Archive - Nov 17, 2010
Guest Post: The Bond-CDS Basis and a Fixed Income Conjecture
Submitted by Tyler Durden on 11/17/2010 23:59 -0500Understanding that credit default swaps are a way to step up the capital structure absorbs them into fixed income trading in a natural way. At the same time they opened up some terrific opening lines. One can basis trade based on the whether a CDS is priced rich (or no) against an underlying bond. One can trade dispersion, by selecting name(s) that outperform an index basket, or by selecting a CDS that outperforms another CDS. There is curve trading of same-name CDS at different maturities. I’m not going to go further, but the cap arb strategies can extend beyond the strictly fixed income space. That “sell VIX- buy CDS” arb is an example.
Will Erin Go Bragh, Erin Go Bust?
Submitted by MoneyMcbags on 11/17/2010 23:28 -0500The market quieted down today as European investors apparently have turned their focus from Ireland's spiraling deficit to wondering if they will be charged international rates for voting in Argentina's Dancing with the Stars while also...
Market Recap: 11.17.2010
Submitted by Tyler Durden on 11/17/2010 18:59 -0500A recap of the day's key action in equities, futures, FX, rates, commodities and credit.
We Won! Bill to Retroactively Immunize Mortgage Fraud Defeated
Submitted by George Washington on 11/17/2010 17:46 -0500Not this time, boys!
A First Person Account Of How Bernanke's Export Of Inflation Is Fueling Asia's Last Bubble, And The Bonfire Of The Fiaties
Submitted by Tyler Durden on 11/17/2010 17:40 -0500Much has been said about how the PPI and the CPI are stuck in deflation mode (despite what everyone is seeing when buying groceries or filling up empty gas tanks). Much less has been discussed about how Bernanke's blunt policy tool of unlimited liquidity is leading to an inflation-driven bubble in Asia (and all Emerging Markets). Luckily, Macro Man Simon Black provides a first person perspective of how this bubble is developing, and how it will soon pop. In some ways this is empirical evidence of what Knight Research said previously: namely that the days of an EM push-pull mechanism are coming to an end. Here is why Knight's conclusion is spot on, paraphrased half way around the world: "when central banks start ratcheting up interest rates (like the Fed did in 2004 and what China is doing now...), buyers and developers no longer have access to cheap credit. Demand drops, and prices fall. When this finally happens, I think the subsequent fallout will serve as another strong argument to abandon the dollar and reset the financial system, especially in the developing world. All they need is a reasonable alternative. China is already allowing its currency to be used for cross-border settlement and limited reserve status, and as this function grows for the renminbi, you can bet that Asian nations will stop importing American monetary inflation and start exporting those dollars back home." A must read note for all those who base their investment decisions based on theoretical musings and thought experiment speculation.
Moody's Downgrades San Francisco To Aa2 From Aa1, As Muni Maul Goes Mainstream
Submitted by Tyler Durden on 11/17/2010 17:15 -0500First Philadelphia, now San Francisco, and all in the same day. Fasten your seatbelts ladies, the muni maul is going mainstream. Per Moody's: "The downgrade primarily reflects the city's very narrow financial position and the minimal prospect of material improvement in the near term. The city ended fiscal 2009 with a balance sheet that was weaker than at any time in the prior ten years and extremely weak by comparison with other similarly rated local governments. Its fiscal 2010 and 2011 budgets both relied heavily on one-time solutions, including draws on reserves, to close sizable projected budget gaps, suggesting that final audited results will show little balance sheet improvement. The lackluster economy cannot be expected to provide substantial relief in the near term. Recent reports from the state confirm that its fiscal challenges continue to loom large, which in turn injects revenue risk into the city's current and next year budgets. The defeat in the election earlier this month of a local pension and health care cost control measure suggests that little near-term fiscal improvement is likely to result from external political pressure."
28 Consecutive Weeks Of Domestic Equity Fund Outflows
Submitted by Tyler Durden on 11/17/2010 16:55 -0500
This is getting boring. The only question is whether we can hit 2011 with no inflows... 2012? 2020? $86 billion in outflows this year, means mutual funds are hanging by a thread on asset values continuing to go up, as they have no dry powder left whasoever.
4closureFraud H.R. 3808 Alert - Disposing of the President’s Veto of H.R. 3808- Interstate Recognition of Notarizations Act of 2010
Submitted by 4closureFraud on 11/17/2010 16:39 -0500LIVE from 4:30 - 6:00 est. Well folks, from the calls that were placed and the information we have received it has now come down to the next few hours...
RANsquawk Market Wrap Up - Stocks, Bonds, FX etc. – 17/11/10
Submitted by RANSquawk Video on 11/17/2010 16:20 -0500RANsquawk Market Wrap Up - Stocks, Bonds, FX etc. – 17/11/10
GM IPO Prices At $33/Share
Submitted by Tyler Durden on 11/17/2010 16:18 -0500Other people's money (most of it via the Fed), goes to fill other people's capitalization holes (most of it the Treasury's). And this IPO better have been bought with other people's money.
Knight Research' Stunning Call: "The Game Is Over"
Submitted by Tyler Durden on 11/17/2010 15:52 -0500
From Knight Research: "The simple story is this: We believe the structural and cyclical terms of global trade have finally reached their tipping point. This will catalyze a wholesale change in sentiment and a historic repositioning of risk assets. The emerging market global growth story is over...Although such cataclysmic shocks rarely result in rhythmic, straight line fractures, the chain of price adjustments should be relatively clear. Accordingly, we expect a shockingly powerful rally in the dollar, broadbased weakness across the commodity sector, a dramatic widening of emerging market credit spreads, and what could prove to be a stampede of hot fund flows out of the emerging markets. We appreciate both the gravity and the brevity of this note; but then again, the story is simple.
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NetApp Halted After Guidance Leak Causes Plunge
Submitted by Tyler Durden on 11/17/2010 15:21 -0500
NetApp (NTAP) is halted after a 10% drop circuit breaker has been triggered, following a Bloomberg TV guidance update which gives a weaker outlook than expected. First switches (CSCO), now cloud computing... How much more can the tech bubble take?
How to Persuade Stubborn People
Submitted by George Washington on 11/17/2010 15:03 -0500Become a power user ...
Nobel Peace Prize Recipient To Award Old Hypocrite Medal Of Freedom For Most Successful Circle Jerk Execution In History
Submitted by Tyler Durden on 11/17/2010 14:39 -0500Yes, it's official. The whole has gone crazy. The rape and pillage of the middle class is now awarded with prizes and medals. "President Barack Obama will name Warren Buffet as one of fifteen winners of the 2010 Medal of Freedom, a White House official said on Wednesday."
Republicans Boehner, McConnell, Kyl And Cantor Send Letter To Bernanke, Blasting QE2
Submitted by Tyler Durden on 11/17/2010 14:34 -0500In a letter written by republicans bashing the Fed's QE2, the four congressmen and senators amusingly insist "that monetary policy decisions by the U.S. Federal Reserve must be free and independent from political pressures." It is not that we disagree. But even a blind monkey may see the irony of a political group telling the Fed to do something. The only way the Fed will be independent is if it is terminated. Why is it so difficult for these politicians to grasp this. And no, removing the maximum employment mandate won't do jack - the only thing that will happen is more papers from various Fed professors will be published explaining how, suddenly, they have discovered that printing massive loads of money is in fact deflationary.






