Archive - Jan 2011

This is a fairly detailed review of Dine Equity (DIN), pre-refinancing.

Following tragic days such as yesterday, some form of levity is always welcome. Which is why we present A. Joseph Cohen's latest. Let the joyous merriment commence.

Salon provides some unpleasant additional information on yesterday's headline news, which many had already suspected: namely that Loughner likely did not act alone. "Pima County Sheriff Clarence Dupnik said at a news conference in Tucson on Saturday that authorities may have a photo of another suspect." Unfortunately, with a nation increasingly on edge, this possibility will likely turn out to be true. We can only hope that other like-minded individuals do not take this event as an escalation signal, and proceed to take vigilante "justice" into their own hands.

Four years ago to the day from Saturday, a team of "experts" from ACA Management took the elevators to the 29th floor of 590 Madison, the then address of Paulson & Co., and sat down to discuss the structuring of a CDO. For both firms, this was supposed to be a by the numbers transaction: ACA, which had the financial acumen of any borderline retarded rating agency, was going to provide the wraparound insurance and be the portfolio selection agent in a synthetic CDO, while Paulson & Co. would be the transaction sponsor, and which, through Goldman Sachs, would indicate on various occasions, that it was a beneficially interested party, and represent direct and indirectly that it was long the equity tranche: an indication that it was beneficially inclined for the success of the portfolio. Little did ACA know that Goldman would assist Paulson in lying to investors about the fund's orientation, and the numbers in question would be one billion for Paulson and a comparable loss for everyone else. The CDO in question is of course Abacus, and has since resulted in the biggest ever SEC settlement with an investment bank, pardon, governmentally subsidized hedge fund. And while Goldman may have thought that the settlement put the embarrassing Abacus situation to rest, ACA certainly harbored no such intentions, and on January 6 filed a lawsuit against Goldman seeking monetary and punitive damages. The reason: ACA claims, and has evidence, that despite Lloyd Blankfein's representation to Congress that it was merely making markets, and did in fact nothing illegal, the reality was far different. In fact, as ACA demonstrates in the attached filing, Goldman repeatedly represented that Paulson was long the equity tranche, and neither Goldman nor Paulson did anything to debunk such an assumption. In fact, in solicitation materials Goldman misrepresented outright the economic interest of the transaction sponsor. We are confident that as many other firms that loathed doing their own due diligence (of which ACA is most certainly guilty) realize that Abacus is still a mini goldmine, we will see other such copycat lawsuits, as banks, primarily those out of Europe (and preferably still in business), attempt to collect a few hundred million here and there.

I ran 1200 comments from the Representative Gifford post through the word cloud generator...

The implications of the crash of 2008 have made one thing very clear. China has emerged as the engine of growth in the world. The US became the land of sub-prime loans, and Europe is the land of finely dressed paupers. The Europe of today is not the Europe of old.

Hooray…Happy days are here again! That is exactly what the elite would have us believe with the 9.4% unemployment number in this huge CONfidence game otherwise known as the USEconomy. We were having dinner at my in-law’s house and I had overheard the TV playing in the back ground. At one point, I thought I had heard the squealing of teenagers who were fawning over Justin Beiber. Instead, it turned out that it was someone on the news reporting the new, much lower 9.4% unemployment rate. I could hear the panting of excitement spoken by the breathless reporters who were interviewing very serious economists about this new 9.4% rate. The news aired their personal interest piece about a girl who was just hired at an internet company. She commented with the utmost confidence that the economy was getting better!! You have all heard that saying, “it is a recession when your neighbor loses a job, but when you lose a job it is a depression.” Well, according to her, we are out of her depression. But alas, this is all a dream and the media is using their very best, tried and true propaganda to keep the people from getting too upset with reality.

Simon Hunt, founder of Brook Hunt, puts a dent in the dreams of all those who expect to see a continuing surge in copper prices throughout 2011 and further.  The copper specialist, who has since left the firm he founded and is now head of Simon Hunt Strategic Services which specialises in copper, global economics and China, is arguably one of the premier experts on the topic of copper. It therefore behooves the copper bulls to pay attention to his latest interim note which contains "our principal reasons why copper
prices this year won?t live up to the hopes of so many bulls." And his long-term vision is about as scary as they get: "Peak prices
for 2011  will be experienced in the first quarter of the year, if they
have not already been seen. Prices will then fall until around the start
of the fourth quarter, hitting a low of some $5500. Recovery will
follow rising parabolically in 2012 to some $14,000 by the end of next
year.  This will signal the end of the gaming of copper prices. A return to
global recession, deflation and the destruction of large end uses of
copper will see prices crashing to levels long since forgotten - to
under $1500 by 2016. It will be at that point that the real
restructuring of the industry will take place.  Future trend growth
rates for world refined copper consumption will be below 2% a year
implying that marginal producers will be closed down. It  is not a
shortage of supply that will shape the future of copper but a shortage
of required material for furnaces." Full note attached.

And now back to finance. From John Noyce of GS FX sales, one of the better chartists out there, here are the charts that matter in the next week. Of particular note: dollar strength, silver weakness, range bound rates, rate-USD correlations, some interesting observations in a secondary pair of EURKRW, the bullish key day reversal in the USDJPY, the derivative nature of the AUDCAD as a China/US proxy, and more.

"You know that Republicans will yell about the evils of partisanship whenever anyone tries to make a connection between the rhetoric of Beck, Limbaugh, etc. and the violence I fear we’re going to see in the months and years ahead. But violent acts are what happen when you create a climate of hate. And it’s long past time for the GOP’s leaders to take a stand against the hate-mongers." Paul Krugman

Details emerge about the shooter Jared Loughner. In addition to numerous details about his life, such as his favorite books, among which are The Communist Manifesto and Mein Kampf, we find the following suicide video. Incidentally his MySpace site has already been taken down.

Per the AP, the gunman in Arizona lawmaker's shooting identified as Jared Laughner, and the weapon used was a pistol with an extended magazine. According to Jay Bookman, Laughner is "ex-military and fought in Afghanistan."

This morning, in an unspeakable tragedy, a number of Americans were shot in Tucson, Arizona, at a constituent meeting with Congresswoman Gabrielle Giffords. And while we are continuing to receive information, we know that some have passed away, and that Representative Giffords is gravely wounded. We do not yet have all the answers. What we do know is that such a senseless and terrible act of violence has no place in a free society. I ask all Americans to join me and Michelle in keeping Representative Giffords, the victims of this tragedy, and their families in our prayers.

"It is with the deepest sadness that we have received word of the attack on Congresswoman Gabrielle Giffords, members of her staff, and her constituents. This terrible act of violence is a national tragedy, and today is a very sad day for our country. My prayers, and the prayers of all Members of Congress, go out to her husband, Captain Mark Kelly, their family, and to all of the staff and others who were victims of this horrible attack. Congresswoman Giffords is a brilliant and courageous Member of Congress, bringing to Washington the views of a new generation of national leaders. It is especially tragic that she was attacked as she was meeting with her constituents whom she serves with such dedication and distinction."

My sincere condolences are offered to the family of Rep. Gabrielle Giffords and the other victims of today's tragic shooting in Arizona.

On behalf of Todd and my family, we all pray for the victims and their families, and for peace and justice.

- Sarah Palin