Archive - May 2010

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.

Got Gold?

USSR-ization of the EU can now officially begin.

According to Jim Leech, president and CEO of the Ontario Teachers’ Pension Plan, the failure of pension plan legislation and design to keep up with the times is hurting the ability of Canadians to prepare for retirement. He's right and it's high time we revamp Canada's pension system.

Nothing exceeds like American Express.

All we can hope for is for this to get to trial. And any case which in its brief says: "As American citizens, the Plaintiffs allege the financial and banking system imposed on them by the Federal Reserve Banking sytem is a violation of their Constitutional and Human Rights. That the banking system practiced by the New York Federal Reserve Bank, owned and controlled by the Defendant Wall Street Banks, is the most sinful and evil PONZI scheme man is capable of devising" deserves a hearing.The ratings for C-Span will blow the Superbowl away. A 30 second ad slot will cost exponentially more as the case progresses adversely for the Federal Reserve, and the dollar gets increasingly devalued.

Couldn't resist.

The weekly ICI number for long-term domestic mutual fund flows is out, and not surprisingly, retail investors were bailing out in droves from the stock market even before the massive flash crash of May 6. In fact, in the week ended May 5, retail investors had pulled a massive $2.235 billion out of the market, after the S&P had dropped a mere 5% or so from the prior week. We are positive that when the number for the current week comes out, the outflows will be stunning now that investors have no faith left in the rigged casino "capital markets." Of course, this is simple to explain: with everyone and their grandmother habituated to a market that can only go up, at the first sign of jitteriness everyone and their grandmother bails, although only the big institutions really get to exit: everyone else has to hope the SEC will not cancel their trades the next day. And now that the market has been thoroughly discredited, the primary dealers have no choice but to ramp it up on no volume yet again, in hopes of pulling in the momos and the housewives into it as usual, courtesy of the CNBC cheerleaders, just to pull the rug a few days before the next trillion dollar bail out is needed and "justified." Oh, and whoever cares, retail domestic flows into stocks year to date are negative by $1.5 billion. Tells you all you need to know about who is buying this "market" - momo emptor.

On the other hand ...

Spreads rallied today with HY outperforming IG but neither IG nor HY able to get down to Monday's tightest levels as we note 3Y continuing to underperform 5Y (albeit both compressing today) as risk seems to be dragged nearer-term and credit is definitely less Utopian than equities.

Earlier we noted that the Austrian mint was on its way to depleting its gold reserves following "panicked buying" from Europeans, who now openly fear the demise of their currency. Now, courtesy of Slim Beleggen, we understand that the situation in the silver market is just as bad and has also spilled over to Germany: the contagion is no longer one of sovereign debt, but of precious metal physical inventory. The primarily silver focused (but holding gold as well) Kronwitter precious metal online retailer is not only not accepting any orders, but has entirely taken down its website. The only message left for visitors is (translated from German) as follows: "Dear customers, due to the enormous number of orders we can take at the moment no new orders via the Internet, email or fax."

5-minute Futures Charts + an open thread

All you need to know is highlighted in red (we'll leave the 10 paragraph recap to those who enjoy building narratives out of noise). We are now back to the old regime where a 25 handle move is based purely on Vitamin H(ope). And now, the EURJPY is completely decoupled as the carry trade is once again the USDJPY. At this point the Euro can fall to 0 and nobody will bat an eyelid: that signal has been terminally disconnected from all algos.

RANsquawk Market Wrap Up - Stocks, Bonds, FX etc. – 12/05/10