Archive - Oct 17, 2011

Want to know what Occupy Wall Street is about?  Watch this ...

Talk about being caught between a rock and a hard landing. China just reported (completely fabricated) Q3 GDP of 9.1%, which was the slowest GDP growth in the past 2 years and well below expectations of 9.3%, which has sent the Hang Seng index down to -3% on the news, and which confirmed that the Chinese economy is slowing... but not enough for the PBoC to release the spigots. Because just after the GDP data we learned that Industrial Production was chugging along at a relatively healthy 13.8% y/y vs Exp of 13.4% while new home prices gained in 69 out of 70 cities on the year. Unless China wants more spontaneous inflation "appreciation" days by its hundreds of millions of migrant workers, it will have to wait for its economy to cool even more before it does anything, meaning that even as it caught in a very unpleasant place, the aftereffects of Bernanke's inflationary exports are still keeping the economy hot. And those hoping that China will be the much needed growth catalyst (sure, we may get the occasional RRR cut but that will be all) will be disappointed. And because suddenly everyone is a China expert, yet doesn't realize that 9.1% is effectively the equivalent of 1.1% stall print in an economy where 8.0% growth is the minimum threshold for social order and stability, please read this.

When back in 2010, Lehman examiner Anton Valukas exposed the bankrupt bank's Repo 105 practices (which subsequently we learned were also partaken into by most other banks, although the trail ends there and nobody was prosecuted for it, let alone went to jail -after all, everyone was doing it, and everyone knew about it), many were shocked and appalled that such a blatant window dressing practice was allowed to continue quarter after quarter. Which is why we suppose nobody will be surprised to learn that glaringly "in your face" window dressing continues to this very day quarter in and quarter out by the same Primary Dealers who already leech billions in free Fed (i.e., taxpayer) money courtesy of a collusive BWIC/OWIC spread-to-market in the Fed's daily POMOs. The quote-unquote shocking chart below is one we have demonstrated on numerous occasions in the past: it shows total primary dealer assets on a weekly basis as reported publicly by the New York Fed. We have made it clear time and again, that this chart demonstrates nothing short of the end of quarter window dressing, when PDs convert their asset holdings into cash to make their Tier 1 Capital much more robust than it truly is. After all, none other than JPM and Citi were praising just how prepared for Basel III they are with their "sterling" capitalization ratios... which were only sterling courtesy of precisely the highlighted window dressing which occurs each and every quarter. We expect nothing less from Bank of America and Morgan Stanley when they report their own numbers in the coming days. We also expect the regulators to do absolutely nothing to prevent this blatant abuse of fiduciary duty which has no other purpose than to hide the true sad state of America's banking system.

What is oddest about the below cartoon is how, in retrospect, it was absolutely spot on one 1 year ahead of the formation of the Federal Reserve, and shortly, about one century ahead of its destruction. We are happy to see that even William Banzai may have finally met his match, even if the temporal displacement is modestly skewed.

And from denial, or the comic and alcoholic, we shift to far more important things, such as acceptance, and actually dealing. Earlier we discussed the broad strokes about the imminent announcement by Ron Paul of his Plan to Restore America. Next, watch live as the Texan reveals the details of the only plan that has any sense of making even remote sense from a mathematical standpoint: start time 6pm EDT / 3pm PDT.

This is not what Europe needed, 6 days ahead of the G20 ultimatum's expiration for Europe to somehow fix itself, and hours after Deutsche Bank said the rating agencies may go ahead and put France on downgrade review. Just out "Moody's notes that the government's financial strength has weakened, as it has for other euro area sovereigns, because the global financial and economic crisis has led to a deterioration in French government debt metrics -- which are now among the weakest of France's Aaa peers." As for the timing... "Over the next three months, Moody's will monitor and assess the stable outlook in terms of the government's progress in implementing these measures, while taking into account any potential adverse economic or financial market developments."

You know the drill: every time the TOTUS says "pass this bill" => shot, and 5 shots for every instance of "win(ning) the future." And if he actually says "the 1%", you have to finish the entire bottle. May the most cirrhotic man, woman or child win.

To anyone who is neither too young to recall, nor just got their first ever Bloomberg terminal a few days ago, CROX holds a special place in the heart since this perpetual momo stock, was without doubt the best coincident indicator of the market top back in 2007: the stock peaked just two weeks after the all time high in the S&P in October of 2007, only to collapse and never recover. Lightning may just have struck twice. Following an announcement that CROX cut guidance from $0.40, which was also the street's consensus, down to $0.31-0.33, the stock was halted for 30 minutes, only to reopen and plunge as much as 38% lower. The biggest loser? Not Paulson (for once), but Fidelity, which as the following chart from CapIq shows, decided to add 6.3 million shares in the Q2 quarter (having held nothing before), making it the second biggest holder. Oh well. There goes $50 million and some analyst's job. The biggest question, whether CROX part two is the same market peak signal that is was back in 2007 remains to be answered.

Putting the cherry on top of an ugly day for bulls comes global tech vanguard IBM, which did not use the DVA wildcard and still saw its earnings beat already reduced expectations of $3.22, printing at $3.28... but... it did miss the consensus top line of $26.34 billion by just under $200 milllion, at $26.16 billion. Since this the first time in probably forever that Big Blue has not beat the top line, the stock is certainly not too happy after hours. That this is happening despite the company's boost to its EPS forecast is quite troubling.

First we have Credit Suisse saying 66 European banks will fail the 3rd stress test, and will need hundreds of billions in fresh capital, something the market ignored entirely last week but may want to reevaluate now that the idiocy appears to have subsided. And now, inexplicably, we have Deutsche Bank warning that France may well be put on downgrade review by year end. "We highlight in this note that the French corporate sector is already financially stretched, with poor profitability and large borrowing requirements. We consider that the deterioration in economic conditions is now creating a distinct risk that France could be put under “negative watch” by the rating agencies before the end of this year. We think that France has the wherewithal to react to such an outcome and could avoid an outright downgrade by taking corrective measures quickly, but this naturally would be a very sensitive political decision a few months before a major election." Why either Credit Suisse or Deutsche Bank would jeopardize their own existence by telling the truth, we have no idea. If either of these two banks believe they can survive a vigilante attack on French spreads, and the subsequent shift of contagion to none other than Germany, we wish them all the best. Yet that is precisely what will likely happen, especially now that the market can no longer pull the trick it did for the past two weeks, and stick its head deep in the sand of complete factual avoidance.

Better late .....here is all you need to read.

Zero Hedge is the last to cut Wall Street, with its rampant criminality, conflicts of interest, and corruption, any slack - in fact we are often the first to expose it. That said, we have long found it surprising that popular anger is focused on this particular group of individuals, instead of targeting the just as, if not far more, culpable for the current economic collapse enabling focal point known as Washington D.C. As has been discussed previously, it is no surprise that none other than the president has been quick to embrace the Occupy Wall Street movement and its offshoots as his own: after all it cleanly and efficiently deflects attention from his own near-3 year performance as president. Surely Obama is neither the first (nor last) to recognize that the scapegoating of a "minority" group (as the Wall Street "1%" clearly is) and use it as a catalyst for class warfare, is a historically very successful tactic. Well, while thousands of people may express their displeasure with their plight openly before the traditional symbols of Wall Street, it would appear that Obama is failing in his attempt at global diversion from the place where popular anger should truly lie: Congress, Senate, and of course, the White House, without whose (and by 'whose' here we clearly envision Tim Geithner, Hank Paulson and Ben Bernanke) blessings Wall Street would not exist in its current form. Yet it does, and many have figured that out. According to a brand new poll by The Hill, "in the minds of likely voters, Washington, not Wall Street, is primarily to blame for the financial crisis and the subsequent recession. The movement appears to have struck a chord with progressive voters, but it does not seem to represent the feelings of the wider public. The Hill poll found that only one in three likely voters blames Wall Street for the country’s financial troubles, whereas more than half — 56 percent — blame Washington. Moreover, when it comes to the political consequences of the protest, voters tend to believe that there are more perils than positives for Obama and the Democrats." Sorry Obama, your attempt to demonize bankers (who richly deserve the public pariah status they have achieved, not least of due to the in vitro world they occupy, where anything less than $1 million is pocket change) has failed, and the people recognize that real social change, one that must and will impact Wall Street, has to begin with the commodity most often purchased  by Wall Street: politicians... such as yourself.

For all its criticisms, if there is one thing one can say about Goldman, is that unlike their pathetic TBTF cousins in the US financial industry (JPMorgan, Citi, and shortly Morgan Stanley and Bank of Countrywide Lynch), it can report a loss like a man. Which, in less than 24 hours, it may have to do, for only the second time since its 1999 IPO. As Bloomberg notes, tomorrow the market expects the vampire squid to announce at 8:00am Eastern that it had a loss driven by lower revenues and debt and equity marks. Also, unlike the "others", we are confident Goldman will not hide behind such blatant accounting gimmicks as DVA and loan loss reserve releases (the second because the firm never got into the lending business... on the other hand, the FDIC-insured bank also has yet to open any ATMs, making one wonder just why it continues to have taxpayer backing as a bank holding company, but we digress). Here is what to expect tomorrow from Viniar and Blankfein, courtesy of Bloomberg. Naturally the one thing nobody expects is the announcement of a succession event at the top. Considering the recent step function in popular "appreciation" of financial innovation, we believe a Blankfein phase-out announcement could be in the works. One thing is certain: Ferrari dealerships will not be happy come Christmas as bonuses this year will be poor to quite poor, if any.