Archive - Apr 2010

RANsquawk US Afternoon Briefing - Stocks, Bonds, FX etc. – 30/04/10

Just in case all those long, multisyllabic words like "integrity, honesty, ethicality, and client-focus" confuse you...

Ah, ye old "have your ZIRP cake and eat it too." First the Fed's overlord single-handedly destroys money market holdings courtesy of negative real rates in his scramble to get 120 year olds to buy Baidu, and now after the same MMs are down well more than 10% in AUM in 2010 alone, he is formalizing the way to bleed them even further. From Reuters: "The New York Fed on Friday posted on its website a master agreement it will use with money market funds to engage in reverse repos. The contract details the steps the New York Fed and money market fund counterparties will have to take to enter into a reverse repo agreement. Such an agreement would lock up cash at the Fed for a predetermined amount of time." The actual press release from the Goldman branch of the Currency Printing Institute is below.

Developing, but not surprising. Shit happens when your central bank drinking buddies are all broke. Issue is per Grayson amendment Bernanke needs to get Geithner's public approval to do this. Has Bernanke broken the law to bail out Europe? Or does the Fed have perpetual immunity from law compliance? There is nothing in the most recent week's H.4.1 on liquidity swaps. We will see if this changes next Thursday.

Oh isn't it ironic that Goldman's Correlation desk is the one calling the shots of the entire world market? And for all those who were kicking themselves for missing the Goldman "bottom", here is your chance to catch a falling chainsaw for the second time.

All you need to know in two easy words.

Not to worry though, other blogs are allegedly saying the criminal case against Goldman is a total "non-event." We'll go with them over a major bank ripping into a major constituent of its own ponzi kabal any day.

The FT reports that "the CFTC fined Moore Capital, the hedge fund led by Louis Bacon, $25m to settle allegations that it attempted to manipulate platinum and palladium prices from November 2007 through to May 2008." If the suit was settled at this near-record fine, one wonders just how bad it would have been had the CFTC allowed this to go to trial. In other news, the PM markets are perfectly unmanipulated and the LBMA has never done anything illegal.

Total PIIGS funding needs (defined as the sum of debt maturities and budget deficits) over the next 3 years: $2 trillion. Total PIIGS funding needs in 2010 alone amount to $600 billion. Total IMF bail out capacity: around $700 billion. Sorry - it simply does not compute.

Schrodinger's Chapter 11 paradox: If the world goes bankrupt in the woods, and nobody hears it happen, did it really go bankrupt?

• Asian stocks advance as earnings improve, Greek debt crisis eases.
• Greece has agreed with the IMF and the EU to take additional austerity measures.
• Japan Household Spending, Wages rise as consumer prices tumble for the 13th month.
• Steel futures in Shanghai heading for biggest monthly drop since January on demand woes.
• UK consumer confidence falls to three-month low as election approaches.
• Yen weakens as Greece aid talks, economic outlook revive demand for yields.
• Barclays' Q1 net rises 29% to $1.7B, helped by growth at its investment banking operations.
• Brazil's Embraer posts Q1 net profit of $35.3M vs. year-ago loss of $23.4M.
• Bristol-Myers' Q1 profit rises 16%, but outlook slips on reform costs.
• China Construction Bank plans to raise $11B in Asia’s biggest-ever rights offer.

Reading a 901 page Goldman document production (cover to cover) at 36,000 feet has proven to be both relaxing and quite productive. Among the plethora of emails, documents and memoranda, we may have stumbled upon something that could prove to be an even "bigger short" for John Paulson than RMBS: a $2 billion position in Bear CDS initiated prior to January 2007, as well as all other financial firms. Additionally, we discover that arguably the world's richest hedge fund manager (for a reason) was prophetically putting on bank counterparty hedges as early late 2006, up to and including Goldman Sachs itself. Most relevantly, in what could be damaging disclosure by Fabrice Tourre, the Frenchman notes that as a result of Paulson's mistrust of Goldman's counterparty risk, the Abacus AC1 deal was structured in a novel way in which "they would be acting as protection buyer, facing the ABACUS SPV (as opposed to a structure where Goldman is protection buyer as is usually the case)." This little legalistic variation could make a world of difference in an Attorney General's hands. It may be time to very carefully read the indenture of AC1 and compare it with those of 2006 and earlier "Abaci."

Time for the media circus to go nuts. The AP reports that the Feds have just opened a criminal probe into Goldman: now it is getting interesting. And everyone was thinking that Eric Holder is a toothless puppet (well, that still has to be refuted).

RANsquawk European Morning Briefing - Stocks, Bonds, FX etc. – 30/04/10

If you look beyond the Greek crisis, you have to ask yourself where are we heading and will the current form of Casino Capitalism survive? Greece is the birthplace of democracy, will it also be the birthplace of a new form of capitalism?