Archive - Jun 29, 2010

The U.S. Justice Department told BP Plc, Transocean Ltd. and three other companies associated with the Gulf of Mexico oil spill to provide the government with advance notice of corporate actions that may deplete assets that could cover judgments against them.

And it's not like Congress even fell for Kanjorski's fin-terrorism with the whole "market would drop 2000 if fin reg not passed." There still is some time to bribe what little borderline conscientious senators and congressment exist.

Better late than never. FCIC also adds it has not received some information requested from Goldman.

Although what are the going to find - that Hank Paulson used taxpayer money to bail out the firm, even as Goldman was betting against AIG and made billions, was made whole on all its impaired AIG collateral, had insider information on the firm's holdings courtesy of its own CDO efforts, covered its AIG CDS while allegedly in possession of material nonpublic information, and made billions in 2007 by shorting housing? Yeah, we know all that. And the best line of the year - Did Goldman make markets or make "Pyramids" FCIC's Thomas says.

Just announced that BP has now officially halted oil skimming operations due to Storm/Hurricane Alex. The firm is still continuing the actual LMRP capture. It would be sadly ironic if in its attempt to do too little too late and capture a few thousand barrels they end up completely busting what's left of the riser, and making the oil spill unfixable.

One of the less discussed topics by the propaganda machine is that with bond yields approaching record yields, and in the case of the 2Y below them, the S&P has no place trading over 1,000. There was a time when bonds and stocks would correlate, and as bond prices surged, equities would plunge and vice versa. Now that we live in HFT days where stock values are completely disconnected from fundamentals, and even the bond market, courtesy of the Fed's seemingly endless market interference,  it makes sense to extrapolate what the fair value of stocks would be implied purely based on bond yields stripping away for the Fed. Attached we present a very simple regression analysis between simple 10 year spreads and the S&P, and the 2s10s (steepness between the 2 and 10 Year) and the S&P. What both analyses indicate is that stocks are approximately 30% overvalued, at least based on historical regression patterns relying on yields to imply stock prices. Yet even though this analysis is purely statistical, here is a simple extension: with US stocks at about $13 trillion in market cap, if one assumes the suggested 30% haircut the result is $9.1 trillion in fair market value. Considering that the Fed has pumped $2.5 trillion in the form of monetary stimulus, and Obama's various fiscal stimuli now amount to just over $1 trillion, that explains the delta. Bonds are implying where stocks should be almost to the dot, absent the $3.5 trillion pumped into stocks by the administration and the Chairman. Fair value of stocks, when stripped away from the printer and Congress, is 750.

From Bloomberg: "IMF is working to develop a precautionary credit line, MD Dominique Strauss-Kahn said." Last time they did the same with the New Arrangements to Borrow (discussed here), on April 12, a $1 trillion bailout followed. Get ready folks. Europe bailout two is coming.

HFTs baby. HFTs. They just provide liquidity.

Will the methane kill marine life in the Gulf? Cause global warming? Bring on tidal waves and firestorms? Here's everything you ever wanted to know about methane - INCLUDING woolly mammoth farts ...

RANsquawk US Afternoon Briefing - Stocks, Bonds, FX etc. – 29/06/10

Here is why the entire Liberty 33 trading desk is set on preventing a break of 1,040 in the S&P - as Goldman's trading desk technician John Noyce warns, the next stop in the head and shoulders formation, should 1040 be taken out, would be 865, not to mention a complete rout for global teleprompter stocks post the mid-term elections.

Goldman off to the races as 3 reports confirm that the captured and bribed congressmen and senators are about to drop the $19 billion bank levy in order to win the support of Scott Brown and others who demand that banks gradually lose every expense item from their P&L over time, and have revenue translate to net income.We anticipate more such 11:59th hour horsetrading, as the entire already worthless bill is reduced to one ply toilet paper for Wall Street's CEOs.

Zero Hedge's view on the systemic threat that HFT poses to markets, a topic beaten to death on the binary pages of this website, is gaining ever more supporters each day. The latest to lament the lack of imagination, creativity, and work ethic, and to caution against the greed, bandwagoning and groupthink of the binary churning crew know as the HFT lobby is Paul Wilmott, in yet another scathing critique of all that is rotten with modern market structure. One would hope after 10 years of increasingly more vocal complaints and a few hundred more flash crashes, even the incompetent illiterates at the SEC will finally pay attention and put an end to this travesty.

Larry Kudlow is selling this report as good news. I think it stinks

The teleprompter also says that economic headwinds are due to concerns about Europe, and that the US must extend unemployment benefits to boost jobs. What can one even say at this point... The lunatics are firmly in control. We will keep listening to hear when Obama tells the general public that the Fed will stage another year long melt up as he did in March of 2009, and report promptly.

$2,000 in tax increases will be needed per household to cover increased government social service spending by 2015. This figure then soars to a mind blowing $12,636 by 2050. We are now paying the piper for 30 years of tax cuts and spending increases. Sure, we won the Cold War, but we did it all on an American Express card, and have been rolling over the balance ever since. The winner of elections from now on is basically irrelevant, as our problems have grown to the point of insolvability.