Archive - May 17, 2010

Econophile's picture

Wolves vs. PIIGS





The problem with Greece is George Papandreou and his socialist party. For years they have been looting the country by transferring capital from the producers to government employees, national health care, and the unions. They've been borrowing to pay for it ever since capitalists found ways to hide capital from confiscation. Now he blames "speculators" for Greece's problems. He has no shame and he will take Greece and the eurozone down.

 

Leo Kolivakis's picture

Pick Your Pension Poison?





As final salary pensions reach the end of the road in the UK, politicians in Illinois ponder on which pension poison to swallow. Kicking the can down the road is no longer an option...

 

Tyler Durden's picture

Complete Paulson Q1 Portfolio Update: Major Additions To Gold Exposure, New Casino Stakes, But What About CDS And Gamma?





Paulson & Co's March 31 13F has been released. The fund is increasingly playing the barbell strategy, adding materially to both financial and gold stakes (both new and existing) across the board. While there were no new additions in the list of top 10 names, Paulson did add to some key names: the fund upped its stake in Bank of America by 16.8 million shares, bringing total value in BofA to $3 billion at 3/31 (combined with selling 3 million BAC Warrants); Paulson also has continued to increase its stakes in various gold producers, including Anglogold and Kinross. Other names added to included XTO, Hartford Financial, CBRE, First Horizon, and Macerich. The firm established new positions in MGM (40 million share), Apache (3.4 million), Mylan (11.4 million), Family Dollar (6 million), Devon Energy (3.3 million), Novell (25 million), Novagold (20 million), Supermedia (2.6 million), Dex One (3.7 million), Smith International (2 million), Boyd Gaming (4 million), Randgold (0.5 million), Iamgold (2.7 million), Beazer (5 million), Barrick Gold (0.4 million), and First Midwest (0.4 million). In short, Paulson added 4 new gold exposures in addition to its massive $3.4 billion stake in GLD, Anglogold ($1.7 billion), Kinross ($567 million), and Gold Fields ($297 million). Stakes eliminated completely consist primarily of various M&A arb deals that closed: Burlington Northern, Dr Pepper, Chattem, IMS Health, Encore Acquisition, Fifth Third, Kraft, Liberty Media, New York Community Trust, Pepsi Bottling and Pepsi Americas, Philip Morris, Sun Micro and Valley National. Of Paulson's $21 billion in total notional holdings at March 31, 30% were held in names directly related to gold extraction, production or gold ETFs.

 

Tyler Durden's picture

Commentary On Today's Deja Vu Volume Action






In an earlier post today Tyler shows us the overall increase of volume as the market sold off. The volume did spike indeed as you can see the market slam the bid here. Talk about an increase in volume...and oh yeah, it's all blood red on the bid! Later, however, as the market melted up yet again, you do not see the corresponding heavy buying lifting the offer. Rather, you see very light buying lifting the offer - but it is non-stop.
The ES trades nearly EIGHT handles straight up before any heavy buying hits the tape, which was probably a combination of HFT and a pool of buy stops.

 

Tyler Durden's picture

Daily Oil Market Summary: May 17





Oil prices dropped to their lowest levels in 2010 on Monday, in a follow-through of the active selling we have seen since the start of the month (May). Equities were hammered in early trading, but they managed to claw their way back to unchanged and even into lightly positive territory by the final bell. The DJIA ended the day up 5.67 points. The rally in equities came late enough in the day not to have any major impact on oil prices. The question in front of us is whether the late rally will have an impact on oil trading tonight or on Tuesday.

 

Tyler Durden's picture

Daily Credit Summary: May 17 - Anything But Unch





Spreads closed modestly wider today with HY underperforming IG and both underperforming stocks as an afternoon rally helped the indices but left single-names decidedly less sanguine. Intraday swings remain somewhat volatile in US and EUR credit and activity in the US definitely tailed off as Europe closed and the afternoon began. M&A/LBO deals dominated much of the idiosyncratic action today but breadth remained negative and not supportive of any aggressive rerisking sentiment for now. Importantly there was widespread credit underperformance and equity outperformance today as the Pactiv and UHS deal suggest relevering being priced into the capital structure and seemed to spread some contagion across other deal-worthy names.

 

Tyler Durden's picture

Hoover Warned "New Deal" May Lead To Fascism, Asserting War In Europe Was Result Of Similar "Planned Economy"





In a Washington Post article from 1938 one finds an interesting warning from former president Herbert Hoover, in which he declares that the FDR "New Deal" is leading the US to fascism. In a grass roots convention, Hoover stated that "despite every alibi, this depression is the direct result of Government actions. The torch of liberty has been dashed out by some sort of fascism in 14 nations of more than 240,000,000 people - they all undertook new deals under some title, usually planned economy. The New Deal started with a government debt of $21 billion and today finds itself with a debt either direct or guaranteed of $42 billion. It started with 12 million unemployed; it finds itself after five years with 12 million unemployed. If the 12 million unemployed are not due to [overextension in new construction or in capital equipment or speculation requiring liquidation] to what are they due? Why have a recession in the face of low interest rates, no overextension of credit, no oversized inventories, no overextension of capital equipment, no overstock of goods, no speculation. If there are none of these sins or forces in the financial world, such as did exist in previous depressions, obviously the origins cannot be blamed upon finance and business. There is only one place left to search for the causes of this depression. Despite every alibi, the depression is a direct result of governmental actions." We know how the 30s ended for America, and we wonder what would have happened had the US not joined the WWII fray, which according to many economists was the only exogenous factor which pushed the country out of the depression andrealigned the global map. We do not know what Hoover would say about our current regime, but we doubt it would have been full of praise.

 

Tyler Durden's picture

Vote On Cornyn Amendment For Blocking US Bailouts Of Overindebted Foreign Countries Currently On C-SPAN





Update: vote passes 94-0. O. If Italy, UK, or Japan (or, soon, the US), with their 100%+ debt/GDP need an IMF loan, they may well be out of luck. It will be viciously ironic if the US is prohibited from obtaining an IMF loan to save itself.

Currently on C-Span is the vote on the Cornyn amendment which requires the Obama Administration to evaluate any proposed
bailout of a foreign nation where that nation’s public debt exceeds its annual
Gross Domestic Product (GDP), and then to certify to Congress whether the
bailout loan will be repaid. If the Administration cannot certify that the
bailout loan will be repaid, it will be required to oppose the bailout and vote
against it at the IMF. That this is in effect a new Monroe Doctrine, as the entire world now has more debt than GDP, is not mentioned. The vote can be seen here.

 

Tyler Durden's picture

Goldman Revises Gold Forecast, Now Constructive, As It Sells Gold To Clients





A month ago we posted an article which we titled: "Goldman Again Buying Gold, Selling Copper As It Lowers Gold Price Forecast, Boosts Copper" in which we speculated, as the title suggests, that since Goldman had turned bearish on gold, we were expecting gold price to jump as Goldman was once again implicitly buying the precious metal from its clients. Sure enough, a month later and $100 dollars higher, Goldman has once again performed its non-fiduciary duty and released another commodities update in which the firm is now quite constructive on gold. And all it took was a month (and some called us cynical). That said, as Goldman is now selling gold, it may be time to reevaluate gold positions, at least from a technical trade perspective.

 

Tyler Durden's picture

$253 Billion In Bills Redeemed MTD, $4 Trillion In Total Redemptions YTD, Treasury Down To $7 Billion in Cash





And the government keeps on chugging along in its merry Keynesian way (and to those who believe that just because the USD is the reserve currency for the time being and have yet to hear about a country called China, we have one thing to say: just keep buying Treasuries). After burning through $91.1 billion in operating cash in the first 14 days of May, the government is down to just $7.2 billion in cash (ex the $200 billion in the untouchable, for now, SFP account). Not only that, but the little problem of ever increasing rolls in Bills just keeps on reminding about itself, although with $253 billion redeemed so far in May, we don't think little quite captures it. But once again, do not be concerned: the deflationists out there will say that this is all good as the government can just print infinite amounts of reserve pieces of paper (all the while deflation still paradoxically rages, with gold, oil and the Dow all rushing to hit 36,000 first). Back to facts: in the 7 months since the beginning of fiscal 2010, the US has redeemed $3.6 trillion bills, $400 billion notes, and $5 billion bonds. This 150% roll in sub 1 year debt when we are just 7 months into the fiscal year is also nothing to write home about, you may occasionally hear. But at least today's DTS still has not logged the $100 billion or so in yet unsettled debt (and the $120 billion in upcoming issues that will be announced tomorrow). When that happens we will solidly push right past $13 trillion in total debt subject to limit. This, is the last thing that you should not be concerned about. Because worry about unsustainability is merely an artifact of a simplistic Austrian school of economics, which as Greenspan and Bernanke have demonstrated so well, is nothing but a total joke to those sophisticated enough to grasp all the nuances of Keynesianism.

 

RANSquawk Video's picture

RANsquawk Market Wrap Up - Stocks, Bonds, FX etc. – 17/05/10





RANsquawk Market Wrap Up - Stocks, Bonds, FX etc. – 17/05/10

 

Tyler Durden's picture

Larry Tabb Confirms Exchange-Based Frontrunning Is The Norm





A funny exchange between a rather conflicted Larry Tabb of Tabb Group and AFL-CIO's Brandon Rees deserves a watch, as it highlights the latest fault lines in the market structure debate: watch for exchanges to increasingly blame dark pools, and vice versa, even as both do nothing but add to systemic market collapse risks in exchange for a marginal reduction in trading costs. Whether the trade-off of imminent market crashes at any moment courtesy of a market structure that nobody can make sense of any longer in exchange for a few cents per thousand shares is equitable is up to others to decide. It is certainly something that the industry will defend until its last drop of blood, although expect the SEC and the government to finally step in to curb the rampant abuse of front-running "privileges" by exchanges and secrecy and rent internalization by banks through dark pools. The funniest bit of the exchange occurs at 3:35 into the clip, when Tabb publicly discloses that front-running is not only legal but occurs all the time on open exchanges. When Erin Burnett, who unfortunately still thinks that the Deutsche Mark is used in Germany, asks who is doing the front running, Tabb says "It could be anyone." And as retail investors tend to not have access to dark pools (in fact Reg ATS allows banks to singlehandedly determine who is allowed access to their dark pools without any appeal recourse),  now you know that every single time you put in an order, it is by definition frontran by everyone who has a million dollar collocated trading station: thank you Mr. Tabb for once again proving our breathless rantings. Which brings us to our question from early 2009 - when will the SEC finally look into this broken, criminal and endlessly front-running market?

 

Tyler Durden's picture

Katla Earthquake May Presage Next Volcanic Explosion





Just to add to the ink needs of European central banks, the Iceland met office reports that it has recorded a small earthquake at the Katla volcano. With Europe already pretty much bankrupt, and the only reason why Europe is still quoted being due to ECB, IMF and Fed backstops, the last thing needed by the troubled continent is the next major volcanic explosion to terminate airline travel indefinitely. As earthquakes tend to not be an indicator of volcanic stability, the most anticipated volcanic explosion in human history may finally be a fact quite soon. We are confident the HFT lobby will somehow determine that volcanic ash clouds add liquidity to the market. Stay tuned.

 

Tyler Durden's picture

EURUSD Now Swings To Positive For The Day As Central Banks Come Out In Full Defense Of Euro





Volatility in Euro trading is now reminiscent of bucket shop penny stocks. After plunging to the mid 1.22, the EURUSD is now back to green for the day. This is due primarily to panicked buying by various central banks every time the EUR drops to support levels, a fact now fully transparent to the entire market. More importantly, the EURJPY which is much more critical as a carry funding source to buy stocks, is almost back to unchanged, which in turn has forced a spike in the market to retrace nearly half its losses in under an hour. If anyone believes stocks track any fundamental news flow, our condolences. As disclosed last week, any stock trade, especially of the short variety, now faces the world's biggest moneyprinters in the world and high priests of Keynesianism as a very malevolent counterparty.

 
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