Archive - Mar 8, 2010

Tyler Durden's picture

Wall Street Has Become Underwrita Non Grata In Europe





First China comes through on its threat of disposing US securities, now Europe is rapidly isolating Wall Street from participating in European sovereign bond offerings. The Guardian reports that "for the first time in five years, no big US investment bank appears among the top nine sovereign bond bookrunners in Europe, according to Dealogic data compiled for the Guardian." Curiously, just the one bank which has recently found itself out of favor with domestic investors, Morgan Stanley, has a notable presence in Euro sovereign league tables (at number 10). The biggest loser - the dynamic duo of vampire squid and Fed Jr. " Goldman Sachs doesn't make the table. Goldman made it to number five last year and in 2006, and number eight in 2007, the data shows. JP Morgan was in the top ten last year and in 2007 and 2006 but doesn't appear this year." European leaders are funny - first they use Goldman for everything; now that they have been caught red-handed, they avoid Goldman like the plague.

And while the lost corp fin revenue stream is likely not huge (for now), should domestic issuers follow in Europe's footsteps, it may get a little tricky. We wonder when the Huffington Post will start a "move your money" campaign for capital raisers: urge companies to go to small and boutique banks instead of the bulge bracket behemoths... When dying from a thousand cuts, each little one counts.

 

Leo Kolivakis's picture

FDIC Prodding Pensions to Invest in Failed Banks





U.S. regulators are encouraging public pension funds that control more than $2 trillion to inject capital directly into the banking system by buying failed lenders, Bloomberg said, citing people briefed on the matter. Is this the next huge financial blunder? Sure looks that way...

 

Fibozachi's picture

Narrowest S&P 500 Range in 2-3 Years: Fibonacci Time Cycles & Volume Analysis





High-Low range comparison, Fibo time cycles & volume analysis charts of the S&P 500, ES & SPY. A bottom-line market outlook for prop traders, portfolio managers, market makers & individual investors. At day's end, if you are still trying to chase the Jones' performance off March '09 lows, what the hell else is keeping you invested in this Russian roulette equity crap-shoot? Please, please don't "invest" like Buffett, but do heed the gist of his approach to selectivity (shared in 1999), which essentially posits that ...

 

williambanzai7's picture

CISCO AND THE FUTURE OF THE INTERNET





What's up at CISCO?

 

Tyler Durden's picture

Is The Federal Reserve Insolvent?





The ongoing troubles at the GSEs are no secret: it is public knowledge that Fannie had a 5.38% delinquency rate at December, while Freddie just passed the 4% threshold in January; both continue to rise rapidly each month. The fact that the mortgage-bond spread has just hit a record tight is merely an ongoing artifact of the Fed's endless meddling in the mortgage market, with the sole purpose of keeping rates artificially low, and preventing banks from being forced to take massive writedowns on their entire loan book. This is all well known. What, however, seems to have escaped public attention is what the impact of these delinquencies is on the one largest holder of Mortgage Backed Securities, the Federal Reserve. What also seems to have escaped the public is that the Fed is now the world's largest bank, with total assets near $2.3 trillion. We provide a weekly update of the Fed's balance sheet and while we briefly note the liability side, our, and everyone else's, attention, is traditionally focused on the asset side. Yet a more detailed look at the liability side reveals something very troubling, specifically that the Fed's capital, i.e. equity buffer, which as of most recently was $53.3 billion (a comparable metric for plain vanilla banks is their equity buffer, or Tier 1 Capital, or however the FASB wants to define it on any given day when it is covering up massive capital shortfalls) is in fact negligible and could well be substantially negative, if the Fed were to account for the rapidly rising level of delinquencies in its one largest asset holdings: the $1.027 trillion in settled MBS. And while there is no possibility of a run on the Fed, the reality is that the Fed now likely runs with a negative real capital balance, meaning that the US Federal Reserve is now essentially insolvent.

 

Tyler Durden's picture

John Hussman Rips Apart CNBC





Today's letter by John Hussman is as insightful as ever, yet what caught our eye is one of the most lyrical and gorgeous Crucifixions ever performed of Wall Street's favorite mouthpiece, CNBC, and specifically,its most vocal anchor: one James Cramer. "In reflecting on why the past 15 years have been so riddled by irresponsible speculation, it is impossible to ignore the rise over that same period of widely-viewed financial programming that is equally riddled with cartoonish content that encourages short-term thinking and speculation (buy-buy-buy! sell-sell-sell! boo-yah!)...To watch a half hour of CNBC today is like watching an old episode of Gomer Pyle ("Well, surprise, surprise, surprise!")"

 

Tyler Durden's picture

Fed's Brian Sack: "The Fed Will Be Embarking On A Tightening Cycle Like No Other In Its History"





When the time comes to tighten monetary policy, the Federal Reserve will be embarking on a tightening cycle like no other in its history. First, this tightening cycle will have two policy dimensions, in that the FOMC will have to decide on the path of its asset holdings in addition to the path of the short-term interest rate. Second, we will be using tools to drain reserves that are new and that will have to be implemented on a scale that the Fed has never before tried. And third, we will be operating in a framework of interest on reserves that has not been fully tested in U.S. markets. - Brian Sack, Executive Vice President and Undisputed Head of the Fed's Markets Group, Rumored Head of Mythical Plunge Protection Team.

 

Tyler Durden's picture

GATA Claims To Have Evidence Of "Massive Physical Short Gold And Silver Positions That Can Not Be Covered"





In a letter to the CFTC's Chairman, Gary Gensler, GATA Chairman William Murphy shares the following bombshell:"GATA has evidence that there are enormous physical short positions in the gold and silver markets that cannot be covered." Even as the CFTC is meeting later this month to establish position limits in the gold, silver, and other precious metals' markets, it could be none other than the CFTC's core banks, and Mr. Gensler's former Goldman bosses, that form the very core of the biggest market manipulation collusion syndicate in the history of the commodity markets. If GATA is not bluffing and indeed has evidence of massively uncoverable physical positions, and should this evidence be made public, the repercussions for the price of gold will be unprecedented.

 

Tyler Durden's picture

SPY Volume Back To 2010 Lows As Equity Mutual Funds Run Out Of Cash





At 112.8 million shares traded, the SPY just recorded its lowest volume day for 2010. One of the possible reasons for this: mutual funds are rapidly running out of cash to buy stocks. As Bloomberg notes, "equity mutual funds are burning through cash at the fastest rate in 18 years, leaving them with the smallest reserves since 2007 in a sign that gains for the Standard & Poor’s 500 Index may slow. Cash dropped to 3.6 percent of assets from 5.7 percent in January 2009, leaving managers with $172 billion in the quickest decrease since 1991, Investment Company Institute data show. The last time stock managers held such a small proportion was September 2007, a month before the S&P 500 began a 57 percent drop, according to data compiled by Bloomberg."

 

Tyler Durden's picture

Commodity Currencies





We are back to our same observations of last week. Copper has tested again the former bullish channel's trend support now resistance and failed. A close today below 239.95 would have triggered a bearish engulfing day but it was not the case. We are also very close the highs of early January. Interestingly the Chinese PMI wich is very highly correlated to Copper has rolled over (the chart showcasing the copper/Chinese PMI correlation is missing March data with a PMI of 52, worst than expected). Hence economic data is not validatng these new highs. There is an earthquake effect but given the very high inventories we doubt that a short squeeze is a real possibility at all right now. - Nic Lenoir

 

Tyler Durden's picture

Is Okun's Law Broken? SF Fed Discusses Why Record Worker Productivity Is Painting An Overly Optimistic Jobs Picture





One of the big puzzles over the past several months has been the apparent plateau in the unemployment rate, even despite a double dip in initial claims and an overall sentiment that the economy is ready to take a second, post-stimulus, leg down. Aside from the traditional allegations of data fudging by the BLS, one concept often presented has been the unprecedented surge in labor productivity, which despite overall declines in hours per worker and a deterioration in the labor force, has allowed GDP to not only regain its losses from the recent lows, but to stage a dramatic improvement. Today, in a must read paper, the San Francisco Fed tackles precisely this topic, and comes to the unpleasant conclusion that unemployment rate forecasts may well be too rosy for 2010 and beyond, especially if companies continue to sacrifice workers at the expense of ever increasing "worker productivity" which in itself is about as "credible" as any other data series presented by the government over the past year.

 

Econophile's picture

Are We in a Recovery?





A lot of conflicting data came in last week. There is a lot of positive news, but does it all add up to a recovery or is the cyclical recovery headed for a stall? Nothing has changed the underlying conditions that would relieve the credit freeze. And without credit, the economy will stall.

 

Tyler Durden's picture

Barney Frank Asks Top Four Banks To Write Down Second-Lien Mortgages, Claims Have No Economic Value





FRANK:ASKS 4 TOP BNKS TO WRITE DOWN 2ND LIEN MORTAGES
FRANK SENT LETTER TO BK OF AMERICA,JP MORGAN,WELLS FARGO, CITI
FRANK:ASKS TO ALLOW PRIN REDUCTN MODIFNS OF UNDRLYNG 1ST LIENS
FRANK:LARGE NUMBER OF 2ND LIENS HAVE NO ECON VALUE
FRANK:2ND LIEN MORTGES NOW MAIN OBSTACLE TO LOAN MANY MOFIS
FRANK:MUST FOCUS ON PERMANENT MTG LOAN PRINCIPL REDUCTION
FRANK ASKS 4 TOP BKS MORE ACCURATE ACCNTG OF 2ND LIEN MTGS

Of course, the impact on Tier 1 capital will be felt (and if the market was efficient, priced in) immediately. One wonders after Second Liens, what next? Holdings of CRE, CMBS? Cross equity holdings? All other mark to myth "assets"?

 

Tyler Durden's picture

And Now The Facts: German Regulator BaFin Sees "No Signs Of Massive CDS Speculation Against Greece"





Sorry, Merkel, Papanderou et al. BaFin finds that there is no sign that CDS speculation is involved when it comes to Greek government bonds, even as the volume in cash bonds has spiked. As a reminder - selling bonds has the same effect as buying CDS. And guess what: the real Greek cash-CDS basis is negative 112 bps (for "experts" this is swap-clean basis, i.e., Greek CDS minus German CDS compared to GGB minus Bunds). This means that cash bonds are far and ahead a leading indicator, and much more dominant when it comes to determining actual price/yield levels. So does this mean that GGB sellers will now be demonized with the same ferocity as those meddling CDS traders? Hopefully, this will finally be the end of the CDS as satan's spawn topic.

 
Do NOT follow this link or you will be banned from the site!