment over time, the possibility for loose interpretation exists and is (ab)used by many. In order to hopefully mitigate a lot of the debate on the margin, here is probably one of the more comprehensive charts available, which tracks Initial Claims, Continuing Claims and Emergency Unemployment Compensation (the last being somewhat notorious lately, and a datapoint that has to be considered due to the skyrocketing exhaustion rate) since 1967. The result does not need much commentary.

"I Did Not Run For Office To Be Helping Out A Bunch Of Fat Cat Bankers On Wall Street. Some people on Wall Street still don't get it" - Barack Obama

Unfortunately, the people on Main Street get it, and at this point they can see right through your ever-escalating hypocrisy.

Professor Samuelson was a giant in economics. His many articles, books and lectures are a true testimony to his intellectual breadth and depth. The world lost another great thinker today.

Continuing our series of impending Commercial Real Estate debacles, today we focus on CMBX 3 (H1 2007 transactions). As Fitch disclosed on Friday, the November delinquency rate across CMBS increased by 43 bps to 4.29%, while more than double, 9.16% of the entire Fitch universe, was in special servicing. Of this CMBX 3 (together with 4) hold the brunt of the collapse in CRE. Of the 25 deals in CMBX 3, those performing the worst as of the latest remittance report were:

• COMM 06-C8, with 18.3% of all deals delinquent or in special servicing ($680.4 million of $3.7 billion total)
• CSMC 07-C1, with 16.5% of all deals delinquent or in special servicing ($552.3 million of $3.3 billion total)
• LBUBS 07-C1, with 15.6% of all deals delinquent or in special servicing(576.4 million of $3.7 billion total)

And highlighted below are the properties most indicative of the CRE collapse within CMBX 3, and in CRE in general. Once again, this is merely a sample with many other properties already in foreclosure and/or delinquency.

Populist anger is starting to awake all over the world, as the G-20's actions continue favoring only the "aristocratic" banker class. We hope Berlusconi's mistresses will still find him just as attractive even with a black eye, bleeding lips and busted teeth.