Archive - Dec 6, 2010

Fresh all time nominal high in spot gold: $1,427.01

The markets are a cartoon. D.C. is a cartoon.

You don’t need a “wikileaks.org” site to reveal much of the BS that is going on in the world today. A lot of revelation can be made simply by having motivated, knowledgeable experts scour through publicly available records. I’m about to make said point by showing that the proclamations of the ECB, IMF, the Portuguese government and all of those other governments that claim that Portugal will not default on their loans is simple nonsense.

As the chart below shows something just snapped in Mini Silver several minutes ago, which may have been the proverbial pseudo violent break of the JPM barrier. As the price briefly shot up to well over $30.60 on just under 150 contracts, leading to a $0.30 differential with the large silver contract, an arbitrage which may put the NYSE Liffe in hot water with quite a few clients. Will this third attempt to take out the key $30 barrier prove to be the decisive one?

Once again, Ireland finds itself with the rare opportunity to strike a blow against the EU and end the dream of a corporate superstate. And all they need to do is vote "No".

Breaking news per Reuters: "Lawyer for WikiLeak's Julian Assange says arranging to meet police by consent." Whether this means an arrest is imminent we hope to find out shortly. And just this out from NBC: Julian Assange's attorney says a place and time are being negotiated for a meeting with Scotland Yard.

In this week's Straight Talk episode, Chris Martenon interviews Charles Hugh Smith, both very insightful individuals who have repeatedly appeared on the pages of Zero Hedge with unique and always original perspectives. Of all issues that dominate CHS' outlook on the economy, society and politics, the top two items that keep Smith up at night are "demographics and Peak Oil...which cannot be massaged away by policy tweaks or financial engineering." Much more in the enclosed interview.

Earlier today it was announced that in lieu of a physical arrest, Julian Assange is currently undergoing a liquidity one, after earlier today first Swiss NZZ and subsequently the WSJ reported that the Australian's funds in Swiss PostFinance bank have been frozen: "In a statement Monday, WikiLeaks said there was €31,000 in the PostFinance account, belonging to the defense fund and to Mr. Assange personally. WikiLeaks described this money as "frozen." But €31k may be a small price to pay knowing that very soon Assange will most likely succeed Ben Bernanke as the magazine's Person of the Year.

The Communist Party learned from Tienanmen in 1989 how surging prices can seed dissent. "Inflation is a redistributive mechanism in favour of the few that can protect living standards, against the large majority who cannot. The political leadership cannot, will not, take risks in that regard," said Mr Ash.

It is confirmed: last week's incursion by the ECB in buying any and all offered Irish and Portuguese bonds is now in the history books. As the ECB reports, "in the week from Monday 29 November to Friday 3 December were of a volume of EUR 1,965 million, the rounded settled amount - and the intended amount for absorption accordingly - increased to EUR 69 billion. The transactions made between Wednesday 1 December and Friday 3 December have, with few exceptions, not yet settled and hence are not reflected in this figure." In other words, the bulk of the peripheral bond buying is not even included, and we will share the final tally with readers next Sunday night. We fully expect the amount for the week ended December 13 to be another all time record. In the meantime, the chart below shows all of the recent purchases under the ECB's SMP (aka sterilized open market monetization) program. As an aside, the biggest amount monetized occurred in the first week of the program's launch when the ECB monetized €16.5 billion.

Now that Tim Geithner has put the bond issuance machinery on autopilot, and all future bond auctions will be eventually monetized by Bernanke (and then some: after all a fiscally united Europe is expected to start bond issuance soon), he has decided to branch out into the next best thing to destroying the once greatest country in the world - blogging. And, sure enough, that titanic scion of the blogging world, Barry Ritholtz takes some time away from his busy schedule which lately involves a daily stint on CNBC's Fast Money, to share some brilliant insights with Tim Geithner on how to create a killer blog. We present this without commentary, because after one reads such words, and what can one say but... Ritholtz.

After in the last two POMOs Brian Sack put the most recently issued bond on the exclusion list, today, as part of today's micro $2.044 billion long-end (2028-2040) POMO, the PPT head tried to sneak a fast one, after the second most monetized issue ended up being the QL5 of 11/15/2040, which just happens to be the bond auctioned off less than a month ago (November 10). This amounts to 2.6% of the entire $16 billion auction. We are confident that before all is said and done, not only will the 35% SOMA limit be raised on this 30 year CUSIP, but the Fed will be the proud owner of well over half of any and all recently issued long-end bonds.

Two weeks ago, the New York Times's Gretchen Morgensen wrote an article in which she touched upon the curious case of Kemp vs. Countrywide Home Loans in which Countrywide held on to the original mortgage note and related docs "even though the pooling and servicing agreement
governing the mortgage pool that supposedly held the note required that
it be delivered to the trustee, the court document shows" thereby impairing the integrity and validity of all downstream securities. Prior to this (and since) we have seen many more cases in which there was outright court fraud in some capacity, either w/r/t the PSA or the already well known issue of robosigning. It is no surprise that after making a splash, this topic has disappeared from the mainstream media, as banks are doing all they can to "silence" the debate, whose implications could be terminal for the US leveraged housing paradigm, which has existed since the advent of the GSEs. Yet, surprisingly, in today's Weekly Credit Outlook, Moody's brings new attention to this particular case, and adds some language that if one were the CEO of Bank of America, one would be very, very nervous, more so than even how damaging the revelations from the Wikileaks disclosure on BofA may end up being. To wit: "We believe the case will lead to increased litigation, higher servicing costs, and more foreclosure delays. This will pressure BofA’s earnings. Increased foreclosure timelines and costs associated with potentially defective loans will also increase losses for Countrywide-sponsored RMBS. This is negative for both BofA and Countrywide-sponsored RMBS." Did Moody's (always horrendous at timing its entrance and exit) just pee in the proverbial RMBS pool?

I don’t know about you, but I’m not 100% sure about anything. The older I get, the less sure I am about everything. I question things that I was sure were true when I was 25 years old. I’m not sure I’ll wake up in the morning. I’m not sure I’ll survive my commute to work. That is why I was flabbergasted last night as I watched Scott Pelley interview Ben Bernanke on 60 Minutes. As a side note, boy this show has gone downhill. In the old days of real journalism, Mike Wallace would have scorched Ben Bernanke, pointing out his phenomenal ability to be wrong or clueless on every financial issue the country has faced in the last 10 years. Today, Pelley underhands softball questions to Bernanke and never challenges him. It was a pathetic display of journalism. Below is the dialogue that made me almost fall off my chair...

RANsquawk US Afternoon Briefing - Stocks, Bonds, FX etc. – 06/12/10