Archive - Dec 10, 2010

Senator Bernie Sanders commenced a filibuster speech at 10:25 am this morning objecting to the proposed tax extension. Three hours later, and now joined by Mary Landrieu, the soliloquy (or is that duoloquy) continues. While the backstage dealing will likely not be impacted much if at all by this speech, it does provide for entertaining viewing. Bernie sure is passionate about the topic.

A&P stock (GAP) has just been halted. As reported earlier, this is likely in connection with the company's imminent filing. Hopefully the avalanche of sellers managed to get out in time.

Score one for the farce team. That scourge to market efficiency, fairness and integrity, Sergey Aleynikov, about whom we have written tomes, has been found guilty. The HFT code in question, that can "manipulate markets" is safe and sound, back with its true master, Goldman Sachs, which firm promises its malicious attempt to squeeze CDS traders in 2007 is completely irrelevant, and the sheeple once again don't understand that the firm's intentions were nothing but pristine.

Now that it appears that the Build America Bond program may end up being pulled in just two short weeks, those who are most reliant on the program for their continued existence are starting to not only crawl out of the woodwork, and make their voices heard, but pull the usual trick of threatening with cataclysms unless they get what they want. Sure enough, enter California Treasurer Bill Lockyer. Per Bloomberg" “Allowing the BABs program to die would undermine the economic recovery and harm taxpayers and working families across the country,” Tom Dresslar, spokesman for California Treasurer Bill Lockyer, said yesterday by telephone. And the justification: taxpayer cocaine is the best damn cocaine money can buy: “I know that stimulus has become a dirty word but you’d be hard-pressed to find an economic recovery program that has worked better.” And that is all that is needed to convince the masses of corrupt politicians: after all as Neel Kashkari made it all too clear both 2 years ago, the world will end unless bankers or their administratively placed cronies get anything they need to maintain the ponzi on their behalf. And lastly let's not forget that the biggest beneficiary of the BAB program is none other than PIMCO...which is incidentally where Kashkari gets his paycheck currently.

RANsquawk US Afternoon Briefing - Stocks, Bonds, FX etc. – 10/12/10

Fears America is "turning Japanese" have been rampant ever since our real estate
bubble burst.

Just as Japan's policymakers were unable to stave off deflation after their
credit bubble burst in 1989, despite their best efforts, conventional wisdom
holds that all of Ben Bernanke's "reflation" policies will ultimately be
overwhelmed by deleveraging and debt destruction.

Speaking of China AND job growth, one industry that's booming in China is: Day Trading! That's right, as many as 10,000 people in China are doing speculative day trading of American stocks, according to the NY Times. They have been hired (ie. outsourced) by our own Banksters to mess with our markets from 9:30 pm to 4 am China time.

And for another confirmation that the Nasdaq is now at the same extreme "irrational exuberance" levels last seen during the dot com crash, we read courtesy of sentimenttrader.com that the Rydex Nasdaq 100 bull/bear ratio is now the highest it has been since just before the dot com crash. "Traders in the Rydex mutual fund family have poured into the Nasdaq 100 long fund at the expense of the inverse fund on the same index. These traders now have 34 times more money invested in the long fund vs. the inverse fund, which is the highest ratio since the bubble days of 2000 and early 2001." And what is scarier, is that unlike during the dot com, investors are using leveraged methods to express their exuberance: "The Bull / Bear Ratio for the leveraged funds isn't quite as extreme...but it's close (on a relative basis)."

Ben may regret this one day, soon..

From ABC News: "Wikileaks founder Julian Assange, the man behind the publication of more than a 250,000 classified U.S. diplomatic cables, could soon be facing spying charges in the U.S. related to the Espionage Act, Assange's lawyer said today. Justice Department officials declined to comment on the possible coming charges, but earlier this week, U.S. Attorney General Eric Holder said the release of the documents had put the United States at risk and said he authorized a criminal investigation into Assange."

The Apple borg collective has its foot soldiers too. And it turns out if they were to be mobilized, they would represent the world's fifth largest army... at just over 1 million. Bloomberg reports that the number of employees who diligently bring you your iPad, now exceeds a whopping 1 million. This however, does not make the company the biggest employer in the world: Walmart is reported to have 1.8 million "associates" worldwide, but at Foxconn's rate of growth it would not surprise us if even the staple American company were to be surpassed very soon.

With the first schedule of QE2 POMOs over yesterday, everyone's attention shifts to 2pm Eastern today when the New York Fed will announce the second line up of bonds to be purchased through the middle of January. As we have noted previously, we believe that this time around the Fed will buy materially more bonds than the roughly $105 billion acquired in round 1 due to the increasing amount of MBS prepays in November (although if mortgage rates persist higher this level of activity will likely tumble). Coupled with lack of bond issuance over the next several weeks, and we believe the pressure on yields will be moderated, as increasing demand is met with zero new supply, in essence allowing the Fed to accrue bond purchases in this USTreasury sabbatical. That said, here is a complete POMO post-mortem for those who keep track of what and when Brian Sack's team is busy monetizing.

Stunning that anyone in this environment can file for Chapter 11. But that is precisely what is happening: supermarket chain A&P, with law firm Kirkland and Ellis and financial advisor Moelis in tow, is about to file for bankruptcy, Bloomberg reports. It is ironic that instead of passing through costs supermarkets are instead opting out to default. Nonetheless, this is likely telling on the status of food margins at major supermarkets.

Neel Kashkari, previously of Goldman Sachs, subsequently of TARP creation fame, and currently of PIMCO payroll generosity and Macroeconomic Advisors "expert network" insight, has penned a charmingly faux-heartfelt, and supremely hypocritical Washington Post op-ed in which he asks rhetorically whether "Washington can tackle the big economic issues?" Ironically these are precisely the same "issues" that have arisen as a result of none other than his very own decision to make moral hazard a global policy courtesy of his own TARP creation. It was also none other than the Washington Post's own profile of Kashkari that explained the deep thought that went into the creation of the biggest Bernanke Put in history: "Seven hundred billion was a number out of the air,” Kashkari recalls….”It was a political calculus. I said, ‘We don’t know how much is enough. We need as much as we can get [from Congress]. What about a trillion?’ ‘No way,’ Hank shook his head. I said, ‘Okay, what about 700 billion?’ We didn’t know if it would work. We had to project confidence, hold up the world. We couldn’t admit how scared we were, or how uncertain.” So the next time Kashkari's own boss at Pimco waxes philosophically on how it is that "the Fed is now the most brazen of all ponzi schemes" perhaps he can first get the advice of his own puppet whose own morally hazardous actions "held up the world." And, by the way Neel, had the US government done the right thing, and not "held up the world" letting those who deserve to fail, actually fail, then there would be no need for Washington to tackle big economic issues - ironically the market would have long been able to fix said problems on its own. But thanks to your actions we will indeed watch in terror as the government continues its exercises in supreme central planning.

The IMF, which had been scheduled to consider the Irish loan release on Friday, has decided to delay its own internal board vote until after the Irish parliament has agreed on being bailed out. The IMF could recommend an approval of the GBP 22.5bln loan for Ireland as early as Dec. 16 assuming the Parliament supports package. The Irish EU/IMF acceptance vote is scheduled for December 15.