Archive - Apr 20, 2010

Headlines from www.bankingnews.gr. Looks like its IMF-go time. The same source states that the "market situation will be aggravated by Greece's usage of the bailout mechanism 10-12 days from today."

Now that the Prop Desk traders at GS are on edge, they are starting to bully their clients again with time tested "Shank and Crank" operations to shake everyone out of various stocks. No doubt, attempting to get the money train going again before they are litigated out of business.

Even as the GOP has gotten some harsh words for having its two SEC commissioners side with Goldman in the recent vote to press charges against the squid, Darrell Issa has decided to turn the tables, and is demanding all correspondence between the Syndicate Encouraging Corruption and "White House aides, Democratic Party committee officials, or members of Congress or their aides" Politico reports. The reason - Issa is asserting that Friday’s fraud filing against Goldman Sachs raises “serious questions about the Commission’s independence and impartiality.” On the other hand, letting rampant corruption run amok and unobstructed on Wall Street with or without any form of regulatory framework (as worthless and totally corrupt as Dodd's bill is) does not seem like such fair exchange to us.

The (in)famous Greg Lippmann is gone. The question is why? Is Deustche Bank about to report the next Wells receipt? Of course not: Goldman did not do so even though it held it for 9 months.

Earlier we disclosed that finally someone with more than just 4 neurons is going to pursue Goldman; Reuters now confirms that indeed Neil Barofsky is on the case, and, unlike the SEC, may collaborate with the Department of Justice "to see if there are cases of fraud and if AIG and as a result, the American taxpayers, were victims of similar types of fraud." Should he find fraud, and let's not forget that Goldman bought protection on all parties that bought Abacus exposure from it, with a special place in its heart saved for AIG, whose bailout by the US kinda makes all claims that Goldman lost money on its Abacus exposure moot: can someone finally ask Blankfein or Viniar or whoever, how much money Goldman made on its CDS over AIG's exposure in all Goldman underwritten and AIG purchased CDOs? Be it on a total or pro-rata basis. Anyway, we are tempted to believe there may yet be hope that some justice could after all be served: the SigTarp, whose $40 million budget to date, has uncovered more dirt on the US financial system, than the SEC has in its entire history, with its $1 billion a year moneyhole. What is also notable, is Barofsky's disclosure that he is considering an audit of the role of BlackRock in TARP. Dear SIGTARP, while you are doing that, please also investigate why the Federal Reserve is actively managing its Maiden Lane portfolio, presumably via BlackRock, and whether BlackRock is also advising the Fed on managing its $2.5 trillion SOMA holdings, which as was discussed yesterday has a DV01 of $1.5 billion, and is the biggest ticking time bomb at the heart of the US banking system, and just how much any such off-balance sheet hedging costs the US taxpayer.

Just this morning I posted an article describing how much of the mainstream media suffers from diminishing revenues due to the fact that they simply rubber stamp soundbites and produce reports that are simply cardboard cutouts of what is pushed out by Reuters and the AP.org. Well, JP Morgan’s latest quarterly earnings release is a perfect example.

A special squad of North Korean soldiers was behind last month's deadly sinking of a South Korean frigate, this according to human rights activist Choi Sung-yong, who cited a North Korean military officer. The claim could not be verified because Choi promised the source not to reveal his identity. In Seoul, South Korea’s Joint Chiefs of Staff said, they could not confirm the allegation. The 1,200-tonne Cheonan was blown apart by an explosion on 26 March 26 as it conducted a routine patrolling mission in South Korea’s western waters near the tense maritime border with North Korea. Fifty-eight sailors were rescued, but at least 38 died and eight are still missing.

Goldman spent about 28 hours on Monday repeating over and over how neither it nor anyone else has done anything wrong. Which is why we are scratching our heads at the news just reported by the WSJ that Goldman decided to deregister Tourre with the London FSA. Sure, there is an explanation: "A Goldman spokeswoman said the company decided to de-register Mr. Tourre with the Financial Services Authority because the London-based employee is on indefinite paid leave, and therefore won't be interacting with Goldman's clients." That sounds about as credible as Irene "Cash Cow" Aldrdige's defense of the ethics of HFT.

American Banking News investigates the reason for the recent massive surge in financial stocks, to a big extent predicated by the government's desire to push Citi stock price over the $5 critical threshold "participation" barrier. As ABN notes: "The reason behind wanting the share price to go beyond $5 is in relationship to institutional investors, who in many cases are prohibited from investing in any stock under $5 a share. For example, pension funds and mutual funds are some of those I’m referring to here." Nothing surprising there. However, the scathing critique that follows, based on nothing but the truth and exposing the government's endless stock market manipulation gimmicks, deserves a broader audience.

RANsquawk US Afternoon Briefing - Stocks, Bonds, FX etc. – 20/04/10

Why are all the big banks suing their employees for stealing their "complicated" HFT market manipulation codes? Here is the basic framework of every HFT algo these days, transcribed from Hex:

• 10. If volume non-existent, then buy everything
• 20. If flashing indicates big dumb money block order coming, use dark pool to front run in sub-penny increments
• 30. If stock trades between $1 and $5 trade churn with best algo buddy to generate millions in liquidity rebates
• 40. If 30 True and churning is in place slowly raise bid/offer range to create impression market rising
• 50. If big brokers see 40 and create feedback loop with ETF buying pushing prices even higher tap self on algo shoulder
• 60. If 40 and 50 True dump everything in last 5 minutes of trade in dark pool, reconciliation will occur after market close, end day 100% cash
• 70. If seller appears, drop everything and go to binary Hampton.

Here is a chart of last three days of ES volume. The "surge" in volume as Pisani observes, is a victory for the bulls.

"While on the subject of gold manipulation, last month I referred to the cartel's specific modus operandi on those days when its members choose to take gold lower. However, this is only one of their ploys. Another page in their playbook relates to keeping enthusiasm in the gold sector as subdued as possible. Gold is seldom, if ever, allowed to rise more than two percent on a given day. If strong buying propels gold higher, massive selling inevitably appears when it has risen two percent and continues until gold is stopped dead in its tracks. The next day, to ensure that there is no follow-through fervor, any further upside is capped at a one percent gain. Following that, gold is held in check until the long speculators who propelled the original rise lose patience. At that point, the cartel looks for an opportunity to clean them out. I realize this sounds pretty Machiavellian but I can only point to the trading patterns as confirmation." John Embry of Sprott Asset Management

It is NOT a republican versus democratic issue ... It is a reform versus spin issue!

ICI reports that the depletion of money market flows, which as we have pointed out have seen outflows of over $300 billion year to date, is finally starting to force retail capitulation into domestic equities: the week of April 7 saw domestic equity mutual fund inflows of $1.9 billion, reversing the outflows of the past two weeks. At this point total domestic fund outflows for 2010 have dropped to only ($1.8) billion, which surely "justifies" the spike in the S&P from January 1. The implication is that, as we have pointed out repeatedly, the only marginal buying of US-based stocks continues to be executed primarily by Primary Dealers. We will update on Lipper/AMG data as soon as it is available.

Apologies for the lack of color for the past 24 hours. We pick up first with a quick update on equities following our call on Friday: Equity markets did rebound to test out the break-out level between 1,198 and 1,203. Tactical players or people interested in initiating short positions for the longer run but with a tight cost of entry should look at selling the market here, with above 1,207, to play 1,180 first, and then a drop that if we believe our signal from last Monday on the Vix should be a least 5%. It is probably also a good level to reload on long VIX and volatility positions with an excellent risk reward. - Nic Lenoir