Archive - Nov 2010

Two more lawsuits in the neverending safa fraudclosuregate, this time against JP Morgan. "Two purported class action lawsuits have also been filed against Washington Mutual Bank and JPMorgan Chase & Co. in the United States District Court for the Northern District of Illinois, and against Chase Home Finance, LLC in California state court alleging common law fraud and misrepresentation, as well as violations of state consumer fraud statutes. These investigations and actions follow the Firm’s decision in late September 2010 to commence a temporary suspension of obtaining mortgage foreclosure judgments in the states and territories that require a judicial foreclosure process. "

It is now official that Bank of America has a 'better' trading desk than Goldman (no matter that it is outsourced to Calcutta). GS has just released its 10-Q, in which it discloses that even though it had 7 days in the quarter in which it made over $100 million, it actually lost money on 2 days out of a total of 66. This compares to BofA's flawless Q3. Additionally, in Q2, while Goldman has far more trading losses, it also made big money (>100) on more than double as many days. The trend here is unmistakable: the open ended >$100MM trading days for Goldman are plunging: from 35 to 17 to 7. And this is a trend which now that Goldman prop's activity is far more limited, will persist.

One way this could play out.

• Fed Global Backlash Grows (WSJ)
• Warsh Says Federal Reserve's Asset Purchases May Fail to Benefit Economy (Bloomberg)
• The HFT parasites are back in full force: High-Frequency Traders Lobby, Donate to Head Off U.S. Rules (Bloomberg)
• China to Tighten Control on Inflows of Overseas Funds (Bloomberg)
• Goldman Faces Lawsuit Over $1.2 Bln Hudson CDO Deals -Filing (WSJ)
• Ireland's Next Blow: Mortgages (WSJ)
• One Law for the Rich, One Law for the Poor: The new foreclosure crisis reveals the shocking unfairness in how the law treats struggling homeowners (Stiglitz)
• Goldman, Natixis Fight Over Swaps Deal Goes to Trial in London (Bloomberg)
• A Recipe for Fascism (TruthOut)

What you have is a contest where you are trying to find the proverbial dog with the least flees on it, and at these levels, I am not sure the euro is the winner in this currency contest.

Precious metals have now entered their parabolic phase. The latest catalyst for gold having traded north of $1,420 is not only the ongoing collapse of Europe via surging spreads and accelerating ECB bond monetization, which in tried and true bizarro fashion have lead to a more than 100 pip move higher in the EURUSD, but the latest speech by PBOC academic advisor Li Daokui, who said that it is "absurd" that the dollar is still the reserve currency of the world. We are confident that pretty much everyone in China agrees. The likelihood that China is about to do something big in FX land was also confirmed by the biggest move higher in the CNY which rose by 0.51%, the most since the revaluation period, and also by the high yield in the one week auction, which has led some to believe that China may be willing to hike rates once again, and further weaken the dollar peg.

A fundamental restructuring America’s conduct of its foreign policy through the implementation of a quadrennial review is in the works. The US is executing a two pronged military/diplomatic strategy of stepped up bombing, while enticing the Taliban to the negotiating table. Before the US helps Pakistan, it must help itself first, through the raising of domestic taxes. Pushing for a common negotiating forum with Europe to bring Iran to the table on the nuclear issue. The START treaty with Russia on nuclear weapons control may pass in the Senate during the lame duck session. The US supports China’s peaceful rise, but the picture is “complex.”

Small business survey, wholesale inventories, and consumer confidence… No POMO today, PM short squeeze continues as silver now threatens to pass $30.

• Inc. to sell its distribution business to TPG Inc. for $930M.
• AutoZone sells $500M of 10-year debt in increased offer.
• Bank of China reportedly considering taking a stake in Portugal's Banco BPI SA.
• Barclays' Q3 net falls 76% as invt banking unit posts loss on revaluation of its own debt.
• BlackRock's largest investors BofA, PNC raise $8.3B in stock sales.
• Chrysler reported Q3 loss of $84M; ups 2010 forecast. Expects positive free cash flow.

"The love of money as a possession--a distinguished from the love of money as a means to the enjoyments of life--will be recognized for what it is, a somewhat disgusting morbidity, one of those semi-criminal, semi-pathological propensities which one hands over with a shutter to the specialists in mental disease."--John Maynard Keynes

RANsquawk European Morning Briefing - Stocks, Bonds, FX etc. – 09/11/10

Retail traders are notoriously wrong at picking market direction/tops and bottoms. Most retail traders very naturally seem to adopt a counter-trend stance and this offers very accurate signals for individuals looking to trade against this group. This daily report is designed to help traders focus their efforts on higher probability pairs.

Just as in fraudclosure, the PM manipulation lawsuits are now coming daily... Soon - hourly. From the just filed lawsuit by Eric Nalven, which references Andrew Maguire's series of whistleblowing emails: "In connection with its acquisition of Bear Stearns in March 2008, defendant JPMorgan acquired massive short positions in the silver futures market. Thereafter, JPMorgan, with HSBC, artificially depressed the price of silver dramatically downward. The conspiracy and scheme was enormously successful, netting the defendants substantial illegal profits. The conspiracy and scheme has been corroborate by a 40-year industry veteran and former employee of Goldman Sachs (the "Informant") who was told by representatives of the defendants about the conspiracy and scheme. The Informant has stated that he had been told first hand by traders at JPMorgan that JPMorgan manipulates the silver market. The JPMorgan traders would brag to the Informant about how much money they were making as a result of such manipulation. The informant reported the defendants' activities to the CFTC which has opened an investigation into the manipulation of the silver market."

Some time ago, we wrote that the best outcome for the US population would be to eliminate the Fed... but the best outcome for holders of gold and silver would be to preserve the current Fed policies in perpetuity. Tonight, all silver longs wish to extend Ben Bernanke their sincerest thanks, as the silver metal passes yet another historical milestone. In the meantime, Asian traders are squeezing the last few remaining margin pennies out of Blythe Masters, whose remaining monthly tenure at JPM can be counted on one hand.