Archive - Mar 14, 2010
Why is the President's Working Group Oppossing the FDIC Reform Proposals on Residential Mortgage Securitization by Banks?
Submitted by rc whalen on 03/14/2010 20:42 -0500This week in The IRA, we remind one and all about the impending FDIC rule-making process on bank securitizations. Then we ponder whether zombie love won't bring together Barclays Bank and Citigroup in an unholy but politically fortuitous union. And we feature an interview with derivatives market veteran Bill King about OTC derivatives and earnings fraud. The rant on the President's Working Group follows below. -- Chris
Behind the Sentiment Disparity: Main Street vs. Wall Street
Submitted by asiablues on 03/14/2010 20:23 -0500In contrast to the cheery mood of the markets, the latest readings from consumers and small business owners indicate economic sentiment isn’t improving. This divergence has got the Wall Street scratching its collective head. In short, the disparity may be deciphered in one word – liquidity - which Wall Street has plenty of, while main street remains strapped.
Investor Sentiment: Few Words Needed
Submitted by thetechnicaltake on 03/14/2010 18:11 -0500With 3 out of 4 of our measures registering extreme readings, few words are needed to describe investor sentiment this week.
GATA Presents New Evidence Of The Fed's Gold Price Supression Scheme, Combing Through Oddly Unredacted FOMC Minutes
Submitted by Tyler Durden on 03/14/2010 17:36 -0500GATA's Adrian Douglas has done a tremendous job of combing through dozens of hundred-plus page FOMC transcripts, and has compiled numerous quotes by assorted FOMC-related personnel, including former Chairman Greenspan, which provides yet another piece of evidence, demonstrating the persistence of the Fed's gold price suppression scheme. As Douglas puts it: "My thinking was that if an organization is so inept at covering up that detailed transcripts were retained, then perhaps it is also inept at completely redacting sensitive and incriminating information. What I found is quite astounding and serves as documented evidence by the Federal Reserve itself that it manipulates the gold market." We present the relevant quotes dug up by Douglas, whom we applaud for his effort, together with his very relevant commentary, which once again exposes the Fed's covert gold price suppression intentions.
7 Questions About Public Banking
Submitted by George Washington on 03/14/2010 17:21 -0500Do you know where credit really comes from?
Presenting Empirical Evidence Of The Existence Of "Greater Fools"
Submitted by Tyler Durden on 03/14/2010 16:19 -0500This weekend the New York Times has published an interesting observation of gender differences when quanitfying the intangible concept of "overconfidence" as it relates to stock trading. While the article throws a relatively minor wrench at the spoke of "efficient markets", we are following it up with a scientific paper by Wei Xiong and Jialin Yu, discussing the Chinese Warrant Bubble, in which speculative mania gripped the trading of warrants so deep out of the money that they were certifiably worthless, yet trading at an increasing turnover rate, and substantially inflated prices. With numerous unequivocal examples of bubbles in the history of capital markets, starting with Dutch tulip mania (1634-37), progressing through the Mississippi bubble (1719-20) the South Sea bubble (1720), the Internet bubble in the late 1990s, and the housing bubbles of the mid 2000s, it appears that human traders never learn from history as the speculative element overpowers rationality each and every time. The underlying premise: the hope that another greater fool will emerge. And emerge they do, until they don't, and markets collapse bidless. It is certainly easy to draw a parallel between the Chinese Warrant Bubble, and the trading of AIG, C, FNM, FRE and a whole slew of otherwise worthless companies, which on occasion make up over 30% of of the volume of the US stock market, which in turn drives the momentum that pushes the balance of all stocks. Another parallel: the entire US stock market is now one big "greater fool" trap waiting to spring once the greater fools have their fill of gambling fever.
On Banning CDS
Submitted by Bruce Krasting on 03/14/2010 15:55 -0500Those that want to ban CDS don't understand how the world works. They certainly don't get the fact that the US mortgage market is one gigantic CDS mess.
YTD and MTD CDS Heatmaps
Submitted by Tyler Durden on 03/14/2010 15:40 -0500
Presenting an update of North American Investment Grade CDS. While Month To Date the credit market has ripped in line with equities, with just CTL and AA marginally wider for the period, Year to Date the vast number of names is still wider than at January 1, or at beast unchanged, demonstrating that credit is certainly not as enthused about the equity market activity over the past two and a half months.
De[constructing/functing] Ernst & Young
Submitted by Tyler Durden on 03/14/2010 13:55 -0500Ultimately the biggest loser from the whole Repo 105 scandal may not be the perpetrators, i.e., Fuld, the firm's numerous CFOs, Tim Geithner and Mary Schapiro, but the alleged "fact-checkers" - auditors Ernst & Young. Just like Enron's Star Wars-based off balance sheet accounting gimmicks brought down Arthur Anderson, so "Repo 105" may likely be responsible for the downfall of E&Y. Although while in Enron's case, it was just the accounting that brought the firm down, in Lehman's case the confluence of numerous factors will render each individual one relatively less critical, potentially to the point of irrelevance. And while book cooking was just as big of an issue for Lehman as it was for Enron, the fact that the bank did pretty much every other borderline illegal thing possible, will take away focus from just the Repo 105 fiasco, or just the liquidity misrepresentations, or just the commercial real estate book mismarking, and so forth. So to facilitate a decision on E&Y culpability, we present a candid look at Ernst & Young's Financial Services Office, the company's presentation on Paragraph 10 of IAS 39 overseeing Repo agreements, E&Ys analysis of FAS 140 "Accounting for Financial Transfers and Repurchase Financial Transactions", the Examiner's conclusions on the firm's breach of conduct, the firm's soon to be dwindling banking client base, and last, and most certainly least, a snapshot of E&Y's Lehman co-lead partner, Hillary Hansen, against whose negligent actions, as part of the Lehman E&Y practice, the Examiner concludes "that sufficient evidence exists to support a colorable claim for malpractice."
Another Great Depression Coming Soon?
Submitted by Leo Kolivakis on 03/14/2010 13:04 -0500Bill Hemling, a widely respected agricultural economist, told the Kansas City Star that “we’re heading for a recession we haven’t seen the likes of since the 1930s.” Let's pray he is is wrong — again.
Preparation for Options Expiration Racketeering Week
Submitted by RobotTrader on 03/14/2010 12:14 -0500Now that we have last Wednesday's the rollovers over with, now it is time to start thinking like a criminal and figure out how Goldman is going to make its $500 million this week by vaporizing 90% of all the potential put/call profit in the current period's open interest.









