Archive - May 4, 2010

Regulations are going to get tougher, inspections more rigorous, and taxes higher. Raising the production cost of what is already the world’s most expensive oil. Watch out for the new $10 billion liability cap. The offshore industry’s dirty little secret. Cap & Trade, once DOA, has been reborn. The only certainty is more expensive gas at the pump.

Is there Eurozone warfare going on right now? William Engdahl thinks so, and what he has to say might surprise you.

The oil markets were hammered on Tuesday as investors liquidated equities and commodities aggressively. From a purely technical perspective, looking only at crude oil, prices failed to break out above $87.09, getting only as high as $87.15 before turning back down. That can be seen as a technical failure.
Adding to yesterday’s heavy liquidation, though, was widespread selling in equities. The DJIA was down more than 230 points at noon and, shortly after that, crude touched the $3.00/bbl lower mark. Gold prices were down $7/ounce and the euro was down 150 points. The focal point Tuesday morning was the Greek bailout and its possible failure, which many thought could lead to chaos or panic.

Why are the D.C. lenders "overweight" Puerto Rico?

The oil spill in the Gulf of Mexico from a collapsed offshore drilling rig could affect White House plans to extend offshore drilling, press secretary Robert Gibbs acknowledged as the oil slick threatened onshore sites from the Louisiana wetlands to the Sarasota beaches and disrupted fishing and energy industries. As oil giant BP mobilized resources to try to stop the leak and to mitigate its damage, President Barack Obama called the spill “potentially unprecedented environmental disaster.” However, some critics charged that the administration’s slow response to the rig accident and Obama’s decision to take part in the humorous proceedings at the White House Correspondents Dinner as the disaster unfolded has been as bad as the Bush administration’s sluggish response to Hurricane Katrina and the subsequent flooding of New Orleans.

Max Keiser is in his prime discussing Goldman and Bill Clinton's hypocrisy in defending Goldman. Which is not all that surprising considering Clinton's son-in-law Marc Mezvinsky is a Goldman Investment banker. Anyway, in addition to the usual scathing observations on the life, universe and everything, Max goes head to head with Senate hopeful Peter Schiff. Good clean fun ensues, with Alan Greenspan's invitation to the Keiser show pending.

Just because Goldman tends to get a pretty good look at all counterparty books, we will surely take their word on this one. Or not- as we reported recently, DTCC indicated that Spain has seen massive synthetic derisking over the past 2 weeks. We contend that Goldman's prop desk has been a major participant in the recent derisking action. We would be happy to be proven wrong: if Messrs. van Praag and Canaday would but disclose the firm's prop positions which refute this claim, we will immediately issue a retraction. Also, the latest DTCC data will be updated when it becomesavailable tomorrow morning European Caffeinated Time: we expect Spain to be among the top recipients of market suspicion in the past week. In other news, we expect Spanish CDS spreads to blow out shortly, and the Spanish curve to invert within two weeks, even as Goldman sets everyone at hypnotic ease.

A quick look at these charts says that unless this is yet another fake H&S which will get squeezed in no volume tomorrow, we have more to go. The previous times though we had divergence as we were triggering the patterns: not this time. Clean H&S break on the Nikkei future and Nasdaq future. Similar pattern on the S&P (though downward sloping neckline) and the Elliott Wave count indicates that whether this is a full bearish impulse from the highs or just an A-B-C correction, the 3/ or C wave is not completed for sure. Looking closely at the sub-structure for AUDUSD confirm our impressions. We see intermediary target at 1,934 for the Nasdaq future and 1,143 for the S&P future, but the key medium term support for the S&P future is currently at 1,114. - Nic Lenoir

1) Stupid, 2) Serrated, 3) Suicidal, 4) Sycho? We won't even start with the P. After 9 20 points S&P swings in the index in the past two weeks, the quants and the momos are both waving flags of surrender, just in time for the carry traders to be carted off trading desks in body bags. For a market that has no volatility, this is the most volatile market in recent history. No need to discuss how volume performed on today's plunge, which was the biggest in several months as it finally became painfully clear to the market that the IMF and the ECB have nothing up their sleeve when it comes to preventing the Greek spillover from impacting the rest of the PIIGS and then head to the core of the European death star.

RANsquawk Market Wrap Up - Stocks, Bonds, FX etc. – 04/05/10

Just 5 months ago, the Europeans were snubbing their noses at our weak currency, charging us $8 for Big Macs and Starbucks Coffee. Claiming that our currency was backed by "worms and nightcrawlers", since the Fed had monetized some delinquent Cabela's receivables during the initial phase of Quant Sleaze. My how things have changed.

IMF CHIEF SAYS EUROPEAN LOAN SHOULD HAVE BEEN AT IMF RATE

Because, you know, it is so usurious and greedy of US taxpayers to demand a 5% rate for a 3 year loan to a bankrupt country. As we get more on this preamble into QE2, we will post it. Presumbly someone is transcribing the monologue by Mrs. Dominique Genghis-Khan, aka Shalom of the Old Country.

The EURUSD broke through 1.3000 to 1.2996 and the BIS (yes, that BIS) immediately stepped up its buying to prevent a full blown rout of the Euro, or so the rumor goes. Check to you, Viceroy of the West Indies Bernanke. We have the QE2 press release all, pardon the pun, queued up, for your approval.

So everybody is asking if "Greece will make it through the Pan-European Sovereign debt crisis and if not, then who's next?" Well, we have spent at least 3 man-months answering this very question, and I am finally getting around to publishing these answers in a formal report. It is the calculations behind this very same report that has allowed me to call this Pan-European Debt thing quite accurately for the last 4 or 5 months - calls that were in direct contravention to practically every quoted political leader and most Wall Street banks may I add. Let's walk through recent history...

If only the Greeks were as passionate about maintaining the debt of their economy at a reasonably insane level, as opposed to the "full retard" reserved for banana republics such as the UK and the US, as they are about striking when it comes to preserving their entitlements, Europe would have a budget surplus of several quintillion. Today, and tomorrow, and likely everyday thereafter, Greece will be shut down as billions in non-taxable economic output is eliminated, trade is shuttered, and the tourism industry is dead. And since hospitals are also on strike, tourism may be the least of the casualties. Bloomberg reports: "Greek government workers shut down schools and hospitals and disrupted flights as demonstrators occupied the Acropolis in an escalation of protests against 30 billion euros ($40 billion) of additional wage cuts and tax increases unveiled this week." And no, there is no hope: "“Protests will increase,” said Spyros Papaspyros, the head of ADEDY. “Opting for the easy path of cutting wages and pensions can’t be accepted.” In essence, the Greek people would rather see their country bankrupt, the EMU destroyed and their nation locked out of the funding market for the next decade than have to retired at age 63. But at least they gave us democracy.... The same democracy that will see the Supreme Court soon side with the Federal Reserve over 300+ million US citizens.