Archive - Mar 15, 2010

Sometimes I truly wonder if those who make broad proclamations of "the coast is clear", "everybody is safe", and "all is calm on the western (European) front" ever took the time to glean the facts and evidence before makings such a proclamation. Here is HARD evidence that easily shows that the Greek crisis is FAR from over. I welcome anyone and everyone to challenge the evidence and/or prove otherwise.

And so we learn that the Fed will get even bigger, Volcker will get some love, the SEC will be self-funded, the Fed's (lack of) disclosure requirements, Obama will soon likely appoint Blankfein to head the FRBNY, and that there is absolutely no mention of the undoubtedly biggest problem for the US economy - the GSEs - as usual.

We think that China is an indestructible economic juggernaut but its economy is very fragile and it is sitting on a property bubble which will burst. What China does in response has major implications for their economy and the rest of the world. This is the first part of a three-part series on this topic.

It is difficult to get a man to understand something, when his salary depends upon his not understanding it.

Some weeks ago we presented evidence that the sovereign CDS market pales in comparison with cash notionals outstanding, and furthermore, we demonstrated that sovereign spreads have been led by cash selling, which has been followed only subsequently by CDS moves, not the other way around. The fact, however, did not stop the bashers. Today, ISDA, the International Swaps and Derivatives Association, has issued the following statement, which along the lines of our observations, refutes claims that CDS speculators are to blame for widening (but not, shockingly, tightening) in sovereign spread moves.

As readers may have noticed, Zero Hedge has had intermittent traffic spikes over the past several hours, causing occasional downtime. In order to reduce database loads, we have temporarily taken off anonymous comment entry, until the traffic and database queries normalize. Registered comments are fully enabled.

And so the snow scapegoating continues, now in the NAHB/Wells Fargo Builder Confidence index, which blamed the February confidence decline on"unusually poor weather conditions" i.e., snow in the middle of winter . The index, which came out at 15, was a drop from 17 in February, and is now back to June 2009 levels. More ominously the spread between hope and reality, or the 1-family Sale Present Time component and the Next 6 Months components, dropped to 9, matching the tightest level over the past year, even as the Prospective Buyer Traffic component dropped from 12 to 10, or the lowest reading since March of 2009. Do we really need any more confirmation that even with all the governmental stimulus bells and whistles, housing has relapsed into the second leg of the depression.

RANsquawk 15th March US Afternoon Briefing - Stocks, Bonds, FX etc.

While the cynics tell us that the foreign exchange market is an ugly contest, with the best currency being the least ugly. None are beautiful. That seemed to be a fair description during the crisis, but it is less apt now. Instead, it seems that the race in the foreign exchange market is who can close the output gap fastest. The economic contraction created a large gap between actual output and potential GDP. As the gap is closed, real interest rates will likely rise and may help boost earnings. Those countries that grow relatively faster should have relatively stronger currencies. - Brown Brothers

Developing story

Hey y'all. Some more headlines on that completely resolved (thanks Mario Draghi) Greek situation.

11:53 03/15 DUTCH FINMIN: NO BAILOUT FOR GREECE
11:55 03/15 DUTCH FINMIN:COULD BE SOME GREECE SUPPORT, BUT NOT BAILOUT
11:57 03/15 DUTCH FINMIN: ANY GREEK AID WOULD HAVE STRICT CONDITIONALITY
11:57 03/15 DUTCH FINMIN:WON'T SPECULATE ON WHETHER GREEK DECISION TONIGHT
11:56 03/15 DUTCH FINMIN: LOAN GURANTEES, BILATERAL LOANS UNDER DISCUSSION

We have been bearish on the Shanghai composite ever since the index rejected the 50-dma around 3,100. Overnight we tested and so far held the 61.8% retracement of the rally since 02/03/2010 at 2,971, and we have the support of a possible triangle formation at 2,947. Long term I remain bearish on China for reasons I will detail a bit more lower. However this potential triangle support need to be invalidated by a break to the downside. Indeed, triangles are almost exclusively continuation patterns within a trend, and in the case of an horizontal triangle it is always the case. Triangles however need 3 touch on one side and 2 on the other to be validated technically, so it is not a forgone conclusion that it is what the market is doing. This is why it is key break to the downside here, if not expect 3 months of consolidation between 3,000 and 3,240 (yawn). - Nic Lenoir

A former president of a privately-held New York bank, Park Avenue Bank, was arrested Monday on charges including bank bribery, embezzlement and fraud, a federal prosecutor said.
A source familiar with the case identified the banker as Charles Antonucci, who was president of the bank from June 2004 to October 2009.
On Friday, state regulators closed Park Avenue Bank, which had assets of $520.1 million and deposits of $494.5 million at the end of 2009, according to the Federal Deposit Insurance Corp.
The charges against the former bank president include self-dealing, bank bribery, embezzlement and fraud on the New York state banking department, FDIC and the Troubled Asset Relief Program (TARP), the statement by Manhattan U.S. Attorney Preet Bharara said.
His office said U.S. officials were to disclose more details at a press conference at 1 p.m. (1700 GMT) on Monday.
In November the bank applied for a bailout of less than $12 million under the TARP program but withdrew its application over concerns about restrictions on banks that receive taxpayer money, bank chairman Donald Glascoff said on March 10.

The smoothed ECRI leading economic index for the U.S. fell last week for the 12th week in a row, to stand at its lowest level since July 2009. Something tells us a slowdown is about to start. With a week to go before the debate with the legendary Jim Grant at the Plaza in New York, we seem to recall that this was the index he was using several months ago to predict that nominal GDP growth was set to accelerate to a double-digit annual rate. We seem to have stopped well short of that mark. - David Rosenberg

The game is on the table. We’ll watch to see if the bulls can break out from the January levels and excite sideline money. Or, will the bears have a goal-line stand and force a double top. Friday did not give us a clear answer. Stay tuned! - Art Cashin