Archive - Feb 21, 2011

45 days after the end of any given quarter financial television programs and bloggers race to be the first to report the holdings of – insert name of big hedge fund here. They analyze the report to see what the hedge fund managers are buying and selling. However, the question remains – can you beat the fast money at their own game?

$250,000/year in St. Louis you can live in one of the top 10 most expensive houses in town. In Manhattan? Not even close...

Just as the military is now the defacto (and indefinite) ruler in Egypt following what was a revolution-cum-coup, it appears that Libya is poised to repeat in the same footsteps. One thing to note is the increasingly shorter halflife of Maghrebian revolutions: Tunisia took more than a month, Egypt took 18 days, Libya is in its 6th day, and all signs point to a rapidly approaching endgame in which the military will end up with control. Hopefully they know the dynamics of oil cartel game theory behavior. In the meantime, here is Stratfor's latest geopolitical outlook on Libya following earlier reports that the airforce has started firing on military installations (and civilians) to prevent them from falling into protesters' hands.

Plus a brief word from some real Presidents...

The Numbers Behind the Middle Eastern and North African Revolts

While I respect the idea that confidence and psychology affect consumerism, the reality is that a 23% unemployment figure is a depressionary red flag. This tells us that the “Great Recession” has neither ended, nor was it “just” a recession. I know it is hard to dispute the National Bureau of Economic Research (NBER) - after all they were only 9 months late in noticing and calling the greatest economic downturn in history. The fact remains: We are in a depression and failing to address the structural unemployment problems will make matters worse not better. The first step to fixing a problem is of course admitting that we have one. We’ve squandered valuable time and in doing so we’ve greatly exacerbated the situation. Globalization was an absolute unmitigated, disastrous failure. The only thing it did was temporally boost stocks and allow some CEOs to make 400 times what their wage-earners made. While the economy appeared to be doing well - it was bubble driven credit binging - not organic spending that was fueling it.

RANsquawk US Afternoon Briefing - Stocks, Bonds, FX etc. – 21/02/11

The first very shy tick above $34 in the last 31 years is in the history books. Will soon be followed by many more. And only $16 more to go to all time nominal highs... and ~$160 to real ones. What is truly hilarious vis-a-vis claims that the dollar is a reserve currency is that in the period in which gold has risen by 2.9%, and silver, 12.3%, the DXY has dropped by 1.45%. It would be quite amusing if Schumer's push to unpeg the CNY came true, only for the US to realize that its currency is now completely irrelevant.

It may not be 12k RPM.... but it beats nothing.

Announcement that Muamar has slipped into a coma to hit within 3-6 hours. As a reminder, Libya had 143.8 tonnes of gold.

"We will make efforts to vigorously secure rare earths"

With pervasive shooting across Libya, stoppage of oil production, and overall revolutionary activity, it makes sense to take a look at the biggest holdings of some of the key Libyan investment players. We start with the country's Sovereign Wealth Fund, the Libyan Investment Authority. We find some interesting names...

Courtesy of endlessly trading and constantly front-run electronic markets, after watching the geopolitical carnage overnight with little reaction futures have suddenly gapped down by over 10 points to below Wednesday's closing levels, wiping out the levitation from both Thursday and Friday. Indicatively, as stocks finally appear mortal once again, silver (now a quarter away from $34) is up 11.63% from its Wednesday lows, and even gold is up 2.7%. The former traditionally takes a while to pick up momentum. Once it does, not even JPM can stop it.

With just 4 days left before the Irish General election, the Irish Times reports that Fine Gael is now guaranteed to be the winner of the upcoming popular vote. The only question is whether the government will be a monopoly one or coalition based. Reports the Irish Times: "When people were asked who they would vote for if there were a general
election tomorrow, the figures for party support (when undecided voters
were excluded) compared with the last Irish Times  poll on
February 3rd were: Fianna Fáil, 16 per cent (up one point); Fine Gael,
37 per cent (up four points); Labour, 19 per cent (down five points);
Sinn Féin, 11 per cent (down one point); Green Party, 2 per cent (up one
point); and Independents/Others, 15 per cent (no change)." Not surprisingly, lagging Labour party is scrambling to get some last minute votes: "Labour Party leader Eamon Gilmore has urged voters not to give Fine Gael
a “monopoly of power” and called on people to “switch to Labour” when
they cast their vote on Friday." Sounds like a call for a vote for hope and change. That worked swell back in the US. So now that the election outcome is certain, and Brian Cowen's tenure has at most 3 more days to go, here is a profile of the new Irish leader: Fine Gael Leader Enda Kenny.

As was reported on Saturday, the culprits for the surge in borrowing on the Marginal Lending Facility have been supposedly identified, with Ireland once again to blame. The flawed explanation provided was that insolvent Irish banks are paying an extra 75 bps in interest just so they have access to capital on a day's notice (as opposed to a week) as they unwind their collateral. Needless to say, we are skeptical of that "explanation." And judging by the fact that today total borrowing on the MLP, while still near record highs, dropped by €2 billion, without any news of collateral unwind to free up asset sales by either Anglo Irish Bank and the Irish Nationwide Building Society, puts the credibility of the FT source at question. What is without doubt, is that borrowings on the MLP will persist for a long time, as was insinuated in the original piece. After all the whole point was to make this latest outlier event "priced in."