Archive - May 12, 2010

"The trading profits of the Street is just another way of measuring the subsidy the Fed is giving to the banks. It's a transfer from savers to banks."

Gasparino has broken news which everyone knew was pending, namely that Deutsche Bank's Greg "I am short your house" Lippmann, who abruptly left the firm a few days after the SEC complaing against Goldman was made public, is about to get the probe. In other words, the toxic CDO sale probe is escalating, and the latest lucky contestants are Citi and Deutsche Bank, which according to Fox Biz' Charlie Gasparino have been subpoenaed for further documentation after a preliminary investigation left far too many questions open.

ENGLEWOOD CLIFFS, N.J. – May 12, 2010 – John Carney will be joining CNBC.com, the online destination for real-time global business news and expert analysis, as Senior Editor, it was announced today by Allen Wastler, Managing Editor, CNBC.com. In addition to writing for the site, Carney will also appear regularly on CNBC’s Business Day programming.

“John has deep connections on Wall Street and has a unique insight into its trading community,” said Wastler. “He is well-known within the financial world and we are delighted to have him on our team.”

Has it already started?

Well, if nothing else, we now know officially just how great those tax receipts were. Good thing too - we can end that whole superficial tax receipt debate and focus on important things. April's tax deficit of $83 billion was the highest April deficit on record. America is now more bankrupt than ever. Income was $245.3 billion, 8% below the total recorded last April. Spending was $328.0 billion, up 14% year-over-year. A year ago in April the deficit was $20.9 billion. And here is the data: tax receipts down 7.9% YoY, Individual Income Tax down 21.5% YoY, and more importantly, spending: Total spending up 14.2%, National defense up 17%, Medicare up 39.4%, Social Security up 4.2% and General Government up 5.6%. At least interest payments were down 9.5%.

And now back to your regularly scheduled bankrupt country market melt up.

We brought up the other day the CAC index as one of the indices we would like to short on a rebound. Being French I can promise you first hand that if there is any form of austerity required as part of the $1Tr package it will not fly one bit by main street and we are likely to see some footage reminiscent of Athens last week. We had riots with a daily car burn rate above 1,200 for over a week because a teenager electrocuted himself trying to escape from the cops, so just try and imagine if railway workers can no longer retire at 50 or 55 after being driven to exhaustion watching a computer do their job 35 hours a week? - Nic Lenoir

A web page of precious metals prices provider Kitco.com has sparked rumors that Germany will leave the Eurozone and reintroduce German Marks, sending gold to a new record of $1,244 and silver to a multi-year high of $19.64.
It is this half-ready page shown below that has created excitement as it lists precious metals in Deutschmark units.

The $24 billion 10 Year auction just closed at a 2.96 Bid To Cover. So far so good, except that the Direct Bid is now as credible as the market once again is: at 25% (an all time record) there is no way that the Federal Reserve is not directly or indirectly interfering with auction take downs. Whether it is via Chinese participation and behind the scenes arrangements or through London-based shadow-Fed clearing organizations, it doesn't matter. Treasury auctions are now just the same ridiculous spectacle of central bank interference that stocks are. All we can say is stay away from the markets: both stock and bonds. Our hope that the DOJ will end JPM's manipulation of the gold market is the only reason why we are still not endorsing profit taking in gold and silver and getting the hell out of dodge.

I have decided to release the Greek Banking Fundamental Tear Sheet to the public. It was released as a summary of a more verbose document designed to inform subscribers which of the Greek banks we felt were worth putting short positions on as of 02/17/2010.

The only question now is who will hit 36,000 first - gold or the Dow. Sorry Bernanke - you can't have both. The good thing with gold is that unlike stocks, gold actually trades after 10 am, unlike stocks, when just the liquidity rebatealgos churn ultra high volume on ultra bankrupt companies during that time. Also, breakouts are actually validated by high volume, unlike stocks where the opposite is true as banks hope to fool gullible mom and pops into throwing their money into the Keynesian fire pit.

First, just in case you were wondering, today's melt up episode #xyz is being orchestrated by the HFTs on no volume as per the norm. There is no volume period. The volume only appears when the Dow is down 1000 points. At that point everyone tries to front run everyone else as we saw last Thursday. It happened then, it will happen again. In the meantime nothing will change, except the launching station for the 30% drop straight down will be marginally higher (one would hope).

RANsquawk US Afternoon Briefing - Stocks, Bonds, FX etc. – 12/05/10

The Nomura strategist shares his latest insights into Greece and the European contagion. As widely reported, the Western media blames the subprime crisis on “the bankers” for lending to American home buyers who lied on their loan applications and who clearly could not afford their interest payments. It is somewhat ironic that the same popular outrage (at least in core Europe) is now directed entirely at Greece for taking on debts it could not repay, while the bankers who lent the money remain without blame. Perhaps the media thinks the Greek government should have known better, while the average subprime borrower was too simple-minded to be culpable? Koo is happy to lay the blame with the bankers, in both instances, for not doing adequate due diligence. In the case of Greece, the economy’s structural problems were well-known, and he points out that both the subprime and Greek crises were the result of banks/investors chasing high yields and ignoring the inherent high risks. Koo thinks the Maastricht Treaty’s 3% ceiling on fiscal deficits is extremely problematic, as it does not allow for necessary fiscal stimulus when nations find themselves in a balance sheet recession. It is also unenforceable (as we have just seen); plus levying fines on Greece for its violations makes little sense at this point given that it has no money.

When global governments refuse to act responsibly toward their currency, the people will create their own currency. Welcome gold.

( NAW ) 05/12 08:57AM AUSTRIAN MINT SAYS SOLD 243,500 OZ GOLD IN COINS AND BARS IN LAST 2 WEEKS, MORE THAN IN ENTIRE Q1

( NAW ) 05/12 08:58AM AUSTRIAN MINT SAYS GOLD ORDERS COMING ENTIRELY FROM EUROPE IN LAST FEW WEEKS, SIGNS OF "PANIC BUYS"

Equities now officially have an active memory of about 24 hours. The biggest market drop in history is now long forgotten, and the only consolation to investors is that SEC is actively fixing the problem even though it has no idea what the problem is. Overnight, futures went up by 20 handles in the span of 4 hours as the invisible bid appeared yet again, afraid of what would happen if the immediate drop in ES was not breached. Luckily, funding markets are not nearly as stupid as stocks, and as a result the TED spread has yet to show any signs of moderating. At last check 3 month LIBOR was 0.4302%, the highest it has been since Q3 2009, and certainly a change from the funding market calm that hadenveloped all market participants like Federal Reserve "no risk" amniotic sack over the past year. At the same time the 3 Month Bill is once again grinding tighter, as investors unsure what to buy, buy everything: stocks, bonds, oil and especially gold. Another perfectly insane day in US capital markets glutted by endless liquidity.