Archive - 2010

The company which came to investors two years ago via Goldman Sachs peddling the biggest turd of a business model caked with 10 layers of lipstick for a global refi, and proceeded to file for bankruptcy before even one coupon payment was made (we hope that's a warning to Hexion 1.5 lien investors... wtf is a 1.5 lien anyway?), is throwing in the towel once again, and preparing to file for Chapter 11 for the second time in as many years according to the WSJ. Sucks for investors Sopris Capital and Aspen. We hope they managed to extract some equity out of this brilliant investment while they had the chance.

Meeting with the head G-Man. FBI Director Robert Mueller gives his take on the Google Affair. Welcome to the new Cold War. Where is my 20 terabytes of data? One country’s criminal is another’s national hero.

• JP Morgan Chase & Co: 51.50, last 46.3 +5.25
• Goldman Sachs Group Inc: 104.50, last 100.5 +4.00
• Merrill Lynch & Co., Inc: 114.50, last 105.5 +9.00
• Morgan Stanley: 119.50, last 113.5 +6.00

JP Morgan earlier reported better than expected earnings on weaker than expected results. While the 9 am conference call will provide additional data, here are the key data points from the provided slide deck.

• As anticipated, China FX reserves surge to $2.4 trillion; no accompanying TSY purchasing (Bloomberg)
• Steven Pearlstein: A transaction tax is the answer (WaPo)
• Stiglitz: Why are we letting Wall Street off so easy? (Mother Jones)
• JPMorgan beats profit, revenues miss; shares, futures fall on cautionary language from Dimon (WSJ)
• Euro falls most in month against dollar on Greece; oil drops (Bloomberg)
• The Greek CDS curve is now inverted (FTAlphaville)
• Brooksley Born wants the public—and Wall Street—to understand unregulated derivatives’ role in the crisis (City Journal)
• Separating investment banks will not make us safer (FT)

• Asian shares were mixed, with tech stocks gaining after solid earnings from Intel.
• China charged US with “backsliding” toward protectionism; warns on Google.
• Chinese equity funds had a third week of outflows as the central bank tightened lending.
• Foreign Direct Investment in China more than doubles to $12.1B in Dec as economy recovers.
• Jobless Claims in US increased 11,000 last week to 444,000.
• Mortgage rates mostly fell in the past week, 30-yr fixed-rate mortgages back toward 5%.

This paper considers the potential liquidity risks related to interoperability ~ the issue at the center of the current multi-jurisdictional regulatory review that has temporarily suspended progress toward increased competition in equity clearing. It discusses several options regulators and CCPs could consider to mitigate the systemic risks that could be triggered from liquidity risks in multi-CCP links, and also presents options to minimise the credit risk to CCPs arising from the failure of an inter-operating CCP.

RANsquawk 15th January Morning Briefing - Stocks, Bonds, FX etc.

Pray tell, how can anyone in their right mind trust the economic reporting of company that says it is running 13 cylinders of an 8 cylinder engine leading the world to economic recovery when they overtly, and without denial, censor free speech and publicly outlaw research and even Internet searches on government activities?

The grave unemployment situation not only undermines the economic health and recovery hopes, but is also acting as a major source of financial strain on the Fed's books. It is observed that the Fed has been taking in huge deficits on its books because of UI programs. The total UI withdrawals on Fed books in 2009 were $139 billion against deposits of just $31 billion received from states for unemployment. While the withdrawals in 2009 have increased by 320% when compared with withdrawals in 2007, the deposits have declined by 6.6%. The deficit has increased to nearly $107 billion from nearly no deficit, two years ago.

Are bond markets signaling the start of the Great Transition? Will inflationists or deflationists get the last laugh?

The Big Bonus story is coming out and boy is it going to stink. D.C. has done it's best to put lipstick on this pig. A talking down to the bank bosses and a 'see through' tax. That strategy is not going work.

Recently China has once again attained prominent status among the investment community, where while the majority still adheres to the old, permabullish view that Chinese risks are contained, increasingly more fund managers are convinced that the Beijing-based central-planned economy is due for a major pullback. One such one investor, as we pointed out previously, is Jim Chanos, whose exemplary track record means his opinion should never be ignored. Somehow we doubt Chanos is much insulted by Jim Rogers' derogatory remarks of his understanding of the China situation. He who laughs last...

We present critical observations by Corriente Advisors which incorporate all the salient ideas of Chanos, Edwards, Grice and other such skeptics into a fluid narrative which is a must read for all fascinated by the topic of China.

The EUR/AUD has been an important forex cross in the realm of risk and liquidity. Could a potential reversal be at hand, signaling the inevitable return to risk aversion and liquidity chasing?

Spreads were broadly wider in the US as all the indices deteriorated. IG trades 13bps tight (rich) to its 50d moving average, which is a Z-Score of -1.4s.d. At 80bps, IG has closed tighter on only 6 days in the last year. The last five days have seen IG flat to its 50d moving average. Indices generally outperformed intrinsics with skews widening in general as IG's skew decompressed as the index beat intrinsics, HVOL outperformed but widened the skew, ExHVOL outperformed but narrowed the skew, HY outperformed but narrowed the skew. 17.6% of names in IG moved more than their historical vol would imply as higher vol names outperformed lower vol names by 2.07% to 3.37%. IG's vol is around 4.38% per 1 day period, which leaves 96 names higher vol and 29 lower vol than the index.