Archive - Jan 2011

This is not hate for Goldman, but elucidation & clarification regarding exactly what business Goldman, et. al. are actually in & how they generate the profits that they do off of their Client's Backs! Many think that Goldman is the best and brightest on the Street. Those guys went to the same schools, studied under the same teachers, graduated and employed using the same strategies trading the same products as everybody else. Get over the mysticism marketing bullshit.

When we noted last night that there was a Baltic fat finger index, we thought we were joking. Appears not. The BDIY has plunged by 4.5% overnight from 1,773 to 1,693, easily the biggest one day drop in a long time. And, more importantly, the index has just taken out the 2010 lows hit on July 15, when the BDIY last traded at 1,700. So in a normal world, one could argue, the fact that there no demand for shipping may actually indicate something. However, in this bizarro "5 year plan" politburo reality, this will likely result in futures once again surging as QE4.5 starts getting priced in.

The key events from around the world shaping today's Swiss watch melt up.

• Goldman Investment in Facebook May Draw SEC Scrutiny (Bloomberg) ...but won't
• Currency Carry Trade Losses May Bolster U.S. Dollar (Bloomberg)
• Brown Says Calif. Budget He Proposes Next Week Will Be "Painful" (Bloomberg)
• Special Report: California or bust (Reuters)
• When States Default: 2011, Meet 1841 (WSJ)
• Setup and Resolution (Hussman)
• China Promises to Buy Spanish Bonds (FT)
• Moynihan Fights Fires at Bank of America Amid Book-Value Doubts (Bloomberg)
• Italian Banks Wage `War on Cash' as Consumers Pass on Plastic (Bloomberg)
• Curbs On Realty Buys To Remain In 2011 (China Daily)
• Beijing Residents Rush to Register Cars on New Quota (Bloomberg)
• Obama urges Republicans to help him revive economy (Reuters), because $14 trillion in debt is for amateurs

Factory orders, auto sales, and the FOMC minutes…There is a POMO today, and each day henceforth until next Wednesday when the new POMO schedule is announced.

After last week the ECB experienced a rare event: a failed SMP sterilization tender, when only E60.8 billion of bids from 41 banks appeared to compete for E73.5 billion in recycle monetized peripheral bonds, this week it is back to smooth sailing, after JC Trichet mobilized the infantry and got every single bank to submit a bid: the number of banks participating in today's "liquidity absorbing" operation surged from 41 to 68, and the total amount of bids increased by a whopping 50% from E60 to E92 billion, a 1.4x bid to cover. And lastly while the marginal rate in the last auction of 2010 was 1% with full allotment, this time it was cut by more than half, at 0.45%, with 93.04% of the bids allotted at the marginal rate. Just what changed so drastically in the past week to justify such a huge surge in liquidity and confidence is just slightly baffling.

To all those who penned lengthy essays and activist missives to various law enforcement and judicial organizations in 2010 over the fraudclosure fiasco, we have one word: condolences. According to Bloomberg, which cited Iowa Attorney General Tom Miller, "The five largest mortgage loan servicers, including Bank of America Corp and JPMorgan Chase & Co may be the first to settle with 50 state attorneys general who are investigating foreclosure practices." It appears these attorneys general were all sequestered and advised of the now-traditional M.A.D. apocalypse that would follow if this latest iteration of Wall Street's corner cutting was pursued by the full extent of the law. In other words what many have claimed is the biggest fraud in MBS history is about to be swept under the rug in exchange for 30 pieces of silver wrtistslaps. In the meantime, disclosure such as that revealed by Allstate, which virtually proves that Bank of America was lying outright to investors about its portfolio quality, will be made irrelevant, and yet one more aspect of TBTF fraud will be institutionalized.

RANsquawk European Morning Briefing - Stocks, Bonds, FX etc. – 04/01/11

After Zero Hedge posted the King World News update that Carlos Slim may be looking at (re)entering the silver market fray by acquiring Fresnillo yesterday (following a comparable rumor spread some time ago by none other than the Daily Mail, which of course meant it was going to be bogus), the stock is reacting appropriately and has moved violently to the upside, 5% higher at last check. The FT, which has chimed in on this development this morning, believes that the Mexican billionaire may need to bid a hefty premium for the $19 billion company.

The Daily Mail is rapidly becoming the most discredited rumor spreading enterprise in the known universe. As if last week's completely bogus Imax rumor was not enough, today the newspaper is going to town on BP, claiming that Shell is interested in bidding up the name. While we couldn't care loss what the intangible benefit to the tabloid is from spreading these rumors which take about 2-4 hours to be refuted, we are stunned that investotrs, pardon, robots, are so stupid to keep falling for this. Then again, as all robots do now is scan headlines and trade accordingly (the faster the better), this is not really all that surprising. And once the momentum HFT algos are activated, it's off to the races. We cant't wait for Daily Mail to spread the next Radioshack LBO rumor whose sequential number may have as many zeroes a the new US debt ceiling.

Goldman's Alec Phillips has compiled a great docket of key events on the US fiscal calendar for the first half of 2011, of which easily the biggest wildcard is the initiation of the debate debt ceiling increase. While Zero Hedge believes that most of the rhetoric surrounding this issue is primarily of a polemic nature, with lots of ins, lots of outs, and most certainly lots of theater, the ceiling will be passed right on cue, by anywhere between $1.6 and $2.0 trillion: enough to fund the deficit for the next year and leave a small buffer. One thing is certain: discussion will most certainly not commence until as late as possible, which means sometime in late March, early April (as such we urge readers to aggressively sell the InTrade Feb 28 "debt ceiling" contracts).

Retail traders are notoriously wrong at picking market direction/tops and bottoms. Most retail traders very naturally seem to adopt a counter-trend stance and this offers very accurate signals for individuals looking to trade against this group. This daily report is designed to help traders focus their efforts on higher probability pairs.

The market ran today like Ben Bernanke was giving out free money (which um, he kind of is, as long as...

Talk about another internet bubble. New York Times broke the news that not only Facebook is valued at $50 billion (more than Time Warner, Baidu, and twice the market cap of Dell), but also Goldman Sachs is involved. This most likely means something frothy is brewing.

Simon Black currently in Santiago, Chile, presents a quick introspective on the key events of 2010, before moving on to a few broad forecasts for 2011. We hope his predictive ability is better than that of one Byron Wien. The key among Simon's predictions is that very soon we may see the same kind of power vacuum that brought about the Thermidorian Reaction in that last major systemic overhaul. Of course, the fact that we still have to experience a an actual storming of the Bastille is a little perturbing. But everything in due course...