Archive - Jan 7, 2011

For all those with a penchant for crunching manipulated numbers and wish to make a change by taking on the Fed (ironically, making some fiat in the process), this may be your chance: Ron Paul, chairman of the Domestic Monetary Policy subcommittee, and his chief of staff Jeff Diest are seeking to hire a young economist, “thoroughly Austrian, and preferably with an advanced degree. The candidate needs strong knowledge of the Fed and monetary policy generally, and must be an effective writer. He or she will be responsible for organizing hearings; summarizing data and Fed actions for Dr. Paul; writing statements; dealing with Financial Services committee staff; and various other tasks.” Sorry Joe LaVorgna, despite your ubercreative "weather worker" adjustment, you are on the exclusion list.

RANsquawk US Afternoon Briefing - Stocks, Bonds, FX etc. – 07/01/11

A few days ago some were very surprised by the previously announced decision from the SNB that it the bank would cease accepting Irish bonds as collateral. Considering that the Swiss National Bank is now the only responsible institution left in Europe, now that floundering Jean Claude Trichet is willing to accept even used condoms at a 120% LTV as long as they have a sterling CCC- rating by S&P, we fail to see how this is surprising. That said, those same people may be even more surprised that the SNB has just added Portugal to its "restricted" list. The FT reports: "The Swiss National Bank confirmed on Friday that it had stopped accepting Portuguese government securities as collateral for repurchase (repo) agreements, adding Lisbon to Dublin among the eurozone governments on its ineligible list. The decision to exclude both countries follows steep downgrades of Portuguese and Irish debt and was based on the Swiss central bank’s strict, but highly transparent, acceptance criteria." What this means is that on Monday JCT will be very busy BTFD in Portuguese bonds. He will have many opportunities to do so, as everyone holding the paper will be bailing in droves. Furthermore, this disclosure could not have come at a worse time: with Portugal slated to hold another major bond auction next week (following last week's abysmal 6 Month Bill auction), there is actual risk the entire affair could be a failure and set the European sovereign market ablaze, kicking off the 2011 round of "bail out Europe."

Primary Dealers know all about fight or flight. And boy are the flighting. After yesterday more than half of the POMO consisted of one single CUSIP, with the bond auctioned off just a week earlier accounting for well over 50% of the entire operation, today the New York Fed, following our ridicule that Brian Sack allows such bond flipping it is virtually borderline criminal churning decided to add the most recently auctioned off CUSIP, the PLP8s of 12/15/2013 on the exclusion list, meaning PDs were stuck with their holdings in the name. The Fed, however, did not prevent any of of the previously auctioned off securities from being monetized. And what a selling frenzy those were: of today's $7.2 billion POMO, 75% of the operation consisted of the monetization of the two most recently permitted securities: the 3 Years auctioned off in November (PU8), $3.4 billion worth, and October (PB0), for $2 billion. This is a stunning rush to get the hell out of dodge, and confirms that Primary Dealers can not wait to sell every single piece of paper purchased recently via the PD auction take down. What this also means, is that any pretense the Fed had that it was not monetizing debt directly is now gone. Brian Sack should just expand the SOMA allocation per auction, and add the Fed as a legitimate 4th bidder party: after all nobody is fooled by the Treasury->Primary Dealer-> Fed charade any more. And at least that way, the PDs will stop collecting commissions on arbitrary bid/ask spreads.

These are an interesting group of charts.

This is not quite the end of Bank of America (and Wells.. suck it up Munger), but it very could be the start, unless Brian Moynihan's bank now spends hundreds of millions if not much more more bribing judges across the country... The only winners out of this? The plaintiff's bar as usual. Luckily, at this stage burying fraudclosure will be far more difficult for the kleptocratic banker mafia syndicate...

Whitney Tilson, the consummate "value investor" is the latest confirmation of what we have been claiming since the beginning of 2010: namely that with the Fed's intervention in capital markets, those who plan on making money using a gold old fashioned long-short, 130/30 portfolio distribution, value trading are in the bullseye of central planning. What has happened over the past year, when courtesy of the Chairman's endless market manipulation, is that the worst of the worst stocks, those traditionally shorted by all, the 5x beta crapshoots, were the ones the screamed higher, with State Street and BoNY making it impossible to hold shorts in anything, not to mention repo desks calling in borrow on a daily basis, and killed traditional fundamental analysis, where good companies are purchased, and bad ones are shorted. Congratulations Bernanke: with your reckless destruction of prudent capital allocation decisions, you will put every single "value investors" out of business. Which is why we feel for Whitney, who despite his seemingly constant appearance on CNBC at one point talking his book, returned just 10% net for his fund, compared to the S&P which did about 50% better. Hopefully the redemption requests leave something in their wake. On the other hand, like every single self-respecting asset manager, Tilson blamed the bulk of his underperformance on Netflix. Of course, he is absolutely right: the company is worth exactly nothing, but it will likely take a few years for the momo crew to figure it out. By then, all shorts in the name will be but a memory.

chairman bun s. bernanke speaks...through the ALI G Translator

*BANKS LOSE PIVOTAL FORECLOSURE CASE IN MASSACHUSETTS HIGH COURT
*MASSACHUSETTS TOP COURT DECIDES CLOSELY WATCHED IBANEZ CASE
*MASSACHUSETTS DECISION MAY AFFECT FORECLOSURE-CRISIS CASES

This is the last chart we will dedicate to today's B(L)S non-farm payroll data. It shows nothing less than than just how much of a factor the "seasonal adjustment" has become in every December data series, and is the definitive evidence of why only the most gullible but any credibility in the BLS seasonal adjustment mechanics. Unfortunately far from indicating a one time seasonal adjustment, it is no yet another secular trend policy tool, whose goal is to offset the actual drop in jobs. Indicatively while the number is now well over 2x greater than it was in 2000, the US population has hardly tripled over the past decade, requiring such a dramatic increase in fudge factors.

A few words on “adequate diversification” from a legendary hedge fund manager. Emphasis is our own . . .

We have been claiming for almost half a year now that with the policy tool known as stocks now completely irrelevant, the places where traders can still find some Fed-free volatility (for the time being) is in the FX and bond markets. We are confident that in 2011 the MOVE bond vol index will be far more relevant that then the VIX, and that 200 pip daily moves in key FX pairs such as the EURUSD will be a normal occurrence. As validation of the first, just after the NFP number was announced, it was not US stocks, but the massive German treasury market that was halted due to a surge in volatility. This bears repeating: the massive, presumably liquid, and critical sovereign debt market of Europe's biggest economy was halted! We look forward to many more such examples of connected vessels, as computer, robots and the few remaining homo sapiens traders, pursue only modestly manipulated markets in which to trade volatility.

Watch Bernanke sweet-talking his puppets in the Senate Budget Committee live and commercial free after the jump.

We present two takes on the NFP number: first from Knight Capital, and second from most recent entrant in the ridiculous propaganda drama queen race, Goldman Sachs, which is most gladly selling ES as its customers are buying with visions of S&P 1,500 as per David Kostin's latest chartmongery.

The non-seasonally adjusted underemployment rate (U-6), probably the one metric that has the least possible amount of Department of Turh intervention, has come at 16.6%, a jump from 16.3% in November, and the highest since July 2010. It is also the third consecutive month of deterioration, roughly since QE2 started. There goes your economic recovery. But at least quantitative easing is boosting the wealth effect of all those employed (on Wall Street) and adding to the poverty effect of everyone else. In the meantime, can someone please switch the ABC confidence index with the ADP bullshit indicator in terms of data significance?