Archive - Jan 2011
Strength in Canadian equities have helped Canadian pension plans surge ahead of their pre-financial crisis levels of 2008...
Ben Bernanke is insane. I mean neither insane in a flippant sense, nor in the ordinary sense (as in plain nuts), but an even more insidious form of insanity, namely the insanity of one who cannot see the world as a place outside his own thoughts and beliefs. I am speaking of the insanity of one who believes that all things can be reduced to a simple issue or pattern, the insanity of which Chesterton spoke in his essay The Maniac.
Long-time readers will excuse us as this post is almost identical to one we put up in December 2009 when the debt ceiling was last about to be breached. And future readers will likewise have to excuse us as this post will be put up again some time in November 2011, when the next deadline for raising the debt ceiling approaches. But for now, for those who still are confused by the extend and pretend options available to the US treasury, here is Goldman's now-annual (soon semi-annual, then quarterly, etc) analysis of what Tim Jeethner's can do to avoid bankrupting the United States of America, if only for the time being.
I've written on this subject before, and my bottom line is that its a net positive for society for people who know what they're talking about to do so in a public forum, even if in order to do so they must use a pseudonym. I want to take a survey here and see what you all think, but before that, I want to clarify a few things:
Courtesy of Gen Ben, we passed another landmark in rates: the 2s30s closed at an all time high of just over 400 bps. Ths is the widest closing spread in history. What does this mean? Simple: instead of taking the inverse method which has worked so well in equities, where banks make money through ever-increasing trading volumes (well not anymore) at the expense of margins, with ever more incursive electronic trading, the Criminal Reserve has decided to pull a Harry Winston and get banks to get their entire P&L from the least amount of transactions (in this case mortgages). Why so? Because as we pointed out recently, mortgage origination and refinancing volume has plunged to the lowest in a year. And with no volume, bankers are forced to make money increasingly more on spread from those who are desperate enough to go through the pain of the entire mortgage origination nightmare, even if (or especially) it means ending up with a mortgage that has no actual mortgage note (yes, that is a factor... in addition to mortgage rates that continue to be close to year highs). In other words expect to see the 2s30s to go even steeper until it is made obvious that banks will no longer make money on the curve. At which point it will be the Fed's obligation to go out and start buying up the long-end in mortgages, just like in March 2009. As stated before, we expect this, together with the required market crash to spawn QE 2.1+ Lite to occur some time in April, May, around the time the extra $195 billion in SFP liquidity is absorbed by the market. In the meantime, the Fed can only hope that stocks continue rising ever higher so as to have as great a buffer as possible from which to enter free fall. And 'trivial' events like Egypt are not allowed to stand in the way.
Treasury yields are "blinking red", but the Fed keeps acting like nothing's wrong. What's the deal?
For those who are getting tired of Al Jazeera's third party Egypt coverage, yet find the real time #Egypt stream on twitter overwhelming, below we present an interface which allows mapping (and this gives a far better sense of orientation) of what is going on where, on in a real time basis. We feel that ahead of tomorrow's million man (+) march which will likely end up with at least one presidential palace being sacked this will be quite a useful function to track the ongoing revolution.
Earlier today, SAC Capital filed a 13G in which it disclosed an incremental 2.374 million share stake in Orexigen, or 5% of the total, which also happens to be the stock's 10 Day Average volume. Why is Orexigen special? The company is expected to announce a ruling by the FDA on whether its leading obesity drug candidate Contrave will be approved, just this afternoon. Of course, with old blue eyes indicating his last minute participation, we are 100% confident that the firm will pass with flying colors. We are also confident that i) Gerson Lehrman and other expert networks have quite a few experts on how Contrave is viewed by the regulators, and/or ii) that Sigma and SAC may well have retained the services of recent portfolio managers who in their previous life have had quite an extended facility with the nuances of the Contrave-focused metabolic processes.
RANsquawk Market Wrap Up - Stocks, Bonds, FX etc. – 31/01/11
Stocks closed nicely up, and why not: the investing public which is now bored with any revolution longer than 15 minutes did not see things burning, people getting shot or buildings getting blown up (and there was that whole Flip That Bond thing earlier) so it makes all the sense in the world. Yet a far more notable move was that of Rice, which traded more or less as expected earlier in the day. As can be seen on the chart below, RRH jumped by 50 cents, the maximum allowed before a limit up lock, to close $15.51 on the CBOT, which is 5.5 cents away from the one year high. We are fairly confident that tomorrow we will see a new 52 week high, as evil, evil speculators decide to go for the ultimate PBOC put. But before that happens, if we are correct that the world's spec crowd will test the inflationary equivalent of the global Bernanke put, it will go far higher. And when Al Jazeera starts sending riot pictures not from Egypt, but from the heart of Asia (consumption data here), we are 100% confident it will get very messy, very quick.
After a month and a half ago, a Virginia Judge found a key provision of the healthcare law unconstitutional, today Judge Roger Vinson from the federal district court in Florida has found the entire healthcare law void. "I must reluctantly conclude that Congress exceeded the bounds of its authority in passing the Act with the individual mandate," Vinson writes. "Because the individual mandate is unconstitutional and not severable, the entire Act must be declared void."
Treasury Sees $194 Billion Drop In Borrowing Needs Due To SFP Program Roll Off, Over Half A Trillion In Financing Needs For Jan-Mar QuarterSubmitted by Tyler Durden on 01/31/2011 15:19 -0500
Today, the Treasury issued its revised merkatble borrowing estimate. And while the last time the Treasury issued this forecast, it had expected a $431 billion need of marketable borrowing financings (while expecting a $454 billion total Financing need), this number has now plunged by $194 billion to $243 billion. But don't be fooled that this is due to an expectation that treasury revenues are suddenly going to pick up. Oh no. In fact, total Financing Needs have increased by $49 billion to $503 billion for one quarter! The only reason why the marketable borrowing estimate has plunged is due to the roll off of the SFP program, which will bring down EOQ cash from a previous estimate of $270 billion to $65 billion, a $205 billion decline in cash. In other words, the Treasury now sees adding $237 billion in marketable debt to the total December 31 debt which means that the US will be close to breaching the debt ceiling by the end of March even with the SFP program roll off. What is amusing is that the Treasury now expects financing needs in Q2 to plunge from $503 billion to $258 billion, which in turn will need $299 billion in marketable debt to be issued over the April-June time period. We are willing to write naked CDS, and sell the TVIX against this number being revised by at least 20% at the next forecast revision, some time in late April.
Now, $1 trillion is a tough number to get your head around. Here’s a little visualization to help you…Imagine you had a stack of $1,000 bills. $1 million would be a stack eight inches high. $1 billion would be over 800 feet high (think of the Washington Monument). And $1 trillion would be a stack 142 MILES high.
About half a year ago, after it became painfully clear that the BRIC concept was dead (which has since become quite obvious with surging inflation and liquidity tightening across the board, and markets in China, India and Brazil reacting appropriately), the man who was subsequewntly sent to exlie to manage Goldman's cloaca division, the GSAM which carries about the same clout on Wall Street as Bank of Lynch, penned the term "N-11." Supposedly, these were the countries that were expected to carry the world to the next massive leverage induced consumption boom. As a reminder: here are the countries: Bangladesh, Vietnam, Egypt, Iran, Pakistan, Indonesia, Nigeria, Philippines, Mexico, Turkey, Korea. Well... make that N-10 now... And soon to be N-0, as the policies of Jim's drinking buddy, Gen(ocide) Ben, become fully transparent to the developing world. That said, the N-11 list (RIP) is a great indicator of where speculator should be bidding all CDS to the limit up hilt (we jest... obviously CDS has no limit up locks... Unlike rice - which just hit one).
No, there is no "dis" prefix missing. Sorry. Today's "heat" map, which in places like a burning Cairo has a very peculiar double entendre, comes courtesy of the WSJ.