Archive - Dec 15, 2010

Munis Are The First Official Burning Theater: "There Is An Avalanche Of Bid-Wanteds" As Nobody Can "Accomodate This Much Sell-Side Pressure"

Over the past year, there have been many references to panicked sellers behaving like people in a burning theater. May 6 was the closest we got so far in 2010. Today we get our second confirmed spotting. Advice to parents: do not let your kids read this if your last name if Gross and their first is William: "Bondholders sought buyers for $1.4 billion in debt yesterday, the most since June 15, 2006, according to a Bloomberg bids-wanted index.    “Nobody’s bidding,” Tony Shields, a principal in the public-finance department at Williams Capital Group LP in New York, said in an e-mail. There’s “an avalanche of bid-wanteds, and there is just not enough liquidity to accommodate this much sell-side pressure.” There is another words for this condition. Bidless.

Guest Post: What The Silver Vigilantes Understand That You Probably Don’t (Arithmetic, Human Nature and other Stuff)

Sorry about the insulting headline, but every last shred of evidence I can find suggests that the most people remain utterly clueless about silver, despite the efforts of the silver vigilantes, led by Max Keiser and Mike Kreiger. Their brilliantly simple plan (go get some physical silver) promises to topple the criminally insane fraud that has become US economy. It doesn’t require politicians or regulators to lift a finger either, you simply take advantage of what is undoubtedly an artificially low price. I can completely understand anyone who is skeptical of that last statement; I’m sure you’ve been burned before, but that doesn’t mean you should stop seeking truth.

Observations On The Correlation Between Gold Price And Rates... Or The Complete Lack Thereof

One of the specious and false memes circulating among the faux-punditry, which is undoubtedly based on a few months worth of amateur observations, is that gold is supposed to correlate inversely with interest rates. Presumably the logic goes something like this: instead of buying gold, it makes more sense to take one's money and buy $4.99 grande lattes, as it will be $6.99 tomorrow. So sell now. Fair enough, and on the surface this almost makes sense. Too bad it is completely wrong. If those same people who base their observations on one quarter of a business cycle maybe had the tools to extend their analysis a little further back, they would find that gold correlates with 10 year rates... in absolutely no way (with one very notable exception).

Contrary To Rumors, New York Comptroller Sees An Increase In Banker Bonuses In 2011, As Rick's Cabaret Prepares To Add Locations

One of the more pervasive recent disinformation campaigns, one which has seen the very active media participation of GE-subsidiary CNBC, has been that bonuses on Wall Street are expected to decline on aggregate by 10-20%. After all, Morgan Stanley has gone so far as leaking information to the broader public that employees they may see a 10-30% cut in bonuses: why they would do this makes no sense, as it does nothing but put the bank in a competitive disadvantage vis-a-vis the only commodity on Wall Street: banker "talent." On the other hand, the information makes perfect sense considering that as we recently disclosed, in a Bloomberg poll, over 70% of respondents stated their firm belief that no bankers (of bailed out institutions, which means all of them), should get bonuses this year. Public anger at the banker class is palpable, and nothing is sure to generate spontaneously combustible public non-DA like overhearing  a discussion over who will foot (or, better yet, expense) the $50k Cristal bill. So while the media is distributing stories about the imminent poverty of Wall Street, quietly, and behind the scenes, the banking class could ostensibly pocket one of the biggest bonuses paydays in history. And while the plan may have been working effectively until now, a brand new report just released by the New York City Comptroller (who has absolutely no incentive to overestimate revenue numbers, and is in fact motivated to show as a bleak a financial picture a possible to also get on the taxpayer gravy train) throws some cold water in the face of this clever scheme. To wit, from page 16 of the report: "total compensation in the industry is expected to be up modestly once year-end bonuses are paid." So, bonuses are going to be... up?

Join Dylan Ratigan As He Kicks Off His "Steel On Wheels" Tour To Advocate American Job Creation For Americans

Dylan Ratigan, having recently reincarnated himself as an activitst against the meddling of the banking oligarchy in American everyday lives, and a proponent for job creation, has hit the road, literally, with his inaugural event for his Steel on Wheel movement. The event starts at 7pm, and will be held in Seneca Falls. The idea behind this event is to bring different sectors of the political spectrum, from activists to investors to corporate leadership, towards building a Jobs Movement where Americans advocate for jobs in America that make things for Americans. The focus will be on removing the four bottlenecks of jobs: megabanks, the health care cartel, corrupt trade practices, and the aristocratic tax code. The tour is done in partnership with Nucor Steel, whose CEO Dan DiMicco will be one of the participants in tonight's town hall.

Obama's Novel Spin On M.A.D. - "Assured Self-Destruction"; President Tells Congress Not Passing Tax Deal Would End His Presidency

By now America has grown to expect that every failed negotiation by the politico-financial oligarchy always ends up with some version of the "Mutual Assured Destruction" card. And while the bankers of the world at least threaten others with total annihilation if their "much more erudite" suggestions are not adopted up by the great unwashed plebs, the president has come up with a unique spin on this worn out tactic. The Hill reports that the president has been telling members of Congress that failure to pass the tax-cut legislation could result in the end of his presidency. This begs the question: with the domestic (and global) economy in shambles, and not foundering only due to $4+ trillion in fiscal and monetary stimuli, and near-double digit unemployment, (there is, however, a silver lining - Reuters reports 2010 may be the second highest bonus payout season on Wall Street ever), whether Obama's departure would even be considered 'bad thing'...

Nic Lenoir On Why The Euro Is About To Crash And Burn, And Why His Concern For The "New Normal" Is Not Slow Growth But Civil War

Today 6 countries in Europe were the theater of riots. I highlighted in the past that voting turn-out has been on the rise in the past 8 years after a steady decline the 3 previous decades. During the credit boom fat and happy citizens had no time to vote, too busy producing or even more so consuming. Now with unemployment through the ceiling and poor economic perspectives people have started voting again. The next step is that they realize that no one in the political spectrum currently has any guts or brain and therefore no one offers a real credible fair solution, at least for now. When they do they burn things up. Because things are a little worse in Europe economically, and because the people there actually do realize the people in power are monkeys, they have now reached that stage of realization where burning things up is the logical response. Don't think the US will remain immune to this symptom of the new normal (unlike El Erian I have not revised up my forecast, and my concern is not slow growth but civil war).

Retail Investors Celebrate 32 Consecutive Weeks Of Equity Outflows By Pulling Money Out Of Taxable Bond Funds As Well

That ICI has just confirmed the 32nd consecutive outflow from domestic equity mutual funds is not surprising. After all, we have long been saying that retail's love affair with stocks has gone straight to the bitter divorce stage. That the amount of outflows was a massive $2.7 billion is a little more surprising: after all last week was just $1.7 billion, and the market really surged since then in its last ditch attempt to get the dumbest money in. It failed (and total outflows year to date are not $96 billion: we expect $100 billion through the end of the year). But what is truly surprising, and what debunks every myth that investors are now rotating out of bonds and into stocks, is that in the last week in addition to a surge in domestic equity outflows, for the first time in what seems forever, there was also an outflow of $401 million in taxable bond funds (in addition to $1.3 billion in outflows from muni bonds). Hopefully we can now leave all debate about capital rotation out of fixed income into stocks, courtesy of rising rates, in the dust (same as debunking the whole "money on the non-repatriated sidelines" falacy). In fact the only asset class that saw any inflows were foreign equities. Of course should the reverse decoupling that the "experts" on TV are predicting, and the US outperform developing markets, the foreign asset flows will promptly reverse as well. Yet the bottom line is that all who were expecting a rotation out of bonds and into equities, are proven wrong, and just as we have been predicting for 32 weeks now, equity-related capital withdrawal decisions are completely disconnected from what happens in the rates domain, and the primary objective is capital extraction. Simply said: the latest target of all outbound sector rotation is cash.

BofA To Extend Discussions With Pimco, New York Fed, Seeking Settlement Over $47 Billion In Putback Claims

After it was earlier announced by the WSJ that BofA was in settlement discussions with the various parties seeking putbacks on $47 billion worth of mortgages, the bank has just released an statement that while there is no settlement imminent, the bank is merely extending the period of negotiation, which started on October 18 and had a 60 day duration. This is not surprising: after all the bank has a mere $872 million in amounts reserved for putbacks. This amount will be laughable should even 10% of the total amount sought to be put to BofA be formally repurchased by the undercapitalized bank.