Archive - Dec 2010

There are 26.2 unemployed or underemployed workers in America today. And the labor participation rate (percentage of employed to total workforce) has gone backwards for the past 10 years. There are forces that continue to discourage job growth and will hinder economic growth for years. Apparently your government hates workers because it is doing everything is can to discourage job growth.

On April 15, the VIX contango hit its heretofore steepest of the year. What happened immediately afterward was a peak in the market followed by a plunge, and the flash crash, coupled with a massive flattening of the curve. What also happened was unprecedented pain for Goldman, which had been pushing the Variance Swap so hard, it ended up with residual inventory on its flow (but not prop) desk, resulting in a major loss for the firm once the curve flattened. Yet anyone who thought that Goldman's Delta One prop desk would ever lose money, should just look at today's ridiculous VIX curve which is now trading at a steepness unseen in years. More than obviously someone is pushing very hard on the spot, while ignoring or buying the mid and long end. And as we expected earlier this week, the only driver for stocks right now is what is happening in VIX land, driven by the near record open interest, which is now so disconnected from the volatility in all other assets (FX, bonds), it is beyond deplorable. Yet perfectly expected: with no volume, one market maker can do with the market entirely as they see fit.

A night to remember...

... in which a familiar chart appears on page 8.

The market was up yesterday as PIMCO is set to get their equity on, Fed Ex plans to deliver a fuckload...

Because why go B when DD will do (and double as a gas mask). Or is Mark merely wishing he was part of the Power Lunch crew? We doubt it: for some odd reason, and completely independent of wardrobe, that particular segment continues to have some of the lowest Nielsen ratings on the Comcastic station.

At this point it appears Bank of America can't wait for the alleged Assange secret fraud trove to finally be released and put the bank out of its misery: not a week passes without someone suing the bank for gross mortgage fraud. One would almost think that if we had a functioning legal system in which perpetrators of crime, instead of those protesting it, were arrested that BofA may actually be a sell on the f#&^@!g dip. The latest reason why the best job in the world these days is to be BofA's outside counsel, is that as Reuters just reported, Arizona has sued the bank as a result of the latter "consistently misleading consumers about its home loan modification process." Perhaps a greater crime is BofA's consistently misleading the SEC into settling every single case of multi-billion bonus dispersal at or about the time the banks receives a $15 billion taxpayer funded TARP bailout. And while this latest case will also be settled promptly and quietly, to not give some other plaintiffs the idea that such a thing as equitable compensation exists, in the meantime the actual damages sought by Arizona AG Terry Goddard is $25,000 per violation. Ball park estimate of 500,000 of those countrywide (not just Arizona) , and there goes the firm's Christmas Bonus.

One of the biggest misconceptions about inflation is that the US Dollar needs to collapse in order for inflation to occur. While a currency collapse often accompanies periods of heightened inflation, this is not necessarily true.

RANsquawk US Afternoon Briefing - Stocks, Bonds, FX etc. – 17/12/10

Every massive inventory accumulation.... has an equal and opposite effect on GDP. To all those who snickered at the earlier chart of the BDIY, we recommend you read the following brief blurb from Nordea, whose implications may put everything you have heard about a surge in GDP in Q4 and Q1 (primarily from the Goldman bull brigade) in a slightly different light.

Just headlines for now, but not good for BofA: Per Reuters, the SEC has sent out a new round of subpoenas to Wall St. banks, the agency is aking harder look at securitization process; finally, the SEC is looking at role of 'master servicer' that oversees collateral in pool of loans. And here Brian Moynihan was, hoping this thing would disappear like a silent but deadly fart in the wind.

Does anybody else notice the very close correlation between the Baltic Dry and the stock market/myths of economic recovery? Neither do we. Oddly enough, the BDIY did predict the late August S&P surge by about a month. And incidentally, we are back to early August levels all over again. Just as incidentally, the market was about 15% lower back then. Then again, our advice is to pay no attention to this index which tracks nothing relevant, and has no bearing on the world economy (and certainly not markets) whatsoever. And ignore the data on the Bberg chart: the value of the BDIY as of this morning is 1,999.

The cascade of restructurings are approaching exactly as I have forecast. Not 48 hours after I warned of Spain's impending problems, ratings agency have (rather tardily) moved to downgrade them.

Reggie Middleton vs Goldman Sachs' marketing department for investment banking, brokerage and trading (otherwise known as their sell side analysts), round 4. Who has been the most accurate in the past?

After killing the db server, and suffering through domain issues to boot -- we're back up and fully functional. If you have any login problems, let us know: everything should be working. Also, all email should be directed to @zerohedge.org now, NOT zerohedge.com.

Update: We just switched over from the backup server data, which restored all the missing December posts. Unfortunately, it ended up in a loss of all comments since last night. We are confident our readers' sense of expression will not be blunted by this minor glitch.