Archive - May 26, 2010

Leo Kolivakis's picture

Ties Surface in Pension Chief's Exit





Michael Travaglini, head of Massachusetts' pension fund plans to quit next month, citing as a reason efforts by legislators to limit what he and his staff can earn. Interestingly, Travaglini is joining Grosvenor Capital Management, one of five firms slated to manage the Pension Reserve Investment Trust board’s $3.2 billion in hedge-fund assets last fall. Talk about violating basic pension governance rules!

 

Tyler Durden's picture

Distressed Market Commentary From Alden Global





We often talk about industry themes in the portfolio because individual companies in the same industry usually face similar economic drivers. When these economic drivers slow it is common that many companies in an industry experience distress at the same time. Two of our current industry themes are financials and media. Among other reasons, financials are experiencing distress as a result of the credit crisis and media companies are experiencing distress as a result of the significant slowdown in advertising in 2009. In both cases, we think that the analyst community is underestimating each industry’s emergence from distress and this out of consensus view provides support for our investment thesis. In most cases, our positions in these industries have a direct catalyst event that we feel will drive price performance in our respective positions. In others, the catalyst has passed, and we hold a position that we feel has not yet fully benefitted from the catalyst event (such as long equity). In the few that are non-event driven, valuations drive the investment when securities’ prices are tainted by membership in a distressed industry. Catalyst or not, our investments are underpinned by fundamental analysis where we seek to find mispricing of true value. - Alden Global Capital

 

Bruce Krasting's picture

On the Edge?





If we are not there, we're pretty close.

 

Tyler Durden's picture

Greek Scramble For Physical Brings Gold Price To $1,700 Per Ounce





And there are those who wonder how Sprott's PHYS could have traded at "ludicrous" NAV premium of over 20%. Coinupdate.com reports that prices at which the Greek Central Bank is selling one ounce gold equivalents are as high as $1,700 (40% over spot), and prices on the black markets are even higher. The punchline, as Athens slowly returns to a forced gold standard: " A popular spot for street vendors to sell their coins is near the Athens Stock Exchange.  There the traders wait for citizens to bring payments received from unloading their paper assets like stocks and bonds." That's good - downtown Manhattan close to the NYSE has some free space for gold vendors to set up shop as well, they just need to push some of the frontrunning/collocation boxes off to the side. And in other rhetorical ruminations, is it safe to say that the last days of the fiat experiment are among us now that people themselves are bypassing the government and enforcing their own gold standard?

 

Tyler Durden's picture

Game Over For Moody's On Einhorn Kiss Of Death? Stock Plunges After Greenlight Strategic Short Revealed





Update: the Einhorn-Ackman dynamic duo does the groupthink tango, as Ackman joins Einhorn in bashing rating agencies. Tomorrow's MCO open will be a bloodbath

It's official: Moody's is the next Lehman. The ratings agency just received the kiss of death after David Einhorn announced he is short the name at the Ira Sohn conference (we are not sure how this is news...Einhorn has repeatedly noted his hatred of the rating agency). With numerous other adverse catalysts, such as the pending Wells Notice, as well as the fact that its business model is conflicted is obsolete, this was the straw that broke the camel's back. And since we are confident that uber honest capitalist Waren Buffett is by now completely out of the name, replaced presumably with the same idiot middle east sovereign wealth money that just gulped up the Treasury's Citi stake, there won't be too many tears wept at its funeral. RIP Moody's.

 

Tyler Durden's picture

Lehman Sues JPMorgan, Claims Dimon Forced Firm Into Bankruptcy; Opens Avenue For AIG Lawsuit Against Goldman





In October of last year we wrote an extended piece discussing the conflict between the bankrupt Lehman Brothers estate (i.e., its unsecured creditors) and Barclays, in which JPMorgan played a prominent part, as it was the critical tri-party repo clearing bank on all of Lehman's collateral that would subsequently go to Barclays. As we summarized, extortion attempts back then by Barclays only had the adverse effect of making Jamie Dimon very, very angry: "Barclays' attempt to nickel and dime JPM (and the US taxpayers) so infuriated Jamie Dimon that he penned an angry letter to John Varley,
Barclays Group CEO (which CC:ed Barclays' president Bob Diamond),
threatening with litigation in case Barclays is intent on sticking JPM
with Lehman collateral that it thought was without value and not worth
assuming in a time when every single day stock prices were crashing
further lower
." As we expected in October, the resolution would most likely involve litigation, as by dint of its collateral clearing position, JPM had unprecedented knowledge about Lehman's affairs: a special status that would likely be abused in a court of law. Sure enough, here is the lawsuit: the estate of Lehman Brothers, desperate to pick another several bps in recovery on their Lehman General Unsecured Claims, has sued JPMorgan, claiming Jamie Dimon's bank pushed Lehman into bankruptcy by forcing it to turn over $8.6 billion in collateral. As Lehman was completely insolvent long before JPM demanded any incremental collateral comfort, claiming that JPM was the catalyst for Lehman's bankruptcy is absolutely the same as saying that Goldman forced AIG's bankruptcy by increasing its collateral demands. While both arguments are ludicrous, should the JPM case proceed to court, it is tantamount that AIG immediately seek legal action against Goldman Sachs on identical grounds.

 

Marla Singer's picture

The Wages of Obfuscation: Farcism and the AIG Timebomb





One of the central tenants of Farcism as a doctrine is the promotion and use of layers of opacity and complexity to empower regulators via their ability to mitigate red tape and compliance costs and to conceal this power under a cloak of (for example) promoting the "American Dream of Home Ownership."  It will be seen that Farcism has imbued the halls of regulatory power, particularly in financial services, for decades.  Zero Hedge readers are invited to opine on the impact this realization has on prospects for a financial reform bill that puts more power in the hands of these parties.

In this connection, back in November of last year we explored the nuances of the "foreign regulatory capital" credit default swap portfolio of the besieged Financial Products group at AIG.  We pointed out that $172 billion in notional exposure (well, it seemed like a big number for a potential loss before Fannie Mae actually lost $145 billion in eleven consecutive quarterly losses, wiping out its combined profits for the prior 35 years and still leaving about $80 billion in red ink to spare) remained outstanding, that deteriorating credit markets may force AIG to recognize additional losses on the portfolio, but that AIG expected the swaps mostly to be terminated by the first quarter of 2010 (please please please please?).  We also noted that the implicit backing of the Federal Reserve might be one of the key (only?) elements permitting these swaps to perform their desired function: permitting European banks to reduce their regulatory capital requirements (read: boost their leverage).

This is Part III of a multi-part series on global rise of Farcism.  Part I, "The Silver Curtain" can be viewed here. Part II "On the Pensioning of Roman Veterans" can be viewed here.

 

Tyler Durden's picture

Dow Closes Under 10,000 For First Time Since February 7





On a day like today, when the entire CNBC fast momo brigade said it was buying into the close (we would show you the clip of just how worthless intraday trading advice on CNBC is, if only the propaganda station had not pulled the episode), there was just one way for the marker to close: below 10,000. The fight over the 10k barrier, which the traders over at Liberty 33 find important for some reason, was fast and furious, but in the end, reinforced by a deteriorating euro, the bears won, closing at 9974.4, further plunging after hours. The Dow is now at the lowest close of the year, with the only times the Dow has closed under 10k being in a three day brief period between February 5 and 7th. Also, looking at the EUR panel, things are going from bad to worse. Absent China lifting every other offer, which would be confusing in light of SAFE's earlier negative announcement on European bond holdings, we could easily see a 1.20 handle by tomorrow morning, which would solidly push the S&P on its way well into triple digit territory.

 

RANSquawk Video's picture

RANsquawk Market Wrap Up - Stocks, Bonds, FX etc. – 26/05/10





RANsquawk Market Wrap Up - Stocks, Bonds, FX etc. – 26/05/10

 

Tyler Durden's picture

Ira Sohn Conference In Progress, Einhorn Speaking At 4:45PM, Grantham At 5PM; Klarman At 6:15PM





The annual hedge fund "go to" meeting, the Ira Sohn conference, is currently in progress, and 12 hedge funders will discuss their top picks. The place where Einhorn famously declared his Lehman and Moody's shorts, and Ackman announced he was "bearish" on MBIA and Ambac is perceived as the place where HF managers disclose their highest conviction plays, usually leading to major market waves in the ensuing days. The managers presenting this year are as follows:

 

Tyler Durden's picture

Treasury Sold 1.5 Billion Shares Of Citi, To Sell 1.5 Billion More





Congratulations to the lucky, soon to be bankrupt, Petrodollar sovereign wealth fund that was suckered by Morgan Stanley to buy this radioactive piece of gamma decay. We hope for your sake that the US government is successful in postponing the inevitable unwind of Keynesianism until you can sell. Of course, you can just shut down oil deliveries to the US, although soon US refiners will just be able to syphon the stuff from the surface of the Gulf of Mexico.

 

Tyler Durden's picture

South Korea On Alert As North Korean Subs Disappear In East Sea





From Yonhap: South Korea's military was tracking four North Korean submarines which disappeared from their east coast base after conducting naval training in the East Sea earlier this week, a military official in Seoul said Wednesday. Locations of the North's four 300-ton-class submarines have been unknown for two days, the military official said, noting, "We are tracking the four submarines by mobilizing all naval capabilities in the East Sea."

 

Tyler Durden's picture

Break Of Dow 10,000 Activates Sell Programs





Well, that was a fast move down. EURUSD is still above the critical support at 1.2150, most recently at 1.2180. China is buying EUR, BIS selling. Let's see who wins.

 

Tyler Durden's picture

Bank Of Spain Tells Lenders To Take 30% Loss Provisions On Foreclosed Real Estate Held For Over Two Years





Here comes the latest destabilizing Central Bank "intervention" in Europe. The Bank of Spain, doing what Fed and the Treasury should have done with domestic toxic loans backing worthless real estate, has notified lenders that they should be prepared to set aside much greater loss reserves against assets, "such as real estate, acquired in exchange for bad debts once the holdings have been on their books for more than two years." The staggered loss provision schedule will call for a 10% loss assumption for real estate acquired in foreclosures, 20% for real estate held for more than a year, and 30% for anything held for more than 2 years. Bloomberg reports that Spanish lenders have foreclosed upon property worth nearly €60 billion, which means that very soon Spanish banks, which as we pointed out earlier are already suffering a liquidity crunch as a result of loss of access to Commercial Paper, will have to take an incremental up to €18 billion in asset write-downs, a development which will have a major adverse impact on Spain's banking sector once it funnels through the banking system, and especially once the need for liquidity spikes yet none is found.

 

Tyler Durden's picture

Market Rolls Over As EURJPY Breaks 110, Treasury Curve Flatenning Further





The EURJPY has now pushed back below the 110 support even as stocks, which nobody except a few computers, trades any more, fight tooth and nail to give the impression there is buying interest. Hopefully, readers have been prudent enough to stay out of the market since when it broke down terminally, some time in April of 2009, and ridiculous equity moves such as today's will not matter. What should matter, is the ongoing flatenning in the 2s10s, which, as we have claimed previously, is a far more troubling phenomenon, and indicates that between the unending FX carry unwinds, and the Treasury steepener selloffs, liquidations are continuing. That these are not spilling over into the now completely irrelevant stock class is not at all important: stocks are now just for administrative window dressing, and to push the Obama propaganda just how good the economy is, which as everyone knows, is nothing but a lie.

 
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