Archive - Apr 2010

And so the real fallout begins. From Reuters: " German landesbank BayernLB
[BAYB.UL] said on Wednesday it cut ties to Goldman Sachs in response to U.S. regulatory action against the Wall Street
bank, the first sign of a loss of business in Germany."

A spokeswoman for Goldman Sachs declined to comment.
BayernLB's action comes days after the Securities and
Exchange Commission accused Goldman Sachs of defrauding
investors by failing to say that a prominent hedge fund manager
bet against a Goldman subprime debt product that he helped
design.

Germany warned it would do this. It is doing it. It took them 24 hours. German efficiency.

RANsquawk US Afternoon Briefing - Stocks, Bonds, FX - 21/04/10

The Q1 2010 corporate lobbying data from the House Office Of The Clerk has been released and it shows that Goldman's lobbying efforts have really taken off: after donating "just" $670,000 in Q1 2009, the firm doubled its political campaign donations to $1.15 million for the first three months of 2010. The bulk of specific lobbying issues focused on Dodd's Wall Street Reform act, HR4173. Among other lobbying activity were issues relating to housing finance reform, issues related to financial services taxation, issues related to carbon pricing and renewable energy, issues related to ERISA and Build America Bonds. A primary lobbyist for Goldman is Joyce Brayboy, former chief of staff for Mel Watt - one of the primary opponents to Ron Paul's Audit the Fed proposal. Well, now you don't have to wonder why. Most importantly, as Reuters reports, according to data by the Federal Election Commission, Goldman has now turned Republican, having donated more to republicans over democrats in 2010, a reversal from 2009.

A (totally unconfirmed so far) rumor has surfaced on the Professional Pilot Rumor Network that a British Airways 747 flight has suffered a twin engine failure over north UK, and was forced to divert for an emergency landing in Ostende, Belgium.

Goldman Sachs claims great risk management skills, while it shirks responsibility for its role in the near collapse of the U.S. economy. The former is a myth, and the latter is a dodge. [1] As taxpayer wealth was destroyed, Goldman exploited the financial crisis it helped cause, while the U.S. was (and remains) at war.

Goldman Sachs released its 2009 annual report today showing it made net revenues of $45.17 billion with net earnings of $13.39 billion. In its shareholder letter, Goldman says it repaid TARP money, but did not mention the massive new taxpayer subsidies it continues to enjoy.

"Goldman did not and does not operate or manage our risk with any expectation of outside assistance."

Yet due to the influence of highly placed Goldman Sachs former officers, Goldman received--and continues to receive--enormous assistance from taxpayers.

The one critical piece to a successful Greek bailout (if one can call 10 year Bond spreads at 8% any indicator of success) has been the implicit assumption that the proposed rescue package can pass the critical approval of the German parliament in order for it to become legislatively valid. Reuters reports that in a new, pre-electionary development, Germany's main opposition party, the Social Democrats (SPD) have now decided to block Angela Merkel's plans for a Greek bailout, all but dooming the incipient Greek rescue even as G-Pap finally realizes that he will need to ask for assistance in the next several days.

Judging by Ben Bernanke's recent abnormal behavior, we are quite confident the Fed forgot to add at least three zeroes to the latest version of the Benjamins. Here is how the government is spending money to recreate old money, just so it can print even more money.

Dear Investor,

Many of you have asked questions in the past few days about Paulson & Co.'s ("Paulson") participation as an investor in mortgage securities from 2005 through early 2007, and specifically about our investment in a synthetic collateralized debt obligation ("CDO") which is the subject of a civil complaint by the Securities and Exchange Commission ("SEC") against Goldman Sachs. We wanted to provide you with accurate information and context regarding the decisions we made during this time to preserve and enhance our clients' capital.

There is at least one person left who isn't afraid to speak the truth. We only wish the camera would have panned to Dick Fuld's face as Mr. Black was delivering his testimony.

Probably not the best words to use when trying to diffuse a ticking time bomb.

SCHAEUBLE SAYS WOULD REGRET LETTING EURO COUNTRY DEFAULT
SCHAEUBLE SAYS EURO FOUNDERS COULDN'T IMAGINE SOVEREIGN DEFAULT

The market should dutifully ignore this if it knows what's good for it.

PIIGS investors are following closely the rapidly deteriorating developments in Greece: the latest indication that the EU's botched bluff attempt with Greece is likely to have adverse implications on not just the Mediterranean country but on all other highly leveraged countries are the CDS spreads of Portugal. After blowing out to all time wides in early February, about the same time we first heard that Greece was in essence insolvent, the country's credit risk has been once again slowly creeping higher and today hit a level of 235bps: for all intents and purposes a record. As the risk posture reasserts itself in Europe, America has not looked back even once since the market lows of 2010, which were caused by just these European fallout considerations. Is Europe slowly coming to the same conclusion that Dylan Grice did today? What will take for the US to emerge from its bubble trance of a utopia in which any and every problem can be solved with just more money printing, and a steeper yield curve. For now, the answer is nothing, as consumers get their second wind on mortgage payment and credit card bill defections.

With the US increasingly locked up in its own liquidity bubble, even as its traditional trading partner China moves to a trade deficit stance for the first time in years, the key question of how that other critical trading counterparty, Europe, will survive the tensions in its periphery have been persistently unaddressed. As rumors of a Greek credit restructuring become ever louder, the next question becomes not whether it is "constitutional" to bail out Greece, but whether a EMU member can impair the balance sheets of its investors in a pre-packaged bankruptcy, the bulk of whom just happen to be other Union members. And all of this is occurring even as concerns about the viability of the euro as a currency have become a mainstream topic. Below is the latest essayistic observation on the future of the euro and the eurozone from SocGen's Dylan Grice, who as usual shows more foresight on all matters sovereign than most. His conclusion: the euro could very well soon become the short-lived barbarous relic of the 21st century.

Things did not improve in Greece yesterday but they seemed to calm down a little bit. That kept the U.S. dollar below Monday and Friday’s highs. That, in turn, allowed the Troika (gold, oil and stocks) to move higher in lockstep. The techs continue to stand out. Many are long cash and had no real exposure to the financial meltdown. The upbeat Intel report suggested that a round of technology upgrading may be evolving. The buying tended to be broad. Advances beat declines better than 4 to 1. Advancing volume outpaced declining volume by a similar ratio. New highs swamped new lows 295 to 4. Net/Net it was a walk in the park for the bulls. As just stated, the lockstep coordination of stocks, gold and oil strongly hinted the influence of a calming in currency markets. The dip in volume was the only miss by the bulls. - Art Cashin

• AIG said to insure Goldman's board against investor suits (Bloomberg)
• UK unemployment hits 16 year high - they need to subcontract the BLS (FT)
• Earnings update: Boeing says health costs cut outlook (Bloomberg), AT&T hit by charge (Reuters), Wells misses revenue estimate (Bloomberg), Morgan Stanley posts profit on CDS and bond trading (Bloomberg)
• V-shaped explosion: an eventual inflationary collapse into a "double dip " Greater Recession (Asia Times)
• Richard Rahn: could the US become Argentina (Washington Times)
• Paulson reassures on Goldman role (Reuters, WSJ)
• Goldman says SEC case hinges on actions of one employee (Bloomberg)
• Greece says to agree joint text with IMF, EU by May 15, claims "restructuring talks are nonsense" (Reuters)

• Airlines lost over $1.7 billion from ash cloud disruptions over Europe, industry says.
• Americans see US autos topping Asian competitors.
• Asian stock markets gain on US corporate earnings, jump in oil price.
• Chinese bank watchdog orders quarterly tests on property loans.
• IMF proposes bank tax to fund bail-outs.
• Oil jumps above $84 in Asia as stocks rally on earnings.