Archive - Feb 2010

While nothing new to constant Zero Hedge readers, Rosenberg's recap in a few simple paragraphs of what is happening in the European periphery, the EMU, and with sovereign balance sheets is a must read for all recent entrants into fundamental sovereign default analysis.

As always, a much more rational credit market is not following the sudden intraday exuberance of stocks, which are trading in lock step with the DXY and specifically the EUR-JPY pair: every correlation engine is primed to copy step for step how the Euro and Yen trade in the stock market. With all indices green for the day, the culprit is solely the DXY which has taken a downleg over the past 30 minutes for no particular reason. In the meantime IG, HY, SovX and, yes the STUPIDs, have all put their fireman's hat on: IG is 2.5 wider, HY is 15 wider, SovX is 6 wider to 112, the UK passed a hundred and the prevalent STUPIDity is surging to 242 from 235, another recent record.

In the pre-math of the Greek collapse, conspiracy theories are swirling about who keeps blowing Greek CDS spreads wider. The answer, so far completely unconfirmed, is that a large US investment bank (we "wonder" just which US investment bank dominates the sovereign CDS market), and two major hedge funds are behind the CDS "attacks" on Greece, Portugal and Spain. According to Jean Quatremer, and his Coulisses de Bruxelles, UE blog, the plan involves blowing spreads to record levels, and is prompted by the hedge funds' anger at not having been allocated substantial amount of the recent €8 billion GGB issue, in order to lock in profits from their CDS long exposure. Being thus unhedged with a short bias, their alternative is to continue buying protection else risking to mark losses on their extensive CDS short risk exposure.

After last week's outlier data, in which 3 buyers pushed the balance for the first time in over a year to a positive buyer/seller ratio, this week we are back to the new normal: a/k/a selling deluge. $488 million in shares was sold in the past week in 192 documents transactions, while just $8 million was bought in 38 deals. Notable dispositions included Bill Gates selling $85 million worth of MSFT, Roger Pensky dumping over $100 million, and Juniper Chairman Scott Kriens selling $12.5 million worth of JNPR stock. Also, after announcing a major trimming in his GOOG portfolio, Sergey Brin sold some "pocketchange" worth of Google stock worth $7.6 million. Source: FinViz

RANsquawk 8th February US Morning Briefing - Stocks, Bonds, FX etc.

Last week the China Investment Corporation (CIC), also known as China's sovereign wealth fund, and the entity that allocates China's nearly $3 trillion in foreign assets, posted its first ever 13-F filing, which disclosed holdings of just $9.6 billion. Missing were CIC's Blackstone stake and the fund's first 2008 Morgan Stanley investment. Furthermore, the listing omits any real estate, fixed income, and foreign securities, implying that the true holdings of the sovereign wealth fund are likely much more extensive. We are confident that the CIC likely is a major holder of Treasury securities. As a reminder the CIC reported about $300 billion in AUM at the end of 2008 in the fund's first annual report. Combing through the 13-F (presented below) indicates that while the fund has a soft spot for commodities and financials (its investments in Teck, MS and Blackrock), the prevalent holdings of CIC are, surprisingly, in ETF.

Ready for a breakup of the Euro, anyone? How long can a sober, conservative German grandfather be expected to indulge the disgraceful habits of its party animal, thrill seeking, drug addicted grandchildren? They’re actually worried about inflation down under. If you want to know how the big boys are coining it, come this way. The trade that George Soros and Paul Tudor Jones glory in.

• No job growth for small business spurs recovery doubt (Bloomberg)
• S&P plunge fails to shake Gabelli on technology (Bloomberg)
• El-Erian favors Brazil bonds, Chinese Yuan. Whatever happened to Bunds? (Bloomberg)
• Is the market priced for perfection? (NYT)
• America's #1 creditor holds the ultimate weapon (Post)
• Conan's Majestic duplex on West 72nd Street on the block for $35 million (Post)

Bailout rumor refusal - check, bank/country run - check, collateral pulls - check. If anybody tells you there is everything in common between Greece and Lehman/AIG, believe them. The latest escalation in the Greek crisis comes courtesy of Greek daily Banking News which notes that the latest nail in the Greek coffin comes from formerly major Greek players, Deutsche Bank and Unicredit, which over the past 2-3 weeks have ceased accepting Greek collateral and have pulled out of the Greek repo market altogether.

• Australia removes large-deposit guarantee amid signs of economic recovery.
• Brazil poised for Latin America's first rate increase as growth picks up.
• Corporate bond yield spreads widen the most since November: Credit Markets.
• Euro, Asian stocks fall as G-7 fails to end concern over Greece, fiscal budgets.
• G-7 governments risk 'muddled middle' with plan to spend now, save later.
• Greenspan sees 'slow' recovery, would be 'very concerned' if stocks drop.

RANsquawk 8th February Morning Briefing - Stocks, Bonds, FX etc.

RANsquawk 8th February Morning Briefing - Stocks, Bonds, FX etc.

In the UK, the data shows the financial crisis led to a £6bn fall in dividends from the banks, leaving drug, tobacco and oil companies to fill some of the gap. Meanwhile, UK commercial property is benefiting from huge pension flows. Is this a wise long-term investment?

Sooner or later it was bound to happen: the SEC is now looking into whether Goldman's over the top variation margin demands on AIG caused an "improper distress" in the mortgage insurance market (not to mention a couple of competitors' bankruptcies here and there). Not that much will come out of it, you see, since the SEC is woefully underfunded to purchase even one copy of any Janet Tavakoli book... Although the fact that they are finally investigating it should be indicative that if you raise enough stink, even the brain dead Wall Street sycophants at the Syndicate Encouraging Corruption will stop watching pornography for a living and for a few short minutes pretend to push a few papers here and there and actually do their pathetic, anaerobic jobs (and bill taxpayers more than appropriately).

Even as China is days away from yet another hike in reserve requirements to control "excess liquidity", the nation is preparing for cold war with the US. An independent survey of Chinese-language media for The Sunday Times has found army and navy officers predicting a military showdown and political leaders calling for China to sell more arms to America’s foes. The trigger for their fury was Obama’s decision to sell $6.4 billion (£4 billion) worth of weapons to Taiwan, the thriving democratic island that has ruled itself since 1949. “We should retaliate with an eye for an eye and sell arms to Iran, North Korea, Syria, Cuba and Venezuela,” declared Liu Menxiong, a member of the Chinese people’s political consultative conference. War pulled America out of the First Great Depression. It is only fitting that war will be the result of the Second one. The only problem is this one won't be won by America.