Archive - Feb 4, 2010
Yawn, Swiss Bank Intervenes Again
Submitted by Tyler Durden on 02/04/2010 23:42 -0500
Bruce was right. Yet it's one thing to feverishly speculate. Seeing it in action twice in one week is oddly anticlimatic... and getting downright tiresome.
Goldman's Levitt Calls Obama's Gimmick To Keep GSEs Off The Balance Sheet "Shades Of Enron"
Submitted by Tyler Durden on 02/04/2010 23:25 -0500A few days ago we made some observations on the just-announced nearly $4 trillion 2011 budget. The key point was that while the ugly numbers already looked like a superglued Frankenstein monster without a Kardasian botox treatment, or even simple lipstick, it would have been truly disastrous had the administration done what Peter Orzsag threatened he would do 2 years ago, namely bring the GSEs, Freddie and Fannie, on the government's balance sheet. How this is not the case yet is simply stunning: the GSEs enjoy not only the constant "bid of first refusal" courtesy of the Fed's MBS QE program, but an explicit Treasury guarantee that has no ceiling as of last Christmas eve. Bloomberg's Jonathan Weil today came to the same conclusion, although being a Bloomberg employee he was characteristically much more crass, uncouth and downright cynical than the paragon of respected journalistic patois that is the establishmentarian concept known as Zero Hedge. In an attempt to awake the morts out of their stupor, a pandering Weil uses such cheap tricks as hyperventilating allegory, sarcasm, and hyperbole when saying that "[b]y all outward appearances, it seems
Obama and his budget wizards decided that including the
liabilities at Fannie and Freddie would be too much reality for
the world to handle. So they left the companies out, in a trick
worthy of Enron’s playbook, except not quite so hidden." Obviously, Bloomberg has an uphill struggle if its ever wishes to reach profitability (in the trillions of dollars that is... billions is so fin de pre-bailout siecle). We also fear for Weil's job prospects should he ever wish to find an occupation at such a highly respected place, where not only is there a 4 syllable word minimum but no sentences ever end in prepositions, as the Reuters blogosphere. Ironically, Bloomberg did redeem themselves somewhat later today, when in a Tom Keene interview, Goldman policy advisor Arthur Levitt is caught on tape performing more of the same hyperventilating, and in doing so blasting the administration, using the same Enron-esque analogy, when analyzing the paradox of the GSEs and the sovereign balance sheet.
Guest Post: Cycle Logical Issues?
Submitted by Tyler Durden on 02/04/2010 21:52 -0500One of the early year themes we have been discussing on our subscriber site has been our expectation for an increase in market volatility. Probably about three weeks back we wrote, “Unlike the consensus and big Street houses which have been predicting/expecting falling volatility in 2010 after an already accomplished death defying drop in volatility during 2009, we’re not so sure shorting volatility is such a wonderful investment idea right here. Although we could be dead wrong, we believe 2010 will present us with a great opportunity to buy volatility. We could be very close right now.” We’re not reprinting this to proverbially pat ourselves on the back as the year is still very young. Secondly, anyone spending time patting themselves on the back in this business are usually about 15 seconds away from having the proverbial rug pulled out from under them. Anything can happen, so judgment is reserved for now as we’ll just have to see what happens on the financial market front as we move forward. We think an increase in volatility is in store not only for the financial markets, but also in a much broader context we’d like to discuss in this missive. We want to quickly talk about another type of volatility – economic volatility. And we want to take a look at the long term in the hope that perhaps we can “see” the future more clearly. Here’s the question that may indeed morph into an investment theme for 2010 and beyond that we’d like to pose. Looking ahead, will the US economy be more or less volatile than we have experienced over what is close to the last thirty years? Yes or no? If indeed were are anywhere even close to the mark regarding our thoughts that economic volatility will increase, then that has direct and meaningful implications for equity and broader business valuations. Let’s start digging through some facts.
Market Internals Confirm Primary Wave 3 (DOWN)
Submitted by Fibozachi on 02/04/2010 19:45 -0500Today's price action registered extremely bearish readings across the NYSE TICK and NYSE VOLD (Up-Down Volume Difference). In our oh-so-very-humble opinion ~ equity markets are about to enter the Temple of Doom.
Goldman Keeps Its NFP/Unemployment Estimates Unchanged: -25,000 And 10.1%, Says This Is A U- Not A V-Shaped Recession
Submitted by Tyler Durden on 02/04/2010 19:04 -0500Goldman is known for changing its estimates within 24 hours of an NFP number. Today, there is no change, and it stays at -25,000, coupled with an estimation of the unemployment rate at 10.1%. Additionally, some bearish observations on the US economy via Goldman uber economist Jan Hatzius, who is now convinced this is a U- and not a V-shaped recession, follow.
Harribsurg, PA - A Doomed City?
Submitted by Tyler Durden on 02/04/2010 18:45 -0500With the buzzword du jour continuing to be [municipal/state/sovereign] default, it is time to consider the city of Harrisburg, PA, which many consider is next on the default escalation series of events. Some perspectives from Janney Fixed Income Strategy analysts Alan Schankel and Tom Kozlik.
Daily Credit Summary: February 4 - Triple Digits Here We Come
Submitted by Tyler Durden on 02/04/2010 18:41 -0500Spreads were mixed in the US with IG worse, HVOL improving, ExHVOL weaker, and HY selling off. IG trades 9.1bps wide (cheap) to its 50d moving average, which is a Z-Score of 1.1s.d.. At 99.75bps, IG has closed tighter on 72 days in the last 283 trading days (JAN09). The last five days have seen IG flat to its 50d moving average. Indices typically underperformed single-names with skews widening in general as IG's skew widened as it underperformed, HVOL outperformed but widened the skew, ExHVOL's skew widened as it underperformed, HY's skew widened as it underperformed. 50.4% of names in IG moved more than their historical vol would imply as higher vol names underperformed lower vol names by 6.01% to 4.74%. IG's vol is around 4.38% per 1 day period, which leaves 97 names higher vol and 28 lower vol than the index.
CIBC Covered Bond Deal Terms
Submitted by rc whalen on 02/04/2010 18:35 -0500The first covered bond deal of 2010 is very simple in its terms and still, alas, a 144A deal. Notice four ratings firms were retained to provide ratings.
US Default Protection Surges To Widest Levels Since March
Submitted by Tyler Durden on 02/04/2010 18:00 -0500
The fire in the sovereign periphery is slowly moving to the core. Today, US CDS, on which we have been constructive since it hit 20 bps in September, as unprecedentedly cheap insurance, are trading 55/60, or almost 200% "higher." This is the most 5 year US protection has cost since the market lows in March. We anticipate at least another 15-20 bps of widening in US risk absent some dramatic and miraculous improvement in Europe, as existing shorts are forced to cover en masse. As for the "sure buy" out there, it doesn't get any better than German CDS.
Berkshire Prices 6-Part, $8 Billion Deal
Submitted by Tyler Durden on 02/04/2010 17:40 -0500JPMorgan, as lead underwriter, just priced the $8 billion Berkshire 4-part bond offering, which ended up being a 6-part deal. Terms were as follows.
FX Intervention an Option? - Maybe
Submitted by Bruce Krasting on 02/04/2010 17:35 -0500The market action today makes me wonder if FX intervention is in the cards. A long shot that might happen.
Is Ken Lewis About To Drag Down Bernanke And Paulson With Him?
Submitted by Tyler Durden on 02/04/2010 17:20 -0500Charlie Gasparino over at the Daily Beast points out a new development in the neverending Ken Lewis saga, which if true, may mark the beginning of the end of the pristine image of Ben Bernanke and Hank Paulson: "In defending former Bank of America CEO Ken Lewis against charges that he misled investors, his lawyers will call as witnesses former Treasury Secretary Hank Paulson and the current Federal Reserve Chairman Ben Bernanke, according to people close to the matter." We hope the AG will take advantage of this opportunity to pursue justice, and expose the former Treasury Secretary and the just reconfirmed Fed Chairman who will under oath, be revealed as the true masterminds in this illegal operation.
Is Mary Schapiro's Reign Of Negligent Incompetence About To End?
Submitted by Tyler Durden on 02/04/2010 17:00 -0500The Syndicate Encouraging Corruption lately has been far more busy begging for money from the Tim Geithner's gargantuan budget than performing any enforcement, analysis, or regulation, case in point today's second attempt to kill any investigation into the ML/BAC merger. We hope some Congressional or Senate committee will finally find the guts to subpoena any and all communication between BACML, or any other banks, and the SEC related to this proposed settlement, to uncover just what the SEC's motives are to fast-lane yet another case involving the endless corruption on Wall Street. Luckily Cuomo is still there to pursue the punishment of real wrongdoing, since America is now completely unable to rely on the $1 billion publicly funded organization, which, at least on paper, "works in American investors' interest"... and by American investors we assume the agency does not refer to Goldman Sachs or Bank Of America. Yet judgment day for Mary Schapiro may soon be coming. Larry Doyle at Sense on Cents notes that next week FINRA's board of directors will finally address alleged wrongdoings by Schapiro. We join Larry in asking: "Will the Board realize it ultimately needs to be accountable to ALL its member firms and, by extension, to the American public at large? Will the Obama administration compel the Board to provide the transparency America so badly wants?"
Note to CNBC Commentators
Submitted by Reggie Middleton on 02/04/2010 16:31 -0500One of the regular reporters on CNBC was comparing Greece to the subprime "crisis" of 2007, in that "investors" (I am sure that term is being used very loosely) are not going to make the same mistake as they did in 2007 by underestimating the "contagion" that subprime contained.
I feel compelled to correct him.
Who's Laughing Now?
Submitted by Tyler Durden on 02/04/2010 16:29 -0500
We will start our market update with Greece's 5Y CDS market. The chart does not look like anything that could have a happy ending. Greece has come up with a plan to reduce the deficit which experts believe a) may not be enough b) will hard to achieve. The market obviously did not buy it either, and we have not really seen a wave of approval around Europe. If Greece wants to further they will have to start cutting entitlements and will face strikes which won't help the problem, so it leaves us most likely with some form of loan or bailout. We stick to our original thought that the EU won't let the IMF step in on their turf as it would be too humiliating, especialyl since this is the first harsh economic test for the union. The problem is that left holding the bag would probably be Germany (there are not that many candidates around the EU that can step in and help Greece, especially with Portugal and Spain waiting in line!). No wonder that today the German CDS was trading 8bps wider. As mr. Almunia said: in the EU there are no defaults! That does not bode well, because bail out or not, the problems of the EU are only beginning. - Nic Lenoir






