Archive - May 13, 2010

Does anyone here remember the Latin American debt crisis in 1982? It was a lot like Greece....

In the FDIC’s own words: “The crisis began on August 12, 1982, when Mexico’s minister of finance informed the Federal Reserve chairman, the secretary of the treasury, and the International Monetary Fund (IMF) managing director that Mexico would be unable to meet its August 16 obligation to service an $80 billion debt (mainly dollar denominated). The situation continued to worsen, and by October 1983, 27 countries owing $239 billion had rescheduled their debts to banks or were in the process of doing so...

• Asia stocks rally, bond risk falls as Europe debt concern eases; Won gains.
• Australian employment rises, driving currency higher on rate speculation.
• Bank of Korea to press government to reduce its involvement in meetings on interest rates.
• Experts see Europe crisis delaying Fed rate boost.
• US Prosecutors start criminal probe into Wall Street banks.
• Yuan Forwards climb as US-China talks may lead to appreciation.
• Celanese announces emulsions price increases of €80/tonne in Europe, Africa & Middle East.

This is a European bank that is thoroughly insolvent, and this is without counting the fact that its sovereign debt holdings will probably drag it 3 fathoms below sea level, yet it is trading at one of the highest premiums in all of European bankdom!

And so the EURUSD plunges to new lows. Yesterday, we expected the euro would hit a 1.25 handle by the end of the day. Alas, we were off by 4 hours. US banks are now rumored to be joining European banks in taking on the ECB directly and shorting the living daylights out of the doomed currency expecting another several hundred billion in bank bailout funds to be added shortly. Last time we were here a week ago in the EURUSD, the Dow was crashing in the four digit range. Now, we know that the machines have decoupled from the EURUSD and EURJPY signals, as the EUR is no longer a part of any correlation trade, As such we expect the euro to hit parity at about the time the S&P hits 1,500, on yet another no volume melt up, just in time for Gold to hit a 3x multiple of the S&P. Although, that won't be today: gold is currently being pushed down the LBMA. JPMorgan can not imagine a world where gold is $1,250 or higher. Alas, we give this last ditch attempt at most 24 hours. In other news, the EURUSD has buyer support in the 1.2550 area. As for stocks: look at volume. If it abysmal as it tends to be whent he Primary Dealers, the Fed and the quant community collude to push it up double digit handles, we expect S&P 1,200 today. If volume picks up the market will tank. Guaranteed.

RANsquawk European Morning Briefing - Stocks, Bonds, FX etc. – 13/05/10

In a feat that would seem to defy the odds, Goldman Sachs, JPMorgan Chase and Bank of America this week each said its trading desk made money every day of the first quarter. Goldman said its daily net trading revenue topped $100 million 35 times last quarter out of 63 trading days. JPMorgan and Bank of America disclosed similar eye-popping stats. Citigroup, too, recorded a profit on each trading day, Bloomberg News reported, citing unnamed people who knew the results. The intrigue is high. If a too-big-to-fail bank’s traders were able to make money every day of a quarter, were they really trading in any normal sense of the word? Or would vacuuming be a more accurate term? What kinds of risks do such incredible profits entail, for the banks and the rest of us taxpayers? And are results such as these too good to be true? - Jonathan Weil, Bloomberg

Crude oil prices dropped on Wednesday, with the front month falling to fresh lows against deferred contracts. Refined products fared better, and they finished in positive territory, as traders responded to this week’s DOE report.
In the process of falling, the front-month June crude oil contract finished near a three-month low, and it ended within fairly easy striking distance of its now major support at $74.50. Also evident on Wednesday was a clear divorce from equities, which had a very strong day, with the bellwether DJIA gaining 148.65 points to 10,896.91 by the 4 PM final bell. The US dollar was slightly higher against the euro and did not seem to exert any major influence on oil prices on Wednesday.

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